Kovo Announces Shares for Debt Transaction and Debt Restructuring

Vancouver, British Columbia--(Newsfile Corp. - May 22, 2024) - Kovo Healthtech Corporation (TSXV: KOVO) ("Kovo" or the "Corporation") is pleased to announce that it has entered into a shares for debt agreement (the "Shares for Debt Agreement") with the Corporation's largest secured creditor, Avonlea Ventures #2 Inc. ("AVI"), a company controlled by Mr. Michael Steele, a director of the Corporation. The transaction forms part of a larger restructuring of the Corporation's debt. Pursuant to the Shares for Debt Agreement, Kovo's outstanding indebtedness to AVI, will be reduced by an aggregate of CDN$2,257,229.56 through the conversion of such outstanding indebtedness into common shares in the capital of the Corporation ("Common Shares"), at a deemed issue price per Common Share equal to $0.035 in respect of 57,543,906 Common Shares and $0.05 in respect of 4,863,861 Common Shares (the "Debt Conversion Transaction").

Following the Debt Conversion Transaction, and AVI's agreement to reduce a portion of fees owing to it, Kovo will continue to owe approximately USD$4,340,039 (the "Remaining Indebtedness") to AVI under the senior loan and security agreement dated as of April 20, 2023 (collectively, the "Loan Agreement"), as amended pursuant to a forbearance agreement dated February 27, 2024 (the "Forbearance Agreement") and pursuant to a letter agreement April 23, 2024. In connection with the Debt Conversion Transaction, AVI and the Corporation have agreed to amend and restate to the Loan Agreement to extend the maturity date of the Remaining Indebtedness to April 30, 2025 and provide AVI with the right to convert the Remaining Indebtedness into Common Shares (the "Additional Conversion Right") at a fixed price of CDN$0.05 per share and at the prevailing market price in respect of future interest in accordance with TSX Venture Exchange policies (the "Loan Agreement Amendments", with the Debt Conversion Transaction and the Loan Agreement Amendments collectively, the "Transaction"). Upon final TSX Venture Exchange (the "TSXV") acceptance, the Forbearance Agreement will terminate, and the Corporation will no longer be subject to the default interest rate provided for in the Loan Agreement.

In aggregate, a total of 62,407,767 Common Shares (the "Settlement Shares") will be issued by the Corporation pursuant to the Debt Conversion Transaction all of which will be owned or controlled, directly or indirectly, by AVI. Following the issuance of the Settlement Shares, the Corporation will have 119,951,673 Common Shares issued and outstanding and AVI will own or control, directly or indirectly, 80,007,767 Common Shares, 8,800,000 warrants to acquire Common Shares (having an expiry date of April 20, 2025 and an exercise price of $0.40 per share) and the right to acquire additional Common Shares pursuant to the Additional Conversion Right (which, on the date hereof, would represent a right to acquire an additional 118,179,262 Common Shares at CDN$0.05 per share, based on the amount of the Remaining Indebtedness and the CAD/US exchange ratio in effect as of May 20, 2024), representing approximately 66.7% of the total issued and outstanding Common Shares on a non-diluted basis and 83.8% of the outstanding shares on a partially diluted basis (assuming the exercise of such warrants and the Additional Conversion Right). AVI was previously approved by the shareholders of Kovo as a new "Control Person" in connection with the private placement announced in the Corporation's press release dated April 21, 2023.

AVI is considered to be a "related party" of Kovo within the meaning of Multilateral Instrument 61-101 – Protections of Minority Security Holders in Special Transactions ("MI 61-101"). The Transaction with AVI constitutes a "related party transaction" within the meaning of MI 61-101. MI 61-101 regulates transactions that raise the potential for conflicts of interest, including transactions involving parties who are "related parties" to the reporting issuer, as that term is used in MI 61-101. Among other things, MI 61-101 requires, in certain instances, that unless an exemption is available or discretionary relief is granted by applicable securities regulatory authorities, a reporting issuer proposing to carry out a related party transaction is required to: (i) engage an independent valuator to prepare a valuation of the affected securities (and any non-cash consideration being offered therefore) and provide to the holders of the affected securities a summary of such valuation (the "Formal Valuation Requirement"); and (ii) obtain the approval of a majority of the "minority" shareholders (as that term is used in MI 61-101) (the "Minority Approval Requirement").

Subject to the TSXV's potential application of its discretion in section 3.1 of TSXV Policy 5.9, Kovo intends to rely on the exemption from the Formal Valuation Requirement of the instrument for any "related party transaction" by virtue of the exemption contained in section 5.5(b) (Issuer Not Listed on Specified Markets), as no securities of Kovo are listed or quoted on the Toronto Stock Exchange, Aequitas NEO Exchange Inc., the New York Stock Exchange, the American Stock Exchange, the NASDAQ Stock Market, or a stock exchange outside of Canada and the United States.

Additionally, Kovo is exempt from the Formal Valuation Requirement and Minority Approval Requirement as it is relying on the exemption contained in sections 5.5(g) and 5.7(1)(e) (Financial Hardship) (the "Financial Hardship Exemption") of MI 61-101 on the basis that: (i) Kovo was (and continues to be) in serious financial difficulty; (ii) the Transaction was designed to improve the financial position of Kovo; (iii) paragraph 5.5(f) (Bankruptcy, Insolvency, Court Order) of MI 61-101 was not applicable; and (iv) Kovo's board of directors, acting in good faith, and at least two-thirds of Kovo's independent directors, acting in good faith, determined that: (A) Kovo was (and continues to be) in serious financial difficulty and the Transaction was designed to improve the financial position of Kovo, and (B) the terms of the Transaction were reasonable in the circumstances.

The Shares issued pursuant to the Shares for Debt Agreement will be subject to a four month plus one day hold period pursuant to the policies of the TSXV.

It is Kovo's expectation that if the Transaction is not completed, AVI will enforce its security to realize upon payment of the indebtedness as a consequence of Kovo's financial condition. In the event this occurs, it is anticipated that Kovo shareholders would not realize any return on their investment.

The Corporation anticipates that the closing of the Transaction will occur as soon as possible. As a result, closing of the Debt Conversion Transaction and effectiveness of the Loan Amendments may occur less than 21 days after the date of this press release. The issuance of the Settlement Shares and the effectiveness Loan Agreement Amendments remain subject to acceptance and final approval of the TSXV.

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

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 2250 US healthcare providers. Kovo helps healthcare providers digitally track and manage complex patient care registration, services, billing and payments in a seamless way. 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, 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
investors@kovo.co
1-866-558-6777

Forward-Looking Information

This news release contains forward‐looking statements and forward‐looking information within the meaning of applicable securities laws. These statements relate to future events or future performance. All statements other than statements of historical fact may be forward‐looking statements or information. More particularly and without limitation, this news release contains forward‐looking statements and information relating to the Corporation's settlement of certain debt obligations owed to entities controlled by a current directors of the Corporation, the future financial condition of the Corporation and its prospects, including any proposed debt restructuring transaction, including the Debt Conversion Transaction and the Loan Agreement Amendments. The forward‐looking statements and information are based on certain key expectations and assumptions made by management of the Corporation. Although management of the Corporation believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward‐looking statements and information since no assurance can be given that they will prove to be correct.

Forward-looking statements and information are provided for the purpose of providing information about the current expectations and plans of management of the Corporation relating to the future. Readers are cautioned that reliance on such statements and information may not be appropriate for other purposes, such as making investment decisions. Since forward‐looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the Corporation's ability to continue operations without adequate capital, the Corporation's ability to raise further capital, the Corporation's ability to meet the terms of its current debt obligations and to repay its indebtedness with or without the Debt Conversion Transaction and the Loan Agreement Amendments, the likelihood of the Corporation satisfying its ongoing obligations under the proposed Debt Conversion Transaction and Loan Agreement Amendments, the Corporation's ability to efficiently and successfully develop new opportunities, failure to identify future transactional counter-parties, and the likelihood of any debt restructuring transaction being consummated, and the Corporation not defaulting in the future. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward‐looking statements and information contained in this news release are made as of the date hereof and no undertaking is given to update publicly or revise any forward‐looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The forward-looking statements or information contained in this news release are expressly qualified by this cautionary statement.

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