In a Jan. 30 research note, Canaccord Genuity analyst Doug Taylor reported that Patriot One Technologies Inc. (PAT:TSX.V; PTOTF:OTCQX) will form a joint venture (JV) called Sotech Secure with Nano-Bio Detection Systems to commercialize the latter's "airborne molecule detection technology."
Nano-Bio's technology can detect "explosive materials, biological/chemical weapons and other illicit substances (like Fentanyl)" and can provide "'stand-off' detection, consistent with Patriot One's broader PATSCAN platform focus," Taylor added.
Taylor relayed the terms of the JV agreement. Patriot One and Nano-Bio each will own 50% of the new entity, Sotech Secure.
Patriot One will fund research and development and pay Wyoming-based Nano-Bio US$3 million in three equal tranches. The first payment is due after execution of the agreement, the second one on or before March 2, 2019 and the final one upon completion of the JV transaction.
Nano-Bio will have the option to increase by 20% its stake in Sotech Secure within 18 months of the agreement.
As for royalties, the JV will pay 20% of the net profits to Nano-Bio and 2.5% of net sales to the University of Texas, where Nano-Bio's technology was developed.
The deal, Taylor commented, is "on point with Patriot's strategy to become a platform offering multiple threat detection sensor technologies. . .we see today's acquisition as supportive of our current growth expectations."
In the report, Taylor also relayed upcoming milestones, announced by management at two recent presentations, which "should confirm Patriot's transition from concept to commercialization."
As for commercialization, "paid trial rollouts" will commence in Q1/19, Taylor explained, and will be followed by "paid commercial programs" in Q2/19. Also during that time frame, paid trials will be expanded geographically to include South America, South Africa, the Middle East, Australia and the United Kingdom.
In Q1/19, Patriot One is scheduled to move onto the Toronto Stock Exchange.
Other potential catalysts are further acquisitions, particularly of complementary technology that will help round out Patriot One's PATSCAN sensor suite, along with additional partnerships, Taylor noted. Finally, Patriot One is expected to enlarge its board of directors, "potentially adding industry experience and access."
Canaccord Genuity has a Speculative Buy rating and a CA$3.25 per share target price on Patriot One, whose stock is currently trading at around CA$2.25 per share.
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Disclosures from Canaccord Genuity, Patriot One Technologies Inc., January 30, 2019Analyst Certification
Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst's personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst's coverage universe and (ii) no part of the authoring analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.
Patriot One Technologies, Inc. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Patriot One Technologies, Inc.
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Patriot One Technologies, Inc.
In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or co-manager of a public offering of securities of Patriot One Technologies, Inc. or any publicly disclosed offer of securities of Patriot One Technologies, Inc. or in any related derivatives.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Patriot One Technologies, Inc. in the next three months.
An analyst has visited the material operations of Patriot One Technologies, Inc.. No payment was received for the related travel costs.
Disclosures are available here.