Mr. Peter Bak reports

KOVO+ ANNOUNCES FORBEARANCE AGREEMENT WITH SENIOR SECURED LENDER AND SPECIAL MEETING OF SHAREHOLDERS

Kovo+ Holdings Inc. (Kovo), further to its news releases of Aug. 6, 2026, and Aug. 13, 2026, has entered into a forbearance agreement with Avonlea Ventures #2 Inc. (AVI), Kovo's senior secured lender, pursuant to which AVI has agreed to forbear from exercising, subject to the terms and conditions of the forbearance agreement, its enforcement rights under the company's existing loan arrangements for a period extending through April 1, 2027, subject to the satisfaction of certain conditions and milestones.

The company also announces that it has called a special meeting of its shareholders to be held at 10 a.m. Calgary time on Oct. 5, 2026, at Dentons Canada LLP, 1500, 850 2nd St. SW, Calgary, Alta., T2P 0R8, to consider and, if thought fit, approve a special resolution authorizing the transactions contemplated under the forbearance agreement. The record date for determining shareholders entitled to receive notice of and to vote at the meeting is Aug. 27, 2026.

Background of the proposed transaction

As previously announced in the company's news release dated Aug. 13, 2026, Kovo's board of directors established a special committee, chaired by Peter Bak, board chair, to lead the company's evaluation of strategic and financing alternatives in connection with the default notice and demand for repayment received from AVI on Aug. 5, 2026.

The default notice was delivered in respect of the company's obligations under its second amended restated senior loan and security agreement dated Aug. 29, 2024, and the secured promissory grid note dated May 1, 2025, both as extended and amended pursuant to extension agreements dated May 1, 2025, June 30, 2025, July 31, 2025, Aug. 29, 2025, and April 20, 2026. As at Aug. 4, 2026, the aggregate indebtedness owing under the loan documents was approximately $27,088,873 (U.S.), comprising principal of $16.7-million (U.S.), fees of $5,996,749 (U.S.) and accrued interest of $4,392,124 (U.S.).

Forbearance agreement

On Sept. 2, 2026, the company and its subsidiaries entered into the forbearance agreement with AVI. Pursuant to the forbearance agreement, AVI has agreed, subject to the occurrence of a termination event (as defined below), to forbear from exercising its enforcement rights in respect of the indebtedness, including appointing a receiver, seizing or selling secured property, commencing legal proceedings, or filing insolvency petitions against the borrower entities, across three staged forbearance periods: (i) through Oct. 6, 2026, at 4 p.m. Calgary time; (ii) from Oct. 7, 2026, through Dec. 31, 2026; and (iii) from Jan. 1, 2027, through April 1, 2027.

As consideration for the forbearance, the company has agreed to pay a forbearance fee equal to 3.0 per cent of the indebtedness. The forbearance fee will not be earned by AVI unless a termination event occurs and, upon being earned, will be added to and secured as part of the indebtedness.

The forbearance agreement provides for a 24-month payment holiday during which no required cash payments of principal, interest, fees or expenses are owing by the borrower entities. Interest will continue to accrue on the indebtedness during the payment holiday period.

AVI has agreed to advance to the company up to $1.0-million (U.S.), of which $150,000 (U.S.) has been advanced. The default advance is to be used solely for specified payables of the borrower entities and will be added to and secured as part of the indebtedness. All obligations owed by Kovo to AVI, including the default advance, are and will continue to be secured by all present and after-acquired property of Kovo and the borrower entities, including pursuant to a general security agreement, a guaranty and security agreement, and a securities pledge agreement.

Under the forbearance agreement, the borrower entities have agreed to, among other things: (i) continue observing all covenants under the loan documents; (ii) not sell, transfer or otherwise dispose of any secured property without the prior written consent of AVI; (iii) not incur any additional debt or issue any equity without the prior written approval of AVI; (iv) develop an updated operating plan acceptable to AVI; (v) negotiate in good faith the development agreement (as defined below) and the RCM ROFR (right of first refusal) (as defined below) with AVI; and (vi) not make any filing under insolvency legislation without the prior written consent of AVI.

The forbearance agreement establishes reorganization milestones across the three forbearance periods, including, among other things: (i) holding the special meeting by Oct. 5, 2026; (ii) completing the sale of the RCM assets and the disposition of AI Vector 2.0 Inc. (AIV) by Dec. 31, 2026; and (iii) entering into a restructuring facility with AVI providing for not less than 12 per cent annual interest over a five-year term, by April 1, 2027.

AVI may terminate the forbearance agreement upon the occurrence of specified termination events, including new defaults under the loan documents, breaches of the forbearance agreement, third party enforcement actions, events placing collateral in jeopardy, material adverse changes affecting the borrower entities, failure to meet reorganization milestones, insolvency proceedings or failure of shareholders to approve the proposed transaction at the special meeting. The forbearance agreement is also subject to automatic termination if the conditions for the applicable forbearance period are not satisfied by the end of that period.

The proposed transaction contemplated under the forbearance agreement also includes the following key elements:

• Dispositions and ROFR: The company intends to sell certain revenue cycle management assets (the RCM assets) and its subsidiary, AIV, with the proceeds used to pay down the outstanding debt. AVI has been granted a right of first refusal over the RCM assets and the AIV business. Under the RCM ROFR, AVI has provided a backstop offer of $13-million (U.S.) in debt reduction for the specified assets.
• Debt restructuring: After completing the sale of the RCM assets and AIV, the remaining debt will be restructured into a five-year loan at not less than 12 per cent of annual interest, with no payments required during the first two years.
• Development agreement: The company further expects to enter into a development agreement with AVI and under which Kovo is expected to be appointed as exclusive representative or reseller for specified HEAL products to revenue cycle management clients, and which is expected to include product revenue-sharing arrangements, a development collaboration framework, management arrangements for certain HEAL entities and related conditions to effectiveness. Although the terms of the development agreement have been negotiated, there can be no assurance that the development agreement will be entered into on terms satisfactory to the company or at all.

Related party transaction

The proposed transaction constitutes a related party transaction for the purposes of Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions, as AVI is a related party of the company. AVI is also a non-arm's-length party for the purposes of TSX Venture Exchange policies. In accordance with MI 61-101, Kovo is required, in the absence of exemptions, to obtain a formal valuation and minority shareholder approval, of the related party transactions.

The company is relying on the exemption in Section 5.5(b), because it is listed on the TSX-V, and the financial hardship exemption in Section 5.5(g), from the formal valuation requirement pursuant to MI 61-101. Kovo intends to seek minority shareholder approval of the proposed transaction at the special meeting.

The proposed transaction remains subject to acceptance by the TSX Venture Exchange to the extent required.

Special meeting of shareholders

At the special meeting, shareholders will be asked to consider and, if thought fit, pass a special resolution approving the proposed transaction.

The proposed transaction resolution must be approved by not less than two-thirds of the votes cast by shareholders present in person or represented by proxy at the special meeting as the sale of RCM assets and AIV represents a sale of all or substantially all of the assets of the company. In addition, the proposed transaction resolution must be approved by a majority of the votes cast by shareholders, excluding the votes of AVI, HEAL Access USA Inc. and other interested parties, in accordance with the requirements of MI 61-101 and applicable TSX-V policies.

Shareholders wishing to be represented by proxy at the special meeting must submit their completed form of proxy to Computershare Trust Company of Canada, the company's transfer agent, by no later than 10 a.m. Calgary time on Oct. 1, 2026.

Full particulars of the special meeting, the proposed transaction and the proposed transaction resolution are set out in the information circular of the company dated Sept. 3, 2026. Shareholders may obtain a copy of the information circular by contacting the company at investors@kovo.com or 1-866-558-6777. The information circular will also be available on SEDAR+.

The board unanimously recommends that shareholders vote for the proposed transaction resolution.

About Kovo+ Holdings Inc.

Kovo is a versatile technology company leading the charge in AI (artificial intelligence) 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 exploitive business optimization synergies exist. Moving forward, Kovo will integrate accretive broader health care 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.

We seek Safe Harbor.