The TSX Venture Exchange added 5.80 points to 706.73 Friday, ending the week up 11.79 points and the month up 29.92 points. Robert Munro and Michael Dalsin’s Inspira Financial Inc. has sold a $5.7-million private placement of 57.05 million units at 10 cents as it prepares to go public through Mr. Munro and Marc Lavine’s capital pool shell, Chrysalis Capital IX Corp. (NYN).
Last October, Chrysalis Capital IX signed a definitive agreement to acquire Inspira as a qualifying transaction for an unstated number of shares. The target offers lines of credit between $500,000 (U.S.) and $5-million (U.S.) to small U.S. medical companies with revenue below $50-million a year. The loans are secured by accounts receivable, but only government and big insurance company receivables, which have a very low loan default risk. Inspira charges the borrowers between 10 per cent and 20 per cent, including interest and fees. It takes about one week to process an application, compared with about two months when applying at a bank.
Investors appear convinced this is a good business model. Earlier this month, Inspira, with help from Beacon Securities Ltd., lined up 40 subscribers for its $5.7-million financing at 10 cents. Subscribers included Colin Stewart’s JC Clark Ltd., an investment management firm that acquired six million units, Bruce Campbell’s StoneCastle Investment Management, which acquired five million units, and former Cormark Securities broker Marc Murnaghan, who personally acquired three million units. These days, Mr. Murnaghan is a partner at Harrington Global, a Toronto merchant bank that operates a fund, Harrington Global Opportunities Fund Sarl, which acquired 2.75 million units of Inspira. Finally, there was Tom English, a broker at Salman Partners, who acquired 1.5 million units. Last year, Mr. English was involved in listing Cameron Chell’s tech promotion, Slyce Inc. (SLC: $0.61).
Mr. Dalsin, a founder of Inspira, was also a founding director of Chrysalis Capital IX, but he resigned last month. He still owns 100,000 escrow shares of the shell. Mr. Dalsin has become one of the TSX-V’s busiest stock promoters in the past year. He is a large shareholder and the chairman of Patient Home Monitoring Corp. (PHM: $1.18), a U.S. health care company that traded at around 25 cents one year ago. Since then, it has become one of the most active stocks on the TSX-V and risen fivefold, peaking at $1.27 last Wednesday. Earlier this month, Mr. Dalsin listed his second U.S. health care company,Convalo Health International Corp. (CXV), which was today’s most active stock on the TSX-V, slipping one cent to 34.5 cents on 3.4 million shares. Convalo, which manages a rehab clinic in Hollywood and has plans to open more clinics shortly, sold a financing of 29.07 million units at 10 cents in connection with its going-public transaction. Those shareholders have all tripled their investment on paper in a pleasingly short time.
Chrysalis Capital IX has not provided many details about its QT with Inspira, but they will arrive when the shell submits a filing statement. Since Mr. Munro is a director and shareholder of both the shell and its target, he will likely remain on the board following the deal. Mr. Munro and his colleague Mr. Lavine have been packaging Chrysalis shells for more than a decade. We discussed their record in the Shell Summary for Jan. 7, 2014, concluding that of the eight Chrysalis shells that have already completed QTs, four were successes, three were failures and one was undecided. The undecided shell was Chrysalis Capital VIII Corp., which in February, 2013, rolled back 1:3.8 and launched Spectra7 Microsystems Inc. (SEV: $0.47), a microchip designer. One year has passed since we discussed it, which is enough time to decide whether Chrysalis Capital VIII was a success or a failure. An IPO shareholder, who paid 20 cents for his position in Chrysalis Capital VIII, could have broken even if he had sold in the first year after adjusting for the rollback, but since then he has had few opportunities (a total of about one month) to get his money back or sell at a profit. Most IPO shareholders of capital pool shells hope to make a large profit in exchange for the risk they take when they invest, and since Chrysalis Capital VIII did not offer that opportunity, by our measure it was a failure. The shell-packaging record of the Chrysalis men now stands at four successes and four failures. IPO shareholders of Chrysalis Capital IX are probably optimistic that with Mr. Dalsin involved in the QT the ninth Chrysalis shell will be successful.