Kovo+ Announces Definitive Asset Purchase Agreement, Senior Loan Extension and Short Term Secured Promissory Grid Note

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Calgary, Alberta--(Newsfile Corp. - May 28, 2025) - Kovo+ Holdings Inc. (TSXV: KOVO) ("Kovo" or the "Company") is pleased to announce, further to its news release dated February 13, 2025, that it has entered into a definitive asset purchase agreement (the "APA") with Avonlea Ventures #2 Inc. ("AVI"), Kovo's largest shareholder and secured creditor, whereby the Company intends to acquire the exclusive right to purchase certain contractual assets of AI Vector, LLC ("AI Vector") and AAG Core, LLC ("Veebas" and together with AI Vector, the "Target Companies") pursuant to certain letters of intent between AVI and the Target Companies (the "Target Company LOIs").

Under the APA, the Company will acquire the exclusive right to purchase, among other things, all of the membership interests of AI Vector and all of the material business and intellectual property assets of Veebas (collectively, the "Target Assets"), pursuant to the Target Company LOIs (the "APA Transaction"). In consideration for the Target Assets, Kovo will issue to AVI (i) US$3,500,000 million of common shares of the Company (the "Consideration Shares") at a deemed price to be determined in accordance with the rules and policies of the TSX Venture Exchange (the "TSXV"); and (ii) a vendor take-back note in the principal amount of US$1,500,000 (the "VTB Note") for an aggregate purchase price of US$5,000,000 (the "Purchase Price"). The Purchase Price recognizes the approximately US$1,500,000 million cash advanced to AI Vector and Veebas by AVI, as well as the increased value of the business and assets of the Target Companies, which have resulted from such funding and which, therefore, permit Kovo to acquire the Target Assets at a discount to the current enterprise value.

By its terms, the VTB Note bears interest at a rate of 12% per annum and will mature, subject to the terms thereof, one (1) year from the closing date. The Consideration Shares will be subject to a statutory four-month and one-day hold period in accordance with applicable Canadian securities laws.

The entering into of the AI Vector and Veebas transactions (collectively, the "Target Transactions"), respectively, are expected to be effected through definitive agreements in relation to the Target Assets (the "Definitive Agreements"), which are expected to formalize the terms and conditions set forth in the Target Company LOIs, respectively, and which shall reflect a reduction in the aggregate purchase price payable to the members of AI Vector and to Veebas by an amount equal to the Purchase Price (the "Price Reduction Accommodation"). The Price Reduction Accommodation is expected to be reflected in each Definitive Agreement in proportion to the percentage value that each of AI Vector and Veebas has in relation to the aggregate value of both Target Companies.

The entering into of the Definitive Agreements is conditional on valuation of the Target Assets being no less than US$5,000,000 in aggregate and is expected to include, among other customary terms and conditions of transactions of this type and nature, the Price Reduction Accommodation. The Company intends to proceed with the acquisition of the Target Assets as soon as practicable upon closing of the APA Transaction. Closing of the APA Transaction and Target Transactions are each subject to certain customary conditions, including, without limitation, third-party and regulatory approvals, including TSXV approval.

Secured Promissory Grid Note and Senior Loan Extension

Kovo is also pleased to announce that, effective May 1, 2025, (i) AVI completed a further loan to the Company pursuant to a secured promissory grid note (the "Secured Prom Note") for available proceeds of up to US$850,000 (the "Loan"); and (ii) AVI extended the term of its 2^nd Amended & Restated Senior Loan and Security Agreement (the "Senior Loan Agreement") to June 30, 2025 (the "Maturity Date") pursuant to the terms of an extension agreement (the "Extension Agreement").

The Secured Prom Note contains customary financial and other covenants, and the proceeds of the Loan will assist Kovo with working capital obligations and ongoing expenses. The Secured Prom Note is secured by the same security granted to AVI under the Senior Loan Agreement (see press releases dated April 21, 2023, May 22, 2024 and July 24, 2024 and September 17, 2024). The Secured Prom Note will mature on June 30, 2025, and bears interest at a rate of 24% per annum. The Company may draw on the available proceeds of the Loan from time to time during the term and has drawn US$225,000 to date and US$325,000 to be drawn on or before May 30, 2025.

Pursuant to the terms of the Extension Agreement, Kovo and AVI extended the maturity date upon which the indebtedness owing thereunder was to be repaid to June 30, 2025. The other terms, as set out in the Senior Loan and Security Agreement, remain unchanged.

As an inducement for the Loan and Extension Agreement, Kovo granted AVI a bonus of an aggregate US$300,000, payable in cash at the Maturity Date, or such later date as mutually agreed between the parties. The bonus qualifies as a "Loan Bonus" pursuant to section 2 of TSXV Policy 5.1 - Loans, Loan Bonuses, Finder's Fees and Commissions.

Related Party Transactions

AVI is an Ontario corporation controlled by Mr. Michael Steele, a current director and controlling indirect shareholder of the Company. Mr. Steele is also a director, officer and the sole indirect beneficial shareholder of AVI. AVI is also considered a "Non-Arm's Length Party" pursuant to the policies of the TSXV.

The Loan

As AVI is a "related party" of the Company, the Loan Transactions (as defined below) and the APA Transaction (collectively, the "Related Party Transactions") are each considered to be a "related party transaction" within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") requiring Kovo, in the absence of exemptions, to obtain a formal valuation and minority shareholder approval, of the Related Party Transactions.

Pursuant to Sections 5.5(b), 5.5(g) and 5.7(e) of MI 61-101, the Company relied on exemptions from the formal valuation and minority shareholder requirements, respectively, as, in addition to no securities of the Company being listed or quoted on certain specified exchanges: (i) Kovo was (and continues to be) in serious financial difficulty; (ii) the Related Party Transactions are each designed to improve the financial position of the Company; (iii) paragraph 5.5(f) (Bankruptcy, Insolvency, Court Order) of MI 61-101 was not applicable; and (iv) Kovo's board of directors (the "Board"), acting in good faith, and at least two-thirds of Kovo's independent directors, acting in good faith, determined that: (A) the Company was (and continues to be) in serious financial difficulty and the Related Party Transactions are each designed to improve the financial position of Kovo, and (B) the terms of the Related Party Transactions were reasonable in the circumstances.

The Related Party Transactions were unanimously approved by the Board members who are independent for the purposes thereof, being all directors other than Messrs. Michael Steele and Robert Galarza. Neither the Company nor, to the knowledge of the Company after reasonable inquiry, AVI, has knowledge of any material information concerning the Company or its securities that has not been generally disclosed.

A special committee comprising Messrs. Peter Bak and Harp Gahunia (the "Special Committee") was formed to, among other things, consider the APA Transaction and matters ancillary thereof. The Special Committee reviewed the terms and conditions of the APA Transaction and consideration of a number of factors, including advice and assistance of advisors and the retention of an independent valuator for the purpose of valuing of the Target Assets. As the directors independent of the Related Party Transactions, the Special Committee unanimously approved the Related Party Transactions at a meeting of the Special Committee held on May 26, 2025. No special committee of the Board was established in connection with the Loan, the entering into of the Extension Agreement and matters relating thereto (the "Loan Transactions"), as the entire Board was engaged in respect thereof, and, other than Messrs. Steele and Galarza, who abstained from voting thereon, no materially contrary view or abstention was expressed or made by any director of the Company in relation thereto.

Neither the Company nor any director or senior officer of the Company has knowledge, after reasonable inquiry, of any prior valuation in respect of the Company that relates to the subject matter of or is otherwise relevant to the Related Party Transactions, which has been made in the 24 months prior to the date of this news release. The Company did not file a material change report more than 21 days before the expected closing as the details of the Related Party Transactions were not finalized until immediately prior to its issuance, and the Company wished to close the Related Party Transactions as soon as practicable for sound business reasons.

None of the securities sold in connection with the APA Transaction will be registered under the United States Securities Act of 1933, as amended, and no such securities may be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

About Kovo+ Holdings Inc.

Kovo is a versatile technology company leading the charge in AI initiatives to drive impact and innovation across diverse industries. Kovo remains committed to its core business-model of strategic growth opportunities within mid-market Medical Billing firms, where exploitative business optimization synergies exist. Moving forward, Kovo will integrate accretive broader healthcare sector additions to its portfolio and opportunities beyond in multiple new markets. Dedicated to revolutionizing business process optimization through technological advancements and evolving AI-applied methods, Kovo embodies a commitment to ensured and enduring profitability. To learn more about Kovo and to keep up to date on Kovo news, visit www.kovoplus.com.

Cautionary Note Regarding Forward-Looking Information

Statements contained in this news release that are not historical facts are "forward-looking information" or "forward-looking statements" within the meaning of applicable Canadian securities laws. Such forward-looking statements or information are provided to inform the Company's shareholders and potential investors about management's current expectations and plans relating to the future and include, but are not limited to, (i) expectations regarding the characteristics, value drivers, and anticipated benefits of the Related Party Transactions; (ii) expectations regarding the Company's financing plans, closing times, and future development opportunities in connection with Kovo's acquisition of assets under the APA; (iii) expectations regarding the timing and closings thereof; and (iv) expectations concerning the Company's business plans and operations. Readers are cautioned that reliance on such information may not be appropriate for other purposes. Any such forward-looking information may be identified by words such as "anticipate", "proposed", "estimates", "would", "expects", "intends", "plans", "may", "will", and similar expressions.

Forward-looking statements or information are based on a number of factors and assumptions that have been used to develop such statements and information, but which may prove to be incorrect. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties, include, but are not limited to the Company being unable to use the proceeds of the Secured Prom Note as described, legal or regulatory impediments regarding the Secured Prom Note, the Company defaulting on the Secured Prom Note, Senior Loan Agreement or VTB Note and leading to enforcement under the security, the proceeds being insufficient for the Company's purposes, the Company's inability to repay the Secured Prom Note, Senior Loan Agreement or VTB Note at the end of the terms thereof and the Company being unable to raise additional funds on terms acceptable to the Company or at all. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. The forward-looking information in this news release reflects the current expectations, assumptions and/or beliefs of the Company based on information currently available to the Company. Any forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or expressly qualified by this cautionary statement.

Contact Information

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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.

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