Valiant Minerals Ltd.
TSX VENTURE : VTM.H

October 16, 2014 11:40 ET

Valiant Minerals Provides Details on Qualifying Transaction With Convalo Health International and Concurrent Financings

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Oct. 16, 2014) -

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.

Valiant Minerals Ltd. (TSX VENTURE:VTM.H) ("Valiant"), a "capital pool company" pursuant to the policies of the TSX Venture Exchange (the "TSXV") announces further details of its proposed merger (the "Amalgamation") with Convalo Health International, Corp. ("Convalo") pursuant to an amalgamation agreement (the "Amalgamation Agreement") dated February 24, 2014 between Valiant, Convalo and 0986282 B.C. Ltd. (a private wholly owned subsidiary of Convalo) (the "Amalgamation Entity"), previously announced on November 4, 2013 and May 6, 2014.

Convalo Health International, Corp.

Convalo is a private company, incorporated on June 7, 2013 under the laws of the Province of British Columbia, operating in the highly fragmented and fast growing US outpatient addiction rehabilitation market. More than 20 million Americans suffer from substance abuse problems that require treatment. Recent regulations in the US, including ObamaCare and the Parity Act, have created a significant increase in demand in the US. In particular, the recent passage of the Parity Act requires private health insurance companies to treat many mental health disorders on parity with physical disorders, making treatment available to millions for the first time because health insurance companies are now covering these services. The provision in ObamaCare giving parents the option to cover children until age 26 expands the universe of those who can be treated. Health insurance companies are motivated to reduce treatment costs by sending patients away from often extraordinarily expensive residential treatment centers to more affordable outpatient centers - the portion of the market that Convalo will serve.

Once the Amalgamation is complete, Convalo plans to continue to consolidate specific sectors of the addiction treatment market in major cities across the US. Many of these companies are currently owned or managed by individual therapists who try to run them as an adjunct to their private practice, with limited marketing efforts.

The first acquisition of a center located in Hollywood, California, is open and serving patients for the treatment of addictive and co-occurring disorders under the brand name BLVD Centers (www.blvdcenters.com). This center was acquired on May 1, 2014 and has generated unaudited revenues of $600,000 and unaudited net profit of $6,000, not including stock-based compensation, gains or losses on financial derivatives or foreign exchange.

The BLVD philosophy emphasizes mindfulness, meditation, trauma work, giving back, creative self- expression and community, all to achieve a deeply soulful and sustainable recovery. In conjunction with the time tested 12-step approach, BLVD also offers additional insurance-reimbursed groups for a variety of communities: gender specific, creatively oriented, meditation/mindfulness and LGBT affirmative. BLVD offers access to transportation, sober companions, and a wide range of services helpful to the recovery process to their clients.

BLVD's flagship location at in the heart of Hollywood, California right on Highland and Hollywood Blvd features outdoor lounging patios with fireplaces and retractable awnings, a cross training gym next door and a luxury spa across the street. The neighborhood has countless restaurants, movie theaters, salons, stores and cafes within walking distance.

Other potential acquisition targets in Los Angeles or other cities may cater to other specific market segments, or to the general outpatient market, depending upon demand and market opportunities.

There are currently 112 shareholders (not including subscription receipt holders) of Convalo. Michael Dalsin of California (the Chairman of Convalo) beneficially owns 23.20% of the outstanding shares of Convalo and Roger Greene (the Executive Director of Convalo) beneficially owns 16.97% of the outstanding shares of Convalo. No other person owns or controls, directly or indirectly, more than 10% of the outstanding shares of Convalo. Messers Dalsin and Greene are the two directors of Convalo.

On the basis of the unaudited financial statements of Convalo for the nine month period ended August 31, 2014, Convalo had total assets of $2,900,000 and shareholders' equity of $2,900,000 with no debt.

About the Proposed Amalgamation

Pursuant to the Amalgamation Agreement, Valiant and Convalo have agreed to combine their businesses by means of a three-cornered amalgamation.

The Amalgamation will effectively provide for the acquisition of all of the outstanding equity interests of Valiant by Convalo, indirectly through the Amalgamation Entity in a transaction in which the shareholders of Valiant will receive shares of Convalo (the "Resulting Issuer Shares"). As a result of the Amalgamation of Amalgamation Entity and Valiant (the "Amalgamated Corporation"), Convalo (the "Resulting Issuer") will become the sole beneficial owner of all of the outstanding shares of Amalgamated Corporation, Convalo will become a reporting issuer listed on the TSXV, and Valiant will cease to be a reporting issuer listed on the TSXV. The exchange ratio for the exchange of shares of Valiant (the "Valiant Shares") will be 1:2.

The end result of the Amalgamation will be that the Resulting Issuer will have the following capital structure (not including the securities issuable pursuant to the Concurrent Financing (defined below)):

  1. the existing Valiant shareholders, holding 11,800,000 Valiant shares will receive and hold 5,900,000 Resulting Issuer Shares (one Resulting Issuer Share for every two Valiant shares). There are no outstanding warrants or options in the capital of Valiant;

  2. the existing Convalo shareholders, holding 53,234,550 shares of Convalo will continue to hold the same number of Resulting Issuer Shares;

  3. the existing 16,999,000 warrants to acquire shares of Convalo will continue as warrants of the Resulting Issuer; and

  4. the existing holders of 17,855,000 Convalo subscription receipts, will hold 17,855,000 Resulting Issuer Shares and warrants exercisable at $0.20 per share for an additional 17,855,000 Resulting Issuer Shares.

Following completion of the Amalgamation, and assuming the maximum Concurrent Financing is achieved, the current shareholders of Valiant will hold approximately 5.5% of the Resulting Issuer Shares, the current shareholders of Convalo will hold approximately 49.8% of the Resulting Issuer Shares, current holders of the previously issued Convalo subscription receipts will hold approximately 16.7% of the Resulting Issuer Shares, and subscribers in the Concurrent Financing will hold approximately 28.0% of the Resulting Issuer Shares.

Closing of the Amalgamation remains subject to several conditions precedent, including the preparation and filing of an Information Circular, holding a meeting of Valiant shareholders and receiving shareholder approval for the Amalgamation, holding a meeting of Convalo shareholders and receiving shareholder approval for certain matters related to the Amalgamation, and obtaining TSXV approval to the transaction.

The Amalgamation is expected to constitute the Qualifying Transaction of Valiant as defined by the policies of the TSXV, and upon the closing thereof, the Resulting Issuer will be listed as a Tier 2 Industrial issuer on the TSXV.

The Amalgamation will not constitute a "Non-Arm's Length Qualifying Transaction" (as such term is defined by the TSXV). In addition, the Amalgamation is not a "related party transaction" as such term is defined by Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions and is not subject to Policy 5.9 of the TSXV. As a result, no meeting of the shareholders of the Valiant is required pursuant to Policy 2.4 of the TSXV or securities laws, however one will be required pursuant to corporate law as the shareholders of Valiant will have to approve of Valiant amalgamating with Amalgamation Entity.

Concurrent Financing

In conjunction with the Amalgamation, Valiant anticipates completing as non-brokered private placement (the "Concurrent Financing") through the issuance of subscription receipts (the "Subscription Receipts") at $0.05 per Subscription Receipt for aggregate gross proceeds of a minimum of $1,150,000 and a maximum of $3,000,000. Each Subscription Receipt will be automatically exchangeable in certain circumstances, without additional payment, into units (a "Unit") of Valiant on a one-for-one basis concurrently with the completion of the Amalgamation. Each Unit shall consist of (i) one Valiant Share, (ii) one-half of one transferable share purchase warrant (a "Valiant A Warrant"), with each whole Valiant A Warrant entitling the holder thereof to acquire one Valiant Share at a price of $0.10 per share until the date that is the earlier of (a) thirty (30) months from the date of issuance, and (b) ninety (90) days following the Amalgamation, and (iii) one-half of one transferable share purchase warrant (a "Valiant B Warrant"), with each whole Valiant B Warrant entitling the holder thereof to acquire one Valiant Share at a price of $0.10 per share until the date that is the earlier of (a) thirty (30) months from the date of issuance, and (b) twelve (12) months following the Amalgamation. If the Amalgamation is not completed by December 31, 2015, the subscription proceeds will be returned together with any interest earned thereon to the subscriber in full satisfaction of all rights of the subscriber under his, her or its Subscription Receipts. In connection with the Concurrent Financing, on closing of the Amalgamation, agents/finders will be entitled to a cash commission equal to 7% of the aggregate gross proceeds raised and broker warrants exercisable for Valiant Shares equal to 7% of the number of Subscription Receipts issued, at an exercise price of $0.05 per Valiant Share exercisable for a period of twenty-four (24) months from the closing of the Concurrent Financing. Pursuant to the Amalgamation each Valiant Share, Valiant A Warrant and Valiant B Warrant issued pursuant to a Subscription Receipt, and each broker warrant issued pursuant to the Concurrent Financing, will be exchanged for similar securities of the Resulting Issuer on a one for two basis, and with the exercise price of the warrants increased by 100%.

Management and Board of Directors of the Resulting Issuer

In connection with the Amalgamation, Valiant will become a wholly owned subsidiary of the Resulting Issuer (Convalo) and the proposed officers and directors of the Resulting Issuer will consist of the following individuals:

Michael Dalsin, Chairman, Chief Executive Officer and Director

Mr. Dalsin is currently the Chairman of Patient Home Monitoring Corp. (TSX VENTURE:PHM), a profitable, acquisition oriented healthcare company operating in the US. Mr. Dalsin was previously a Managing Director of Stanmore Capital Partners, Inc., a healthcare services specialized investment firm since 2002. Prior to Stanmore, Mr. Dalsin worked in international investment banking and deal-making in London, Hong Kong and New York. He has participated as a lead banker and negotiator for a number of medium-sized market international roll-ups. He holds an economics degree from the University of Wisconsin- Madison.

Roger Greene, Executive Director

Mr. Greene was previously a Managing Director of Stanmore Capital Partners, Inc. since 2002. He holds a Bachelor of Arts degree in economics from Harvard College and a law degree from Harvard Law School. Mr. Greene worked with the various funds in the Robert M. Bass Group in Texas as a principal and as general counsel. He participated in a number of their opportunity funds, including Brazos Fund, which purchased $2 billion in assets in the United States and Canada, and Lone Star Fund, which has acquired and managed several billions of dollars in assets in North America, Asia and Europe. For Brazos, Mr. Greene was responsible for negotiations on a $300 million purchase of assets from a thrift in Canada, a roll-up of assets of over $100 million that resulted from the merger of two insurance companies and the securitization of hundreds of millions of dollars of loans.

Dave Costine, Director

Mr. Costine has been president of Costine Management Company ("CMC") since he founded it in 1987. CMC is engaged in finding and investing in early stage venture investments for the principal of the company and other qualified individuals. From 1988 until 2003 he was the managing general partner of Corporate Venture Partners LP, an institutional partnership he founded in 1988. Investors included the New York State Teachers Pension Fund, New York State Employees Pension Fund, Chase Manhattan Bank, Niagara Mohawk Power Corp., Corning Inc. and Cornell University. The fund has an overall rate of return of 18.7% annually over its 13 year life. He has served on the boards of many early state companies, four of which became public. He is currently on the board of trustees of the Cornell University Foundation. He has a BME from Cornell and an MBA from Harvard.

Nitin Kaushal, Director

Mr. Kaushal has worked in senior roles with a number of Canadian investment banks focused on healthcare, including Desjardins Securities Inc., Orion Securities Inc., Vengate Capital, HSBC Securities Inc. and Gordon Capital. He has held roles within the private equity/venture capital industry at MDS Capital Corp. and at PricewaterhouseCoopers in their mergers and acquisitions, valuations and audit groups. In addition, Mr. Kaushal has sat on a number of public and private company boards. He obtained a Bachelor of Science (Chemistry) degree from the University of Toronto and is a Chartered Accountant.

David Ward, Chief Financial Officer

Mr. Ward previously was Chief Financial Officer for Patient Home Monitoring Corp. (TSX VENTURE:PHM) . He has also worked as a financial analyst for Stanmore Capital Partners, Inc. Mr. Ward is a graduate of Columbia University's Graduate School of the Arts and Sciences for Financial Mathematics and holds a Bachelor of Arts degree from the University of California, Berkeley in Mathematics.

Robbie Grossman, Corporate Secretary

Mr. Grossman holds a LL.B. from the University of Windsor and a B.A. (Political Science) from Concordia University. Mr. Grossman was called to the Ontario bar in 2002. Mr. Grossman, an experienced securities lawyer, joined McMillan LLP in September 2013 after having been with Garfinkle Biderman LLP since 2004. He assists public and private companies and securities dealers with corporate finance, M&A and securities matters. Prior to joining Garfinkle Biderman LLP, Mr. Grossman was the founder and President of a publishing company. He is currently an officer and director of several reporting issuers.

Dennis Wilson, Vice-President of Corporate Affairs

Mr. Wilson holds a degree from the University of California, Los Angeles in English, with a Minor in Political Science. Mr. Wilson has worked as the Vice-President of Corporate Affairs for Convalo since 2013.

Sponsorship

Leede Financial Markets Inc., subject to completion of satisfactory due diligence, has agreed to act as sponsor in connection with the proposed Qualifying Transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the proposed Qualifying Transaction or the likelihood of completion.

Completion of the proposed transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable pursuant to TSXV requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

The financial data contained herein is unaudited and may be subject to refinement or modification during the audit process. Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information release or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The TSXV has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Neither TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

This press release does not constitute and the subject matter hereof is not, an offer for sale or a solicitation of an offer to buy, in the United States or to any "U.S Person" (as such term is defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "1933 Act")) of any equity or other securities of Valiant. The securities of Valiant have not been registered under the 1933 Act and may not be offered or sold in the United States (or to a U.S. Person) absent registration under the 1933 Act or an applicable exemption from the registration requirements of the 1933 Act.

Contact Information

  • Valiant Minerals Ltd.
    Nadia Traversa
    Director
    (604) 684-6264

    Convalo Health International, Corp.
    Michael Dalsin
    Chairman
    (949) 242-0332
    mpd@canparcap.com