CONFIDENTIAL

To: FLC Credit Partners Investment Committee

From: Jay Rogers, Jacques Small
Date: 12/15/2021
Re: Discovery House
Overview
Company: The Discovery House, LLC, Discovery Transition
Outpatient, Inc., and DHP Heights, LLC DBA Circle of Hope
Located in Reseda, California, the entities operate in the
behavioral health industry providing Inpatient and
Outpatient care for clients struggling with drug and
alcohol addiction
Website: https://www.thediscoveryhouse.com
Industry: Rehabilitation Services
Ownership: Private
2021E Revenue 1: $30mm
2021E EBITDA1: $6.2mm
Facility Size (Total / FLC Commit / FLC Target Hold) $12mm / $11.2mm / $11.2mm
Use of Proceeds Dividend
Take-on LTM Leverage (Total / Through FLC) 1.92x/1.79x
Take-on Debt Service Coverage: 2.43x
Yield to Worst: 11.7%
FLC Deal Team: Jay Rogers, Peter Eschmann, Jacques Small
Legal Counsel: Stradling
Deal Source: via Five Crowns Capital Partners
Administrative Agent: FLC Credit Partners
Timing: December 31, 2021

Deal Summary
Discovery House (“Discovery”) is an LA-based drug & alcohol substance abuse continuum of care facility
founded in 2005 by Tom & McKay Whiting. Discovery is comprised of three facilities – two inpatient (42 beds)
and one outpatient (62 beds) – and offers integrated treatment for substance abuse, addiction and co-morbid
mental health issues. Inpatient services are sub-acute detox and residential treatment; outpatient services
include trauma resolution, family therapy and relapse prevention.

Five Crowns Capital Partners is working with Discovery’s owners to secure ~$12mm of financing to fund a
~$10.35mm dividend to the owners, with the remainder going to deal expenses (~$1mm) and balance sheet

1
LTM Consolidated October 2021

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cash (~$650k). FLC is considering a ~$11.2mm 1st lien, 1st out term loan to the business, priced at L+10.75
with a 1.25% floor, 150bps to close and a warrant for 19% of the equity. Sources & uses of the transaction
are shown below.

$ mi l l i ons
Sources Uses
FLC Term Loan 11.20 Divident to Owner 10.35
FCCP 2nd-out TL 0.80 Fees & Expenses 1.00
Cash 0.65
$ 12.00 $ 12.00

Investment Thesis
The demand for behavioral health services, which was already high prior to Covid, has increased during the
pandemic and far exceeds the current capacity of behavioral health providers. Innovative use of technology
has helped improve access to providers and behavioral health services, but further efforts are needed to
address the demand/supply imbalance.

For investors, the increased demand for behavioral health services, combined with a favorable
reimbursement landscape where employers, commercial payers, and government payers are all providing
funding, creates tailwinds. Coming out of Covid, there will be opportunities for consolidation, combining
businesses and leveraging technology to build larger, more scalable businesses. Now is the time for investors
to begin thinking about and preparing for opportunities in this space.

Barriers to entry include:

• Joint Commission Accredited (held by only 18.8% of treatment centers in California);
• California accounts for the highest concentration of facilities in the U.S. (1,502 facilities in CA, or 14.2%
of the US total);
• Established medical network and a strong reputation for care that generates referrals; and
• DH focuses exclusively on treating patients with private insurance (21.0% of the market), reducing the
risk of non-payment.

DH has hired a new CEO and CFO to replace the founders and intends to spend the next 2/3 years 1) improving
the quality and readability of their financial statements, 2) maintaining high occupancy (currently above 90%
as of October 2021 and 3) gaining more in-network insurance certification, which is of particular interest by
financial buyers. With the financing at less than a 2x multiple, we believe we are well-covered and
compensated for our risk.

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Discovery House Overview

In 2018 the Company went through a reorganization The Discovery House (“TDH”) (30 beds) – Detox / Inpatient
process which created the two Discovery Units: (i) The - ~93% occupa ncy, 65 FTEs , l i cens ed i n 2010
Discovery House, LLC and (ii) Discovery Transition - $12.1MM Rev ($24.4K/pa ti ent) $1.6MM EBITDA (2H19 run ra te)

Outpatient, Inc. The Discovery House, LLC is the
inpatient care operations and Discovery Outpatient is
the outpatient care operations. DHP Heights, LLC was
created in 2018 and reports as a separate entity from
Circle of Hope (“COH”) (12 beds) - Detox / Inpatient
- ~92% occupa ncy, 17 FTEs , opened i n Ma rch ’18
- $4.3MM Rev ($21.5K/pa ti ent), $1.8MM EBITDA (2H19 run ra te)
Discovery Transitions Outpatient (“DTO”) - Outpatient services
-17.5K pa ti ent da ys i n 2019, 15 FTEs

the Discovery units. It is exclusively an in inpatient care -$7.4MM Rev ($20.1K/pa ti ent), $2.7MM EBITDA, (2H19 run ra te)
Adjustments Family Services (“AFS”) - Detox / Inpatient
operation.
- 6 bed i npa ti ent fa ci l i ty
Divine Detox (“DD”) - Outpatient services
Group Structure
- Outpa ti ent fa ci l i ty, s i mi l a r to DTO

$11.2m Tom & McKay

FLC
Whiting
100%

Discovery Adjustments
The Discovery Circle of Hope Divine Detox
Transitions Family Services
House ("TDH") ("COH") ("DD")
Outpatient ("DTO") ("AFS")

Reseda Operations Simi Valley Operations

Borrower
Guarantors

Services
• Integrated treatment for substance abuse, addiction and co-morbid mental health issues;
• Inpatient services: Sub-acute detox, residential treatment (RT), partial hospitalization (PHP),3:1
patient/staff ratio, ~20 days ALOS; and
• Outpatient services: PHP,IOP; dual diagnosis treatment, trauma resolution, family therapy, relapse
prevention, ~42 days ALOS.

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Business Model
• Facilities maintain high occupancy due to strong reputation, sophisticated marketing program
(emphasizes outbound email and targeted telemarketing, banners, search engine optimization) and
loyal alumni network
• Captive referral network from Inpatient to Outpatient - over ~80% of TDH inpatients enroll in DTO
outpatient services
• Growth: DTO outpatient volume can be generated from COH patients who are currently
referred to another facility
• Separated six-bed design of facilities has helped to mitigate transmission and impact of Covid-19
• Similar margins feasible with selected in-network programs via cost savings, but no plans to switch
given strength of demand

Key Milestones

Macro-Economic Environment
Over the five years to 2021, demand for substance use disorder and mental illness treatment has increased
amid growing funding and expanding eligibility requirements for public health coverage alongside high
reported rates of behavioral health problems. Mental Health and Substance Abuse Centers industry
establishments, which offer long-term residential housing for individuals struggling with mental illness and
substance use disorder, provide individuals intensive, specialized treatment programs. Due to the

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fragmented nature of the industry, specific treatments can vary widely establishment to establishment.
Industry revenue is expected grow as follows:

• ~$17.6bn Inpatient substance abuse and mental health market growing at ~2.2% to 2024 2
• ~$23.4bn Outpatient substance abuse and mental health market expected to grow at 5.2% to 2024 3
• California accounts for over ~14% of total U.S substance abuse market and over 10% of U.S facilities 4

The coronavirus is a barrier to enter for this industry given the current shortage of medical professionals.
New entrants will find it increasingly difficult to appoint medical professionals and begin a thriving
rehabilitation center.

2
Mental Health & Substance Abuse Centers in the US, IBIS World, November 2019
3
Mental Health & Substance Abuse Clinics in the US, IBIS World, May 2019
4
2018 State Profile, California, National Survey of Substance Abuse Treatment Services (N-SSATS), U.S. Dep’t of Health and Human Services

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Historical Financials

($ in thousands) 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021F 2019 2020 2021
P&L Summary Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual
Discovery House Inpatient 3,185 3,300 3,456 3,345 2,757 3,576 3,375 3,085 3,183 1,989 1,440 2,181 13,286 12,793 8,793
Discovery Transitions Outpatient 1,409 1,758 1,868 1,847 1,890 1,708 1,433 1,478 1,797 1,499 1,416 1,242 6,882 6,508 5,953
Circle of Hope 245 1,080 1,273 1,222 1,368 1,360 1,166 1,560 1,242 1,166 1,103 1,162 3,820 5,454 4,673
AFS (Simi Valley) 62 191 231 818 918 965 775 1,251 731 1,161 997 937 1,302 3,909 3,826
Devine (Simi Valley) 0 2 67 646 524 459 468 677 1,103 1,756 1,384 1,415 715 2,128 5,658
Revenue Adjustments 188 -17 -181 -232 391 -1,580 318 111 -308 -1,209 2,039 530 -242 -759 1,051
Total Revenue 5,088 6,314 6,715 7,646 7,848 6,487 7,535 8,161 7,747 6,361 8,379 7,467 25,763 30,032 29,954
%y/y growth 72% 24% 6% 14% 3% -17% 16% 8% -5% -18% 32% -11% 61% 17% 0%

Total Adj. EBITDA 831 1,719 1,383 1,935 1,570 541 1,394 2,119 1,874 452 2,338 1,583 5,867 5,624 6,248
% Margin 16% 27% 21% 25% 20% 8% 19% 26% 24% 7% 28% 21% 23% 19% 21%

Overview
The Company’s strong reputation and effective marketing reach have led to high demand for its inpatient
and outpatient programs. Revenue reached $25.8mm in 2019 (up 61% from 2017) as inpatient volume
continued to increase at TDH (mature facility) and COH (opened in March 2018, expanded to 92% of capacity).
The Company’s largest expenses are Advertising (25.0% of revenue) to support high occupancy, and Payroll
(20.5% revenue) to support strong outcomes. The Company has a contract with a third-party marketing
company that provides revenue generating leads to the it’s inpatient facility.

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Projected Financials

Historic (Dec) Take-on Forecast

$'Thousands 2019A 2020A 2021F* 2021F 2022F 2023F 2024F

Income Statement Summary

Revenue 25,763 30,032 29,954 29,954 29,888 31,068 32,107
Adj. EBITDA 5,867 5,624 6,248 6,248 5,426 5,634 5,948
% Margin 23% 19% 21% 21% 18% 18% 19%

Cash Flow Summary

EBITDA 5,867 5,624 6,248 6,248 5,426 5,634 5,948
Less: Cash Interest - - 1,410 - 1,457 - 1,299 - 1,235 - 1,172
Less: Cash Taxes - 2,117 - 1,226 - 2,014 - 1,696 - 1,826 - 2,007
Less: CapEx - 770 - 600 - 659 - 600 - 600 - 600
Less: Advisory Fee - 120 - 120 - 120 - 120 - 120 - 120
Change in Working Capital - 779 - 300 - 1,051 - 250 - 250 - 250
Free Cash Flow 2,081 1,968 6,248 946 1,462 1,603 1,799
Loan Amort - - 684 - - 576 - 574 - 571
FCF After Debt Service 2,081 1,284 6,248 946 886 1,029 1,228
Excess Cash Flow Sweep 65.0% - - - - 265 - 593 - 736
Equity Distributions 32.5% - - - - 132 - 296 - 368
Cash to Balance Sheet 2,081 1,284 6,248 946 489 139 124

Balance Sheet Summary

Cash & Cash Equivalents 650.0 650 1,139 1,278 1,402

Revolver - - - -
Term Loan (Take on end 2021) 12,000 11,159 10,031 8,814
Total Debt 12,000 11,159 10,031 8,814
Net Debt 11,350 10,021 8,753 7,411

Net Debt/EBITDA 1.82x 1.85x 1.55x 1.25x

Covenants
Minimum EBITDA 4,250 4,250 4,250 4,250 4,250
Projected EBITDA 6,248 5,426 5,634 5,948
% Cushion 47% 28% 33% 40%

Max Gross Leverage 2.75x 2.75x 2.75x 2.75x 2.75x

Projected Leverage 1.92x 2.06x 1.78x 1.48x
% Cushion 43% 34% 54% 86%

Debt Service Coverage 1.25x 1.25x 1.25x 1.25x 1.25x

Projected FCCR ((EBITDA-Capex)/(Debt Service)) 3.84x 2.57x 2.78x 3.07x
% Cushion 207% 106% 123% 145%

Minimum Balance Sheet Cash 500 500 500 500 500

Projected Cash 650 1,139 1,278 1,402
% Cushion 30% 128% 156% 180%
Term Loan
Beginning balance - 12,000 11,159 10,031
Interest Accrue 11.75% - 1,410 1,311 1,179
Amort (pm) 0.4% - - 576 - 536 - 481
Interest Paid - 1,410 - 1,311 - 1,179
Excess Cash Flow Sweep - - 265 - 593 - 736
Ending Balance 12,000 11,159 10,031 8,814

Assumptions
*Last twelve months months

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Risks/Mitigants
• Dividend recapitalization – the proceeds of the loan will be used for a dividend recapitalization and
therefore be cash out of the system.
o The shareholders are Tom & McKay Whiting whom are leveraging their Discovery House’s capital
structure to diversify their portfolio. Tom & McKay Whiting have been running a successful
business since 2005 and have been earning substantial income. It’s likely they have other assets
available should an equity injection be required.
• Improper reimbursements from insurance companies – in 2018 the Company’s revenue declined due to
the inefficiencies of collecting payments from payor’s (insurance companies).
o In July of 2018, the Company changed its billing process from billing and collecting from in house
to outsourcing these tasks to a third-party billing company. Soon after engaging with the billing
company, the Company experienced a significant decrease in reimbursements due to improper
billing for services it had rendered. In November of 2018, the Company terminated its agreement
with the outsourced party and engaged Nextus to prepare, process, and submit all claims. Nextus
has produced excellent results since.

• Change of Management – The Whitings will substantially be removing themselves from operations
following the closing of the transaction. The new management team (Bob Diehl, CEO, and David Tessers,
CFO) will be assuming responsibility for the business and we believe, therefore, that the risk of current
ownership “checking out” will have minimal impact.

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Three-Dimensional Capital Considerations

While we are not aware of any families within the 1K1V/FLC network with a direct rehabilitation services
focus, there is certainly prominent support for services like these (Green, Belk families).

Approval Sought
We are requesting Investment Committee approval to call capital, close and fund the loan and investment as soon
as possible, likely expected to be early in November, 2021.

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APPENDIX A: SUMMARY LOAN TERMS

Lenders: FLC Credit Partners and Five Crowns Credit Partners, LLC and [co-lender]
Borrowers: The Discovery House, LLC, Discovery Transitions Outpatient, and DHP
Heights LLC, Divine Detox, Adjustment Family Services
Guarantors: All current and future subsidiaries of the Borrowers including Tank Top
Dog, LLC (dba TTD Management)
Agent: [TBD] (annual agency fee not to exceed $25k)
Facility: Senior Secured Term Loan (the “Loan”), a portion of which may be
syndicated and/or sub-divided into multiple tranches of term loan and/or
subordinated debt
Amount: $12,000,000
Term: 42 months from the date of initial funding
Purpose/Use of The Loan will fund a dividend to shareholders, add cash to the balance
Proceeds: sheet, fund working capital and other general business needs, and pay
related fees and expenses as set forth in Appendix B
Collateral: The Loan and the other obligations of the Borrowers under the definitive
loan documents (the “Loan Documents”) will be secured by (i) a first
priority (subject to customary permitted liens to be agreed upon),
perfected security interest in, to and upon all of the Borrower’ and
Guarantors’ assets at the time of the closing of the Loan as well as those
assets acquired or established during the life of the Loan, and (ii) a non-
recourse pledge of 100% of the equity ownership of the Borrowers and
Guarantors by each of the Borrowers’ equity holders (the “Shareholders”).
Springing Limited In the event of certain prohibited competitive behaviors or a material
Pledge: violation of certain prohibited actions (to be mutually agreed upon and
documented in the Loan Documents) by the Shareholders which negatively
impacts the Company and results in principal impairment of the Loan
Amount, the Shareholders will pledge the equity of the Related Party
Operations (as defined below) and related party real estate to cover any
resulting loss of principal.
Related Party Regarding MT Process LLC (dba Divine Detox), MT Golden LLC (dba
Operations: Adjustment Family Services), Diamond Dog LLC (dba Honey Pine), Tower
Building Property LLC (dba School Street) and Tank Top Dog LLC (dba TTD
Management) (collectively, the “Related Party Operations”), Borrowers,
must, subject to and except as provided by applicable law, adhere to the
following:
• All referrals from The Discovery House (“TDH”) and Circle of Hope
(“COH”) facilities must be made to the Discovery Transitions
Outpatient (“DTO”) facility to ensure that DTO achieves a

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minimum of $1.6mm of revenue in each trailing three-month

period (the “Minimum DTO Revenue”) through 2021,
• If the Minimum DTO Revenue is being exceeded, then referrals can
be made from TDH and COH to other Related Party Operations that
are outpatient facilities,
• The Minimum DTO Revenue amount will increase to $1.8mm in
each trailing three-month period in 2022 and then increase by 2%
each year thereafter,
• If the Shareholders seek to recapitalize the Related Party
Operations, Lenders will also have the right of first refusal to
consolidate the Related Party Operations into the Borrowers by
funding an additional dividend to the shareholders in an amount
equal to 3x the incremental LTM EBITDA of the added operations.
If the owners choose to sell the Related Party Operations that are
outpatient facilities to a third-party, all outpatient referrals must
go to DTO to the extent that open capacity exists,
• TTD, LLC cannot be sold off at any time and must be owned and
operated either by (i) the Company or (ii) the Company’s
controlling shareholders.
Interest: The outstanding principal balance of the Loan will bear interest until repaid
in full at an annual non-default rate equal to one-month LIBOR plus
10.50%, payable monthly in arrears (on a blended basis if sub-divided into
multiple tranches)
LIBOR Floor: 1.25%
Principal Amortization: 0.40% per month of the Amount
Upfront Structuring Fee The Loan will be funded at 97% of par
/ Original Issue Discount:
Equity Participation: Lenders will receive penny warrants for 33.5% of the fully diluted
equity in the business with seven year put rights set at 5.5x LTM
EBITDA, less net debt. The put will not be exercisable until the earlier
of full repayment of the Loan and the fifth anniversary of the funding
date. If the put is exercised, the Borrower shall have 120 days to re-
purchase the equity from the warrant holders. Warrants will be
treated as converted for income allocation purposes such that Lenders
receive pro rata tax distributions.

Voluntary Prepayments: Voluntary prepayments in Year 1 may be made by the Company at 105.0
Voluntary prepayments in Year 2 may be made by the Company at 104.0
Voluntary prepayments in Year 3 may be made by the Company at 103.0
Voluntary prepayments in Year 4 may be made by the Company at par

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Mandatory Usual and customary for transactions of this type, including a semi-annual
Prepayments: excess cash flow sweep of 65% of each of the Borrowers free cash flow
(defined as cash flow after all expenses, capex, etc.) at the end of each
fiscal half year (semi-annual sweep) which will, at Lenders’ discretion, be
paid to [TBD], as Agent, and applied to the principal outstanding balance
of the Loan;
Shareholder Shareholders will receive a combined $400k per year in salary and will
Compensation: receive an annual bonus equal to half of the amount of the free cash flow
sweep mentioned above, subject to covenant compliance pro forma for
the distribution (i.e., EBITDA less the shareholder distribution must exceed
the minimum EBITDA covenant). If at the end of 2021 the Company has in
excess of $1,000,000 in cash on the balance sheet (after taking into account
any pending cash payouts to Lenders and shareholders based on the excess
free cash flow sweeps) and is not in violation of any covenant or other
provision in the Loan Agreement, an additional one-time $250,000
payment will be distributed to the Shareholders from balance sheet cash.
Board or Management The Shareholders understand that the Lenders may require the formation
Committee Rights: of a board or management committee, and the Lenders will have the right
to two observer seats, one of which can become a formal seat at Lenders’
option. It is understood that the Shareholders will control at least a two-
thirds majority of any such board or management committee.
Management Advisory $10,000 per month
Fee:
Other Debt: Company pre-consents that Lenders can raise an AR-based revolver or
factoring facility post-closing to pay down the Loan at any time as long as
such debt does not increase the blended cost of capital or result in any new
material obligations on the Company (beyond standard borrowing base
certificates and the like).
Conditions to Funding: Closing and funding of the Loan will be subject to the satisfaction of all
conditions precedent deemed necessary or appropriate by Agent,
including, without limitation:
• Completion of a Quality of Earnings roll forward satisfactory to the
Lenders (the final work product of which will be owned by the
Borrowers);
• The Lenders have reviewed the Borrowers’ Quality of Earnings
report prepared by Somerset, CPAs, including the add-backs
included in the “adjusted” EBITDA and acknowledge that a similar
approach may be utilized in such roll forward of the Quality of
Earnings report, and that certain non-recurring and COVID-related
adjustments may be reasonably factored into the adjustments to
EBITDA;

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• Hiring of a CEO and CFO who will be recommended by the Lenders

and approved by the Company’s board with mutually agreed upon
Employment Agreements in place prior to closing;
• Completion of Regulatory and Compliance diligence;
• Onsite diligence meetings with management;
• Review of contracts and other agreements;
• Background checks completed for key executives; and
• Satisfactory completion of Loan documentation and intercreditor
agreement, including the below conditions, among others:
o Minimum cash on the balance sheet at close of $650,000
o Minimum LTM Adjusted EBITDA of $4,250,000
Covenants: Affirmative and negative covenants for the Borrowers and their respective
subsidiaries, if any, customary and appropriate for transactions of this
nature, including, without limitation, the following:
Affirmative Covenants:
• Maintenance of Borrowers’ assets; and
• Customary financial and other reporting requirements, including a
requirement that Borrowers provide monthly financial updates.
Negative Covenants – Restrictions, subject to Lender’s written consent:
• Liens;
• Debt, guaranties or other contingent obligations other than the
pre-consented AR-based revolving or factoring facility;
• Unauthorized dispositions of assets;
• Cash Dividends and other distributions to equity interest holders,
however Lenders will allow proceeds related to the ADS litigation
to be distributed to Shareholders as long as no litigation-related
expenses are being run through the Company post-closing of this
financing; and
• Material changes to the nature of the Borrowers’ core businesses
and the core businesses of their respective subsidiaries, if any.
Financial Covenants – To be agreed upon, but including and not limited to:
• Minimum LTM adjusted EBITDA of $4,250,000 (tested quarterly)
• Maximum Gross Leverage of 2.75x (tested quarterly);
• Minimum Fixed Charge Coverage Ratio of 1.25x; and
• Minimum Liquidity of $500,000

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Events of Breach and Customary and appropriate for transactions of this nature including, in the
Default case of certain covenants, customary cure periods. In the event of a
payment, financial, or informational covenant default, the following
related-party expenses will be accrued rather than paid in cash until the
Borrowers are back in covenant compliance:
• Any rent paid to the shareholders that is in excess of the mortgage
debt service and property taxes required to be paid by them on the
properties,
• Cash payments to TTD, LLC will be reduced by $40,000 per month
• Lenders will have the right to compel the Company to begin a sale
process beginning 24 months post-closing of the Loan and can
compel a sale of the Company to be completed with the highest
bidder in the event of (i) any material and uncured covenant
defaults within the prior 24 months, or (ii) the pre-tax proceeds
from the sale would result in at least $20,000,000 of consideration
going to the Shareholders.
Default Interest Rate: In the event of default, the applicable interest rate would be increased by
three hundred basis points per annum until the default is cured or waived
by the Lenders in writing.
Governing Law: The Loan Documents would be prepared by counsel to Agent and would
be governed by the internal laws of the State of New York.

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APPENDIX B: SUMMARY OPERATIONS

Shareholders
Tom Whiting - Mr. Whiting, co-owner and co-founder, has led the growth of the Companies
from one sober living facility in 2010 to a continuum of 42 inpatient beds, over
Co-Founder, CEO
17k outpatient visits and three sober living facilities.
- Mr. Whiting has extensive experience in commercial and residential
construction and real estate and has designed facilities tailored to residential
treatment.
- Over 25 years of experience in the addiction recovery field.
McKay Whiting - Mrs. Whiting, co-owner and co-founder, has led efforts to obtain licensing and
Co-Founder accreditation of the facilities, coordinated relationships with local hospitals and
clinicians, and previously oversaw admissions.
- Mrs. Whiting is currently in charge of the financial operations of the Companies
and other companies owned by the Whitings.
Management
Nicholas Russi - Mr. Russi joined the Company in 2020 as Program Administrator and oversees
LAADC, CCS all departments
Program
- Has worked in the substance abuse and mental health field for over 18 years
Administrator
- Mr. Russi is a licensed Alcohol & Drug counselor in the State of Calif and a
certified clinical supervisor
Amanda Loya - Promoted to Program Director for Circle of Hope
TDH & COH - Former responsibilities included Counselor at TDH, Operations role at DTO, and
Program she also worked in the
Director
- Joined Company in 2009
Jorge Becerra - Program Director Discovery Transitions
DTO Program - Former Counselor Residential and Outpatient
Director
- Joined Company in 2016
Dr. Philip Valdez, - Dr. Valdez has served as the Company’s Global Clinical Director since 2020 as
Psy.D., LMFT, an independent contractor
LADC Global
- Dr. Valdez has a long history of working with families and individuals who suffer
Clinical Director
from mental health and substance use disorders in various settings, from a
private practice in Pasadena, CA to psychiatric hospitals

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APPENDIX C: SUMMARY LOAN TERMS

Reseda Operations
The Discovery House (“TDH”)
The Discovery House mission is to save and restore lives. TDH’s staff is comprised of compassionate
professionals, providing residents with solutions for the physical, psychological, sociological, emotional and
spiritual issues they struggle to address. Target caseloads of three residents to every one counselor and
certified counselors offer dedicated, individualized care to residents, using evidence-based methods.
Counselors are present at the facilities 24 hours a day Strong alumni program that helps prevent relapse. The
treatment centers are built especially for treatment. A newly admitted patient will first see a consulting
physician or a nearby hospital. The patient then meets with counselors for a complete and thorough history,
to start an individually tailored plan.

Key stats include:

• Patients typically approved for 20+ days of inpatient care
• Over 80% of discharges enrolled in DTO outpatient facility in 2019
• Occupancy is typically 90 95%
• 2019 Rev per Patient ~ $23.1K
• Joint Commission Accreditation

Inpatient evidence-based methods:

• Motivational interviewing
• Rational emotive behavioral therapy
• Cognitive behavioral therapy
• Psychodrama group
• Music group
• Mindfulness group
• Neurofeedback
• Yoga
• Art Therapy
• Process Groups

Cirle of Hope (“COH”)

Circle of Hope is a 12 bed luxury addiction treatment facility based in the heart of the San Fernando Valley
with proximity to some of the best hikes, views, and tourist must see’s that Los Angeles has to offer. Facilities
are Joint commissions accredited. Outdoor pool and seating area surrounded by palm trees.

Key stats include:

• ~20+ days ALOS

16 | P a g e 5251 DTC Parkway, Suite 1050

Greenwood Village, CO 80111
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• Occupancy in 2019 averages 89%

• 2019 Rev. per Patient ~$ 19.7K
• Primarily refers patients to AFS outpatient, but also refers to DTO

Discover Transitions Outpatient (“DTO”)

Patients that have less than 90 days of combined inpatient /outpatient services are more likely to relapse
Therefore, having access to a continuum of inpatient and outpatient care is critical to achieving better
outcomes

Key stats include:

• DTO’s length of stay can vary from 45 days up to 6 months
• 2019 Revenue per Patient ~ $20.5K
• Typically, over 80% or patients discharged from TDH are then admitted to DTO. This client transition rate
is monitored for each counselor

Treatments offered:
• Intensive Outpatient Alcohol Treatment
• Intensive Outpatient Therapy (IOP Therapy)
• The brain chemistry of addiction
• Relapse prevention
• Dual Diagnosis Treatment
• Outpatient Drug Rehab
• Alcohol Rehab
Discover Transitions Outpatient (“DTO”)
Sober living facilities are also a key component to the Company’s continuum of care. Having access to housing
during the transition to outpatient from inpatient is a key component to keeping the patients on the road to
recovery. All sober living facilities are designed in the same 6 bed format so that they can easily be converted
to inpatient facilities. This would require and application to license the facility an inpatient facility, which
typically takes 6 months up to one year to obtain approvals.

17 | P a g e 5251 DTC Parkway, Suite 1050

Greenwood Village, CO 80111
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1) 6930/6932 Balcom Ave (19 bed female house for sober living/ ~3.8K sq. ft. house)

2) 17900 / 17902 Van Owen St. (22 bed male house for sober living/ ~3.9K sq. ft. house)

3) 17349 Saticoy St. (21 bed male house for sober living/ ~1.1K sq. ft. house)

18 | P a g e 5251 DTC Parkway, Suite 1050

Greenwood Village, CO 80111
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Simi Valley Operations

Divine Detox (“DD”)
• 6 bed inpatient facility, licensed in 2019 to provide detox and residential treatment services
• Church Street was closed in Feb 2020, which is connected to Divine Detox, and submitted the
paperwork for additional 6 beds. It should be expanded to 12 beds in 6 months
Adjustment Family Services (“AFS”)
• COH patients are currently referred to AFS (as opposed to DTO) for outpatient services, therefore AFS
has also been included as a guarantor to reduce the risk of earnings leakage outside of the borrower
group
• ~2,500 sq. ft commercial rental, with 2 apartments attached for use by
• AFS average census is ~40 patients

19 | P a g e 5251 DTC Parkway, Suite 1050

Greenwood Village, CO 80111