Kovo Announces Q4 and Annual Results

Vancouver, British Columbia–(Newsfile Corp. – May 13, 2024) – Kovo HealthTech Corporation (TSXV: KOVO) (the “Company” “Kovo”) – a leader in healthcare technology and Billing-as-a-Service – today reported its annual financial results for the period ending December 31, 2023.

Key Metrics:

• Securing a $3.3 million equity investment in April 2023.
• Securing a US$7.0 million credit facility in April 2023.
• Successful completion of the acquisition of E&A Medical Billing in April 2023.
• Completion of the acquisition of Kairos Billing Solutions in June 2023.

Selected Quarterly Information:

In Q4 2023, Kovo reported revenues of $2.7 million with an adjusted EBITDA of (1.3) million, reflecting a 6% increase compared to Q4 2022. The Company attributes this growth to the successful integration of newly acquired entities, E&A Medical Billing and Kairos Billing Solutions. While revenues from certain contracts decreased due to clients transitioning to in-house billing teams, the Company maintained stability in organic sales, with a less than 1% decrease year-over-year.

Debt Metrics:

Kovo entered into a senior loan and security agreement (the “Credit Agreement”) with Avonlea Ventures #2 Inc. (“AVI”) in April 2023, establishing a US$7 million credit facility. As of December 31, 2023, approximately US$3 million of the facility had been authorized and drawn upon, resulting in a 51 basis points reduction in the weighted average interest rate. The Company utilized funds from the equity investment to repay other debt instruments.

Investments and Strategic Shift:

In 2023, Kovo invested in Kovo Cloud, a cloud-based Electronic Medical Record (EMR) solution. However, in February 2024, the Company pivoted its strategy towards prioritizing returning to cash flow breakeven, leading to the cessation of Kovo Cloud operations. The Company remains committed to its core RCM businesses, with a focus on achieving profitability and driving sustainable growth.

Subsequent to the fiscal year end, and further to its press release of April 3, 2024, the Company entered into a forbearance agreement with AVI pursuant to which AVI agreed, subject to certain terms and conditions, to forbear from enforcing its rights under the Credit Agreement (and other ancillary agreements) until June 30, 2024 in respect of certain defaults or events of defaults which were anticipated to occur on or prior to February 28, 2024 (the “Forbearance Agreement”).

AVI’s forbearance, provided for, among other things, an advance by AVI of an additional US$1.25 million under the Credit Agreement conditional upon Kovo delivering an operating plan acceptable to the lender (the “New Operating Plan”). The forbearance is subject to a fee equal to 20% of the total indebtedness as at February 27, 2024 and to certain additional conditions customary for transactions of this nature such as strict adherence to the Credit Agreement and the approval by the independent directors of the New Operating Plan.

On April 23, 2024, Kovo and AVI entered into a limited waiver agreement, extending the period for Kovo to deliver the New Operating Plan until May 20, 2024. In consideration of the extension, Kovo agreed to pay AVI a one-time charge of US$50,000 and incur a fee equal to 1% of the aggregate indebtedness owed to AVI calculated and payable as at the last day of each month immediately after regular interest payments become payable.

As of April 26, 2024 the Company had drawn US$5.7 million on the facility. The Company continues to work collaboratively to develop an acceptable New Operating Plan. There can be no assurance that AVI will continue to forbear from exercising its rights and remedies on expiry of the Forbearance Agreement, as extended, or what the terms or timing of such continued forbearance might be. The Company remains in a state of negative working capital and thus is facing serious financial difficulty. Accordingly Kovo entered into the Forbearance Agreement to extend some time for Kovo to evaluate its strategic alternatives.

Kovo remains committed to driving shareholder value through strategic initiatives, prudent financial management, and a focus on delivering innovative RCM solutions to the healthcare industry.

Detailed Quarterly Financial Statements, the Company’s MD&A and related documents can be accessed at www.sedar.com.

**Subject to TSXV final approval.

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 and Statements

This news release contains forward-looking statements, which relate to future events or future performance and reflect management’s current expectations and assumptions, potential outcomes of the forbearance, including the timing and delivery of the New Operating Plan; the existence of future business opportunities; and the impact of the decision of the Company’s stakeholders. Such forward-looking statements reflect management’s current beliefs and are based on assumptions made by and information currently available to the Company. Investors are cautioned that these forward looking statements are neither promises nor guarantees, and are subject to risks and uncertainties that may cause future results to differ materially from those expected. These forward-looking statements are made as of the date hereof and, except as required under applicable securities legislation, the Company does not assume any obligation to update or revise them to reflect new events or circumstances except as required by applicable law. All of the forward-looking statements made in this press release are qualified by these cautionary statements and by those made in our filings with SEDAR+ in Canada (available at www.sedarplus.ca).

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/208968