PATHWAY ANNOUNCES BRIDGE LOAN

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TORONTO, Feb. 3, 2023 /CNW/ - Pathway Health Corp. (TSXV: PHC) ("Pathway" or the "Company") is pleased to announce a proposed $1.25 million private placement of a secured convertible promissory note with HEAL Global Holdings Corp. (the "Lender"), an entity controlled by the Company's largest indirect beneficial shareholder Avonlea-Drewry Holdings Inc. ("ADH"), and which is a party to the Company's previously announced letter of intent ("LOI") in respect of a proposed business acquisition, recapitalization and debt restructuring transaction involving Pathway, HEAL and The Newly Institute Inc. (see press release dated December 22, 2022) (the "Proposed Transaction").  Pursuant to the terms and conditions of the promissory note to be issued by Pathway in respect of the loan (the "Note"), the Company will have the ability to request drawdowns of up to $1.25 million in aggregate (the "Principal Amount") to further the integrated business platform of the enterprise that will result from the Proposed Transaction and for working capital and general corporate purposes. The Lender has offered to advance the loan to Pathway to bridge the period of time between the date hereof and closing of the Proposed Transaction, and the loan proceeds represent an advance on the aggregate capital otherwise available to Pathway's business within the larger combined enterprise.

The Note is secured against all of the assets of the Company, and is subordinate to the credit facility between the Company and ADH (see press release dated July 29, 2022).  The Note will mature on the earlier of June 30, 2023 and the date on which the definitive agreement or LOI, as applicable, in respect of the Proposed Transaction is terminated or expires (in either case, the "Maturity Date"). 

The Principal Amount outstanding under the Note from time to time will bear interest at a rate of 15% per annum and is convertible at a conversion price of $0.05 per common share in the capital of Pathway ("Common Shares"). Pursuant to the Note, the Lender has agreed, in connection with completion of the Proposed Transaction, to convert the Note and all accrued and unpaid interest thereon immediately prior to closing of the Proposed Transaction (failing which the Note will automatically convert without any further act of the Lender or the Borrower).

The Lender will be issued, concurrently with the issue of the Note, 25,000,000 common share purchase warrants (the "Warrants"), each such Warrant which will be exercisable for one Common Share at a price of $0.05 per share for a period of 12 months from the date of issuance of the Note.  Accrued and unpaid interest on the Note will be convertible into Common Shares in accordance with the policies of the TSX Venture Exchange (the "TSX-V").

In the event that the Company defaults under the Note, or if the Maturity Date occurs in connection with an event of default, accrued and unpaid interest thereon will be deemed to have accrued at the highest applicable rate permitted under applicable law since the issuance date of the Note, and the Lender shall have the option to either extend the Maturity Date for an additional 24 months (during which time the Note will continue to accrue interest at the highest applicable permitted rate), or avail itself of other remedies provided under applicable law. 

The Company has applied to the TSX-V to obtain approval of the Note and the Warrants, as well as the listing of the Common Shares issuable upon conversion of the Note and the exercise of the Warrants.

The Note contains certain other customary financial and other covenants, and will be made available on the Company's SEDAR profile at www.sedar.com.   The Note and the Warrants are to be issued subject to customary closing conditions, including approval from the TSX-V.

The Lender is an affiliate of ADH.  Mr. Michael Steele, the sole director and officer of the Lender, and Ms. Alison Wright, a director of the Company, are directors, officers and shareholders of ADH (the "Insider Position"). As a result, the Lender is a "related party" of the Company and the entering into the Note and matters relating thereto including the issuance of the Warrants are considered to be "related party transactions" within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), requiring the Company, in the absence of exemptions, to obtain a formal valuation of, and minority shareholder approval of, the related party transactions. Pursuant to MI 61-101, the Company is relying on an exemption from the formal valuation requirements as no securities of the Company are listed or quoted on certain specified exchanges, and on an exemption from the minority shareholder approval requirements as, in addition to no securities of the Company being listed or quoted on certain specified exchanges, the fair market value of the Note and the Warrants, as it pertains to the Company, do not exceed $2.5 million, as determined in accordance with MI 61-101.  Neither the Company nor, to the knowledge of the Company after reasonable inquiry, the Lender, has knowledge of any material information concerning the issuer or its securities that has not been generally disclosed. The Company intends to file a material change report within the required timeframe relating to this related party transaction.

None of the securities sold in connection with the private placement will be registered under the United States Securities Act of 1933, as amended, and no such securities may be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this Press Release. The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Cautionary and Forward-Looking Statements

This news release contains forward–looking statements and forward–looking information within the meaning of applicable securities laws. These statements relate to future events or future performance. All statements other than statements of historical fact may be forward–looking statements or information. Forward–looking statements and information are often, but not always, identified by the use of words such as "appear", "seek", "anticipate", "plan", "continue", "estimate", "approximate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions.  More particularly and without limitation, this news release contains forward-looking statements and information concerning the Note, the Warrants, the use of proceeds of the Note, the Proposed Transaction and the Company's future financing or transactional or operational activities. The forward-looking statements and information are based on certain key expectations and assumptions made by the Company.  Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable in the circumstances, undue reliance should not be placed on the forward-looking statements and information because the Company can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties, include, but are not limited to the Company being unable to use the proceeds of the Note as described, legal or regulatory impediments regarding the Note, accrued and unpaid interest thereon and (or) the Warrants, the Proposed Transaction not completing as proposed or at all, the Company defaulting on the Note leading to, among other things, enforcement under the security, increased accrued interest and the Lender extending the maturity date of the Note (and increased accrued interest in respect thereof) or availing itself of other available remedies, the proceeds being insufficient for the Company's purposes, the Company's inability to repay the Note on the Maturity Date or at all and the Company being unable to raise additional funds on terms acceptable to the Company or at all. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward-looking information for anything other than its intended purpose. The Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law or the TSX Venture Exchange.

SOURCE Pathway Health Corp.

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