Kontrol Technologies Enters into Forbearance Agreement with Secured Lender and Provides Corporate Update

Rhea-AI Summary

Kontrol Technologies Corp. (NEO:KNR, OTCQB:KNRLF) announces a six-month Forbearance Agreement with its secured lender due to prior covenant breaches. The company is required to remain current on principal and interest obligations, with a mandated principal repayment of $2.75 million in the next four months. Additionally, Kontrol plans to wind up its subsidiary, Global HVAC and Automation, as part of a corporate restructuring aimed at achieving positive cash flow and EBITDA in 2023. CEO Paul Ghezzi expressed confidence in focusing on higher gross margin services to enhance financial performance.

Positive

• Entered a Forbearance Agreement with secured lender, allowing for restructuring.
• Focused on higher gross margin services, which may enhance profitability.
• Sufficient cash and working capital to meet principal payments.

Negative

• Covenant breaches for secured loan indicate prior financial instability.
• Wind-up of Global HVAC suggests potential losses in revenue from discontinued operations.

TORONTO--(BUSINESS WIRE)-- Kontrol Technologies Corp. (NEO:KNR) (OTCQB:KNRLF) (FSE:1K8) (“Kontrol” or the “Company”), a leader in smart buildings and cities is pleased to provide an update to its press release dated November 15^th, 2022 regarding certain covenant breaches for its secured loan, as well as provide certain other corporate updates.

“We are pleased that our secured lender is working closely with us as we focus on driving profitability and positive operating cash flows in 2023,” says Paul Ghezzi, CEO of Kontrol Technologies. “With a strategic focus on higher gross margin service and solutions business we are confident in our ability to continue to scale the business and deliver solid operating performance.”

The Company has entered into a Forbearance Agreement (the “FBA”) with its secured lender for a six-month term up to July 31, 2023. Under the FBA the Company is required to remain current on principal and interest obligations and is subject to a minimum EBITDA threshold. In addition, the Company is required to make principal payments of $2.75 million over the next four months. The Company has sufficient cash and working capital to meet the principal payment requirements. The Company is current on its principal and interest payments for its secured debt obligations.

Corporate Restructuring

As part of the Company’s plan to be cash flow and EBITDA positive in 2023 the Company’s operating subsidiary Global HVAC and Automation (Global) will be wound up and considered a discontinued operation for accounting purposes. For the benefit of overall Company profitability, the wind up will take the form of a voluntary assignment into bankruptcy, which has been initiated.

“The restructuring of Kontrol will require that we focus on our higher gross margin businesses which also include recurring revenues in our services and solutions offerings,” continues Paul Ghezzi. “Eliminating loss making operations directly benefits both the gross margins and earnings before interest, taxes and depreciation in a positive manner.”

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.

This news release shall not constitute an offer to sell, or a solicitation of an offer to buy, any securities of the Company nor shall there be any sale of any of the securities in any jurisdiction in Canada; nor shall it constitute an offer to sell, or the solicitation of an offer to buy, any securities of the Company nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This news release shall not constitute an offer of securities for sale in the United States. The securities have not been, nor will be, registered under the U.S. Securities Act and such securities may not be offered or sold within the United States absent registration under U.S. federal and state securities laws or an applicable exemption from such U.S. registration requirements.

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 information contained in this press releases includes, but is not limited to, the following: the potential benefits of winding up Global; the future operations of the Company; and the Company’s ability to meet its contractual obligations to make payments under the FBA.

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 the Company will have sufficient financial and other resources to fulfil expectations with respect to future operations and meet contractual payment obligations.

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/20230216005508/en/

Kontrol Technologies Corp.

Paul Ghezzi

CEO

info@kontrolcorp.com

11 CiderMill Road

Vaughan, ON L4K 4B6

Tel: (905) 766.0400

Source: Kontrol Technologies Corp.

FAQ

What is the Forbearance Agreement for Kontrol Technologies Corp. (KNRLF)?

Kontrol Technologies Corp. has entered into a six-month Forbearance Agreement with its secured lender to manage prior covenant breaches.

What are the financial obligations under the Forbearance Agreement for KNRLF?

The agreement requires Kontrol to remain current on principal and interest payments while making a principal repayment of $2.75 million over the next four months.

What restructuring is Kontrol Technologies undertaking?

Kontrol Technologies is winding up its subsidiary, Global HVAC and Automation, to focus on higher gross margin businesses.

What is the goal of Kontrol's restructuring plan?

The goal is to achieve positive cash flow and EBITDA in 2023.

How does Kontrol plan to improve profitability?

Kontrol plans to concentrate on higher gross margin services and solutions to enhance profitability.