Kenergy Scientific Inc (OTCMKTS:KNSC), a chain delivering Pan Asian Food in Miami, recently delivered interesting news. The market reacted by pushing up the share price on heavy volume. Have a look at the recent share price action: 1 year chart for KNSCFor what reasons?Two news items were released. The first one was that the company will begin work on a third location in Miami, whereas the second news was about its intention to acquire real estate and resort management operations. We will provide all the details in this piece.Recent DevelopmentsLet's revisit the background of the company for those who are reading about it for the first time. KNSC was founded on November 10, 2004 and from 2010 it ran Hibachi Noodle Bar’s Hibachi Grill & Noodle Bar in Miami, FL. We assessed the restaurant in our previous article called "Kenergy Scientific Inc (OTCMKTS:KNSC) Gets A Fresh Start", wherein we also incorporated TripAdvisor's reviews that we recommend reading.
"Hibachi Noodle Bar’s Hibachi Grill & Noodle Bar was established in 2010 in Miami, FL. The restaurant offers Fast, Fresh, Authentic Pan Asian Food“. The menu includes authentic Japanese Food, wherein clients can find soups and salads, hibachi chicken, steak and seafood, to fried rice, noodle bowls and Yakisoba as well as Thai dishes. The company states that the food is prepared using the highest quality ingredients, and customer service and satisfaction is the top priority." Source
With that in mind, now we will review the most recent announcements.On July 21, 2017, the company noted the beginning of construction on its third Hibachi Grill & Noodle Bar location in the heart of Miami. Additionally, it was noted that the company plans to grow at least 3 new locations annually, with the goal of at least 5 additional locations in the South Florida market. We believe that the goal is quite ambitious, thus in our opinion, if the expectations are met, the market will push the share price higher. Adel Nassar, president of KNSC, was quoted:
"As a part of our ongoing commitment to grow our operations across the State of Florida and the United States, we are excited to be expanding our presence in existing markets and debuting our 3rd location," said Adel Nassar, president of KNSC. "We project this will bring an additional $1.5 million to our top line, and with our existing numbers will put the company on track to reach our projected $3.5m annually." He added, "We are also very excited about our franchise program that is under development." Source
On September 1, 2017, the company noted a Letter of Intent, under which the company will acquire all the issued and outstanding shares of an Orlando, FL-based real estate and resort management company. The acquisition includes $20 million in assets and over $6 million in annual revenues. According to the agreement, the company will complete the transaction within 30 business days. We encourage readers to be alert, as when the acquisition is completed, more information will be given about the assets acquired and the market could push up the share price. This is a big catalyst for the stock.On top of it, the following remarkable information was given regarding the payment method that will be used.
"Simultaneously with the acquisition of the management company, KNSC will reverse out the Hibachi Grills and Noodle Bars to Adel Nassar in exchange for his surrendering all shares in the Company." Source
Financial SituationOn August 26, 2017, the company released its quarterly report. Have a look at the most relevant assets and liabilities reported in the balance sheet. Please note that the company did not report long term liabilities.
- Cash: $110,773
- Restaurant equipment: $110,352
- Total assets: $207,912
- Total current liabilities: $945,981
For those who are concerned about the dilution risk, we obtained the following information regarding the total amount of shares:
- Preferred stock: 62,270 issued and outstanding
- Class A Common Stock: issued and outstanding 7,009,465,174 and 6,68,465,174 shares respectively
- Class B Common Stock: issued and outstanding 10,000 and 10,000 shares respectively
Additionally, the accumulated deficit seems high; $15,865,653. Is this useful? Yes, these are net operating losses, which are tax deductible. Once the company is able to report positive net income, the taxes to be paid are drastically reduced. The market tends to appreciate such financial accounting.ConclusionKNSC has released interesting news recently. The fact that the company will soon commence work at a third location in Miami is positive. Additionally, the company plans to grow at least 3 new locations annually, which reflects management's confidence in the business plan. This is good news. Furthermore, the company recently signed a Letter of Intent to acquire another business. We expect to receive some information about this transaction soon, thus we encourage readers to be alert, as the closing of the acquisition may make the share price increase. To sum up, follow KNSC closely, as the stock has proven to be a microcap runner.Be sure to check out our coverage on KNSC!We will updating out subscribers as soon as we know more. For the latest updates on KNSC, sign up below!Image courtesy of illinilitteken via FlickrDisclosure: We have no position in KNSC and have not been compensated for this article.