Mr. Paul Ghezzi reports

KONTROL ENERGY COMPLETES ACQUISITION OF CEM SPECIALTIES INC.

Kontrol Energy Corp. has completed the acquisition of CEM Specialties Inc. (CEMSI), previously announced on March 28, 2018, when the company entered into a letter of intent with CEMSI. CEMSI is an established and leading integrator of turnkey emission monitoring equipment and solutions.

With more than 25 years of successful operating history, CEMSI provides the Canadian and U.S. markets with value-added solutions for emissions and process monitoring applications. For the fiscal year ended July 31, 2018, CEMSI generated revenues of $6-million and EBITDA (earnings before interest, taxes, depreciation and amortization) of approximately $1-million. A significant portion of CEMSI's annual revenue is from multiyear recurring contracts and equipment sales.

"CEMSI is a leader and recognized brand in the emission monitoring and integration market," commented Paul Ghezzi, chief executive officer of Kontrol Energy. "We are excited about the closing of this acquisition, as it is a strong strategic fit with our existing emission business. Expanding our emission monitoring and solutions vertical in Canada, and gaining a growing footprint in the USA, is part of our overall strategic growth initiatives."

According to the market research report entitled, "Emission Monitoring Systems Market by System Type Global Forecast to 2025," the emission monitoring systems market is estimated to reach $4.44-billion (U.S.) by 2025 from $2.39-billion (U.S.) in 2018 at a compound annual growth rate of 9.3 per cent between 2018 and 2025.

The aggregate purchase price for CEMSI is $3.35-million, of which the company paid $2,265,000 in cash on closing. There is a vendor take back in the amount of $502,500, representing 15 per cent of the purchase price. The vendor take back shall accrue interest at a rate of six per cent per year. An additional $582,500 of the purchase price is subject to a 15-month holdback to accommodate postclosing purchase price adjustment(s) and indemnity obligations of the vendor. The vendor has received 250,000 common share purchase warrants. Each warrant is exercisable into one common share of the company at a price of 75 cents per share for three years following the date of issue, subject to accelerated expiry in certain circumstances.

In conjunction with the acquisition, the company has closed on a $2-million secured loan with Pinnacle Diversified Private Income LP, by its general partner Pinnacle Diversified Private Income GP Inc., and FirePower Capital. The loan has a term of 12 months. It is anticipated that the loan will be replaced by long-term senior secured debt and equity financing over the next 12 months. The lenders have received 750,000 common share purchase warrants in aggregate. Each warrant is exercisable for one common share of the company at a price of 75 cents per share for four years following the date of issue, subject to accelerated expiry in certain circumstances.

"On a consolidated basis, the acquisition will add approximately $6-million to our year-over-year revenue growth," added Mr. Ghezzi. "Further, the acquisition will add to our earnings and operational cash flow generation starting in Q3 2018. We have been able to achieve significant year-over-year revenue growth while maintaining less than 27 million shares outstanding. We are keenly focused on continuing our strong growth trajectory and maximizing shareholder value."

About Kontrol Energy Corp.

Kontrol Energy is a leader in energy efficiency through Internet of things, cloud and blockchain technology. With a disciplined merger and acquisition strategy, combined with organic growth, Kontrol Energy provides market-based energy solutions to its customers designed to reduce their overall cost of energy while providing a corresponding reduction in greenhouse gas (GHG) emissions.

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