Quantum International Income Corp.

June 27, 2014 16:49 ET

Quantum International Income Corp. Announces Two Agreements in Connection With Its TSXV Reactivation and Concurrent $6,002,500 Financing

TORONTO, ONTARIO--(Marketwired - June 27, 2014) -


Quantum International Income Corp. ("QIIC" or the "Company") (TSX VENTURE:QIC.H) is pleased to announce that it has entered into a definitive asset purchase agreement dated May 30, 2014 (the "Definitive Agreement") with Roseland Ambulatory Surgery Center, LLC ("Roseland"), the owner of the Roseland Ambulatory Surgery Center, one of the largest ambulatory surgery centers in New Jersey, which represents QIIC's entry into the U.S. healthcare and ambulatory surgery center ("ASC") industry. Separately, QIIC has entered into a letter of intent to make a controlling investment in Multiple Media Entertainment Inc. ("MME"), a full service media content creation and distribution company based in Toronto, Ontario. The Roseland ASC and MME transactions are in connection with a proposed "change of business" transaction (within the meaning of the policies of the TSX Venture Exchange (the "Exchange")), which would see the Company reactivated and thereby graduate from a listing as an investment issuer on the NEX board ("NEX") of the Exchange to a listing on Tier 2 of the Exchange (collectively, the "Transactions").

The Roseland ASC transaction will result in the acquisition by QIIC (or an affiliate thereof) of the assets comprising the Roseland ASC, including its exclusive license for five operating rooms issued by the New Jersey Department of Health, surgical equipment and inventory on site, and Roseland's interest in the lease of the building (the "Assets"). All of the Assets are located in Roseland, New Jersey.

The MME transaction will result in the direct ownership by QIIC of two-thirds of the voting securities of MME, subject to the execution of a satisfactory definitive investment agreement and certain other ancillary agreements relating to the ongoing governance of MME.

Upon completion of the Transactions, subject to certain conditions, it is intended that QIIC will complete its reactivation from NEX. QIIC expects the closing of the Transactions to take place not later than August 31, 2014. Completion of the proposed Transactions is subject to, among other things, receipt of all necessary regulatory approvals and approval of the shareholders of QIIC, which approval is expected to be satisfied through receipt by QIIC of written consent resolutions from holders of common shares of QIIC representing not less than 50.1% of those issued and outstanding.

About the Roseland ASC Assets

Roseland is in the process of arranging for the transfer of an ASC licence to an entity designated by QIIC, which license provides for the operation of five operating rooms that are equipped with beds, medical equipment and supplies, diagnostic equipment, sterilization equipment, lighting and furnishings, making Roseland one of the largest ASCs in New Jersey. Pursuant to the Definitive Agreement, it is a condition of the closing of the ASC acquisition that such license be renewed and transferred to QIIC (or an affiliate thereof).

In 2010, Roseland performed approximately 24,000 procedures. Operations were scaled back in subsequent years due to the surgeons previously practicing at the facility having elected to practice in hospitals rather than the Roseland ASC.

In the U.S. healthcare market, there is an increased demand for surgical services that is primarily driven by overall population growth, an aging population and expanded coverage under healthcare reform. The Roseland ASC is designed for outpatient surgical procedures with patient stays of less than 24 hours. Over 60% of all U.S. surgeries are performed as outpatient procedures and this proportion is continuing to grow due to technology and advances in techniques.

Roseland is a limited liability company organized pursuant to the laws of the State of New Jersey. Dr. Richard Lipsky, an individual resident in the State of New Jersey, is the Managing Member and holds a controlling interest in Roseland.

Terms of the Definitive Agreement for ASC

Under the Definitive Agreement, the purchase price for the Assets is US$3,300,000. Of this amount, US$330,000 has been paid into escrow as a deposit by QIIC. The deposit will be released from escrow to the vendor on closing, and QIIC will pay the balance of the purchase price in the amount of US$2,970,000, in cash upon closing of the acquisition.

The Definitive Agreement contains representations, warranties, covenants, indemnities and customary closing conditions. In addition to standard closing conditions and certain other conditions specified below, completion of the Roseland ASC acquisition is subject to the approval by the New Jersey Department of Health of the transfer of the exclusive operating license from Roseland to QIIC (or an affiliate thereof) and the consent of the landlord of the ASC to assign the lease to QIIC (or an affiliate thereof). In connection with obtaining the approval for the operating license, QIIC has agreed to retain the services of Princeton Public Affairs Group.

The Definitive Agreement may be terminated by Roseland in certain circumstances, including but not limited to, a failure to obtain the approval of the New Jersey Department of Health to transfer the license for reasons relating to QIIC, or a failure to obtain the approval of the Exchange, in either case prior to August 31, 2014. In the case of such termination, Roseland is entitled to retain the US$330,000 deposit. QIIC may also terminate the agreement in certain circumstances, including but not limited to a failure to obtain the approval of the New Jersey Department of Health to transfer the license for reasons relating to Roseland, or a failure to obtain the consent of the landlord of the ASC to assign the lease, in either case prior to August 31, 2014. In the case of such termination, QIIC is entitled to the return of its deposit.

About MME

MME is a full service independent media content creation and distribution company incorporated under the laws of the Province of Ontario and located in Toronto, Ontario. Established in 2010, the company is involved in all aspects of the entertainment content industry including development and production but focuses on film and television program distribution of scripted and non-scripted programming, including series, specials, mini-series, made for TV movies and feature films.

The company provides high quality programming to media outlets, filmmakers, program producers and suppliers. MME tailors its distribution strategy for individual projects and controls the distribution rights to a film and television library of more than 200 titles.

MME continues to acquire high quality films and television series for distribution in Canada, the United States and internationally. MME acquires exclusive, long-term rights to film and television content across all media platforms and provides a full range of services relating to the sales, marketing, licensing and distribution of feature films, television and special interest content across all media.

MME was formed in 2010 by J. Drew Craig and Michael Taylor. Drew Craig, the Chairman of MME, is a 3rd generation media and telecom industry executive. In the early days of radio and television broadcast the Craig family owned and operated radio and television stations in Manitoba, Canada. Mr. Craig became the CEO of Craig Media Inc. which was Canada's largest, privately held company. Its broadcast assets included MTV, MTV2, TV Land Canada, CKX-TV Brandon, A-Channel Calgary, A-Channel Edmonton, A-Channel Manitoba and Toronto 1 in Toronto. Craig Media Inc. sold its broadcast assets to CHUM Limited in 2004 for $265 million. Craig Media Inc. now operates under the name Craig Wireless Systems Inc.

Michael Taylor, the President & CEO of MME, was formerly the President of Peace Arch Television Ltd., a division of Peace Arch Entertainment Group Inc. (AMEX:PAE - TSX:PAE.TO). Peace Arch Television's productions included the Emmy Award winning TV series The Tudors for Showtime, CBC and Sony. Prior to that, he was the Vice President of Programming at Craig Media which included overseeing the programming of MTV Canada, TV Land Canada and television stations in Toronto, Calgary, Edmonton and Winnipeg. He was also the former President and COO of Telegenic Programs, Canada's largest independent television program distributor. Programs distributed in Canada by Telegenic included The Academy Awards Show (ABC), Late Show With David Letterman (CBS), Late, Late Show With Craig Ferguson (CBS), The Bold & The Beautiful (CBS), 20/20 (ABC), Nightline (ABC), Wheel of Fortune, Jeopardy, etc. Mr. Taylor has been a Producer, Executive Producer, Co-Executive Producer, Production Executive, and the Distributor of more than $300 million of Canadian content productions including five television series and more than a dozen films, TV movies and mini-series.

Summary Financial Information of MME

The following tables set forth certain selected financial information for MME in respect of the years ended August 31, 2013, 2012, and 2011.

Year Ended
31, 2013
Year Ended
31, 2012
Year Ended
31, 2011
(audited) (audited) (audited)
Total Revenues 1,834,898 3,721,772 1,598,315
Net Income (Loss) (281,066) 215,770 27,792
Total Assets 319,818 607,972 3,577,480
Total Long-Term Financial Liabilities 56,633 13,103 -

MME generated annual revenues of $1,834,898, $3,721,772 and $1,598,315 respectively in the financial years ended August 31, 2013, 2012 and 2011. Revenue increase from 2011 to 2012 was a result of continued growth in wholesale commercial inventory transactions as well as entrance into program content distribution. In 2013, MME began to move out of wholesale commercial inventory transactions, due to the lower margin nature of the business and began to focus solely on program content distribution.

Net Income grew from $28,792 in 2011 to $215,770 in 2012 substantially due to the increase in higher margin program content distribution product line. Net income decreased from $215,770 in 2012 to a net loss of $(281,066) in 2013 due to MME clearing out substantially all of its wholesale commercial inventory. As a result, the company incurred losses on trading the last of that wholesale inventory.

Since 2010, MME has amassed a library of more than 200 titles on the program content distribution side and continues to expand and grow its distribution acquisitions, offerings and activities.

Terms of Agreement for MME

QIIC and MME expect to enter into a definitive investment agreement with respect to the MME investment on substantially the following terms. QIIC will subscribe for securities in the capital of MME that carry a voting interest in MME equivalent to two-thirds of the issued and outstanding voting securities (the "MME Interest"). The consideration to be paid by QIIC for the MME Interest is $500,000.

Following the closing of the MME investment, the current shareholders and managers of MME, Messrs. Taylor and Craig, will collectively retain the remaining one-third of the voting interest in MME in equal proportion. QIIC expects Messrs. Taylor and Craig to continue to operate MME following the completion of the MME investment.

The respective obligations of QIIC and MME to complete the transactions contemplated by the are subject to a number of conditions, including the entry into a definitive investment agreement, the entry into an employment agreement with Mr. Taylor on terms satisfactory to Mr. Taylor, MME and QIIC, the entry into by Messrs. Taylor and Craig and QIIC of a shareholders' agreement concerning the corporate governance of MME on terms satisfactory to such parties and the entry into by Messrs. Taylor and Craig and QIIC of an incentive policy governing the payment of net income distributions to such parties on terms satisfactory to them.

Financing of Transactions

QIIC expects to finance the Transactions by way of an offering of subscription receipts ("Subscription Receipts") at the price of $0.35 per Subscription Receipt (the "Subscription Price") to raise aggregate gross proceeds of a minimum of $5,000,000 and up to $6,002,500 (the "Financing"). Each Subscription Receipt will entitle the holder to receive, without payment of any further consideration or further action on the part of the holder, upon the occurrence of the Release Event (as defined below), which is expected to occur immediately prior to the closing of the Transactions, one common share of QIIC. All securities issued pursuant to the Financing will be subject to a statutory four month hold period under applicable securities laws.

The Financing will be carried out through Global Securities Corporation, as agent (the "Agent") on a commercially reasonable efforts private placement basis pursuant to an agency agreement (the "Agency Agreement") to be entered into between QIIC and the Agent.

The aggregate gross proceeds from the sale of the Subscription Receipts (the "Escrowed Funds") will be deposited into escrow ("Escrow") with a third party escrow agent (the "Subscription Receipt Agent") pursuant to an agreement between QIIC, the Agent and the Subscription Receipt Agent (the "Subscription Receipt Indenture"). Funds held in Escrow will be invested in short-term obligations of, or guaranteed by, the Government of Canada or Canadian chartered bank (or other approved investments) as determined by QIIC and the Agent. The Escrowed Funds and any interest accrued and actually earned thereon (together, the "Escrowed Funds") will be released from Escrow upon the occurrence of the Release Event. Upon the Release Event, the Subscription Receipt Agent will deliver the Escrowed Funds, less commissions and fees payable to the Agent pursuant to the Agency Agreement, to QIIC, subject to the terms of the Subscription Receipt Indenture. In the event that the Escrow Release Conditions (as defined below) are not satisfied on or before the Release Deadline (as defined below), QIIC shall forthwith deliver a notice thereof to the Agent, each of the Subscription Receipt holders and the Subscription Receipt Agent. The Subscription Receipt Agent shall return to each such holder of a Subscription Receipt an amount equal to the aggregate Subscription Price paid by such holder plus a pro rata share of interest actually earned thereon, less applicable withholding taxes, if any. In the event that the Escrowed Funds are insufficient to return to the Subscriber the aggregate Subscription Price paid for the Subscription Receipts by the Subscriber hereunder, QIIC shall contribute such additional funds as are necessary to satisfy the aggregate Subscription Price in full.

In connection with the Financing, the "Release Event" shall occur if the Escrow Release Conditions shall have been met on or prior to 5:00 p.m. (Toronto time) on the August 29, 2014 (the "Release Deadline"). For the purposes of the foregoing, the "Escrow Release Conditions" are the following:

  • The completion or satisfaction of all conditions precedent to the Transactions to the satisfaction of the Agent, other than the delivery of the respective purchase prices in connection therewith;

  • The receipt of all required shareholder and regulatory approvals required in connection with the Financing;

  • QIIC and the Agent acting reasonably, having delivered a joint notice to the Subscription Receipt Agent confirming that the foregoing items have been met or waived.

Other Key Conditions to Completion of the Transactions

Completion of the Transactions is subject to a number of other key conditions, including Exchange acceptance and disinterested shareholder approval. The Transactions cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed, or at all.

Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the Transaction (the "Filing Statement"), any information released or received with respect to the change of business may not be accurate or complete and should not be relied upon. Trading in the securities of QIIC should be considered highly speculative.

Trading of the common shares of QIIC will be halted in connection with the dissemination of this news release. QIIC intends to issue a further comprehensive news release(s) in respect of the Transactions and related ancillary matters, including upon the finalization of a formal binding agreement with MME and the finalization of the acquisition structure for the Roseland ASC.

About QIIC

QIIC is an Ontario corporation which was originally amalgamated on August 15, 1995. After engaging in several ventures over the subsequent decade, the Company divested itself of substantially all of its assets in February, 2005. The Company has traded on the NEX since March 16, 2005. Since 2005, the Company has had no active operations and its primary business has been to identify and evaluate businesses or assets with a view to completing a reactivation from the NEX pursuant to the policies of the Exchange.

On June 18, 2013, QIIC entered into a reorganization and investment agreement with Mr. Grant White, pursuant to which the Company agreed to: (i) appoint Mr. White as Chief Executive Officer; (ii) nominate new directors for election to the Company's board of directors; (iii) consolidate its issued and outstanding share capital on the basis of one (1) post-consolidation share for each ten (10) pre-consolidation shares; (iv) undertake to complete a non-brokered private placement of common shares and warrants of the Company; and (v) change its name from "E.G. Capital Inc." to "Quantum International Income Corp." (collectively, the "Reorganization"). The Reorganization was entered into in order to better position the Company to complete its reactivation from the NEX. Mr. White's appointment as CEO was effective on June 18, 2013; Mr. Manu Sekhri joined as President and a new slate of directors were elected at the annual and special meeting of the shareholders of QIIC held on November 21, 2013; the consolidation and name change became effective on March 13, 2014 and the Company completed the non-brokered private placement to raise aggregate gross proceeds of $1,160,000 on March 19, 2014.

As of the date hereof, there are 25,460,105 common shares of QIIC issued and outstanding, as well as 23,200,000 warrants to purchase common shares of QIIC at a price of $0.10 per common share at any time prior to March 19, 2015. As of the date hereof, no person owns, controls or directs 10% or more of the outstanding common shares of QIIC.

QIIC intends to seek opportunities to acquire and grow businesses in order to generate stable distributions for its shareholders, as well as to achieve overall capital appreciation. The Company will seek to acquire operating businesses with a proven track record, an opportunity for growth and whose management wishes to continue to operate the business going forward. The Company's investment approach will be to grow through the acquisition of "platform" businesses that are consistent with its business strategy and acquisition criteria and then to continue to build revenues and earnings within these businesses. Potential acquisition targets may be private or public companies in a variety of industries, thereby allowing for diversification. Acquisition of all or a majority of the ownership of each such business is preferred. Value will be created by seeking out high growth, high margin opportunities where the acquired businesses can maintain and develop the deep knowledge, expertise and understanding of their customers' needs required to deliver superior service and command higher pricing and margins than the competition.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking statements and forward-looking information (collectively, "Forward-Looking Statements") and QIIC cautions investors about important factors that could cause QIIC's actual results to differ materially from those expressed, implied or projected in any Forward-Looking Statements included in this press release. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "expects", "will continue", "is anticipated", "anticipates", "may", "could", "believes", "estimates", "intends", "plans", "forecast", "projection" and "outlook") are not historical facts and may be Forward-Looking Statements that involve projections, estimates, assumptions, known and unknown risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such Forward-Looking Statements or otherwise materially inaccurate. No assurance can be given that these expectations or assumptions will prove to be correct and such Forward-Looking Statements included in this press release should not be unduly relied upon. These Forward-Looking Statements speak only as of management's beliefs and expectations as of the date of this press release. In addition, this press release may contain Forward-Looking Statements drawn from or attributed to third party sources. Accordingly, any such statements are qualified in their entirety by reference to the information discussed throughout this press release.

In particular, this press release contains Forward-Looking Statements regarding anticipated future financial, structural, growth and operating performance of QIIC, including as it pertains to the current acquisitions set out in this press release and the deployment of capital into new acquisitions. These Forward-Looking Statements reflect the current beliefs of management with respect to, among other things, the completion of the current acquisitions set out in this press release, the completion of related financing of the acquisitions set out in this press release, qualifying as an "investment issuer" for Exchange purposes, and other future events. Actual results may differ materially due to a number of risks and uncertainties faced by QIIC, including, but not limited to: general economic and business conditions; global financial conditions; the failure of QIIC to identify acquisition targets or complete announced acquisitions; third parties honouring their contractual obligations with QIIC and its subsidiaries; relationships with operating and/or joint venture partners; inaccuracy, incompleteness or omissions in any of the financial and other information upon which management bases its analysis of potential acquisitions; the failure to realize the anticipated benefits of QIIC's current and future acquisitions; factors relating to the healthcare industry, including reliance on third-party payors for revenue; licensing, certification and accreditation risk; healthcare regulatory requirements; dependence on physician relationships; litigation, professional liability claims; insurance coverage limitations and uninsured risks; dependence on key personnel at the QIIC and operations level; competition from other healthcare providers; factors relating to the media content generation and distribution industry, including ability to deliver services in a timely manner; changes in technology, consumer markets or demand for media services; changes in federal, provincial and foreign content laws and regulations; dependence on third party content producers; competition for, among other things, capital, equipment and skilled personnel; the inability to generate sufficient cash flow from operations to meet future obligations; the inability to obtain required debt and/or equity financing for future acquisitions on suitable terms; competition for acquisition targets; seasonality and fluctuations in results; and limited diversification of QIIC's business industries, structures and operations.

QIIC cautions that the list and description of Forward-Looking Statements, risks, assumptions and uncertainties set out above is not exhaustive. All Forward-Looking Statements contained in this press release are qualified by these cautionary statements.

Unless otherwise specified in this press release, information contained in this press release is current as of the date of this press release. Unless otherwise specified, all dollar amounts herein refer to Canadian dollars. Additional information on these and other factors that could affect the operations or financial results of QIIC and its subsidiaries are included in disclosure documents filed by QIIC with the securities regulatory authorities, available under QIIC's profile on SEDAR at www.sedar.com.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved or disapproved the contents of this press release.

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.

Contact Information

  • Quantum International Income Corp.
    Grant White
    Chief Executive Officer

    Quantum International Income Corp.
    Manu K. Sekhri