Kraken Reports Q3 2015 Financial Results

ST. JOHN'S, NL--(Marketwired - December 01, 2015) - Kraken Sonar Inc. (TSX VENTURE: PNG) announced today it has filed its financial results for the third quarter ended September 30, 2015. Additional information concerning the Company, including its unaudited condensed consolidated interim financial statements and related management's discussion and analysis ("MD&A") for the quarter ended September 30, 2015, can be found at www.sedar.com.

CEO Comments

"Kraken made several important developments in Q3 which we believe paves the way for a significant acceleration of revenue in 2016 and 2017," stated Karl Kenny, President and CEO of Kraken. "In the past few months we signed significant deals with two world class partners. This past July we signed a distribution partnership agreement for our AquaTrak® Correlation Velocity Log (CVL) product with an established global marine technology company. We expect this product to generate significant royalties to Kraken as the product is released into Tritech's distribution channels. In October, we received our first KATFISH order from a major international defense contractor. KATFISH is another step in the implementation of Kraken's sensors to systems strategy. With the recently announced purchase of Autonomous Underwater Vehicle (AUV) technology and IP assets, we continue to evolve this strategy forward." Mr. Kenny added, "We continue to increase our headcount and infrastructure to meet the expected demand being driven by our recent product and partnering announcements. Our pipeline is robust as we have moved from an R&D company to a leading provider of advanced sonar and sensor technology."

Business Highlights

Notable business developments and achievements during the quarter and up to the reporting date included the following:

• In November, we acquired SQX AUV assets from a court-appointed Receiver. While the acquisition was not material, we acquired all the assets and IP of a fully developed AUV that had seen more than $3 million of investment by a previous company. In addition, most of the engineering staff on that program are now Kraken employees.
• In October, we signed a contract for our first KATFISH sale with a leading international defense company. Our new KATFISH (Kraken Active Tow FISH) product is an innovative sonar platform for military and commercial applications. We expect our relationship with this customer to lead to significant other KATFISH opportunities in the defense market in the future.
• In August, we executed of a multi-year, global distribution agreement with Tritech, a MOOG subsidiary, for our AquaTrak® CVL product. The first production units are expected to ship prior to the end of December.
• In August, we announced a US$325,000 contract with ECA Robotics to integrate Kraken's Synthetic Aperture Sonar technology into ECA's newest A18D Autonomous Underwater Vehicle. This product is expected to ship in December.
• In August, for the third year in a row, Kraken was named to the MTR100 by Marine Technology Reporter. The MTR100 is a list of the 100 most influential companies in the international marine technology marketplace.
• During Q3, we received a follow on order for a MINSAS 120 system with a leading U.S. defense supplier. This is the 3^rd order with this customer in the last two years and is indicative of the nature of our business. That is, while sales cycles are often long, once our industry leading technology wins approval from leading companies, we expect to win repeat business over multiple years.

Financial Highlights

• Revenues for the 9 months ended September 30, 2015 were $1.6 million as compared to $1.3 million in the comparable year ago period. Excluding RTO listing expenses, non-cash share-based payments, and a bad debt expense, the loss for the first 9 months of 2015 was $0.6 million versus income of $0.0 million in the comparable year ago period.
• Kraken ended Q3 2015 with approximately $1.2 million in working capital, $0.7 million in cash, and was debt free. Cash declined approximately $0.7 million for the first nine months of this fiscal year.
• During December, Kraken expects to collect more than $600,000 in cash from customer deposits and non-dilutive grant money already announced.
• Trade receivables at the end of Q3 were approximately $0.6 million of which roughly 60% has been collected in October and November.
• During the quarter, the Company recorded a bad debt expense of approximately $175,000 on a receivable from a customer in the oil and gas survey sector. Kraken has collected approximately two-thirds of the revenue from this sensor sale from this customer, but due to challenges with the customer's business they have not be responsive to our requests to pay the balance. Subsequent to quarter end, Kraken repossessed this sensor and plans to use this sensor for sea trials with a potential European customer in early 2016.
• Basic and diluted weighted average shares outstanding were unchanged at 71 million.

ABOUT KRAKEN SONAR INC.

Kraken Sonar Inc. (TSX VENTURE: PNG) is an industrial technology company, founded in 2012, that is dedicated to the production and sale of software-centric Synthetic Aperture Sonar (SAS) technology. The Company's products have been sold to leading defence contractors, commercial survey companies and research institutions for producing real-time, ultra high resolution imagery and bathymetry of the seabed. Marine Technology Reporter has three times named Kraken to their MTR100 -- a list of the 100 most influential companies in the international marine technology marketplace. For more information, please visit www.krakensonar.com.

Certain information in this news release constitutes forward-looking statements. When used in this news release, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "seek", "propose", "estimate", "expect", and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. In particular, this news release contains forward-looking statements with respect to, among other things, business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such statements reflect the Company's current views with respect to future events based on certain material factors and assumptions and are subject to certain risks and uncertainties, including without limitation, changes in market, competition, governmental or regulatory developments, general economic conditions and other factors set out in the Company's public disclosure documents. Many factors could cause the Company's actual results, performance or achievements to vary from those described in this news release, including without limitation those listed above. These factors should not be construed as exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this news release and such forward-looking statements included in, or incorporated by reference in this news release, should not be unduly relied upon. Such statements speak only as of the date of this news release. The Company does not intend, and does not assume any obligation, to update these forward-looking statements. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

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