Kontrol Technologies Enters into Agreement to Acquire Building Solutions Company

Acquisition Company to Provide Established Contracted Order Book, Operational Synergies and Growth Opportunities

TORONTO, June 30, 2021 /PRNewswire/ - 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 purchase agreement to acquire all of the issued and outstanding shares of a leading building solutions company (the "Acquisition Company"). The Acquisition Company provides integrated installations of complex heating, cooling, ventilation and building automation systems.

Acquisition Company Highlights

• Audited revenues of $43 million for fiscal year 2020
• Contracted order book of approximately $120 million for next 3 years
• Annual Revenue Growth Rate in excess of 20% over the last 5 years
• More than 20 years of operating history with established customer base
• Synergies with Kontrol's existing operating platform
• Audited net income before tax of $128,000 for fiscal year 2020
• History of positive Adjusted EBITDA from operations

"This acquisition represents another significant milestone in the execution of our plans to further scale our business," said Paul Ghezzi, CEO of Kontrol. "In addition to an impressive order book, there are numerous synergies that the Acquisition Company provides in terms of scale and growth. Given our adequate current cash on hand needed to close the transaction, we hope to complete the acquisition in the near term and integrate the Acquisition Company into our operating platform."

The Acquisition Company has traditionally focused on larger projects with one-time project revenues and a small percentage of its overall business with recurring revenue. Following the completion of the acquisition, Kontrol will seek to grow recurring revenues through vertical integration with its current building energy management software and ongoing service agreements.

"We have identified potential opportunities to grow the Acquisition Company's EBITDA margins by changing its revenue mix through the addition of recurring revenues over time," continued Ghezzi.  "This serves as a prime example of our target acquisition profile and we look forward to realizing the strong synergies resulting from the transaction, ultimately to generate sustainable value for our shareholders."

About Acquisition Company Management

The Acquisition Company is a family-owned private enterprise, and its key management team will remain in place under agreement for a period of up to 3 years.  Existing management will be incentivized to execute and perform on their growing contract order book through an earn-out of over 3 years.

Transaction Details

Pursuant to the agreement, Kontrol will acquire all of the outstanding shares of the Acquisition Company for the consideration of $6.75 Million and additional contingent performance-based consideration. The purchase price will be settled by: (i) $3,250,000 in cash on the closing date, subject to customary post closing adjustments and reconciliations; (ii) $3,500,000 Vendor Take Back at 3% annual interest rate with bullet repayment at the end of 3 years from the closing date (iii) a vendor performance payment equal to 45% of adjusted 3 years cumulative earnings after-tax in excess of $4.5 million.

Closing of the transaction is subject to customary closing conditions and NEO approval and is expected to occur in August 2021.

*Adjusted Earnings before interest, taxes, depreciation and amortization ("EBITDA") and EBITDA Margin are each Non-GAAP measures. EBITDA should not be construed as alternatives to net income/loss determined in accordance with International Financial Reporting Standards ("IFRS"). EBITDA does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers.  The Company believes that EBITDA is a meaningful financial metric as it measures cash generated from operations which the Company can use to fund working capital requirements, service future interest and principal debt repayments and fund future growth initiatives.

About 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 a combination of software, hardware, and service solutions to its customers to improve energy management, air quality and continuous emission monitoring.

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  

https://facebook.com/kontroltechcorp/  
https://twitter.com/kontrolgroup  
https://www.linkedin.com/company/kontrol-group  

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. 

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.

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, that sufficient capital and financing cannot be obtained on reasonable terms, or at all; that those technologies will not prove as effective as expected; those customers and potential customers will not be as accepting of the Company's product and service offering 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.

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SOURCE Kontrol Technologies Corp.