Debt Term Sheet Signed to Extend Private Placement Financing of New Acquisitions
Company Progressing Diligence Phase on 10th and 11th Acquisitions
Vancouver, British Columbia--(Newsfile Corp. - September 9, 2021) - Kovo HealthTech Corporation (TSXV: KOVO) ("Kovo" or the "Company") is heading into September with two prospective acquisitions underway, as the Company confirmed it has entered into a new non-binding letter of intent (the "Non-Binding LOI") to acquire its 11th Revenue Cycle Management (RCM) specialist firm (the "Seller").
Kovo Readies Over CAD$11 Million in Potential Funding
Kovo also announced it has confirmed financing terms (the "Investment Agreement") with a Canadian lender to provide senior secured debt financing of up to CAD$8.8 million on an as-needed basis subject to the Company satisfying certain equity funding requirements of the lender. The net proceeds, together with the anticipated proceeds of the CAD$2.5 million marketed placement agreement announced on September 2, 2021, create a potential pool to fund the Company's pipeline of acquisitions.
Kovo Acquisition Focus: Immediate, Accretive Growth
"As we enter diligence on our prospective 11th acquisition and move into the final stages of diligence on the 10th acquisition target announced on September 2nd, Kovo is focused on integrating targets to our platform to implement operational efficiencies which translate directly into additional, accretive growth," explains Kovo CEO Greg Noble.
Noble adds that, as disclosed previously, Kovo's acquisition strategy targets buying $1 of Annual Recurring Revenue ("ARR") for every $1 investment of debt or equity and explains how the Company proposes to use the debt and equity capital to materially increase its current, reported CAD$7.5 million in ARR (approximately USD$6 million).
"Kovo's current pipeline — with the non-binding LOI announced on September 2nd, the non-binding LOI announced today and additional prospective targets in advanced negotiations — represent opportunities to generate accretive ARR in line with our acquisition strategy post-closing of financings," says Noble, adding that the Company continues to focus on adding new customers and organic growth on its software and services business.
Kovo generated 43% year-over-year organic growth on its core RCM software and services business for the quarter ended June 30, 2021
Proposed Deal Enters Due Diligence
Under the terms of the Non-Binding LOI dated June 25, 2021, the Company has the option to, through a wholly-owned subsidiary, purchase substantially all of the assets of the seller, including associated trademarks, trade names, brand names goodwill, customer lists and customer contracts. The completion of the acquisition is subject to due diligence and the satisfaction of a number of closing conditions, including receipt of the approval of the TSX Venture Exchange (the "TSXV").
Provided that all closing conditions are satisfied, the acquisition is expected to close in the fourth quarter of 2021. Detailed terms and conditions will be disclosed in further press releases as the proposed transaction proceeds. The proposed transaction requires capital from the debt and equity financings discussed herein, and therefore there can be no assurance that the transaction will be completed on the terms contained herein or at all.
The non-binding Investment Agreement has been structured as a non-revolving senior secured multi-draw term facility to fund acquisitions. Under the terms of the Investment Agreement, up to CAD$8.8 Million, or approximately USD$7 million (the "Investment Amount"), up to CAD$1 million will be available to be drawn on closing, with each subsequent draw to be subject to the agreement of the Company and the lender. The Company's right to draw any amount in excess of CAD$4 million under the facility will be subject to the Company first raising equity financing in the amount of CAD$1.5 million. Subject to compliance with the policies of the TSXV, the Company will grant to the lender 40% warrant coverage on each tranche priced at market at the time of each such draw and will receive a six-month interest penalty for early termination. The repayment terms are interest only in the range of 15 to 16 per cent for the term of the loan with a balloon payment after 36 months from the first tranche being drawn, and are subject to financial covenants that are still to be determined. The non-binding term sheet dated August 16, 2021 is subject to due diligence by the lender at the borrower's expense, as well as satisfaction of other standard closing conditions, including any required third party approvals. There can be no assurance that the loan will be completed on the terms contained herein or at all.
About Kovo HealthTech Corporation
Kovo is a leader in healthcare technology and Revenue Cycle Management software and services. Kovo creates, acquires and grows businesses to better the healthcare experience within the patient encounter continuum. To learn more about Kovo and to keep up-to-date on Kovo news, visit www.kovo.co
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 refers to certain non-IFRS measures, including ARR. These non-IFRS 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 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. ARR is a non-IFRS measure that provides an indication of future revenue and billings from customers as of the reporting date. ARR represents the sum of the annual recurring revenue from existing customer contracts or commitments as of the reporting period end date, and as such management of the Company believes that ARR is a meaningful measure for assessment of the Company's performance. ARR is recorded as deferred revenue when it is invoiced and is recognized in revenue evenly on a monthly basis over the contract term. 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.
For more information:
Greg Noble, CEO
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/96014