Quantum International Income Corp.

Quantum International Income Corp.

July 13, 2015 09:30 ET

Quantum International Income Corp. Provides Updates

TORONTO, ONTARIO--(Marketwired - July 13, 2015) -


Quantum International Income Corp. ("QIIC" or the "Corporation") (TSX VENTURE:QIC) (TSX VENUTRE:QIC.U) is providing the following updates.

Columbus Hospital LTACH

On June 23, 2015 the Corporation filed a preliminary short form prospectus (the "Prospectus") with the securities regulatory authorities in each province of Canada (except Québec) in connection with its public offering of 47,620,000 subscription receipts ("Subscription Receipts") at a price of C$0.42 per Subscription Receipt, for gross proceeds of C$20,000,400 (the "Offering"). In connection with the Offering, QIIC entered into an underwriting agreement (the "Underwriting Agreement"), dated as of June 23, 2015 with Mackie Research Capital Corporation and Canaccord Genuity Corp. (together, the "Underwriters"), for the purchase of the Subscription Receipts on a "bought deal basis". For additional information relating to the Offering, please refer to the Prospectus.

The Corporation intends to use a portion of the net proceeds of the Offering to, among other things, partially fund its proposed acquisition (the "LTACH Acquisition") of Columbus LTACH, LLC d/b/a Columbus Hospital LTACH ("Columbus Hospital LTACH"). This news release updates certain information on the Columbus Hospital LTACH contained in the press release of the Corporation dated June 12, 2015.

The Corporation has filed on SEDAR the Columbus Hospital LTACH audited interim financial statements for the three months ended March 31, 2015 and 2014, and the revised audited annual financial statements for the years ended December 31, 2014 and 2013. Updated pro forma financial statements for the Corporation for the period ended February 28, 2015 are also attached. The table below sets forth, for Columbus Hospital LTACH, certain historical financial information for the year ended December 31, 2014, as well as certain forward-looking information, which presents five months (January through March (audited) and April through May (unaudited)) of 2015 financial information, on an annualized basis. Readers are cautioned that forward looking information may not be appropriate for other purposes. A number of factors and assumptions were applied in the formulation of this forward looking information and actual results could therefore differ materially. See "Cautionary Statement Regarding Forward-Looking Information".

Income statement (US$)
audited unaudited annualized(1)(2)
FY-2014 FY-2015
Patient revenue 26,346,173 40,857,295
Operating expenses 24,260,916 26,620,729
Earnings before interest, taxes, depreciation and amortization (EBITDA)(3) 2,085,257 14,236,566
Other expenses 2,481,135 2,221,906
Net income (395,878) 12,014,660
Avg. occupancy 31 51
Balance sheet (US$) audited December 2014
Current assets 8,925,690
Property plant & equipment 1,214,007
Total Assets 10,139,697
Current liabilities 10,997,262
Non current liabilities 12,700
Total Liabilities 11,009,962
Members equity (870,265)
Total liabilities & members equity 10,139,697

(1) Presents annualized financial information for 2015 based on available (audited and unaudited) financial information for the first five months of 2015. The information from January through March 2015 has been derived from the audited interim financial statements of Columbus Hospital LTACH for the three months ended March 31, 2015. The information from April through May 2015 has been derived from unaudited financial statements of Columbus Hospital LTACH for the period from April 1, 2015 through May 31, 2015. Assumes that (i) unaudited financial information would remain unchanged following an audit, and (ii) the annualized financial information may be calculated by multiplying the relevant figures reported therein by 12 and then dividing the result by 5.

(2) On June 12, 2015, the Corporation issued an initial press release announcing the LTACH Acquisition. That press release included unaudited balance sheet financial information for the Columbus Hospital LTACH, which presented an intangible asset with a carrying value of US$33.9 million. Upon completion of the audit for the first quarter of 2015 for the Columbus Hospital LTACH and a further review of US GAAP guidance, it was determined that despite the existence of intangible assets, such intangible assets could not be recorded on the balance sheet of the Columbus Hospital LTACH. The Corporation intends to record the full value of the intangible asset through the purchase price allocation upon closing the acquisition under IFRS. The proposed accounting for such valuation and accounting has been presented in the pro forma financial statements, which are available on SEDAR under the Corporation's issuer profile at http://www.sedar.com/.

(3) EBITDA figures are presented as a proxy for analyzing the cash flows from operations. Readers are cautioned that forward looking information may not be appropriate for other purposes.

For the fiscal year ended 2014, revenues and EBITDA were US$26,346,173 and US$2,085,257, respectively. As at December 31, 2014, assets and liabilities were US$10,139,697 and US$11,009,962, respectively. For 2015, on an annualized basis, the Columbus Hospital LTACH is estimated to have revenues and EBITDA of US$40,857,295 and US$14,236,566, respectively. See "Cautionary Statement Regarding Forward-Looking Information ".

EBITDA is a non-IFRS measure used by management that is not recognized under IFRS and has no standardized meaning prescribed by IFRS and may not be comparable to EBITDA presented by other companies. In regards to the Columbus Hospital LTACH, EBITDA is defined as income from continuing operations before tax and before (i) payments to partners; (ii) non-cash expenses such as amortization and bad debts; (iii) finance income and expenses; and (iv) securities compensation expense. EBITDA is used by management to assess the Columbus Hospital LTACH's normalized cash flow from operations. EBITDA is also a performance measure which may be utilized by investors to analyze the cash generated by the Columbus Hospital LTACH and its operating segments.

Bridge Loan

On May 25, 2015, the Corporation borrowed, on an unsecured basis, US$1,000,000 from Sprott Bridging Income Fund ("Sprott"), which amount was used to make a refundable deposit to an escrow agent in connection with the potential acquisition of a healthcare facility in the southeastern United States, which package of assets would include a fully-licensed healthcare facility in a major urban area (with a pharmacy license, a lab license and a radiology license) and which would also include all of the real estate associated with the healthcare facility, 14.5 acres of land, a seven storey medical office building and a pool of receivables (collectively, the "SE US Assets"). An interest amount of C$30,000 was prepaid by the Corporation to Sprott. On June 30, 2015, the Corporation borrowed, on an unsecured basis, US$1,000,000 from a group of lenders, one of which owns approximately 10% of the outstanding common shares of the Corporation (the "Second Bridge Loan"). Notwithstanding the foregoing, each of the value and terms of the loan is such that the loan was not required to be approved by the holders of common shares of the Corporation. The Second Bridge Loan is to be repaid on the earlier of (i) August 31, 2015, and (ii) the date of the closing of the Offering, bearing interest at a rate of 15% per annum. The Second Bridge Loan was issued at a discount to the principal amount outstanding thereunder; that is, the Corporation received US$1,000,000. If the Second Bridge Loan is repaid on or prior to August 3, 2015, the Corporation must pay US$1,025,000 to retire the loan. If such loan is repaid after August 3, 2015, the Corporation must pay US$1,050,000 to retire the loan.

The proceeds of the Second Bridge Loan together with working capital were used by the Corporation to advance a loan (the "IHS Loan") to IHS HIALEAH, LLC ("IHS"). The IHS Loan was also issued at a discount to the principal amount outstanding thereunder; that is, IHS received US$1,050,000. On maturity, IHS must pay to the Corporation US$1,200,000 to retire the IHS Loan. The IHS Loan is to be repaid to the Corporation on the earlier of (i) December 31, 2015, and (ii) 10 business days after the date that the Corporation delivers a notice to IHS indicating that the Corporation will not be exercising the IHS Option (as defined herein). IHS used the proceeds of the IHS Loan to advance a further US$1,000,000 to the escrow agent referred to above (the "Second Deposit") so that it may pursue the acquisition of the SE US Assets. Receipt of the additional US$1,000,000, put the escrow agent in a position to return the originally deposited US$1,000,000 to the Corporation, which amount will be used by the Corporation to repay Sprott. The escrow agent will hold the funds representing the Second Deposit as a deposit.

The Corporation understands that IHS has entered into an agreement with the vendors for the purchase of the SE US Assets. The Corporation understands that IHS will seek to secure a debt financing package to partially finance the purchase of the SE US Assets. None of IHS, any holder of a membership interest in IHS nor any officer, director or equivalent thereof of IHS is a related party of the Corporation. However, it is expected that a member of management of the Corporation will monitor the progress of IHS and consult with IHS with respect to the above. If IHS is successful in achieving all of the foregoing, the Corporation may exercise an option to acquire 100% of IHS for US$10.00 (the "IHS Option"), which option was granted by IHS and its members to the Corporation at the time of the advance of the IHS Loan by the Corporation to IHS. In the event of the exercise of the IHS Option by the Corporation, it is expected that an amount of money will be advanced by the Corporation to IHS sufficient to fund the equity component of the purchase price for the SE US Assets. The Corporation understands that the securing of a debt package by IHS to partially finance the purchase of the assets is likely to involve the negotiation of a sale and leaseback arrangement or a significant mortgage package with respect to the real property comprising the assets as well as the negotiation of a loan or factoring arrangement against a pool of receivables. In the event that IHS is able to successfully negotiate such a debt package or alternative financing transaction, it would have to be on terms acceptable to QIIC before the board of directors of QIIC would approve the exercise of the Option. Further, it should be noted that the proceeds of the Offering are being used by QIIC as a portion of the purchase price for the LTACH Acquisition. QIIC still needs to raise additional debt to complete the LTACH Acquisition. In order for QIIC to be in a position to exercise the Option, it would need to complete another financing. It should be noted that pursuant to the Underwriting Agreement, the Corporation may not issue securities for a period of 90 days from the date of the closing of the Offering without the consent of the Underwriters. Further details with respect to this potential transaction will be provided in the future as the Corporation assesses whether to exercise the IHS Option.

As outlined above, there are a number of threshold items that must be satisfied by IHS before the Corporation would be in a position to consider exercising the IHS Option and thereafter advancing additional funds to IHS, which additional funds would have to be raised by the Corporation in a financing transaction as the proceeds of the Offering will be required to be applied to the LTACH Acquisition. There can be no assurance that IHS will, among other things, be able to secure a debt financing package on acceptable terms. Even in the event that IHS is able to accomplish all of the foregoing, there can be no assurance that the Corporation will elect to exercise the option to acquire IHS and thereafter seek to complete the acquisition of the SE US Assets, or that it would be able to secure the additional financing necessary to put it in a position to do so.

About Quantum International Income Corp.

Quantum is a healthcare company focused on delivering national integrated health solutions in the United States. The Corporation seeks to back management teams with strong operational track records and deep healthcare experience. The Corporation intends for acquired businesses or assets to fit synergistically within a strategic framework, have a proven operating history, opportunities for standalone growth and, potentially in some cases, national expansion. Potential acquisition targets will be in various related areas of the United States healthcare industry in different geographic regions to allow for diversification.

Cautionary Statement Regarding Forward-Looking Information

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 operations detailed in this press release and the deployment of capital into new acquisitions. The Corporation specifically cautions investors that the information under the heading "Columbus Hospital LTACH" constitutes Forward-Looking Statements and should not be unduly relied upon. Such information may not be appropriate for all purposes. Readers are cautioned that actual results may differ from such Forward-Looking Statements for several reasons, among which are (i) patient expenses or reimbursement rates being less than assumed, (ii) operating expenses (including salaries and medical supplies) being more than assumed, and (iii) the number of patients per days being less than assumed.

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 future acquisition targets; 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. QIIC will update the Forward-Looking Statements as required by securities law. 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 securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.

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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