Kleos Space Files for Bankruptcy, Says It’s Unable to Raise Funds
Signals intelligence company Kleos Space will file for bankruptcy after running out of money to continue operations. The Luxembourg-based company confirmed the news in multiple reports in late July, saying that their Australian financer (Pure Asset Management) would not provide credit. Kleos Space was unable to raise more funds and has notified the Australian Security Exchange of the bankruptcy proceedings.
Global markets have been turbulent in 2023, with numerous large countries, including the United States, raising their lending rates to attempt to control inflation. This financing squeeze has hammered some businesses affected by the pandemic, and the space industry did not escape unscathed. This induced issues in the space market including manufacturing slowdowns, or a lack of shipping and product availability.
Kleos Space’s technology aims to examine and identify the location of radiofrequency signals from orbit using satellite clusters. The idea was to assist the search for malfeasance by ships or other vehicles in remote areas like oceans or deserts. Among its customers was the National Reconnaissance Office, with which it signed a contract last year for radiofrequency data.
The NRO was evaluating Kleos, along with five other companies, to see the quality of their data – with the intention of purchasing some of it in the future for operational use. When the contract was announced in September 2022, the NRO stated that the Ukraine war was one of the drivers of the demand for new radiofrequency data.
The company has 16 satellites in orbit divided among three clusters. A routine review of the constellation found that two satellites (one each from the second and third clusters) had “technical issues affecting operational value,” Kleos disclosed on July 7, although at the time officials stated it would have minimal effect on their plans.
Kleos wrote off the affected satellites at the time, adding that the remaining ones should be able to provide “the anticipated data” with no effects on “customer contracts, data product delivery, capability operational dates, cash generation or revenue targets.”
But deep financial issues were apparent. Kleos had already voluntarily suspended trading of its listed securities on May 3, a practice often undertaken when companies cannot meet the expected financial requirements of their exchange (such as a minimum value per security.)
In the July 7 announcement, Kleos added that it had received $650,000 Australian (roughly $425,000 USD) under its existing debt facility with Pure Asset. At the time, Kleos said it was attempting to raise funds under a secured converting note facility, which allows debtholders to convert their debt into equity.
“The company is advised that the process is taking longer than expected due to competing end of financial year commitments for market participants, and the company is optimistic that the financing will be completed as planned,” Kleos officials stated. In a report with SpaceNews, they added that issues they had faced included development problems, delays in launching their satellites, and financing.
Things were rosier for Kleos in 2021, when markets were performing better; the company secured $12.6 million Australian ($8.23 million) in financing in June and, the following month, stated it had more than 160 prospects for business from numerous security forces and agencies across the world. The company says it has less than 50 employees on its LinkedIn, however, so it was unable to transfer these prospects to viable contracts that would have allowed the company to grow.
Given Kleos’s relatively small market share and its nascent technology, it is possible that its assets might be picked up by one of its competitors during bankruptcy proceedings. But the company is small enough that there would be fewer effects across the industry felt than by more high-profile bankruptcy proceedings of recent years, such as those by OneWeb and Virgin Orbit.
