Convalo Health International, Corp.
TSX VENTURE : CXV

June 10, 2015 15:03 ET

Amended: Convalo Executes Final Binding Purchase Agreements for Hollywood Detox and ARTS; Increases Run Rate Revenues To Over $23 Million and Adjusted EBITDA To Over $5.5 Million

LOS ANGELES, CALIFORNIA--(Marketwired - June 10, 2015) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES AND DOES NOT CONSTITUTE AN OFFER OF THE SECURITIES DESCRIBED HEREIN

Convalo Health International, Corp. (Convalo) (TSX VENTURE:CXV), an acquisition-oriented company focused on rolling up the US addiction rehabilitation market, announced that it executed today a final binding Purchase Agreements for the acquisition of Hollywood Detox Center (Hollywood Detox) and Accredited Rehab and Treatment Services (ARTS), two profitable southern California companies.

Hollywood Detox and ARTS are behavioral health facilities offering detox and residential treatment services for both men and woman in and around the Hollywood and central Los Angeles area.

When added to the outpatient treatment services currently offered by BLVD Treatment Centers, Convalo now has a full service behavioral health platform spanning Hollywood and Central Los Angeles capable of treating patients at every level of the addiction treatment continuum. The combined annual revenue run-rate for this Hollywood and Central Los Angeles business now exceeds $23,000,000 and annualized run rate Adjusted EBITDA now exceeds $5,500,000.

By the end of the year, Convalo will expand this platform to include additional detox and residential treatment centers for both men and women on the west side of Los Angeles.

Three of the companies' top level executives, Keith Fowler, Brent Ortner and Ryan Newport, will remain on after the transaction and are expected to play key roles in Convalo moving forward.

Terms of the Acquisition

Management has reported combined trailing 12-month revenues in excess of $14 million and Adjusted EBITDA in excess of $3.6 million. The combined companies have $2.7 million in assets and $984,000 in liabilities. This acquisition is expected to increase Convalo's revenues by over 150% and Adjusted EBITDA by more than 220%.

According to the Purchase Agreements, Convalo will acquire the businesses for a mix of cash and stock. Convalo will pay a total of $7,937,500 in cash and up to 12,000,000 shares or under 4.5% of the fully diluted shares of the company. Post-acquisition, Convalo will have over $21,500,000 in cash on the balance sheet with which to make further acquisitions. Convalo has no debt.

"We are now a fully established addiction services company in the heart of Los Angeles with over $23 million in revenues and significant profitability," said Mr. Dalsin, Chairman and CEO of Convalo. "While there is a significant positive impact on revenue and profits, this acquisition really only covers Hollywood and Central Los Angeles. The acquisition of the management team gives us the ability to create a similar business in terms of revenues and profits in West Los Angeles and in San Francisco this year."

"When closed, this acquisition will be EPS accretive," continued Mr. Dalsin. "We continue to invest heavily in our M&A activities and continue to expect to close deals in other major U.S. cities in the near future."

At the request of IIROC, the following is a management provided unaudited balance sheet as at June 10, 2015 for Hollywood Detox and ARTS:

(Rounded to the nearest $1000)
Assets
Cash $ 151,000
Accounts Receivable $ 2,145,000
Furniture and Fixtures $ 305,000
Security Deposits $ 100,000
Total Assets $ 2,701,000
Liabilities & Shareholder's Equity
Trade Account Payable $ 456,000
Taxes Due $ 327,000
Accrued Paryoll $ 201,000
Total Liabilities $ 984,000
Total Shareholder's Equity $ 1,717,000

About Convalo

Convalo is an acquisition-oriented company focused on rolling up the US outpatient addiction rehabilitation market led by seasoned management with experience in both US healthcare acquisitions and healthcare service asset management. In May 2014, Convalo made its first acquisition of a small, local addiction rehabilitation center in Los Angeles. Since May, the business has operated under the brand name BLVD Centers (www.blvdcenters.com) in a luxury Hollywood, California location. BLVD offers patients access to a wide range of services, including addictive and co-occurring disorders, helpful to the recovery process. In conjunction with the 12-Step approach, BLVD also offers supplemental insurance-reimbursed services catering to a variety of communities: gender specific, creatively-oriented, meditation/mindfulness, trauma and LGBT affirmative.

These Adjusted EBITDA figures are unaudited and may change subject to due diligence and closing procedures. They are intended only as an estimate of trailing twelve month Adjusted EBITDA of the combined entities and are not meant to convey forward looking information. Adjusted EBITDA is a Non-IFRS measure the Company uses as an indicator of financial health, and excludes several items which may be useful in the consideration of the financial condition of the Company, including interest expense, taxes, depreciation, amortization, stock based compensation, and owner compensation.

Forward-Looking Statements

Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws. Implicit in this information, particularly in respect of the future outlook of Convalo and anticipated events or results, are assumptions based on beliefs of Convalo's senior management as well as information currently available to it. While these assumptions were considered reasonable by Convalo at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including the availability of funds and resources to pursue acquisitions, decline of reimbursement rates, dependence on few payors, possible new drug discoveries, a novel business model, dependence on key suppliers, granting of permits and licenses in a highly regulated business, competition, low profit market segments as well as general economic, market and business conditions, and could differ materially from what is currently expected.

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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