Kontrol Technologies Enters into a Non-Binding Letter of Intent to Acquire Building Service and Solutions Company in Alberta

Rhea-AI Summary

Kontrol Technologies Corp. (NEO:KNR, OTCQB:KNRLF) has signed a Letter of Intent to acquire a building service company in Alberta, Canada. This Target serves blue-chip clients and generated $5.4 million in revenue with a 73% gross margin and 20% EBITDA. The acquisition will cost $3.5 million in cash, $500,000 in shares, and up to $750,000 in earn-outs, contingent on performance. The deal aims to enhance Kontrol's recurring revenue and expand its market presence.

Positive

• Acquisition targets a well-established service provider with a strong customer base.
• Target generated $5.4 million in revenue with a 73% gross margin and 20% EBITDA margin.
• The acquisition enhances Kontrol's recurring revenue and market presence in Western Canada.

Negative

• The acquisition is contingent on a definitive agreement, which may encounter delays.
• Financing the acquisition might rely on the terms and availability of the $50 million credit agreement.

TORONTO--(BUSINESS WIRE)-- Kontrol Technologies Corp. (NEO:KNR) (OTCQB:KNRLF) (FSE:1K8) (“Kontrol” or the “Company”), a leader in smart buildings and cities through IoT, Cloud and SaaS technology, has entered into a Letter of Intent (“LOI”) to acquire a building service and solutions company in Alberta, Canada (the “Target”).

The Target is a well-established service and solutions provider for a wide range of blue-chip customers including municipalities, property managers, developers, and real estate investment trusts. The Target provides high value services in mechanical materials, heating, and building retrofits. The Target provides commercial and multi-residential services to approximately 700 different locations annually with strong repeat business.

“We remain focused on national expansion as well as adding recurring revenues to our existing platform,” says Paul Ghezzi, CEO of Kontrol Technologies. “In addition to an attractive customer base, in Western Canada, the repeat nature of the Target’s revenues provides a high-value platform that we will seek to leverage with our proprietary technology.”

Based on the fiscal year ended April 30, 2022, unaudited financial statements, the Target generated $5.4 Million in revenue with a 73% gross margin and a normalized EBITDA margin of 20%.

The consideration for the acquisition is $3.5 Million to be paid in cash on closing and $500,000 worth of common shares in the capital of the Company (which common shares are expected to be subject to certain escrow restrictions) and a total earn-out of up to $750,000 over a three-year period. The earn-out is subject to achieving certain earnings targets.

As noted in our press release dated August 31, 2022, Kontrol has entered into a $50 Million credit agreement with a Schedule 1 Bank (the “Bank”). The facility can be drawn to fund acquisitions subject to complying with the Bank’s approvals. The Company will assess its acquisition financing options including the potential use of this Bank credit agreement.

A closing date of December 15, 2022 has been targeted by the Company and the Target, and the acquisition is subject to a number of conditions precedent including the finalization of a definitive Share Purchase Agreement and all required approvals.

Kontrol Technologies Corp.

Kontrol Technologies Corp., a Canadian public company, is a leader in smart buildings and cities through IoT, Cloud and SaaS technology. Kontrol provides solutions and services to its customers to improve energy management, monitor continuous emissions and accelerate the sustainability of all buildings.

Additional information about Kontrol Technologies Corp. can be found on its website at www.kontrolcorp.com and by reviewing its profile on SEDAR at www.sedar.com

Neither IIROC nor any stock exchange or other securities regulatory authority accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Statements

This news release contains “forward-looking information” within the meaning of applicable securities laws. All statements contained herein that are not clearly historical in nature may constitute forward-looking information. In some cases, forward-looking information can be identified by words or phrases such as “may”, “will”, “expect”, “likely”, “should”, “would”, “plan”, “anticipate”, “intend”, “potential”, “proposed”, “estimate”, “believe” or the negative of these terms, or other similar words, expressions, and grammatical variations thereof, or statements that certain events or conditions “may” or “will” happen, or by discussions of strategy. Forward-looking statements in this press release include, but are not limited to, statements with respect to the following: completion of the activities contemplated in the LOI and the timing thereof, including the completion of the acquisition of the Target; future funding sources available to the Company; and the Company’s future business plans and operations.

Where Kontrol expresses or implies an expectation or belief as to future events or results, such expectation or belief is based on assumptions made in good faith and believed to have a reasonable basis. Such assumptions include, without limitation: that sufficient capital will be available to the Company and that technology will be as effective as anticipated; that the Company will be able to enter into a definitive agreement with respect to the acquisition of the Target on the terms and in the timeframe as currently anticipated; that the activities contemplated in the LOI will be completed on the timeframe as currently anticipated; and that the Company’s customers will continue to utilize the Company’s products as currently anticipated.

However, forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by such forward-looking statements. Such risks include, but are not limited to the following: that the Company will not complete the acquisition of the Target on the terms as currently anticipated or at all; that the Company may encounter delays in carrying out the activities contemplated in the LOI; that sufficient capital and financing cannot be obtained on reasonable terms, or at all; that the Company’s technologies will not prove as effective as expected; that customers and potential customers will not be as accepting of the Company's product and service offerings as expected; and government and regulatory factors impacting the energy conservation industry.

Accordingly, undue reliance should not be placed on forward-looking statements and the forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. The forward-looking statements contained herein are made as at the date hereof and are based on the beliefs, estimates, expectations, and opinions of management on such date. Kontrol does not undertake any obligation to update publicly or revise any such forward-looking statements or any forward-looking statements contained in any other documents whether as a result of new information, future events or otherwise or to explain any material difference between subsequent actual events and such forward-looking information, except as required under applicable securities law. Readers are cautioned to consider these and other factors, uncertainties, and potential events carefully and not to put undue reliance on forward-looking information.

View source version on businesswire.com: https://www.businesswire.com/news/home/20221014005128/en/

Kontrol Technologies Corp.

Paul Ghezzi

CEO

info@kontrolcorp.com

601 Rowntree Dairy Road, Unit B

Vaughan, ON L4L 5T8

Tel: 905.766.0400

Source: Kontrol Technologies Corp.

FAQ

What is Kontrol Technologies Corp. planning to acquire?

Kontrol Technologies Corp. is planning to acquire a building service and solutions company in Alberta, Canada.

How much will the acquisition cost?

The acquisition will cost $3.5 million in cash, $500,000 in shares, and up to $750,000 in earn-outs, depending on performance.

What were the financials of the Target company?

The Target generated $5.4 million in revenue with a 73% gross margin and a normalized EBITDA margin of 20%.

When is the closing date for the acquisition?

The targeted closing date for the acquisition is December 15, 2022.

What are the risks associated with the acquisition of the Target?

Risks include potential delays in finalizing the acquisition agreement and reliance on credit availability for financing.