Salona Global Medical Device Corporation Announces Execution of a Non-Binding Agreement to Acquire a US$14M in Annual Revenue Physical Therapy Medical and Equipment Business with 35% Gross Margins
SAN DIEGO, June 09, 2022 (GLOBE NEWSWIRE) — Salona Global Medical Device Corporation (“Salona Global”, “SGMD” or the “Company”) (TSXV:SGMD), a fully integrated acquisition focused medical device company serving the global injury and surgery recovery (known as recovery science) market, announced today that on May 27, 2022 it executed a non-binding agreement (“Agreement”) to acquire a cash flow positive medical device business. The Company has come to financial terms to acquire a company providing medical devices and equipment for physical therapy clinics in the U.S. (“Acquisition Target”). According to preliminary due diligence, the Acquisition Target has unaudited annual revenues of approximately US$14M. It reported 35% unaudited gross margins, has a strong balance sheet relative to revenue, and is generating free cash flow. This potential acquisition would improve the Company’s gross margin, putting the Company on plan to meet its stated 40% gross margin target. Management believes this cash flow and asset base can be leveraged to close the deal.
According to the Agreement, Salona Global would pay US$14,00,000 or one (1) times annual revenues, made up of an initial cash payment of US$9,000,000 on closing and the issuance of up to 3,300,000 shares* and US$3,000,000 in a subordinated note. The Company is working with its current lender to secure financing to close the deal without need for equity financing.
This potential acquisition would build upon the strategy to create a fully integrated global medical device company and, if completed, would continue to add cash flow as well as a significant customer list and an additional sales channel for all SGMD’s current and future products. As with acquisitions in the past, this potential deal may provide the opportunity for further organic growth as Salona Global builds out its medical device product portfolio, both through acquisition and product development.
“We are excited to move forward with this deal. It would add a significant amount of revenue and cash flow to our growing company. Perhaps most importantly it can also add a large and growing customer base for us to cross sell other products,” said Les Cross, Chairman of Salona Global. “While we are in preliminary due diligence, we are confident that we can tap our current lending facility to close this deal. To reiterate, our goal for 2022 is simple: acquire more businesses and build out our product portfolio, both by acquisition and internal product development. As with our previous acquisitions, this potential deal would add revenue and cash flow, as well as add a significant customer base and sales channel we can expand.”
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For more information please contact:
Les Cross
Chairman of the Board and Interim Chief Executive Officer
Tel: 1 (800) 760-6826
Email: Info@Salonaglobal.com
* Share price is based on foreign translation on May 8, 2022.
Additional Information
Readers are cautioned that the financial information regarding the Acquisition Target disclosed herein is unaudited and derived as a result of the Company’s due diligence, including a review of the Acquisition Target’s bank statements and tax returns.
There can be no assurance that the potential acquisition and/or the Company securing financing to close the deal will be completed as proposed or at all and no definitive agreement has been executed. Completion of the acquisition and financing will be subject to applicable director, shareholder and regulatory (including the TSX Venture Exchange) approvals.
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.
Certain statements contained in this press release constitute “forward-looking information” within the meaning of the Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. These statements can be identified by the use of forward-looking terminology such as “expects” “believes”, “estimates”, “may”, “would”, “could”, “should”, “potential”, “will”, “seek”, “intend”, “plan”, and “anticipate”, and similar expressions as they relate to the Company, including: the timing and potential closing of the acquisition and financing; the financial impact to the Company of acquiring the Acquisition Target; and the Company acquiring more businesses and building out its product portfolio in 2022, both by acquisition and internal product development. All statements other than statements of historical fact may be forward-looking information. Such statements reflect the Company’s current views and intentions with respect to future events, and current information available to the Company, and are subject to certain risks, uncertainties and assumptions, including, without limitation: the Acquisition Target achieving results at least as good as its historical performance; the financial information regarding the Acquisition Target being verified when included in the Company’s consolidated financial statements; and the Company successfully identified, negotiating and completing additional acquisitions. The Company cautions that the forward-looking statements contained herein are qualified by important factors that could cause actual results to differ materially from those reflected by such statements. Such factors include but are not limited to the general business and economic conditions in the regions in which the Company operates; the ability of the Company to execute on key priorities, including the successful completion of acquisitions, business retention, and strategic plans and to attract, develop and retain key executives; difficulty integrating newly acquired businesses; the ability to implement business strategies and pursue business opportunities; disruptions in or attacks (including cyber-attacks) on the Company’s information technology, internet, network access or other voice or data communications systems or services; the evolution of various types of fraud or other criminal behavior to which the Company is exposed; the failure of third parties to comply with their obligations to the Company or its affiliates; the impact of new and changes to, or application of, current laws and regulations; granting of permits and licenses in a highly regulated business; the overall difficult litigation environment, including in the United States; increased competition; changes in foreign currency rates; increased funding costs and market volatility due to market illiquidity and competition for funding; the availability of funds and resources to pursue operations; critical accounting estimates and changes to accounting standards, policies, and methods used by the Company; the occurrence of natural and unnatural catastrophic events and claims resulting from such events; and risks related to COVID-19 including various recommendations, orders and measures of governmental authorities to try to limit the pandemic, including travel restrictions, border closures, non-essential business closures, quarantines, self-isolations, shelters-in-place and social distancing, disruptions to markets, economic activity, financing, supply chains and sales channels, and a deterioration of general economic conditions including a possible national or global recession; as well as those risk factors discussed or referred to in the Company’s disclosure documents filed with United States Securities and Exchange Commission and available at www.sec.gov, and with the securities regulatory authorities in certain provinces of Canada and available at www.sedar.com. Should any factor affect the Company 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, the Company does not assume responsibility for the accuracy or completeness of such forward-looking information. The forward-looking information included in the investor call is made as of the date of the investor call and the Company undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction. The securities issuable have not and are not currently contemplated to be registered under the United States Securities Act of 1933, as amended (the “1933 Act”), or state securities laws. Accordingly, such securities will not be offered or sold to U.S. persons except pursuant to applicable exemptions from the registration requirements of the 1933 Act and applicable state securities laws.
