Convalo Health International, Corp.
TSX VENTURE : CXV

March 30, 2015 20:18 ET

Convalo Health International, Corp. Opens Second Location in the Los Angeles Market; Expands M&A Plan and Updates Pipeline

LOS ANGELES, CALIFORNIA--(Marketwired - March 30, 2015) -

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Convalo Health International, Corp. (Convalo) (TSX VENTURE:CXV), a company focused on rolling up the highly fragmented addiction recovery sector of companies in the US, today announced the Board of Directors has approved the execution of Purchase Agreements to acquire the stock of two companies with a focus on referral-based addiction related services on the west side of Los Angeles.

Expanded M&A Plan

Convalo announced it has expanded its merger and acquisition strategy since listing February 17, 2015 on the TSX Venture exchange. Convalo is now concentrating on four types of acquisition targets in the market:

1. Medical Detox Centers

2. Referral-Based Outpatient Centers

3. Residential Treatment Centers

4. Criminal Justice Oriented Treatment and Education Centers

All acquisition targets are small, locally-owned treatment, medical or education centers offering addiction related services and specializing in a singular service or market. Convalo plans to increase revenues organically through offering a full suite of services in larger, luxury facilities upgraded to the highest level of licensing and certifications on a nationwide basis.

Convalo has hired a staff of 4 M&A professionals and analysts since listing and is actively working to contact and qualify over 1,000 identified targets fitting the target descriptions. There are over 16,000 licensed treatment centers in a highly fragmented market in the United States.

Pipeline

Since February 17, 2015, the active pipeline of potential acquisition targets has grown to:

  • 3 companies in advanced discussions with trailing 12-month cash flow in between $1,000,000 and $1,500,000
  • 7 additional companies under non-disclosure agreement (NDA)

All potential targets are local companies that range in geography across the US from New York to Florida to California. The companies offer services ranging from treatment services under contract with criminal justice systems to reduce prison overcrowding, to high-luxury treatment centers, to medical detox clinics strictly focused on medical services.

West Los Angeles Market Acquisitions and New Center Opening

Convalo has an agreement to acquire two companies that have historically referred a combined 15 clients per month for outpatient addiction treatment, with potential revenues of up to $200,000 per month for the new facility. Concurrently, Convalo has executed a lease for a luxury 5,772 square foot facility on the west side of Los Angeles near Venice Beach, Culver City and Santa Monica. The center can also serve the large treatment population in Malibu, California.

This acquisition is similar to the Hollywood Center acquisition in 2014. The center will also operate under the BLVD Treatment Centers (www.blvdtreatment.com) brand name. In June of 2014, the Hollywood Center had revenues of less than $62,000 for the month. As part of the 5-point post acquisition organic revenue growth plan, operational, facility and marketing improvements were made that resulted in combined unaudited revenues for January and February of over $675,000 with operational profit* in excess of $100,000. The center was at 45% capacity for the months of January and February of 2015.

The new west Los Angeles facility is expected to be fully operational by summertime and is expected to generate revenue growth similar to the Hollywood operation with a capacity of up to 100 clients per month.

Under the agreement, Convalo will issue 1,350,000 shares to the owners of the companies, restricted for 24 months and $250,000 in cash. The active shareholders of the companies will join BLVD Centers. The closing of the acquisitions are subject to TSX approval.

Audited Financials on SEDAR

Convalo also released audited Financial Statements on SEDAR for the full year-ended November 30, 2014. As a result of the recent listing on the TSX Venture, the company was required to provide Audited Financial results for the full fiscal year ending November 30, 2014. For the period of the audit, Convalo operated one center in Hollywood under the brand BLVD Treatment Centers (www.blvdcenters.com), launching the full 100 client capacity center on November 1, 2014. Through the listing process, Convalo had already provided audited Financial Statements for the first three quarters of FY2014 of limited, pre-acquisition operations.

"Since listing just a month ago, we have invested heavily in our M&A team and pipeline," said Michael Dalsin, Chairman and CEO of Convalo. "We have expanded our focus to three additional types of addiction related service companies for acquisition. I believe this market is ripe for consolidation and we are in a very good position to be one of the most active players in the market."

"Launching the new outpatient treatment center in west Los Angeles is a key part of our growth strategy," continued Mr. Dalsin. "I do expect we will acquire and launch more outpatient centers in other US cities this year, along with acquisitions of other types of addiction-related businesses. As we make these acquisitions, I expect we will continue to see the tremendous organic revenue growth we have experienced at the Hollywood location."

*Operational profits are a non-IFRS figure used by management. Operational profits excludes share-based payments, stock options expenses, public company expenses and expenses associated with establishing and furnishing a new treatment center.

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 2014, Convalo made its first acquisition of a small, local addiction rehabilitation center in Los Angeles. That 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.

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.

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 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, low profit market segments as well as general economic, market and business conditions, and could differ materially from what is currently expected.

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