[ironhak]

Thank's to some AI help I was able to create a code that does exactly what I want:
Python Code:

Spoiler:

import re

# Read the input.txt file
with open('input.txt', 'r') as file:
    text = file.read()

# Initialize variables to store the data
chapters = []

# Split the text into chapters based on the "Chapter X" pattern
chapter_texts = re.split(r'Chapter \d+:', text)[1:]

# Function to remove leading spaces from each line
def remove_leading_spaces(text):
    lines = text.split('\n')
    cleaned_lines = [line.lstrip() for line in lines]
    return '\n'.join(cleaned_lines)

# Function to replace \n\n with \n\n  (two spaces)
def replace_double_newline(text):
    return text.replace('\n\n', '\n\n  ')

# Loop through each chapter text to extract information
for chapter_text in chapter_texts:
    chapter_data = {}
    
    # Extract Chapter name
    chapter_name = re.search(r'(.+?)\n', chapter_text)
    if chapter_name:
        chapter_data['Chapter name'] = chapter_name.group(1).strip()
    
    # Extract Highlight text and remove leading spaces
    highlight_info = re.search(r'Highlight:(.*?)\n(?:Notes:|Chapter \d+:|$)', chapter_text, re.DOTALL)
    if highlight_info:
        highlight_text = remove_leading_spaces(highlight_info.group(1)).strip()
        chapter_data['Highlight'] = replace_double_newline(highlight_text)
    
    # Extract Notes if present and remove leading spaces
    notes_info = re.search(r'Notes:(.*?)(?:(?=\nChapter \d+:)|(?=\nNotes:)|$)', chapter_text, re.DOTALL)
    if notes_info:
        notes_text = remove_leading_spaces(notes_info.group(1)).strip()
        chapter_data['Notes'] = replace_double_newline(notes_text)
    
    # Append chapter data to the chapters list
    chapters.append(chapter_data)

# Create a Markdown file
with open('output.md', 'w') as md_file:
    current_chapter = None
    for chapter in chapters:
        if chapter['Chapter name'] != current_chapter:
            md_file.write(f'### {chapter["Chapter name"]}\n')
            current_chapter = chapter['Chapter name']
        
        if "Highlight" in chapter:
            md_file.write(f'- {chapter["Highlight"]}\n')
        
        if "Notes" in chapter:
            md_file.write(f'  > {chapter["Notes"]}\n\n')

print("Conversion completed. Markdown data saved to 'output.md'.")

Sample input of highlights extracted with Kobo Utilities

Spoiler:

The Richest Man in Babylon by George S. Clason

Book last read: 2023-09-17 16:41:41
Percentage read: 28%


Chapter 7: The Richest Man in Babylon
Highlight
Chapter progress: 27.97%
Highlight: And lastly, you have learned to make gold work for you. You have taught yourself how to acquire money, how to keep it, and how to use it. Therefore, you are competent for a responsible position. I am becoming an old man. My sons think only of spending and give no thought to earning. My interests are great, and I fear too much for me to look after. If you will go to Nippur and look after my lands there, I shall make you my partner and you shall share in my estate.’
			 “So, I went to Nippur and took charge of his holdings, which were large. And because I was full of ambition


Chapter 7: The Richest Man in Babylon
Annotation
Chapter progress: 27.97%
Highlight: I did share in his estate as he had arranged under the law.” 
			 
			 So spake Arkad, and when he had finished his tale, one of his friends said, “You were indeed fortunate that Algamish made of you an heir.”

Notes: Text wirh paeagraph break


Chapter 7: The Richest Man in Babylon
Highlight
Chapter progress: 28.81%
Highlight: I would do it. If on the seventh day I passed by without remembering, I would not say to myself, Tomorrow I will cast two pebbles which will do as well. Instead, I would retrace my steps and cast the pebble. Nor on the twentieth day would I say to myself, Arkad, this is useless. What does it avail you to cast a pebble every day? Throw in a handful and be done with it. No, I would not say that nor do it. When I set a task for myself, I complete it. Therefore, I am careful 


Chapter 7: The Richest Man in Babylon
Annotation
Chapter progress: 28.81%
Highlight: 	 “You had strong willpower to keep on after you lost your first year’s savings. You are unusual in that way,” 
Notes: Some note


Chapter 7: The Richest Man in Babylon
Annotation
Chapter progress: 29.66%
Highlight: thou also will be numbered among them. Therefore, invest thy treasure with greatest caution that it be not lost. Usurious rates of return are deceitful sirens that sing but to lure the unwary upon the rocks of loss and remorse. Provide also that thy family may not want should the gods call thee to their realms. For such protection it is always possible to make provision with small payments at regular intervals. 
			 “Therefore, the provident man delays not in expectation of a large sum becoming available for such a wise purpose. Counsel with wise men. Seek the advice of men whose daily work is handling money. Let them save you from such an error as I myself made
Notes: AGAIN


Chapter 8: Seven Cures for a Lean Purse 
Annotation
Chapter progress: 32.2%
Highlight: “We shall now consider the first cure.”
			 The First Cure: Start thy purse to fattening.
			 Arkad addressed a thoughtful man in the second row. 
			 “My good friend, at what craft workest thou?”
			 “I,” replied the
Notes: This is text wirh paragraph break


Chapter 9: The First Cure: Start thy purse to fattening.
Annotation
Chapter progress: 33.05%
Highlight: 	 Thereupon, they agreed that it was so. 
			 “Then,” continued Arkad, “if each of you desireth to build for himself a fortune, is it not wise to start by utilizing that source of wealth which he already has established?” 
			 To this they agreed.
			 Then Arkad turned to a humble man who had declared himself an egg merchant. “If 
Notes: Hello

Output: properly formatted to account even for paragraph breaks inside the highlighted text:

### The Richest Man in Babylon
- And lastly, you have learned to make gold work for you. You have taught yourself how to acquire money, how to keep it, and how to use it. Therefore, you are competent for a responsible position. I am becoming an old man. My sons think only of spending and give no thought to earning. My interests are great, and I fear too much for me to look after. If you will go to Nippur and look after my lands there, I shall make you my partner and you shall share in my estate.’
“So, I went to Nippur and took charge of his holdings, which were large. And because I was full of ambition
- I did share in his estate as he had arranged under the law.” 

  So spake Arkad, and when he had finished his tale, one of his friends said, “You were indeed fortunate that Algamish made of you an heir.”
  > Text wirh paeagraph break

- I would do it. If on the seventh day I passed by without remembering, I would not say to myself, Tomorrow I will cast two pebbles which will do as well. Instead, I would retrace my steps and cast the pebble. Nor on the twentieth day would I say to myself, Arkad, this is useless. What does it avail you to cast a pebble every day? Throw in a handful and be done with it. No, I would not say that nor do it. When I set a task for myself, I complete it. Therefore, I am careful
- “You had strong willpower to keep on after you lost your first year’s savings. You are unusual in that way,”
  > Some note

- thou also will be numbered among them. Therefore, invest thy treasure with greatest caution that it be not lost. Usurious rates of return are deceitful sirens that sing but to lure the unwary upon the rocks of loss and remorse. Provide also that thy family may not want should the gods call thee to their realms. For such protection it is always possible to make provision with small payments at regular intervals. 
“Therefore, the provident man delays not in expectation of a large sum becoming available for such a wise purpose. Counsel with wise men. Seek the advice of men whose daily work is handling money. Let them save you from such an error as I myself made
  > AGAIN

### Seven Cures for a Lean Purse
- “We shall now consider the first cure.”
The First Cure: Start thy purse to fattening.
Arkad addressed a thoughtful man in the second row. 
“My good friend, at what craft workest thou?”
“I,” replied the
  > This is text wirh paragraph break

### The First Cure: Start thy purse to fattening.
- Thereupon, they agreed that it was so. 
“Then,” continued Arkad, “if each of you desireth to build for himself a fortune, is it not wise to start by utilizing that source of wealth which he already has established?” 
To this they agreed.
Then Arkad turned to a humble man who had declared himself an egg merchant. “If
  > Hello

Given I'm not a coder and ChatGPT did almost everything, if someone is willing to improve the thing it would be nice, for now it seems to work.