Vancouver, British Columbia--(Newsfile Corp. - March 22, 2023) - Kovo HealthTech Corporation (TSXV: KOVO) (the "Company" or "Kovo") — a leader in healthcare Billing-as-a-Service — announced today it has entered into a non-binding letter of intent (the "Letter of Intent") pursuant to which Avonlea Ventures #2 Inc. ("AV") has committed to make a strategic investment into Kovo comprising of a non-brokered private placement of USD$3,300,000 (the "Equity Financing") and an up to USD$7,000,000 secured credit facility (the "Debt Financing" and together with the Equity Financing, the "Financing").

"This funding allows Kovo to further develop our SaaS-based medical billing technology platforms and retire debt, while driving significant growth through our pipeline of strategic acquisitions," explains Kovo CEO Greg Noble.

Equity Financing

It is intended that AV and Kovo will complete the Equity Financing through the purchase by AV of an aggregate of 17,600,000 units ("Units") at a purchase price per Unit of CDN$0.25 (the "Issue Price") for gross proceeds of CDN$4,400,000. Each Unit shall consist of one common share (the "Common Shares") of the Company, and one-half of one transferable common share purchase warrant (each whole common share purchase warrant, a "Warrant") exercisable to acquire an additional Common Share at CDN$0.40 for a period of twenty-four months. Approximately 85% of the proceeds of the Equity Financing will be applied to retire other indebtedness of the Company, with the remainder applied to working capital.

The Equity Financing will be made pursuant to the terms of a definitive investment agreement (the "Investment Agreement") to be finalized and executed by the parties and containing customary terms and conditions, including representations and warranties regarding the business of Kovo, as well as conditions and covenants of the parties suitable for a transaction of this nature and scope, including all necessary TSX Venture Exchange (the "TSXV"), shareholder and other regulatory approvals.

The Letter of Intent contemplates that, for so long as AV owns, directly or indirectly, 10% or more of the issued and outstanding Common Shares on an undiluted basis at any given time, it shall be entitled to nominate two directors to the Company's board of directors at closing of the Financing, with the initial nominated director being Michael Steele. An additional board member will be named at the Company's next Annual General Shareholder Meeting.

As of the date hereof, there are 40,006,156 Common Shares issued and outstanding. Upon completion of the Financing, AV will own or beneficially control 17,600,000 Common Shares, which represents approximately 30.6% of the post closing Common Shares outstanding on a basic basis or 39.8% of the outstanding post closing Common Shares on a partially diluted basis and assuming exercise of the Warrants. The securities to be acquired pursuant to the Equity Financing are intended for AV's investment purposes. Upon completion of the Equity Financing, additional securities of the Company may be acquired or disposed of by AV, through the market, privately or otherwise, as circumstances or market conditions may warrant.

It is expected that on completion of the Equity Financing, AV would be considered a "control person" of the Company under the policies of the TSXV. As such, the Company will seek disinterested shareholder approval, by written consent of shareholders holding more than 50% of all issued and outstanding Common Shares, to authorize the creation of a new control person, in accordance with the policies of the TSXV.

All securities to be issued in connection with the Equity Financing will be subject to a four-month-and-one-day statutory hold period.

Debt Financing

The Letter of Intent provides for basis upon which AV and Kovo intend to enter into a definitive secured credit agreement (the "Credit Agreement") containing customary terms and conditions, including representations and warranties regarding the business of Kovo, as well as conditions and covenants of the borrower suitable for a transaction of this nature and scope.

Upon finalization and execution of the Credit Agreement, AV intends to make a non-revolving secured multi-draw term credit available to Kovo in the aggregate principal amount of USD$7,000,000, which amount may be drawn in multiple advances under the Credit Agreement (each such draw, a "Facility Advance") on an as-needed basis. Each Facility Advance shall be approved, and the proceeds thereof used to finance certain acquisitions by Kovo, in each case as approved by AV in its sole discretion.

Interest will accrue on each Facility Advance at an annual rate of 12%, payable monthly in arrears during the Initial Term (described below), which Kovo shall have right to prepay in whole or in part at any time and from time-to-time. The loan will become due and payable 12 months after the date of the Credit Agreement and will provide, among other things, for a general charge against Kovo's assets as security for the Facility Advances made thereunder. Completion of the Credit Agreement is subject to a number of conditions, including satisfactory completion of due diligence, execution of satisfactory inter-creditor, subordination and share pledge agreements with AV, registration and perfect of security against the Company and its subsidiaries, negotiation of satisfactory documentation and other conditions and covenants customary for a facility of this nature.

The Company expects to announce additional details regarding the Financing when the Investment Agreement and Credit Facility are executed, which is expected in Q1 2023. No assurances can be made that the parties will successfully negotiate and enter into the Investment Agreement or the Credit Facility, or that the Financing will be consummated on the terms or timeframe currently contemplated, or at all.

About Kovo HealthTech Corporation

Kovo HealthTech Corporation is a growing healthcare technology company that specializes in Billing-as-a-Service offering SaaS-style recurring revenue contracts and software for more than 1700 US healthcare providers. Kovo helps healthcare providers digitally track and manage complex patient care registration, services, billing and payments in a seamless way, using its industry-leading OneRev technology platform. Currently, through its clients, Kovo processes over $250 million CAD ($200M USD) in annual billing transactions for more than 3.5 million patients. By offering effective billing practices and technology through long-term SaaS-style contracts, Kovo helps healthcare practitioners get paid so they can focus on offering quality care. To learn more about Kovo and to keep up-to-date on Kovo news, visit www.kovo.co.

For more information:

Greg Noble, CEO
This email address is being protected from spambots. You need JavaScript enabled to view it.
1-866-558-6777

Forward-Looking Information and Statements

This press release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking information") concerning the Company and its subsidiaries within the meaning of applicable securities laws. Forward-looking information may relate to the future financial outlook and anticipated events or results of the Company and may include information regarding the Company's financial position, business strategy, growth strategies, acquisition prospects and plans, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding the Company's expectations of future results, performance, achievements, prospects or opportunities or the markets in which the Company operates is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects", "budgets", "scheduled", "estimates", "outlook", "forecasts", "projects", "prospects", "strategy", "intends", "anticipates", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", or "will" occur. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances.

Many factors could cause the Company's actual results, performance, or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking information, including, without limitation, those listed in the "Risk Factors" section of the final prospectus of the Company dated May 26, 2021. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance, or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this press release. Forward-looking information, by its nature, is based on the Company's opinions, estimates and assumptions in light of management's experience and perception of historical trends, current conditions and expected future developments, as well as other factors that the Company currently believes are appropriate and reasonable in the circumstances. Those factors should not be construed as exhaustive. Despite a careful process to prepare and review forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. These factors should be considered carefully, and readers should not place undue reliance on the forward-looking information. Although the Company bases its forward-looking information on assumptions that it believes were reasonable when made, which include, but are not limited to, assumptions with respect to the Company's future growth potential, results of operations, future prospects and opportunities, execution of the Company's business strategy, there being no material variations in the current tax and regulatory environments, future levels of indebtedness and current economic conditions remaining unchanged, the Company cautions readers that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which the Company operates may differ materially from the forward-looking statements contained in this press release. In addition, even if the Company's results of operations, financial condition and liquidity, and the development of the industry in which it operates are consistent with the forward-looking information contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods. This press release makes reference to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from management's perspective. The Company's definitions of non-IFRS measures used in this release may not be the same as the definitions for such measures used by other companies in their reporting. Non-IFRS measures have limitations as analytical tools and should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS. The Company uses non-IFRS financial measures, including "ARR**", "EBITDA", "Adjusted EBITDA*" and "Adjusted EBITDA Margin" to provide investors with supplemental measures of its operating performance and to eliminate items that have less bearing on operating performance or operating conditions and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. "EBITDA" means net income (loss) before amortization and depreciation expenses, finance and interest costs, and provision for income taxes. *"Adjusted EBITDA" adjusts EBITDA for stock-based compensation expense, transactional gains or losses on assets, asset impairment charges, interest income, net foreign exchange gains or losses, income tax expense or recovery, forgivable one-time government financial payments related to the COVID-19 pandemic ("PPP Loans"), and any transactional expenses. Specifically, the Company believes that Adjusted EBITDA, when viewed with the Company's results under IFRS and the accompanying reconciliations, provides useful information about the Company's business without regard to potential distortions. By eliminating potential differences in results of operations between periods caused by factors such as depreciation and amortization methods and restructuring, impairment and other charges, the Company believes that Adjusted EBITDA can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated. The Company believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures in the evaluation of issuers. The Company's management also uses non-IFRS financial measures in order to facilitate operating performance comparisons from period to period.

Although the Company has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to the Company or that the Company presently believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as of the date made (or as of the date they are otherwise stated to be made). Any forward-looking statement that is made in this press release speaks only as of the date of such statement.

Neither 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.