ST. JOHN'S, NL, July 20, 2021 /CNW/ - Kraken Robotics Inc.
("Kraken" or the "Company") (TSXV: PNG) (OTCQB:
KRKNF), Canada's Ocean Company, is
pleased to announce that it has signed a definitive share purchase
agreement (the "PanGeo Agreement") whereby Kraken Robotics
Systems Inc., a wholly-owned subsidiary of Kraken, will acquire all
of the issued share capital of PGH Capital Inc. ("PGH
Capital") on substantially similar terms to those set out in
the non-binding letter of intent dated April
8, 2021, and disclosed in the Company's press release dated
April 9, 2021 (the "PanGeo
Transaction"). PGH Capital operates its business through its
subsidiaries, PanGeo Subsea Inc. and PanGeo Subsea Scotland Limited
(collectively with PGH Capital, "PanGeo"). PanGeo is a
private Canadian services company specializing in high-resolution
3D acoustic imaging solutions for the sub-seabed with offices in
St. John's, Newfoundland and
Aberdeen, United Kingdom. PanGeo's
assets consist primarily of human capital, know-how and equipment
comprised mostly of sub bottom imaging units and acoustic imaging
units that are used to provide sub-seabed survey services.
The Company is also pleased to announce that it has entered into
an agreement with a syndicate of underwriters led by Canaccord
Genuity Corp. (the "Underwriters"), under which the
Underwriters have agreed to buy on a bought deal basis 20,000,000
units (the "Units") at a price of $0.50 per Unit for gross proceeds of
approximately $10 million (the
"Offering"). Each Unit will consist of one common share of
the Company (a "Common Share") and one-half of one Common
Share purchase warrant (each whole purchase warrant, a
"Warrant"). Each Warrant entitles the holder to acquire one
Common Share (a "Warrant Share") at a price of $0.60 per Warrant Share for a period of two years
following the closing of the Offering, subject to acceleration in
certain circumstances.
Strategic Benefits of the PanGeo Transaction
Completion of the PanGeo Transaction will significantly
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. The PanGeo
Transaction will also increase Kraken's exposure to the non-defense
market, including the offshore renewable energy market (PanGeo's
largest market) which will help to diversify its client base.
Following closing of the PanGeo Transaction, Kraken will be able to
offer a holistic solution of world-leading technologies and
services in subsea acoustic and optical imaging using Kraken's
suite of ultra-high resolution seabed 3D acoustic imaging sensors,
autonomous robotics, and optical laser scanning paired with
PanGeo's suite of leading-edge sub-seabed high-resolution 3D
acoustic imaging capabilities.
Transaction Details
The aggregate purchase price for PanGeo is up to $23 million comprised of the following:
- $3 million payable in immediately
available funds (the "Cash Consideration") on the closing
date of the PanGeo Transaction (the "Closing Date");
- 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;
- $4 million 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 (the "Promissory Notes"); and
- Up to an aggregate of $9 million
to be paid pursuant to an earn-out on the following terms:
-
- an amount equal to 300% of the amount by which certain
qualifying revenue in the one-year period immediately following the
Closing Date exceeds $9,500,000, up
to a maximum payment of $4,500,000
(the "First Earn-Out Amount"); and
- the amount equal to 300% of the amount by which certain
qualifying revenue in the two-year period immediately following the
Closing Date exceeds $21,500,000, up
to a maximum payment of $4,500,000
less any amount paid pursuant to the First Earn-Out Amount (the
"Second Earn-Out Amount", and together with the First
Earn-Out Amount, the "Earn-Out Amounts").
The Earn-Out Amounts will be paid within thirty (30) business
days following the filing deadline date or the actual filling date
on SEDAR, whichever is the earliest, of Kraken's quarterly
financial statements for the quarter that includes first or second
year anniversary of the Closing Date, as the case may be. At
Kraken's option and, subject always to the approval of the TSX
Venture Exchange (the "TSXV") at the time, payments required
to be made in respect of the Earn-Out Amounts may be satisfied by
way of a cash payment equal to 50% of the Earn-Out Amount and the
issuance of Common Shares having an aggregate value equal to the
remaining 50% of the Earn-Out Amount then due and
payable.
The Promissory Notes also provide Kraken with the option,
subject to TSXV approval at the time, to satisfy up to 40% of any
principal amount owing under the Promissory Notes by issuing Common
Shares in accordance with the terms of the PanGeo Agreement.
Based on the unaudited consolidated financial statements
prepared on a review engagement basis using Canadian accounting
standards for private enterprises for the operating entities, being
PanGeo Subsea Inc. and PanGeo Subsea Scotland Limited, the
consolidated assets at December 31,
2020 were $11.51 million and
revenues for the same period were $10.55
million with a corresponding net loss of $1.84 million (which included, among others, a
non-cash amortization expense of approximately $1.42 million). These results for the operating
entities were down from comparable information (also based on
unaudited financial statements) for the year ended December 31, 2019 where the consolidated revenues
were $10.93 million with a
corresponding net income of $1.26
million. The year-over-year decline was largely due to the
impact of COVID on customer activity.
Kraken will also assume ordinary course debt owing to a Canadian
chartered bank in the amount of approximately $1.5 million and to the Atlantic Canada
Opportunities Agency in the amount of approximately $0.688 million on closing of the PanGeo
Transaction (collectively, the "PanGeo Indebtedness"). The
Company anticipates that it will also assume approximately
$1.1 million in cash at closing of
the PanGeo Transaction.
Completion of the PanGeo Transaction is subject to certain
closing conditions including all required regulatory and stock
exchange approvals and the completion of a financing for gross
proceeds of not less than $10 million
within 30 days of execution of the PanGeo Agreement. The PanGeo
Transaction is expected to occur within 30 days of execution of the
PanGeo Agreement.
Management Comments
Commenting on the PanGeo Agreement, Karl
Kenny, Kraken President and CEO said, "Since plans for our
OceanVision project started in 2018, we have been preparing our
industry leading Synthetic Aperture Sonar and 3D underwater laser
scanning technologies to be used in a robotics/data as a service
(RDaaS) business model as opposed to a product only strategy. While
customers in the defense industry generally purchase this
technology, in the commercial market customers are more focused on
the provision of services by capable third-party companies. We
expect that PanGeo will complement Kraken's existing products and
services with a stronger base of recurring revenues. As in the
past, we expect PanGeo and Kraken will continue to work with many
offshore service companies that prime these jobs and integrate
specific scopes of work from various sub-contractors."
Moya Cahill, PanGeo's co-founder
and CEO noted, "Kraken and PanGeo are world leaders in seabed and
sub-seabed technology applications. Our clients are looking to us
to offer a broader service offering and a combined Kraken – PanGeo
will do just that. PanGeo has a commercial track record of more
than 10 years providing 3D acoustic imaging solutions to offshore
renewable energy, offshore energy, and defense customers.
Together we are stronger, more competitive, more resilient, and
have the cream of the crop of brilliant minds to deliver unique
innovative solutions to our clients worldwide. Fred Cahill, Chair of the PanGeo Board and CEO
of the Cahill Group, added "PanGeo has demonstrated a commitment to
innovation and the ability to commercialize research-based
solutions that are valued by industry leaders in the ocean sector.
The leadership and team at PanGeo have enabled this success through
their dedication, commitment to safety and ingenuity – this team
will now be able to contribute to the incredible Kraken growth
story."
Offering Details
In connection with the Offering, the Company will file a
prospectus supplement (the "Prospectus Supplement") to its
short form base shelf prospectus dated April
6, 2021 (the "Base Shelf Prospectus") with securities
commissions or similar regulatory authorities in each of the
provinces of Canada.
The net proceeds from the Offering will be used: (i) to fund the
Cash Consideration; (ii) to provide working capital to PanGeo to
accelerate the growth of its service business; (iii) to repay a
portion of the PanGeo Indebtedness; and (iv) for general working
capital for Kraken to strengthen its balance sheet and provide
flexibility to position the Company for future growth.
The Company has granted the Underwriters an option (the
"Over-Allotment Option") to cover over-allotments and for
market stabilization purposes, exercisable at any time, in whole or
in part, until the date that is 30 days following the closing of
the Offering, to purchase up to an additional number of Units equal
to 15% of the Units sold pursuant to the Offering on the same terms
and conditions of the Offering. The Over-Allotment Option will be
exercisable to acquire Units, Common Shares and/or Warrants (or any
combination thereof) at the discretion of the
Underwriters.
The closing of the Offering is expected to occur on or about
July 26, 2021 (the "Closing")
and is subject to the Company receiving all necessary regulatory
and TSXV approvals.
A copy of the Base Shelf Prospectus can be obtained on SEDAR at
www.sedar.com and from Canaccord Genuity Corp., 2100, 609 Granville
St, Vancouver BC V7Y 1H2. A copy
of the Prospectus Supplement will also be available on SEDAR and
form Canaccord Genuity Corp. once filed. The Prospectus Supplement
and the Base Shelf Prospectus contain important detailed
information about the Company and the proposed Offering.
Prospective investors should read the Prospectus Supplement and the
Base Shelf Prospectus and the other documents the Company has filed
or will be filing on SEDAR at www.sedar.com before making an
investment decision.
The Units, and the Common Shares and Warrants comprising the
Units, have not been and will not be registered under the United
States Securities Act of 1933, as amended (the "U.S. Securities
Act"), or any state securities laws. Accordingly, Units may not
be offered or sold within the United
States, its territories or possessions, any state of
the United States or the
District of Columbia
(collectively, the "United
States") except in transactions exempt from the
registration requirements of the U.S. Securities Act and applicable
state securities laws.
This news release shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of the
Units in the United States or any
jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the
securities laws of that jurisdiction. The securities referenced
herein have not been approved or disapproved by any regulatory
authority.
LINKS
www.krakenrobotics.com
SOCIAL MEDIA
LinkedIn www.linkedin.com/company/krakenrobotics
Twitter
www.twitter.com/krakenrobotics
Facebook www.facebook.com/krakenroboticsinc
YouTube
www.youtube.com/channel/UCEMyaMQnneTeIr71HYgrT2A
Instagram www.instagram.com/krakenrobotics
ABOUT KRAKEN ROBOTICS INC.
Kraken Robotics Inc. (TSX.V:PNG) (OTCQB: KRKNF) is a marine
technology company dedicated to the production and sale of
software-centric sensors, subsea batteries and thrusters, and
underwater robotic systems. The company is headquartered in
Newfoundland with offices in
Canada, U.S., Germany, Denmark, and Brazil. Kraken is ranked as a Top 100 marine
technology company by Marine Technology Reporter.
Certain information in this news release constitutes
forward-looking statements. When used in this news release, the
words "may", "would", "could", "will", "intend", "plan",
"anticipate", "believe", "seek", "propose", "estimate", "expect",
and similar expressions, as they relate to the Company, are
intended to identify forward-looking statements. In particular,
this news release contains forward-looking statements with respect
to, among other things, the completion of the PanGeo Transaction,
including the satisfaction of all closing conditions, potential
business synergies as a result of the PanGeo Transaction, the
anticipated market for Kraken's products and services following
completion of the PanGeo Transaction, business objectives, expected
growth, results of operations, performance, business projects and
opportunities, financial results, and statements
relating to the Offering, including the terms, timing,
potential completion and the use of proceeds of the Offering. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. Such statements reflect the Company's current views
with respect to future events based on certain material factors and
assumptions and are subject to certain risks and uncertainties,
including without limitation, the ability of the Company to satisfy
all closing conditions of the PanGeo Transaction; the ability to
integrate the operations of PanGeo into Kraken's Robotics and Data
as a Service business model; the positive reception of the PanGeo
Transaction by Kraken's target market for sub-seabed acoustic
imaging; changes in market; competition; governmental or regulatory
developments; the ability of Kraken to satisfy the conditions to
closing of the Offering, including obtaining approval of the TSXV
on a timely basis, or at all; that the Offering may not be
completed on the terms and timeline indicated, or at all; that the
Company's use of proceeds of the Offering may differ from those
indicated; additional financing requirements, general economic
conditions and other factors set out in the Company's public
disclosure documents. Many factors could cause the Company's actual
results, performance or achievements to vary from those described
in this news release, including without limitation those listed
above. These factors should not be construed as exhaustive. Should
one or more of these risks or uncertainties materialize, or should
assumptions underlying forward-looking statements prove incorrect,
actual results may vary materially from those described in this
news release and such forward-looking statements included in, or
incorporated by reference in this news release, should not be
unduly relied upon. Such statements speak only as of the date of
this news release. The Company does not intend, and does not assume
any obligation, to update these forward-looking statements. The
forward-looking statements contained in this news release are
expressly qualified by this cautionary statement.
Neither the TSX Venture Exchange Inc. nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release, and the OTCQB has neither approved nor
disapproved the contents of this press release.
SOURCE Kraken Robotics Inc.