Kontrol Energy has been relatively quiet during the summer although being quiet doesn’t mean management has been on vacation. On the contrary. The company has recently announced that the company (CSE: KNR) have been hard at work to close a recent acquisition of a Canadian energy company whose revenues have totaled approximately $6.5 Million over the last 3 years with $700,000 in EBITDA. As stated in their press release dated March 14th 2019, the Canadian Energy company is anticipated to be purchased for a total of $3.0 Million with a $300,00 holdback for 12 months. This Canadian electrical company has established a footprint in the cannabis industry as the undisclosed electrical company has worked with cannabis cultivators in Canada.
Additionally, in relation to the purchase of the new asset, Kontrol Energy has provided an update on its current financing. On August 09th, Kontrol stated that the company has agreed to indicative financing terms with an Institutional Lender to provide acquisition funding to complete the acquisition and the financing would be in the form of a secured loan. The terms for the loan are in the form of a 3-month Bankers Acceptance plus 8% with a 3-year term with only interest payments for the first 18 months. The Lender will also be issued warrants that equal 3.20% of the outstanding issued shares of the company with warrants having a 6-year term with an exercise price of CAD $1.05. According to our calculations, the Lender is anticipated to receive 937,210 warrants at a price CAD$1.05, a premium of 50%, and if exercised, the company will further receive CAD $984,070.00 in its coffers. Furthermore, Kontrol Energy has agreed to indicative terms with the Lender whereby Kontrol Energy will limit its previously announced Convertible Debenture to a limit of CAD $2,000,000 with a conversion of $0.80 cents and an accelerated conversion price of $1.25. The accelerated conversion price of $1.25 would represent a percentage increase of 78.57% from the company’s current share price of $0.70 cents per share. CEO of Kontrol Energy, Mr. Paul Ghezzi stated "We believe the arrangement we have reached with the Lender will provide Kontrol with a less dilutive financing solution to close our next acquisition and allows us to keep our total basic common shares outstanding to less than 30 Million,".
Both the closing of the financing and the company’s acquisition of the unnamed Canadian electrical company is expected to be closed on or by the end of August. Shareholders should keep Kontrol Energy on its radar as the company is not only generating significant revenue, is cashflow positive and its stock has been consolidating since the month of July and is looking to break out.
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