FIRST 3 PAGES of 11ASX RELEASE 31 January 2023Kleos Q4 2022...

FIRST 3 PAGES of 11

ASX RELEASE 31 January 2023
Kleos Q4 2022 Activities Update and Outlook
Highlights:
• First LOCATE geospatial intelligence product released to initial customers following RF data from
Vigilance Mission (KSF1) being successfully processed through Kleos’ proprietary signal
processing platform;
• Significant advancements in Kleos’ proprietary intelligence processing technology allowing Kleos
to accelerate intelligence delivery;
• Two-way communication achieved with all four Observer Mission (KSF3) satellites launched in
January 2023 aboard the Transporter-6 SpaceX mission;
• James A. Quella appointed as a strategic advisor to the Board, conducting corporate finance
review and to assist in the identification and execution of a strategic corporate transaction;
• Recent management changes to further growth, particularly in the US – the world’s largest
intelligence market – assisting in the execution of the significant market opportunity the USA
presents:
o Alan Khalili, US-based senior executive with significant DaaS, aerospace, and satellite
industry experience appointed CEO, transitioning from CFO;
o Sara Fanous, US-based finance executive, appointed VP Finance and acting CFO;
o Andy Bowyer, Kleos co-founder and Executive Director, remains on Kleos’ board and
takes on the Chief Strategy Officer role.
• Partnership with UP42, a leading geospatial developer platform and marketplace, commenced
which offers Kleos’ RF geolocation data to their platform users.
Kleos Space S.A. (ASX: KSS, Frankfurt: KS1, Kleos or the Company), a space-powered defence &
intelligence technology company, provides the following update for the quarter ended 31 December 2022
(Q4 2022) along with its Appendix 4C.
Commenting on recent progress, Alan Khalili, CEO said:
“Delivering our intelligence RF product, to our initial customers at the end of 2022 is a key
milestone for Kleos.
“Data volumes will continue to increase as we bring more of our satellite constellations online –
including our recently launched Observer Mission in January 2023. Advancements in our
proprietary signal processing technology offer the potential to increase the volume of intelligence
commercially available to customers with a lower CAPEX investment.
Kleos Space S.A. 7 Rue de l’Innovation, L-1896 Kockelscheuer, Luxembourg - ARBN 625 668 733 / RCS B215591
“Having secured our first US Government Agency contract in September 2022, we continue to
expand our activities with a focus on the US marketplace, which presents significant strategic
opportunities for Kleos. Broadening our senior executive leadership’s presence in the US market
is an important step in achieving our strategic intentions in that market.”
First LOCATE product released i
Kleos is now processing RF data collected by the Vigilance Mission (KSF1) through its proprietary signal
processing technology platform to create its geospatial intelligence product, LOCATE.
LOCATE provides a valuable intelligence, surveillance, and reconnaissance (ISR) capability to governments
and commercial entities. It complements other intelligence sources to improve the detection of illegal
and/or hidden activity such as piracy, drug and people smuggling, illegal fishing, pollution, and border
challenges.
Technology Advancements i
Kleos’ proprietary intelligence processing technology has advanced significantly and now the Kleos
LOCATE geospatial intelligence product can be produced from data collected from as few astwo satellites
in formation. This also presents the opportunity to ingest raw data from other sensors in addition to
those owned by Kleos to produce the LOCATE product. Together, these advancements enhance our
product offering, and we believe it will accelerate the volume of intelligence available to our customers
with a lower capex investment. These advancements are not only a valuable asset, but they also
significantly reduce execution risk in addition to potentially doubling the number of Kleos collecting
clusters from 3 to 6. With more clusters of satellites, Kleos is able to potentially double the volume of
raw data collected, with greater collect flexibility for further processing through the intelligence
technology on the ground.
RF Data Collection Constellation Status Update i
As a result of the advancements previously mention in our ground-based intelligence processing platform
Kleos has a significantly improved capability to deliver its proprietary geospatial LOCATE data products
notably by using fewer satellites in a cluster. This means that the two Vigilance Mission (KSF1) satellites
that are at the data generation stage can deliver against revenue generating opportunities. The other
two satellites in the cluster once operational will add to this revenue generation either as part of a single
cluster (our original model) or as a separate two-satellite cluster with its own revenue generation
capability. All Low Earth Orbit satellites naturally degrade in altitude over time and currently we are
concentrating on cash flow generation over altitude correction which would lead to a reduction in
satellite life, on current calculations an approximate 1.5-year life remains, the impact of any associated
impairment on the financial results is being assessed.
The Observer Mission (KSF2) is anticipated to be delivering data that can be processed by the intelligence
processing platform by the end of Q1 2023. As previously reported, one of the four Observer Mission
(KSF2) satellites had technical issues which have prevented it from continuing nominal commissioning to
date. Whilst the manufacturer has scheduled activities designed to overcome the anomalies in due
course and management expect the satellite to be able to collect and downlink data, it is unlikely that the
satellite will be able to join the cluster, therefore making impairment of that satellite likely.
It is anticipated that the Kleos intelligence processing platform’s advancements will either allow Kleos to
potentially split missions into two satellite clusters each, increasing raw data collection or preserve the
Kleos Space S.A. 7 Rue de l’Innovation, L-1896 Kockelscheuer, Luxembourg - ARBN 625 668 733 / RCS B215591
existing cluster configuration to reduce business execution risks whilst minimising the risk of cluster
impairments in the event of a satellite failure.
The Patrol Mission’s (KSF3) four satellites were successfully launched on SpaceX’s Transporter 6 early
January 2023. The satellites are healthy and have begun bus commissioning. We anticipate the satellites
to be operational in 2H2023.
Revenue Timing Update i
It is anticipated, subject to the risks as set out below, that the catalyst for deferred revenue recognition,
revenue growth and cash receipts will begin with the Vigilance Mission (KSF1) as its operational capacity
is ramped up over 1H-2023. Subsequent clusters will follow a similar process once becoming
commercially operational in 2023.
Spectrum Licence Renewal
The Company’s spectrum licence expired at the end of December 2022, and the Luxembourg government
has granted a provisional licence extension to 28 February 2023, as the Company works with it to address
the administrative requirements of new licensing regulations. The Company does not anticipate any
obstacle to the licence renewal.'
James Quella Appointment
At the end of January, Kleos announced that it has appointed New York-based James A. Quella as a
strategic advisor to the Board, to conduct a corporate finance review and to assist in the identification
and execution of a strategic corporate transaction.
Mr Quella is a highly experienced corporate director and strategic advisor with current appointments
including director of Dun & Bradstreet Inc, since February 2019, and director of Getty Images (and CC
Neuberger Principal Holdings II prior to their business combination) since August 2020.
He is a former Senior Managing Director, Senior Operating Partner, and Head of Portfolio Operations
Group at Blackstone’s Private Equity Group, having served in those roles from 2003 to 2014.
Mr Quella is a Kleos security holder – holding approximately 2.5% of the issued capital – and has served
as a member of Kleos’ Advisory Board since May 2021.
As Strategic Advisor to the Board, Mr Quella has been tasked with conducting a review of the Company’s
corporate financing strategy with a view towards the completion of a future corporate action – whether
that be a merger, acquisition, or other strategic corporate activity. In this role, Mr Quella will be bringing
his substantial experience in managing businesses and in mergers and acquisitions; his familiarity with
corporate finance and strategic business financing activities, and his extensive experience serving as a
director for various public and private companies.
US Centric Management Changes
As the world’s largest defence intelligence market, engagement in the US is critical to the long-term
growth of Kleos. Further, increased engagement with the US intelligence community should also support
the future acquisition of high-value government contracts.
Cont.... total 11 pages.
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