NowVertical Group Announces Amendment to Acrotrend Obligations

TORONTO, April 23, 2024 (GLOBE NEWSWIRE) -- NowVertical Group Inc. (TSXV: NOW) (OTCQB: NOWVF), ("NOW" or the "Company"), is pleased to announce that Acrotrend Solutions Limited ("Acrotrend") has achieved Adjusted EBITDA of US$2.1 million for the year ended December 31, 2023. In addition, in an effort to further align the interests of management with shareholders, the Company has entered into an agreement to settle its ongoing obligations in connection with NOW's prior acquisition of Acrotrend pursuant to a share purchase agreement dated December 9, 2022, as amended (the "SPA").

"As we articulated to shareholders earlier this year, the Board has been engaged in a renegotiation of commitments with key business unit stakeholders. Today, we are pleased to announce an agreement has been reached with the sellers of Acrotrend that enables NowVertical to improve its balance sheet through the reduction of its overall cash payment obligations, repaying a substantial portion of the 2023 earn out consideration due to the Acrotrend sellers in shares, and deferring and capping certain future payments," said Board Chair Elaine Kunda.

"One of the Board's key objectives in 2024 is to create an environment where all of the Company's stakeholders are working towards the same metrics that are relevant to the Company as a whole and not just the individual business units. Through this amendment, the Acrotrend sellers, including NowVertical's CEO, Sandeep Mendiratta, will increase their direct ownership of NowVertical, in a clear demonstration of their alignment with NowVertical and our shareholders. Since his appointment in January, Sandeep has been laser focused on driving the integration of our business units, the identification of customer and market opportunities, and aggressive execution on growth opportunities," continued Ms. Kunda.

"Our leadership team is dedicated to fostering a culture of 'operator-first mindset', in line with the vision set by the Board, prioritizing alignment across our entire business. By empowering our business unit leaders and strategically organizing our teams, we're primed for dynamic growth. This approach is already yielding tangible benefits, and my choice to receive a substantial portion of earn-out proceeds in NowVertical shares reflects the growth potential I see in the integrated business and my confidence in our leadership team's ability to architect our collective future," said Sandeep Mendiratta, the Company's CEO.

Pursuant to the terms of the SPA, the former shareholders of Acrotrend (together, the "Sellers") are currently entitled to receive more than US$2,160,000, including an earn out in the amount of US$1,255,000 to which the Sellers are entitled for Acrotrend's positive performance during the year ended December 31, 2023 (the "2023 Earn-Out Amount") and excluding the potential earn outs to which the Sellers may be entitled for the years ended December 31, 2024 and December 31, 2025.

Specifically, pursuant to the terms of the SPA, the Sellers are entitled to receive:

• a holdback in the amount of US$410,000 (the "Holdback Amount"), plus interest accrued thereon since January 12, 2024;
• a top-up amount equal the difference between the price of the 750,000 Class A subordinate voting shares in the capital of the Company (the "Subordinate Voting Shares") received by the Sellers in connection with the transaction and the market price of such shares on the date when the Sellers elect to exercise their top-up entitlement, with an estimated value of US$558,116.24 (the "Top-Up Consideration");
• the 2023 Earn-Out Amount of $1,255,000 for the year ended December 31, 2023; and
• future earn-out payments for the financial years ending December 31, 2024 and 2025 (the "Future Earn-Outs").

Following negotiations between the independent directors of the Company and the Sellers, the Company and the Sellers have agreed to certain adjustments to the obligations of the Company under the SPA to better align the interests the Seller with all stakeholders. In addition, the adjustments significantly reduce and defer cash payments required to be paid to the Sellers by the Company over the next two years, enhancing the Company's liquidity.

To crystallize the adjustments, the Company and the Sellers have entered into a deed of amendment (the "Deed") whereby, subject to certain conditions precedent, including the approval of the TSX Venture Exchange (the "TSXV"), the Company and the Sellers have agreed that:

• the payment of the Holdback Amount by the Company will be deferred and paid in installments by December 1, 2024, with the Sellers waiving all accrued and unpaid interest thereon if the Company adheres to certain of its other obligations under the Deed;
• the Company will issue up to 2,835,277 Subordinate Voting Shares in settlement of the Sellers' potential entitlement to Top-Up Consideration at a price per share equal to the greater of: (i) CAD$0.27; and (ii) the Discounted Market Price (as such term is defined under the policies of the TSXV) on the date that is two (2) trading days following the filing of the Company's unaudited interim financial statements for the interim period ended March 31, 2024 on SEDAR+ at www.sedarplus.com (such price being, the "Share Issue Price");
• the Company will pay US$100,000 of the 2023 Earn-Out Amount in cash to the Sellers and will issue up to 5,000,000 Subordinate Voting Shares in settlement of US$1,155,000 of the 2023 Earn-Out Amount at a price per share equal to the Share Issue Price, with any remaining portion of the 2023 Earn-Out Amount to be settled through the issuance of Subordinate Voting Shares at the Discounted Market Price on the date that is two (2) trading days following the filing of the unaudited interim financial statements for the interim period ended March 31, 2024 on SEDAR+ at www.sedarplus.com; and
• the Future Earn-Outs will be settled through a cash payment by the Company equal to US$990,000, payable to the Sellers on or before January 1, 2026.

Until such amounts are paid through the issuance of Subordinate Voting Shares or through cash payments, as applicable, the Holdback Amount, the Top-Up Consideration, the 2023 Earn-Out Amount and the Future Earn-Outs shall bear interest at a rate of up to 8% above the base rate of the Bank of England, provided that, upon the issuance of the Subordinate Voting Shares in settlement of the Top-Up Consideration and the portion of the 2023 Earn-Out Amount to be settled in shares, interest on certain of such amounts shall be waived. In addition, certain of the Company's subsidiaries have agreed to guarantee the Company's obligations to the Sellers and in certain circumstances, including where the Company and certain of its subsidiaries fail to abide by the terms of the Deed, the Sellers may accelerate the payment of certain amounts and elect to receive two-thirds (2/3) of the Top-Up Consideration and the 2023 Earn-Out Amount in cash with the remainder to be settled through the issuance of Subordinate Voting Shares.

Multilateral Instrument 61-101 ? Protection of Minority Security Holders in Related Party Transactions

The Sellers include Sandeep Mendiratta, the Chief Executive Officer and a Director of the Company (the "Related Party"), and the remaining vendors consist of arm's length parties. As a result, the entering into of the Deed and certain of the transactions contemplated thereby are considered to be a "related party transaction", subject to Multilateral Instrument 61-101 ? Protection of Minority Security Holders in Related Party Transaction ("MI 61-101"). Notwithstanding the foregoing, the Company is exempt from the formal valuation requirement per sections 5.5(a) and 5.5(b) of MI 61-101, as neither the fair market value of the subject matter of the transactions, nor the fair market value of the consideration for those transactions, insofar as it involves interested parties, exceeds 25% percent of the Company's market capitalization and Company is not listed on any of the exchanges specified in 5.5(b) of MI 61-101, and the Company confirms that it has not obtained any valuations relevant to the transactions in the 24 months preceding entering into the Deed. In addition, the Company is exempt from the requirement to obtain minority shareholder approval per section 5.7(1)(a) of MI 61-101, as neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the transaction, insofar as it involves interested parties, exceeds 25% percent of the Company's market capitalization.

The terms of the Deed were settled through arm's length negotiations between the independent directors of the Company and the Related Party, with each separately represented by legal counsel. The entering into of the Deed and the transactions contemplated thereby was considered and unanimously recommended to the Company's board of directors by the independent members of the Company's board of directors, having regard to, among other things, the impact of the transactions on the Company's balance sheet, liquidity and overall stability, and, upon such recommendation, the board of directors unanimously approved the transaction with Sandeep Mendiratta declaring his interest and recusing himself from any deliberations or voting on the transactions.

The Company did not file a material change report 21 days in advance of implementing the transactions as the negotiations were only recently concluded.

About NowVertical Group Inc.

NowVertical Group is a Vertical Intelligence (VI) software and services provider that delivers vertically-specific data, technology, and artificial intelligence (AI) applications to industry and governments through its global platform. NOW's proprietary solutions sit at the foundation of the modern enterprise by transforming AI investments into VI, enabling its customers to minimize their risk, accelerate the time to value, and reduce costs. NOW is rapidly growing organically and through targeted acquisitions. For more information about NOW, visit www.nowvertical.com.

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

For further information, please contact:

Andre Garber, Chief Development Officer
[email protected]

Glen Nelson, Investor Relations and Communications
e: [email protected]
t: (403) 763-9797

Non-IFRS Measures

This news release refers to certain non-international financial reporting standards ("IFRS") measures, including "Adjusted EBITDA". For the purposes of this news release, Adjusted EBITDA is defined as the consolidated earnings before interest, taxes, depreciation and amortization. These 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 news 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. These non-IFRS measures are used to provide investors with supplemental measures of our operating performance and to eliminate items that have less bearing on our operational performance or operating conditions and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. The Company believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures in the evaluation of issuers. The Company's management also uses non-IFRS financial measures to facilitate operating performance comparisons from period to period and prepare annual budgets and forecasts.

Forward Looking Statements

This news release contains forward-looking information and forward-looking statements within the meaning of applicable Canadian securities laws (together "forward-looking statements"), including, without limitation regarding the settlement of obligations owing to the Sellers, the form and amount of future payments to be made by the Company, the number of Subordinate Voting Shares issuable and the price at which such shares will be issuable, the payment of the Future Earn-Outs, the alignment of management and the business unit leaders, the approval of the TSXV, the ability and timing of certain payments by the Company. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties, and contingencies. Investors are cautioned that forward-looking statements are not based on historical facts but instead reflect the Company's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made.  Forward-looking statements generally can be identified by the use of forward-looking words such as "may", "should", "will", "could", "intend", "estimate", "plan", "anticipate", "expect", "believe" or "continue", or the negative thereof or similar variations. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause future results, performance, or achievements to be materially different from the estimated future results, performance or achievements expressed or implied by the forward-looking statements and the forward-looking statements are not guarantees of future performance. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed thereon, as unknown or unpredictable factors could have material adverse effects on future results, performance or achievements of the Company. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are the following: direct and indirect material adverse effects from the COVID-19 pandemic; timing and receipt of regulatory approvals, adverse market conditions; risks inherent in the data analytics and artificial intelligence sectors in general; regulatory and legislative changes; that future results may vary from historical results; inability to obtain any requisite future financing on suitable terms; any inability to realize the expected benefits and synergies of acquisitions; that market competition may affect the business, results and financial condition of the Company and other risk factors identified in documents filed by the Company under its profile at www.sedarplus.ca, including the Company's managements' discussion and analysis for the year ended December 31, 2022 dated April 28, 2023 and the prospectus supplement (including all documents incorporated by reference therein) dated February 22, 2023. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended and such changes could be material. All of the forward-looking statement contained in this press release are qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking statements contained herein are provided as of the date hereof, and the Company does not intend, and does not assume any obligation, to update the forward-looking statements except as otherwise required by applicable law. Investors are cautioned that, trading in the securities of the Company should be considered highly speculative.