Convalo Health International, Corp.
TSX VENTURE : CXV

Convalo Health International, Corp.

May 26, 2016 09:00 ET

Convalo Health International Announces Launch of Fifth Facility in Four Months; Expands Service Offerings to Include Mental Health Services in Existing Locations

Debuts Plan for Adolescent Residential Treatment and Education Centers; Announces Warrantholder Meeting

LOS ANGELES, CALIFORNIA--(Marketwired - May 26, 2016) -

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Convalo Health International, Corp. ("Convalo") (TSX VENTURE:CXV), a company in the addiction recovery industry in the US, announced it has launched its fifth facility in just four months: a detox and residential treatment facility in Los Angeles, California. The company also announced it has expanded its services to include mental health dual diagnosis treatment across its facilities. Convalo additionally announced a plan to develop a series of adolescent residential treatment and educations centers, along with proposed issuance of a warrant exchange pursuant to a Warrantholder Meeting.

Launch of Fifth Facility in Four Months - Additional Detox and Residential Facility in Los Angeles Opening in June

The unique BLVD branded facility opening in June is located in the heart of a city center. Unlike many competing detox and residential facilities, the BLVD branded facility is located in the center of Hollywood. Featuring luxurious and modern amenities, the facility features the experience that differentiates the BLVD brand. With the addition of a truly urban treatment setting, Convalo increases the variety of experiences a client can choose from to enhance their recovery.

With its formal opening in early June, the BLVD detox and residential center will immediately increase Convalo's detox and residential capacity as well as the Los Angeles area revenue potential. The Los Angeles facility is expected to generate between $6 million and $8 million in additional annual revenue once fully ramped.(1) The recently announced Corona facility will further increase capacity and revenue potential in the greater Los Angeles area. Between the Corona and Hollywood locations, Convalo is expanding its Los Angeles area detox and residential revenue potential by $9 million to $12 million annually. (1)

"With the opening of this new Los Angeles facility, coupled with the Corona facility expected to be licensed shortly, we have significantly expanded our detox and residential treatment capacity in the Los Angeles area," said Stampp Corbin, CEO of Convalo. "The executive management team has proven it can move quickly to launch revenue generating facilities. The new facility complements our others in Los Angeles, our first and strongest performing city. Our organization now offers patients a range of program settings, from urban to more rural experiences, within a single metropolitan area. Patients can choose the program that best suits their needs, and even graduate from one program environment to another as their treatment progresses."

Dual Diagnosis Service Offering Launched Across All Facilities

Many patients suffering from substance abuse also have a form of underlying mental illness. Patients using drugs or alcohol as a form of self-medication often confront their mental illness during sobriety and recovery.

Convalo now offers mental health treatment to patients suffering from substance use disorders. "Through designated treatment groups and our tailored clinical program, we offer a full range of treatment for our clients," said Lauren Costine, Ph.D. Convalo's Chief Clinical Officer. "I expect as a result, our clients will stay longer in treatment, and achieve greater success, as we provide them co-occurring and post substance abuse treatment for their mental health conditions."

The dual diagnosis service offering is expected to contribute $1 million to $3 million in additional revenue per year through longer patient length of stays, and additional billable services provided.

Plan to Develop Adolescent Residential Treatment and Education Centers and Proposed Related Warrant Exchange

One of the fastest growing segments of the addiction recovery market is treating adolescents. This high-risk population generally is more expensive to treat because adolescents must continue their education during treatment and must be housed in a secure facility. Therefore, full treatment requires therapy, educational continuity and supervised housing. Parents generally control adolescent attendance, resulting in longer average treatment times than in adult populations where some patients choose to leave the facility before treatment is complete.

Adolescent substance abuse treatment facilities combine full time residential treatment with a daytime educational program within a contained campus. The length of stay, revenue per patient and profitability tend to be higher in these types of centers. Management projects that an investment of approximately $5 million to $7 million in capital expenditures and expenses is needed to launch a series of centers across the country. Convalo currently treats patients 18 years of age or older. With the execution of this plan, Convalo can offer services to families looking for adolescent, residential treatment.

As part of the $17,250,000 financing closed in April 2015, Convalo issued 43,125,000 warrants. On September 30, 2015, Convalo announced the expiry of those warrants had been accelerated to November 11, 2015 pursuant to the terms of the warrant certificate. During the time between the announced acceleration of expiry and the date the warrants expired, the warrants remained out of the money. Shareholders held paper subject to a trading hold, and were not able to take advantage of the warrant. The Convalo Board of Directors has determined the warrant holders deserve an opportunity for an extension of these warrants, which will make Convalo more valuable by financing horizontal integration, such as development of the adolescent centers. Convalo will amend the original warrant terms resulting in the warrants being exercisable for 21,562,500 common shares, half at $0.30 with a six month term and half at $0.38 with a nine month term for total proceeds to Convalo of approximately $7 million after transaction expenses. The proposed warrant amendment has been conditionally approved by the TSX Venture Exchange (the "TSXV") and is conditioned upon acceptance by the warrant holders as a group at a meeting.

"We have made tremendous progress in the last few months, Convalo currently has more than $15 million in cash on its balance sheet after investments in launching five revenue-generating facilities this quarter with a potential exit 2016 annualized revenue run-rate of $80,000,000," said Stampp Corbin, Convalo CEO . "We now have the confidence to move into other areas of the market to increase our revenue and expand our presence in behavioral health. The potential warrant proceeds would be used in part to develop further horizontal markets for diversified growth, including adolescent treatment facilities or possibly behavioral health centers."

About Convalo

Convalo Health International, operating under the brand name BLVD Centers (www.blvdcenters.com), is a leader in the highly fragmented addiction rehabilitation market. Led by a seasoned executive management team with experience in US healthcare, Convalo is well positioned for continued national expansion by launching pods in cities across the US. A pod consists of a residential, detox, and mental health facility (detox facility) and an intensive outpatient (IOP) facility. Convalo, under the BLVD brand, is focused upon becoming the largest national provider of a range of mental health services, including addictive and co-occurring disorders. 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.

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 Convalo, the expected licensing of the Corona facility, the expectation that clients will stay longer in treatment and achieve greater success as Convalo provides post-substance abuse treatment, the offering of services to families looking for adolescent residential treatment, as well as the approval of the warrant amendment by warrantholders and the TSXV and the exercise of all the Units for total proceeds of approximately $7 million after the transaction expenses, as well as the expected generation of additional revenue from the Corona and Hollywood locations and from the dual diagnosis service offering, and the potential 2016 annualized revenue run-rate of $80,000,000, are intended to identify forward-looking information. All statements other than statements of historical fact may be forward-looking information. Such statements reflect Convalo's current views and intentions with respect to future events, and current information available to Convalo, and are subject to certain risks, uncertainties and assumptions, including an investment of approximately $5 million to $7 million in capital expenditures and expenses needed to launch a series of centers across the country and the exercise of all the Units. 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, the ability to implement business strategies and pursue business opportunities, state of the capital markets, the availability of funds and resources to pursue operations, 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, difficulty integrating newly acquired businesses, the outcome and cost of any litigation with the sellers of Hollywood Detox, low profit market segments, as well as general economic, market and business conditions, amongst others. Should any factor affect Convalo 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, Convalo 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 Convalo undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law.

(1) Expected revenue contribution of this facility is based upon an 80% occupancy rate at current pricing. Occupancy and pricing rates may change over time.

Neither the 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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