Underwater robots: Aquabotix

Whitney Million is the CEO of a company called Aquabotix, which is based in both Sydney and Massachusetts in the US. I spoke to Whitney in Massachusetts where they’re developing underwater robots, basically under water drones effectively, un-manned drones, and they’re just in the process of doing a deal with The United States Navy. 

They just about ran out of money or have been close to running out of money because they ended the March Q with $2.5 million in the bank and burning $1.4 million per quarter, so they’re basically close to running out of money, they need money from the US Navy to keep going. 

Whitney reckons they’ll get it but we’ll see. It’s obviously a pretty speculative investment but could be worthwhile and maybe at some point Whitney’s name will change from Whitney Million to Whitney Billion! Here she is, the CEO of Aquabotix. 

Whitney, Aquabotix is an underwater robotics company.  What exactly is your product or products?

Aquabotix was founded in 2011 and we started making stationary underwater cameras and from there we’ve progressed into making remotely operated underwater vehicles as well as some high grade autonomous and remotely operated vehicles.  But we’ve recently released a new product line called the SwarmDiver and that’s product’s getting a lot of attention at the moment.  It’s a micro-sized autonomous surface vehicle that both swarms and can dive under water.

How did you come to be listed on the ASX? 

That was actually a little bit before my time.  I recently joined the company just in April of this year, but we do have both business in Sydney as well as The United States at this stage.

What you’ve done recently is announce a deal with The United States Navy, can you explain that to us?

Sure.  Well, we’ve actually announced a couple of deals with The United States Navy, one of them being a cooperative research and development agreement.  That’s held with the Naval Undersea Warfare Centre and that gives robotic access Narragansett Bay Test Facility.  That would include both the rangers and personnel at that facility and it’s going to allow us to test and demonstrate our SwarmDiver product both to the US Navy and other interested parties.  It’s actually very impactful to see these vehicles in the swarming capacity and helping potential customers to sort of mentally flush out cases for use, get ideas about various types of missions where a SwarmDiver could be used.

That’s one deal that we recently struck and another one is that we have recently joined a group called the Innovative Undersea Prototype Development Consortium.  What that is is a group that’s been pulled together, various defence contractors and researchers and the goal of that is to support the US Navy’s forward deployed energy and communications outpost.  In that capacity, we would have the ability to bid on some research and development and different prototype maturation products or projects.  They would be customer funded, support the mission of FDECO (Forward Deployed Energy and Communications Outpost) and that’s kind of an interesting R&D collaboration space for the company.

So is it fair to say that the SwarmDiver is your main product at the moment?

It is at the moment.  It was just recently launched in April of this year and we have gotten fantastic feedback from various potential partners, different government customers with grant funding that they’re looking to develop it a little bit further and potential customers kind of all over the globe for this one.

How much do you charge for them?

They are custom ordered depending on the sensor capability and the size of the swarm.  But they currently range anywhere in price around $10,000 to about $20,000 depending on the payload.

How many would typically be in a swarm and how does the swarm actually work?  Because I take it that they go under water and then circle a vessel or whatever they’re doing they do as a swarm, right? 

They do.  The vehicles, they come in sets typically of 20 and that would be what would communicate back to each receiver, but you can link up more systems than that.  Typically when we would be showing these it would be in a set of about 40-50 but they could operate in significantly larger quantities than that.

What’s the point of having a swarm.  How does the swarm benefit the user, what’s the point of having so many of them?

There’s actually a couple of different ways that that can be used.  One of them being, and this is kind of a general use perspective, just the ability to collect data at multiple locations at one moment in time.  If you were wanting to, for example, just take a depth reading across the shoreline, you would typically send out one vehicle that would track along just point to point and collect that data and it’s a pretty time consuming process.  But when you operate in a swarm you could collect 50 points simultaneously, relay that data back wirelessly in real time and have 50 points of data rather than just a single point.  There’s a lot of benefits from my research and development, oceanography, oil and gas industry and also of course, defence, just from that basic capability.

But if you look into really the defence space, that becomes even more important because, for example, if they became a target from the enemy, there are so many nodes out there, you could afford to lose one or two if someone’s firing at them for example.  One or two nodes can drop off, you could continue you mission and complete it despite that single loss.  Whereas, if you’re working with a singular vehicle, one hit and the mission’s over.

They look a bit like underwater drones?

Yes, yes, they are vehicles, they can carry different payloads but for all intents and purposes it would be fine to call them underwater drones.

Do you think that the main market for them is going to be defence or underwater drilling and that sort of industry?

I think it will be a combination, but there is a lot of interest in the defence space and a lot of funding in the defence space.  Since there’s so much money going in there for additional development of the product and also these very large scale quantity purchases that they’re exploring, defence is going to be the primary focus for this product, but it certainly would be available for universities, oil and gas and these other industries as well and we’re seeing a significant interest out of those groups in addition to defence.  

You said that the company started in 2011 basically doing camera work, coming with underwater camera systems.  Are you actually selling those?  Obviously you’re not selling the swarm divers yet, but have you got some sort of legacy products that you’re getting cash from?

We are.  We’ve been selling the underwater cameras – there’s still interest in those from a stationary viewing standpoint, you can link several of those together and be watching from multiple points at a singular time or be in a remote location and viewing what’s happening anywhere else in the world really, within like aquaculture and various research fields.  There’s still a real need for those.  Same with our legacy remotely operated vehicles and hybrid vehicles, we’re continuing to work developments on those.  The other thing that we’ve targeted...and this is driven by customer interest, is the possibility of doing some out-licencing on the technology there. 

The technology in this space is developing so rapidly and our products are progressing along very quickly.  What we’re trying to do is finally exploit the value of that older intellectual property that’s still very much relevant that I’d say maybe cutting edge instead of bleeding edge and doing some out-licencing to other customers, some less capital intensive activity, while we continue the development on the other product line. 

Just looking at your cash situation, you don’t seem to be making a lot of cash from those sort of existing product lines.  Just for the March quarter cash flow was $187,000.  Can you take us through your cash position and how much you’re burning at the moment and how you expect that to change this year?

Sure.  The cash burn has been pretty high over the past year and you’re pointing out the arrangements of revenue as well.  The traditional product lines are highly customised and typically single purchases.  There’s a lot of engineering support that goes into the customisation and the building of each individual unit that’s being shipped.  What we’re going to be looking at going forward and a lot of these actions have already been taken, are reduce cash burn – we’ve gone through some changes in terms of personnel, we cut about 40% of our workforce including some pretty senior level people, we’ve retained the key talent that we need to do the continued development and to support the existing product lines moving forward there and we’re really focusing on non-dilutive funding options.

Where, in the past we have really looked at technology and tried to drive that technology.  I think there’s a shift that we’re seeing at this point where it’s a little bit more customer led and we’re looking to what specifically our customers are interested in and what they’re willing to put money into the development of.  So, I do anticipate that to be one major change in addition to the reduced cost and spend out of the business.  The other fundamental changes with SwarmDiver product, while we are customising centre payloads, the quantity purchases that we’re talking about with this product line are entirely different.

Those would be purchased in typically thousands, tens of thousands or hundreds of thousands, so you would do the initial upfront development piece and then a very large scale manufacturing effort that’s very streamlined.  There’s a real shift happening in the company from that perspective as well.

Just back to the current cash situation.  At the end of the March quarter you had $2.5 million in the bank and as I say, you were burning $1.4m for the quarter, so obviously you’re about to run out of money.  Your staff and administration expenses were $1 million dollars for the quarter, what have you managed to cut that by?  You said you’ve got rid of 40% of the staff, so what is your staff and administration costs going to be now going forward per quarter? 

We’re still finalising all of this and that’s a difficult question to answer just simply from the fact of, we have a lot of research and development opportunities coming in and of course our cash burn is going to change to scale up our...which specific projects come in or out.  At this point, we have scaled back, like I mentioned, a 40% headcount reduction or slightly over, so we’ve made significant cuts there but of course as these new opportunities come in and we are in advanced discussions there and hope to have some things we can announce there, but as they’ve come in we have to scale back up. 

It’s a little bit difficult to kind of nail down and tell you a specific number, something I can stand behind.  We are keeping an eye on it, as all companies of our size do, and we’re very focused on the path.  But I would look at the cash perspective from what we anticipate coming in as well and the fact that that would be non-dilutive funding and that would be a customer funded effort.

What do you mean by non-dilutive funding, you mean prepayments by potential customers, i.e. the US Navy?

Yes.  Some of these development alliances, the agreements that we’ve been talking about.  Those set us up to bid on certain efforts and we’ve been developing some relationships with specific customers within the Navy and other groups within the military where they could provide grant funding or hardware development, various studies…  It could come from a couple different types of pockets of money from them, but would be customer funded effort. 

How quickly do you think you can nail those things down?

We’re actually in very advanced discussion stages at this point in time.  I’m incredibly hopeful that over the next several weeks and certainly in the next couple of months we’ll have something further announceable there.  

Well, that will be worth keeping an eye on.  Thanks very much for joining us, Whitney.

Yes, thank you so much, Alan.

That was Whitney Million, the CEO of Aquabotix.