Kraken Sonar Update: Call with Management

Late last week I had a call with Sophic Capital, the IR firm for Kraken Sonar, to get a business update and to learn about anything noteworthy going on within the company. I also was able to speak with Greg Reid, CFO, as well. There are some fantastic things going on at Kraken, and I will hit some of the highlights below:

  • One thing that I learned that I did not clearly understand prior to the call is that Kraken is "indirectly bidding" on business opportunities around the world. What do I mean by "indirectly bidding"? Essentially, multinational coglomerates are bidding on government contracts with defense departments. When a large company bids for the business with these defense departments, Kraken is essentially part of the bid because if the larger company is awarded the business, it will likely order Kraken's KATFISH product to fulfill its UUV obligations if it's a company that Kraken has a strong relationship with. While Kraken does bid directly for business, it also participates indirectly via the way described above. Obviously, this increases the potential for significant business awards in the future.
  • In Q4 2015, Kraken executed a lease for a manufacturing/assembly facility for its KATFISH product that has the capacity to approximately manufacture up to 10 KATFISH units per year. I don't think Kraken's Management team would have moved forward with this lease if they didn't feel that demand (thus orders) for its KATFISH UUV weren't going to increase significantly in 2016. Remember, each KATFISH order is $1.5-2M in revs for the company, with significant gross margins of 55%+.
  • Company is very comfortable with current balance sheet. Approx. $900k in cash with the addition of its first receipt of the $750k in R&D credits awarded in late 2015. Other R&D credits in the works. 

I left the call feeling incredibly confident about 2016 for Kraken. Kraken is really starting to turn the heads of some major industry players, and they have technologies and products that are going to be disruptive to the market, particularly on the pricing side. Their pricing is so good, and their technologies are so strong and protected, that their products will significantly erode the pricing models of larger players over time. Generally, when this occurs, there are companies out there that would rather acquire you than to let your technology erode their gross margins. Just saying....  :)

The best part is that the company is completely, 100% under the radar and totally undiscovered-- just how I like it.