Kovo+ holder to convert debt, subscribe to offering

Executive Summary

• Kovo+ Holdings Inc. has secured a lead order and strategic financing commitments from its largest shareholder, Avonlea Ventures #2 Inc. (AVI), totaling approximately $16.4 million CAD.
• The transaction involves two components: the conversion of up to $7.23 million in debt into common shares and a new equity investment of up to $9.18 million in the company's previously announced non-brokered private placement.
• The combined transaction is subject to regulatory approvals, including TSX Venture Exchange approval, and requires reliance on exemptions from formal valuation and minority shareholder approval under Multilateral Instrument 61-101.

Key Details

• Debt Conversion: AVI elected to convert up to $7,230,789 CAD ($5,239,702 USD) of indebtedness into common shares.
  • Conversion price for principal: Fixed at $0.05 per common share.
  • Conversion price for accrued but unpaid interest: Prevailing market price.
  • Total shares expected to be issued upon full conversion: 144,615,772 common shares.
  • Condition: Contingent upon the completion of the private placement.
• Equity Investment (Lead Order): AVI committed a minimum of $9,182,697 CAD ($6,654,128 USD) as the lead investor in a non-brokered private placement.
  • Total offering size: Up to 827.82 million units for gross proceeds of up to approximately $41.4 million CAD ($30 million USD).
  • Units to be issued to AVI: Up to 183,653,943 units.
• Related Party Status: AVI is controlled by Michael Steele, a current director and controlling indirect shareholder of Kovo+. The transaction constitutes a related-party transaction under Multilateral Instrument 61-101.
• Regulatory Exemptions: Kovo+ intends to rely on exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101, as the fair market value of the transaction is not expected to exceed 25% of the company's market capitalization.
• Conditions Precedent: Closing is contingent on:
  • Receipt of all necessary approvals, including final TSX Venture Exchange approval.
  • Sufficient arm's-length investment to maintain compliance with TSX-V continuous listing requirements.
• Share Restrictions: All securities issued will be subject to a four-month-and-one-day statutory hold period from the date of issue.

Notable Quotes

• "We are deeply grateful for Michael Steele's continued confidence and support during this pivotal time for our company. His partnership in this strategic step strengthens our financial foundation and enables us to build on our continued momentum. With his backing, we are better positioned for sustained growth and long-term success." — Justin Anderson, CEO