ST. JOHN’S, NEWFOUNDLAND, August 30, 2017 /Marketwired/ — Kraken Sonar Inc. (TSX-V: PNG) (OTCQB: KRKNF) announced it has filed its financial results for the second quarter ended June 30, 2017. Additional information concerning the Company, including its audited consolidated financial statements and related management’s discussion and analysis (“MD&A”) for the quarter ended June 30, 2017, can be found at www.sedar.com. Unless otherwise stated, all dollar amounts are Canadian dollar denominated.
“Q2 represented a very busy quarter of strategic activity at Kraken as we continued to put in place the structure to deliver a world class sensor, system and service offering to the global market”, stated Karl Kenny, President and CEO of Kraken. “While our quarter-to-quarter revenues can be lumpy, we are very excited about the second half of 2017 and 2018 as we believe business development efforts made over the last 18 months are about to bear significant results. We have invested in key areas that drive future growth for Kraken and we expect those investments to result in sizeable new contracts and significant revenue growth during 2H 2017 and beyond.”
Q2 2017 Overview
- Revenues for the 3 months ended June 30, 2017 were $0.2 million as compared to $0.5 million in the comparable year ago period. Revenues related to sea trials of our MINSAS sensor product with AUVs from two customers as well as additional deliveries of our Correlation Velocity Logs. We did not record any KATFISH revenue in the quarter, and have ~ $0.2 million remaining to recognize on our initial KATFISH order. This amount is expected to be recognized upon delivery and customer integration in the second half of 2017.
- Operating loss for the quarter was $1.1 million versus an operating loss of $0.5 million in the year ago quarter. The increased loss year-over-year reflects lower 2Q revenues and investments in new product development, employees, marketing and business development. The growth in expenses has been the result of a strategic decision to grow headcount and product and business development efforts to have the resources in place for an expected increase in orders.
- At the end of Q2, Kraken had been awarded $2.0 million of non-dilutive government grants that have yet to be used. Kraken submits monthly invoices to be reimbursed with these grants and expects to utilize these grants over the coming four quarters.
- Kraken ended Q2 with 90.7 million shares outstanding. Basic and diluted weighted average shares outstanding increased to 89.3 million versus 78.5 million in Q1 2017.
- During the quarter Kraken completed a non-brokered private placement of 11,806,660 units at a price of $0.18 raising gross proceeds of $2,125,199. Each unit consists of one common share and one half of one common share purchase warrant. Each full warrant is exercisable at a price of $0.30 for a period of two years.
- During the quarter, Kraken completed the sale of its investment in Square Robot Inc., a non-core asset. This investment was made in mid-2016. The company recognized a gain of $0.7 million on this asset.
- During the quarter, Kraken acquired a minority interest in ENITECH Subsea GmbH of Rostock, Germany and that company has been renamed Kraken Power GmbH. Under the agreement, Kraken has taken a 19.9% equity interest and provided a €110,000 convertible loan. This loan is reflected on our balance sheet as a long- term note ad derivative asset. Through the conversion of the loan to equity and a further investment capped at €200,000, Kraken can choose to increase its ownership stake to 75% of the common shares of Kraken Power GmbH. The investment is recorded at cost on our balance sheet.
- During the quarter, Kraken made an initial payment and took delivery of the DEDAVE Autonomous Underwater Vehicle (AUV) from Fraunhofer. DEDAVE is a fully equipped 6000-metre rated AUV that carries advanced sensors including Kraken’s AquaPix® Synthetic Aperture Sonar. DEDAVE will be used as a technology development platform as part of Kraken’s ongoing ThunderFish® AUV program. In addition to supporting engineering efforts, the Company expects that the DEDAVE platform will be contracted for a variety of underwater military, commercial and scientific surveys.
Outlook for the Second Half of 2017
For the second half of 2017, Kraken expects a significant increase in revenue from both announced and unannounced contracts. Announced contracts include:
- Q3 delivery by KRG of a 6,000-metre rated 3D laser/optical imaging system for the Alfred Wegener Institute, Helmholtz Centre for Polar and Marine Research (AWI) for integration onto their subsea crawler.
- Q3 delivery of MINSAS sensor to ECA Robotics of France for integration onto their AUV.
- Q3 delivery of MINSAS sensor to Atlas Elektronik for integration onto their SeaCat AUV.
- Q3 service revenue from OEX Search Group related to the search for the Avro Arrow.
We expect to deliver our KATFISH™ intelligent towfish system and recognize remaining revenues on this initial order. Kraken believes that KATFISH™ will disrupt current industry solutions based on market feedback to-date. The Company is seeing considerable interest from both military and commercial market sectors and is building a second KATFISH for trials with several potential customers. These include a major proposal that Kraken has submitted for an Asian naval customer as well as contract opportunities with several European navies. In addition, there are opportunities in the commercial survey sector.
- As referenced in our press release dated August 3, 2017, Kraken continues with strategic partnering discussions with both military and oil and gas industry leaders who are investingin underwater robots. We expect to make key partnership announcements during the second half of 2017 related to these discussions.
ABOUT KRAKEN SONAR INC.
Kraken Sonar Inc. (TSX.V:PNG) (OTCQB: KRKNF) is a marine technology company, founded in 2012, that is dedicated to the production and sale of software-centric sensors and underwater robotic systems. The company is headquartered in St. John’s, Newfoundland with offices in Dartmouth, Nova Scotia; Bremen, Germany; and Fairfax, Virginia. For more information, please visit www.krakensonar.com,www.krakenrobotik.de, www.krakenpower.de.
For further information, please contact:
Greg Reid, Chief Financial Officer
Stephen Harpur, Investor Relations
Sean Peasgood, Investor Relations
Glenda Leyte, Marketing Manager
(709) 757-5757 extension 288