PNG.V - Further monetized.


Kraken Sonar Inc. (PNG.V) is a marine technology company dedicated to the production and sale of software-centric sensors, subsea batteries and thrusters, and underwater robotic systems.


Previous coverage on March 2017, October 2017, April 2018, July 2018, December 2018, August 2019. and May 2020.

News Releases


June 1 - Reports Strong Q1 2020 Results


July 3 - Provides Positive Update on $40 Million Royal Danish Navy Mine Hunting Upgrade Program:


Under the program, Kraken will deliver the KATFISH™ towed synthetic aperture sonar, the Tentacle® winch and Autonomous Launch and Recovery System (ALARS) to the Royal Danish Navy. The total contract value is expected to be between C$35-$40 million, with the majority of that received over a 2 year equipment acquisition phase.


July 7 - Announces Emera Joins OceanVision™ Project: NSP Maritime Link Inc. (NSPML), has joined Kraken’s OceanVision project. NSPML is an indirect wholly owned subsidiary of Emera Inc., a multi-national energy company.

Along with providing expertise and knowledge of critical subsea infrastructure, NSPML will contribute over $500,000 during the term of the project. NSPML owns and operates the Maritime Link infrastructure, which includes twin 177 km subsea 500 MW HVDC power cables that cross the seafloor between Newfoundland and Labrador and Nova Scotia.


The addition of Emera is an opportunity to develop its RaaS business under the umbrella of the OceanVision™.


July 8 - Announces $1 Million of Defense Contracts: three defense customer orders. A follow-on order for MINSAS 60 LW sensors for man-portable vehicles. Sale of a SeaVision™ laser scanner to a large US defense contractor.


A first purchase order issued to our Acoustic Signal Processing Group (APSG).


July 13 - Announces Ultra High Definition Gap Filler Innovative gap filler solution for unmanned underwater vehicles based on the company’s AquaPix® Synthetic Aperture Sonar (SAS) and SeaVision® 3D laser scanner. It drastically reduces the size of the nadir gap while maintaining full SAS resolution. An optical laser/camera gap filler, based on Kraken’s SeaVision® system, which fills the remainder of the nadir gap with ultra-high-resolution optical imagery and laser bathymetry. The gap filler will be available for customer implementation in Q4 2020.


Kraken also announces that its Board of Directors has approved the issuance of 1,500,000 options to certain Directors. These options have an exercise price of $0.57 and have a three-year term.


Aug. 4 - Addition of Cathy Bennett to Board of Directors


Aug. 12 - Energy Industry Executive Joins Kraken as Strategic Advisor.


Aug. 25 - Reports Q2 2020 Results: Subsequent to the quarter, notification was received that the complaint process regarding the Royal Danish Navy’s mine hunting upgrade program had been finalized, ruling in the Navy’s position on all points. The total contract value to Kraken is expected to be between C$35-$40 million, with the majority of that received over a 2-year equipment acquisition phase. The contract is expected to be finalized and start during Q3,2020.


Aug. 31 - Announces $3 Million of Government of Canada Funding for ThunderFish® XL Development: Receives up to $2.9M non-refundable financial contribution from the National Research Council of Canada’s Industrial Research Assistance Program (NRC-IRAP). The funding will be received over a 26-month project period and will be used to support the development of Kraken’s seabed resident ThunderFish® XL Autonomous Underwater Vehicle (TFXL AUV).


Sept. 8 - Signs $36 Million Danish Navy Contract: The majority of funds to be received over a 2-year equipment acquisition phase. Product margins on this contract are expected to be in line with historical Kraken average.


As part of its commitment to Denmark, PNG.V will be expanding its European presence with the establishment of a new Danish Centre of Excellence in Mine Counter Measures. The new operation will not only conduct R&D to further improve the capabilities of Kraken’s world-class MCM solutions but will also offer local technical support for Danish customers.


Sept. 8 - To Supply Minehunting Systems to Polish Navy: PNG.V will deliver its KATFISH™ towed Synthetic Aperture Sonar, Tentacle® Winch and Autonomous Launch and Recovery System (ALARS) in the second half of 2021.


Due to confidentiality reasons, Kraken cannot disclose specifics about the contract – other than to say that it is significant and that we expect it to be a strong enabler within other NATO nations.


Sept. 10 - Government of Canada Expresses Support for Kraken’s Defence Export Sales.


Sept. 21 - Completes Successful Sea Trials of SeaScout® System Onboard Ocean Seeker: successfully completed sea trials in Nova Scotia with our SeaScout® system installed on the PNG.V’s research and survey vessel, ‘Ocean Seeker’.


The complete SeaScout® system will be delivered to both the Royal Danish Navy and the Polish Navy over the coming years for installation on their mine hunting vessels.


Oct. 1 - Announces $10.0 Million Bought Deal Prospectus Offering: 15M common shares at $0.67 per Common Share for aggregate gross proceeds of $10M the Company. The Company intends to use the net proceeds from the Offering to accelerate its Robotics as a Service (RAAS) recurring revenue model, for leasehold improvements, capital expenditures, parts and inventory, future acquisitions and for general corporate and working capital purposes.


Oct. 26 - Announces Closing of Bought Deal Financing and Partial Exercise of Over-Allotment Option: A total of 15.5M shares at $0.67 for gross proceeds of $10.3M, inclusive of the partial exercise of the over-allotment option.


Oct. 28 - Dive Technologies Completes Successful Sea Trials with Kraken’s Pressure Tolerant Batteries: Quincy, Massachusetts based Dive Technologies Inc. (“Dive”) recently completed successful sea trials of a Large Displacement Autonomous Underwater Vehicle (LD-AUV) which was powered by Kraken’s pressure tolerant batteries.


Kraken and Dive Technologies entered into an agreement in August 2020 whereby Kraken agreed to supply subsea batteries for the LD-AUV. Under the terms of the agreement, Kraken also acquired a license to build two Dive LD-AUVs for use in Kraken’s growing Robotics-as-a-Service (RaaS) business. Production of Kraken’s first Dive LD-AUV is currently underway with the first unit being manufactured in the United States. Kraken expects that it will be delivered to Kraken’s Unmanned Maritime Vehicle Facility in Dartmouth, Nova Scotia for sea trials in the spring of 2021.


Nov. 6 - Completes Successful Fall OceanVision™ Campaign: Recently completed its third offshore data acquisition and technology demonstration campaign as part of the $19 million OceanVision™ project. The OceanVision™ campaign took place from September 21 to October 18 and included the mobilization and integration of Kraken’s KATFISH™ system onboard Atlantic Towing Limited’s Atlantic Kingfisher offshore supply vessel.


Nov. 24 - Reports Q3 2020 Results: Subsequent to the quarter, we closed a bought deal short form prospectus offering for gross proceeds of $10.4 million. In addition, during Q4 the Company will receive advance payments on recent orders with the Danish and Polish Navies totaling $8.8 million.



Summary

Product Milestones

In 2020, PNG.V has continued to deliver innovate products. Following the March 30th announcement, Ultra High Definition Upgrade for AquaPix® Imaging Sonars [Synthetic Aperture Sonar Software (SAS) to a 1.9 cm resolution], a

Ultra High Definition Gap Filler solution for unmanned underwater vehicles was developed. Available in Q4 2020.


Additionally in late September Kraken successfully completed Sea Trials of SeaScout® System. The SeaScout® system consists of PNG.V’s Autonomous Launch and Recovery System (ALARS), Tentacle Winch® and, the KATFISH™ towed Synthetic Aperture Sonar underwater vehicle.


The complete SeaScout® system will be delivered to both the Royal Danish Navy and Polish Navy in the next few years.


Partnerships

Adding to the agreement with Greensea Systems, Kraken disclosed a partnership with Dive Technologies Inc. (“Dive”). (August 2020) for which it reported in late October to have completed successful sea trials of a Large Displacement Autonomous Underwater Vehicle (LD-AUV) that was powered by Kraken’s pressure tolerant batteries. Note that:


Under the terms of the agreement, Kraken also acquired a license to build two Dive LD-AUVs for use in Kraken’s growing Robotics-as-a-Service (RaaS) business. Production of Kraken’s first Dive LD-AUV is currently underway with the first unit being manufactured in the United States. Kraken expects that it will be delivered to Kraken’s Unmanned Maritime Vehicle Facility in Dartmouth, Nova Scotia for sea trials in the spring of 2021.


Oceanvision

OceanVision™ is a three-year, $19 million project focused on the development of new marine technologies and products to enable an underwater robotics data acquisition and data analytics as a service business.


On July 7, NSP Maritime Link Inc. (NSPML) a subsidiary from Emera joined OceanVision by contributing over $500,000 to the project. Specifically, PNG.V stated that the event was an opportunity to further develop its RaaS business.


NSPML owns and operates the Maritime Link infrastructure, which includes twin 177 km subsea 500 MW HVDC power cables that cross the seafloor between Newfoundland and Labrador and Nova Scotia. Its participation in the OceanVision project will help support Inspection, Maintenance and Repair operations through demonstrations and testing of Kraken’s leading technology platforms such as Synthetic Aperture Sonar, Multi-Spectral Synthetic Aperture Sonar, SeaVision® 3D Laser Scanning System, KATFISH™ towed sonar, and ThunderFish® XL Autonomous Underwater Vehicle.

Recently, PNG.V completed its third offshore OceanVision Campaign (ie. data acquisition, technology demonstrations).


“Kraken looks forward to future campaigns in 2021 as part of the OceanVision™ project which will see integration of new technology developments from Kraken and its partners including Multi-Spectral Synthetic Aperture Sonar, ThunderFish® XL AUV and the DIVE LD-AUV. These technologies will form a key part of our emerging Robotics as a Service business as we deploy innovative technology platforms across ocean sectors and extend the global reach and market opportunities.”


Financing

In October 2020, Kraken closed a $10.3M Bought Deal (15.5M shares) at $0.67 cents - no warrants. Note that the net proceeds are to accelerate its Robotics as a Service (RAAS) recurring revenue model, for leasehold improvements, capital expenditures, parts and inventory, future acquisitions and for general corporate and working capital purposes.


Insider Activity.

There has been a number of insiders sales in the last period. While some may be necessary, the presence of insider purchase has not been seen, especially after the Bought Deal ($0.67 cents).


Funding

On August 31, the National Research Council of Canada’s Industrial Research Assistance Program (NRC-IRAP) awarded $2.9M to PNG.V for the development of ThunderFish® XL Autonomous Underwater Vehicle (TFXL AUV). ThunderFish® XL AUV is larger with an increased depth rating, larger payload capacity and longer mission length.


Contract

By far, the achievement of this period is the signing of the $36 Million Danish Navy Contract for which the funds are expected to come in the next 2 years. On the same day, PNG.V also reported the award of a contract to supply Minehunting Systems to the Polish Navy for an undisclosed amount (i.e. confidential). The delivery for the order is expected by the second half of 2021. Kraken was also awarded a $1M contract from three defense customers.


Earnings

To date, results for 2020 are mixed. After starting with strong earnings in Q1, revenue have declined substantially.

Year to Date (YTD) revenue are mostly flat. However, in the Q3 2020 earning release, it was indicated that PNG.V was expecting advance payments on orders from the Danish and Polish Navies totaling $8.8 million in Q4 2020. This would results in FY 2020 earnings exceeding FY 2019 by roughly $4M (22%). A conservative estimate of the remainder of the Danish Navy at $27M for the FY 2021-22 results in $13.6M a year excluding any other additional contract.


Analyst coverage

There are at least five brokerage who are currently covering the stock, the average target price is $1.09








A recent report summary from Beacon analysis can be found here. FY 2020 revenue of $20M are forecasted while 2021 revenue of $40M is estimated. While the later is possible, it certainly represent a very bullish scenario from here.


In Short

Of late valuation has been flat at $0.57 cents. In fact, Kraken is trading well below the last financing (Bought Deal at $0.67 cents). From here, upward movement is dependent on Q4 Earnings and additional contract announcements.


The award from the Danish Navy is a significant milestone for PNG.V. The addition of the Polish Navy is a testament that other countries are interested in the technology. These provide a strong base for which Kraken can build from. FY 2021 revenue growth will depend on the deployment of both contracts and the capacity to generate additional ones.


The Ocean Vision Program continues to be a success as it enables Kraken t0 sell products, provide a service and further enhance its technology. The addition of Emera brings new verticals (underground cables) to existing ones: Petroleum Research Newfoundland and Labrador, Ocean Choice International and Nunavut Fisheries Association.


The importance of Ocean Vision is not to be under-estimated as it represent a template that can be exported internationally where PNG.V's Robotic As a Service (RAAS) and products can be further monetized.



DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.

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