PNDHF: Insider Participation in Private Placement Underscores Management's Confidence in Company Prospects

By M. Marin

OTCQB:PNDHF | TSX.V:POND

READ THE FULL PNDHF RESEARCH REPORT

Pond Technologies PNDHF (TSX.V:POND) is a carbon conversion technology company using a proprietary platform to grow microalgae in a rapid and cost-effective manner that does not require arable land. As concerns about environmental and ESG (Environmental, social, and corporate governance) issues increase, we expect Pond to benefit from growing awareness and demonstrated proof-of-concept of its technology.

Company strengthens financial ability to support growth strategy …

Pond is conducting a private placement of up to 6.7 million shares. The company expects to place the shares at a price of $0.15 per share and raise aggregate gross proceeds of up to $1.0 million. We believe the key takeaways from this transaction are:

▪ The net proceeds will enhance Pond's cash position and financial flexibility

▪ The issuance price represents a 15% premium

▪ The transaction underscores management's confident outlook in the company's prospects

… as issuance enhances cash position & financial flexibility…

Pond expects to raise aggregate gross proceeds of up to $1.0 million in a private placement of about 6.7 million shares. These funds will strengthen the company's cash position and enhance the company's financial flexibility to advance its growth strategy. The funds are earmarked for general working capital purposes, according to Pond. Pond had a cash balance of CAD$635,000 at the end of 2Q22 and deferred contract revenue of CAD$1.8 million.

… issuance price represents 15% price premium …

The issuance price of the shares, at $0.15, represents a 15% premium to the closing trading price of the shares on the TSX Venture Exchange on September 2, 2022 before the transaction commenced. The company's ability to raise funds at a premium price reflects confidence in the overall niche the company's technology addresses and the company's strategy, in our view.

… and also underscores management's confident outlook in the company's prospects

The company expects the transaction to include subscriptions from certain insiders, either directly or indirectly through a holding company. Specifically, Pond's newly appointed Chief Operating Officer (COO) has indicated plans to purchase shares as part of the issuance through O'Connor Holdings Limited, which he controls. In the aggregate, the company expects insider participation in the transaction of $500,000.

Pond believes that algae-based inputs can be used in a variety of industries. For example, among the broad array of opportunities to leverage the technology platform, Pond has been scaling-up the production of recombinant proteins for a project with a major Fortune 500 oil and gas (O&G) company. The initial scale-up is now complete and Pond expects to achieve milestones in 3Q22.

View new COO's share purchase as a positive

We always like to see insiders participate and own shares, as generally it better aligns their interests with those of public shareholders and usually signals their confidence in the company's opportunities and strategies to leverage those opportunities. We therefore view Dan O'Connor's share purchase as a positive that underscores his – and the company's – positive expectations of Pond's ability to leverage the opportunities the company has as focus on carbon offsetting and neutralizing solutions continues to increase globally.

Moreover, Mr. O'Connor has extensive experience in the integrated control systems and biofuels industries in which he has been an entrepreneur, according to Pond. The company notes that he has substantial experience in helping emerging industries reach scale and commercialization, including various aspects of project and business development and capital markets knowledge. Among his more recent projects, he was involved in negotiations on the sale of an emerging cannabis company to a more established company within the industry.

… multiple potential revenue opportunities

In general, Pond believes that algae-based inputs can be used in a variety of industries, including the sustainable animal feed, functional food protein, cosmetics and nutraceutical markets, among others. The use of algae for these and other markets has long been contemplated and a subject of R&D. however, the company believes that there are only a handful of technologies that can produce algae at scale in a cost effective way to enable these industries to use in a cost efficient, profitable and sustainable way. Pond believes that its technology platform can prove disruptive and scalable and prompt adoption by many potential users in a variety of industries.

The company continues to expand its pipeline of commercial opportunities as it validates the potential demand for its solutions. The company's technology addresses multiple environmental issues by not only capturing harmful carbon dioxide emission from smokestacks, but also creating new high-protein algae-based food sources. Pond has multiple revenue opportunities as its technology platform absorbs carbon dioxide emissions to grow microalgae in closed tanks under fully-controlled computerized interior conditions, then harvests algae or extracted ingredients to be sold for a variety of revenue generating purposes.

As noted in a recent update, Pond continues to form new agreements to further validate and commercialize its technology. For example, Pond recently formed a memorandum of understanding with SEM Energy Ltd., a sustainable technology solutions company that implements customized solutions for the treatment of waste products and wastewater, recovery of nutrients and to generate value-added by-products. Pond expects SEM to utilize Pond technology as a bolt-on solution in certain of its projects.

The two companies will collaborate on a non-exclusive basis to pursue projects internationally, beginning with an initial focus on projects based in Scotland. Their goal is to abate 10,000 tonnes of CO2 from an identified waste to energy plant using stack gas. The project is expected to launch in 4Q22. SEM intends to promote and recommend Pond to its existing ESG clients on a non-exclusive basis via a carbon capture campaign.

The company expects that leveraging SEM's current global project pipeline can help Pond commercialize its carbon reducing algae-based platform across multiple sectors. The global collaboration is also expected to provide Pond the added infrastructure to support the scaling up process through its ongoing commercialization efforts. The company believes this agreement can accelerate its commercialization efforts.

Separately, the company also recently engaged Clean Conduit, a clean technology management consulting firm that has more than 15 years of experience in domestic and international cleantech consulting. Clean Conduit will market Pond's technology solutions to prospective clients. The company expects the Clean Conduit relationship will be largely subsidized through GreenCentre Canada.

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