PNG.V - Multiple.


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.


Coverage on March 2017, October 2017, April 2018, July 2018, December 2018, August 2019. May 2020. and January 2021.

News Releases


Feb. 16 - Announces $3.5 Million of Contract & Funding Awards: Contract Updates: a sub-sea battery order totaling $1.5 million and funding awards for $2.0 million. The Company expects to fulfill this battery contract in 2021, while the funding awards are for projects that will be executed over the coming 12-36 months.


Due to confidentiality reasons, our customers and partners cannot be named.


Feb. 23 - Achieves ISO 9001:2015 Certification for Quality Management System.


Mar. 4 - Announces $2.2 Million of Subsea Batteries and Sonar Contracts & Project Funding: Contract Updates - Kraken has received new orders totaling $0.7 million and funding awards for $1.5 million. Due to confidentiality reasons, our customers and partners cannot be named but are characterized below:


a) An existing U.S. defense industry customer is acquiring additional SeaPower® batteries. This is the customer’s second order of Kraken batteries. Delivery will occur in the first half of 2021. b) A defense customer in the Southern Hemisphere has awarded Kraken a contract for an AquaPix MINSAS120 sensor for integration into the customer AUVs. Delivery will occur in 2021. c) Kraken has been notified of $1.5 million of funding awards across two projects. Germany’s Federal Research Minister announced in February that the Ocean Technology Center, Rostock, was one of seven clusters that will receive up to a total of €450 million over nine years. The Ocean Technology Center, Rostock, is expected to receive up to a total of €45 million of this funding. Project will start in Q4 2021 and last for 36 months.


Mar. 23 - Announces Filing of Preliminary Base Shelf Prospectus: The Base Shelf Prospectus, when final, will qualify the distribution of up to $65 million of common shares, warrants, subscription receipts, and debt securities during the 25-month period that the base shelf prospectus is effective.


Apr. 7 - Obtains Receipt for Final Base Shelf Prospectus.


Apr. 9 - Enters into Letter of Intent to Acquire Subsea Services Company: PanGeo Subsea Inc. (“PanGeo”) from Cahill Innovation Inc, a member of the Cahill Group of Companies, and Argentum Asset Management AS.


PanGeo is a private Canadian services company specializing in high resolution 3D acoustic imaging solutions for the sub-seabed. This proposed acquisition would accelerate Kraken’s transformation to a Robotics/Data as a Service model by increasing recurring service revenue and providing increased exposure to the non-defense market.


Transaction details: purchase price will be between $18-$24 million, based on PanGeo’s performance over the 2-year period following the acquisition, to be paid by way of cash and stock over that period.


Apr. 13 -Dive Technologies Completes Successful Sea Trials with Kraken’s Sonar & Pressure Tolerant Batteries: Dive Technologies Inc. (“Dive”) recently completed successful sea trials of Kraken’s Miniature Synthetic Aperture Sonar (MINSAS 120) integrated onto Dive’s Large Displacement Autonomous Underwater Vehicle (DIVE-LD). The DIVE-LD is also 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 DIVE-LD. Under the terms of the agreement, Kraken also acquired a license to build two DIVE-LDs for use in Kraken’s growing Robotics-as-a-Service (RaaS) business.


Apr. 19 - Closes Acquisition of Brazilian Underwater Robotics Company: Acquired 13 Robotics Ltda of Brazil (“13R”). The 13R team, with offices in Rio de Janeiro and Salvador, Brazil, consists of software developers and engineers who have significant experience in underwater robotics and autonomous systems for the energy markets.

Consideration for the 13R acquisition was US$220,000 cash.


Apr. 26 - Reports 2020 Financial Results:


Apr. 27 - Receives Order for Pressure Tolerant Batteries from Dive Technologies: Received another order for its 6000-meter SeaPower® pressure tolerant batteries from Dive Technologies Inc.. Dive’s Large Displacement Autonomous Underwater Vehicles (DIVE-LD) are powered by Kraken’s pressure tolerant batteries. The value of the order is $0.6 million. Delivery is expected in Q3 and will be integrated into the third DIVE-LD production hull.


Apr. 28 - To Equip New AUV Customer with AquaPix® Sonar and SeaPower® Batteries: New purchase orders for a 6000-meter rated AquaPix® MINSAS 120 sonar and SeaPower® batteries totalling over $1.2 million from a new AUV customer. Due to customer confidentiality, Kraken cannot provide more details but expects to fulfill these orders in 2021.


May 11 - Provides 2021 Guidance of 100%+ Revenue Growth and Preliminary Q1 Financial Results: 2021 Guidance: Revenue for the year ended December 31, 2021 is expected to be $24.0 to $28.0 million versus $12.3 million in 2020.


The greater than 100% expected growth is due to recent contract wins for KATFISH™ 180 towed sonars and ALARS for the Danish and Polish Navies, and various orders and expected orders for AquaPix® MINSAS and SeaPower™ batteries.


Net income for 2021 is expected to range from a net loss of $1.5 million to net income of $1.5 million. This compares to a net loss of $5.5 million in 2020; Our revenue guidance excludes any contribution from the proposed acquisition of PanGeo which we announced on April 9, 2021.


May 20 - Receives Order for AquaPix® Sonar from AUV Manufacturer: A 3000-meter rated AquaPix MINSAS 120 Synthetic Aperture Sonar from an American autonomous underwater vehicle (AUV) manufacturer.


The contract value is $0.5 million and delivery to the customer is expected in 2021.


May 27 - To Join LifeMoor Mooring Chain Inspection Project: This 4-year “Knowledge Building Project for Industry” started in 2018. LifeMoor is supported by the Research Council of Norway and run by SINTEF, Norway’s largest independent research institution including industry partners (NTNU, Equinor, MacGregor, Aker BP, Nosted).


The offshore mooring market was valued at over US$ 1 Billion in 2020 and is expected to grow at a 3.7 % CAGR from 2021 to 2026 according to industry analyst, Market Study Report LLC. The largest market segment is offshore oil & gas FPSOs, accounting for over 2,000 km of mooring chains.

May 27 - Receives Order to Equip 2nd Teledyne Gavia SeaRaptor AUV with AquaPix® SAS Sonar: This second order follows an announcement made April 28, 2021. While we cannot provide the specific amount of these orders to Kraken, they total between $1.75 and $2.0 million. Kraken expects to fulfill these orders in 2021.


Teledyne Gavia’s Autonomous Underwater Vehicle (AUV) customer is Argeo AS, a European survey company who recently press released their two SeaRaptor AUV orders. According to Argeo, they intend to have the two AUV systems work in parallel for projects requiring larger seabed footprint and productivity, focusing on deep water projects.


May 27 -Reports Q1 2021 Results.


June 7 -Sign Cooperation Agreement for Containerized MCM Solutions with SH Defense (SHD) of Denmark: For the design and sale of containerized mine countermeasure and other subsea surveillance sensor and robotic solutions.


SHD is an international company developing, producing and servicing hydraulic, electric and mechanical system solutions, including containerized multi-mission module systems for the worldwide naval industry.


SHD manufactures The Cube™, a next generation evolution of StanFlex containers.


June 11 - Announces CRADA on Pressure Tolerant Batteries with US Navy: Signed a Cooperative Research and Development Agreement (CRADA) with Naval Surface Warfare Center, Carderock Division (NSWCCD). The testing is expected to take four months to complete and is expected to start in calendar Q3 of this year.


PNG.V has developed and produces a pressure-tolerant lithium-ion battery design that employs passive propagation resistance to thermal runaway battery casualties. NSWCCD, utilizing its experience in Navy safety requirements, will conduct safety tests on the newest variant of Kraken Robotics’ pressure-tolerant lithium-ion battery design.


Results of the testing could inform further design iterations as well as to promote interest in the battery design by US Navy program offices who might benefit from this technology for use in current and future underwater systems.


June 14 - Announces $0.7 Million Contract Extension from Canadian Department of Defense: Public Works and Government Services Canada, has issued a contract extension to Kraken valued at $690,000. The end user is the Canadian Department of National Defense (DND).


Under the contract, Kraken will provide upgrades, testing, and new hardware and software for the ThunderFish® 300 Autonomous Underwater Vehicle (AUV) that DND acquired from Kraken in 2019.


June 22 - Announces $0.4 Million Follow on Order from European Defense Company: Completion expected in 2021.


Purchase orders received from this customer in 2021 total $0.7 million. These orders fall under the 8-year framework agreement signed in January 2020. Under the agreement, Kraken will provide development, maintenance, and training to the customer to enhance and modernize their sonar product.


The customer’s name and additional contract details cannot be disclosed for confidentiality reasons.


July 15 - Signs Contract with Major Energy Company for Underwater Asset Inspection and Provides SeaVision® Update: Kraken’s SeaVision® 3D laser scanner technology will be used in the Company’s RaaS offering focused on three primary markets: mooring chain inspections, ship hull inspection, and offshore wind farm inspection.


July 19 - Awarded $0.6 Million Robotics as a Service (RaaS) Contract for Subsea Cable Survey: Robotics as a Service (RaaS) contract from Newfoundland and Labrador Hydro (formerly Nalcor Energy) for the Marine Inspection of Strait of Bell Isle Submarine Cable. This contract will be executed in Q3, 2021.


This cable provides power to Newfoundland from Labrador. This $598,871 contract was the result of a recent competitive tender issued by Newfoundland and Labrador Hydro (formerly Nalcor Energy).


July 20 -Signs Definitive Agreement to Acquire PanGeo and Announces Public Offering of Units: PGH Capital operates its business through its subsidiaries, PanGeo Subsea Inc. and PanGeo Subsea Scotland Limited.Public Offering: 20,000,000 units at a price of $0.50 per Unit for gross proceeds of approximately $10 million (Warrant at 0.60 cents).

Benefit of the acquisition: accelerate the Company's vertical move into the provision of offshore survey and inspection services using Kraken technology as part of a robotics/data as a service business model.


Terms: 1) $3M payable in immediately available funds on the closing date of the PanGeo Transaction; 2) 12,068,965 Common Shares having a deemed value of $0.58 each and $7 million in the aggregate to be issued on the Closing Date; 3) $4M to be paid in cash, plus interest at a rate of 6% per annum, on the second anniversary of the Closing Date, to be evidenced by non-transferable promissory notes; and Up to an aggregate of $9M to be paid pursuant to an earn-out.


July 26 - Closing of $10 Million Bought Deal Financing:


Aug. 3 - Completes Acquisition of PanGeo: In connection with the acquisition, Kraken has approved the issuance of 1M options to an officer of PanGeo. These options have a five-year term and an exercise price of $0.50 per common share.


Aug. 11 - Ocean SuperCluster to Provide $2 Million for GeoScan Wide Area Acoustic Corer: Wholly owned subsidiary, PanGeo Subsea Inc. has secured $2 million in funding from Canada’s Ocean Supercluster for the development of wider scanning capability and increased efficiency of GeoScan.


Under this new $3.4 million project, PanGeo will work with Cellula Robotics of British Columbia and the Marine Institute of Memorial University of Newfoundland to reconfigure the Acoustic Corer™ 3D technology to allow for a wider area scan and the ability to image geohazards to depths greater than 30 meters sub-seabed.


Aug. 26 - Reports Q2 2021 Results:


Sep. 9 - Receives $0.8 Million Sensor Order from New Fortune 500 Customer: An order for an AquaPix® MINSAS 120 sonar system from a Fortune 500 company with activities in the defense sector. This is a new Kraken customer and due to the nature of this customer’s business, Kraken cannot disclose further details.


The Company expects to fulfill this order in Q1/2022.



Summary


Contracts

A number of engagements were announced in the past nine months totaling roughly $9M.


- $1.5M Subsea battery order and $2.0M in funding awards. (Feb 2021)

- $0.7M Subsea batteries and sonar orders plus a $1.5M in funding awards. (Mar 2021)

- $0.6M Pressure Tolerant Batteries (6000-meter SeaPower®) order from Dive Technologies (Sea Trials). (Apr 2021)

- $1.2M AquaPix® MINSAS 120 sonar (6000-meter rated) and SeaPower® battery order. (Apr 2021)

- $0.5M order for a AquaPix MINSAS 120 Synthetic Aperture Sonar (A 3000-meter rated). (May 2021)

- Up to $2M order to Equip 2nd Teledyne Gavia SeaRaptor AUV with AquaPix® SAS Sonar. (May 2021)

- $0.7M Extension from Canadian Department of Defense (test hardware/software for Thuderfish 300). (Jun 2021)

- $0.4M Order from European Defense Company for Sonar products. (Jun 2021)

- $0.6M Robotics as a Service (RaaS) Contract for Subsea Cable Survey. (Jul 2021)

- $0.8M Sensor Order ( AquaPix® MINSAS 120 sonar system) from New Fortune 500 Customer. (Aug 2021)


Acquisitions

April 2021, 13 Robotics Ltd (“13R”) of Brazil was acquired. Also in April 2021, PNG.V signed an Letter of Intent (LOI) to Acquire PanGeo Subsea Inc. A definite agreement was signed in July and the transaction completed in August 2021.


PanGeo is a private Canadian services company specializing in high resolution 3D acoustic imaging solutions for the sub-seabed. This proposed acquisition would accelerate Kraken’s transformation to a Robotics/Data as a Service model by increasing recurring service revenue and providing increased exposure to the non-defense market.


Financing

March 2021, Kraken Robotics filed a Preliminary Base Shelf Prospectus for up to $65 million of common shares, warrants, subscription, receipts, and debt securities during the 25-month period. In April 2021, the Final Base Shelf Prospectus was obtained. July 2021, a Public Offering for Pangeo's acquisition was announced consisting of 20M units at a $0.50 cents (Warrant; $0.60 cents) for gross proceeds of approximately $10M.


R&D

April 2021, Dive Technologies successfully completed a sea trials with Kraken’s Miniature Synthetic Aperture Sonar (MINSAS 120) + Kraken’s pressure tolerant batteries. This led to an incremental $0.6M order within two weeks.


May 2021, Kraken joined the LifeMoor Mooring Chain Inspection Project. This project(LifeMoor) is supported by the Research Council of Norway and run by SINTEF, Norway’s largest independent research institution including a number of industry partners such as NTNU, Equinor, MacGregor, Aker BP, Nosted.


June 2021, PNG.V signed a Cooperative Research and Development Agreement (CRADA) with Naval Surface Warfare Center, Carderock Division (NSWCCD) to conduct safety tests on the newest variant of Kraken Robotics’ pressure-tolerant lithium-ion battery design.


August 2021, Pangeo Subsea Inc. (now a subsidiary of Kraken) received a $2M in funding from the Ocean SuperCluster. The goal is to further the development of wider scanning capability and increased efficiency of GeoScan.


Partnership

June 2021, Kraken signed a Cooperation Agreement with SH Defense (SHD) of Denmark. The objective is to promote and sell containerized subsea surveillance solutions with a variety of Kraken’s surveillance solutions. In Canada, Kraken, supported by SHD, will promote, sell, deliver, install and service SHD hydraulic, electric and mechanical system modular containerized solutions to the Royal Canadian Navy, Canadian Coast Guard and commercial industry.


Earnings

Year to date (YTD) 2021 revenues are weaker than 2020. Q1 2021, was particularly soft. Net Losses are considerably low.

Kraken issued Guidance for FY 2021 . The company expect Revenues of $24.0 to $28.0M with Net Income ranging from a net loss of $1.5M to + $1.5 million. Also the guidance provided excludes contributions from PanGeo.


In short

For the last period, valuation fluctuated as high as $1.16 and as low as $0.40 cents. Kraken closed today at $0.435 cents which is below the levels of the Public Offering ($0.50 cents) to acquire Pangeo Inc.


Despite issuing a strong guidance for FY 2021 ($24 to $28M in revenue) and announcing a number of orders, valuation has yet to recover. Granted, to achieve guidance, Kraken needs to deliver $10M in revenue for both Q3 and Q4 2021.


Another reason for current valuation could be that the market was caught by surprise not by the actual offering (telegraphed by Base Shelf Prospectus) but by the type and terms of the deal (see volume activity for July 21, 2021).


For instance, the number of new warrant at $0.60 cents (20M) from the last Public Offering ($10M) could be a factor given that the company completed a Bought Deal in October 2020 at $0.67 cents, also for $10M but with no warrants.


Indeed, Kraken is now valued less than it was without the acquisition of Pangeo Inc.! This is questionable given that the guidance provided exclude Pangeo's contribution. Furthermore, the premium assigned to the R&D efforts underway (i.e. LifeMoor, CRADA and Ocean SuperCluster) and their future impact on revenue seemed discounted.


Q3 2021 earnings should provide context into whether the company is delivering as planned on guidance. As of now, Kraken is a hardware/software industrial which continues to be valued solely on an industrial multiple.



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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