Mr. Karl Kenny reports

KRAKEN REPORTS 2015 FINANCIAL RESULTS

Kraken Sonar Inc. has filed its financial results for the fourth quarter and year ended Dec. 31, 2015. Additional information concerning the company, including its audited consolidated financial statements and related management's discussion and analysis for the year ended Dec. 31, 2015, can be found at SEDAR.

Financial highlights -- 2015:

• Revenues for the 12 months ended Dec. 30, 2015, were $1.9-million as compared with $2.4-million in the comparable year-ago period. Excluding a one-time research contract in 2014, revenues declined slightly from $2.1-million to $1.9-million. In addition, a customer product shipment slipped into early 2016 and, as a result, Kraken was unable to recognize this $200,000 of revenue in Q4 2015.
• Approximately 90 per cent of Kraken's 2015 revenues was generated from synthetic aperture sonar sensor sales, with the balance from the new KATFISH, AquaTrak and SoundPix products. These new products were introduced in the second half of 2015 and their revenues are expected to materially ramp in 2016.
• Excluding non-cash items, including reverse takeover listing expenses, stock compensation and a bad debt expense, the operating loss for 2015 was $800,000 versus an operating profit of $400,000 in 2014. The difference reflects the company's investment in new product development, people and marketing.
• Kraken ended Q4 2015 with approximately $800,000 in cash and was debt-free. Cash increased approximately $100,000 from the September quarter, but was down $600,000 from the end of 2014. At 2015 year-end, Kraken still had over $1.4-million in awarded but unbilled customer contract milestone payments and financial contribution payments. The company expects these revenues will be collected during 2016.
• In the second half of 2015, Kraken recorded a bad debt expense of approximately $300,000 on a receivable from a foreign customer in the oil and gas survey sector. Kraken had collected approximately two-thirds of the revenue from this customer, but due to their business challenges the customer had not paid the balance. In Q4 Kraken repossessed the sensor with plans to use this equipment for sea trials with a potential European customer in Q1 2016. Kraken expects to monetize this asset with the European customer in second quarter 2016.
• Basic and diluted weighted average shares outstanding were unchanged at 71 million.

Subsequent to the 2015 year-end, other notable events include:

• Awarded a $600,000 contract by Woods Hole Oceanographic Institution;
• Received repayment of the shareholder loan receivable of $200,000;
• Awarded a non-dilutive financial contribution of $500,000 from the National Research Council of Canada Industrial Research Assistance Program (NRC-IRAP) for KATFISH product development.

Chief executive officer comments

"This has been an exciting year for Kraken, as we continued to invest and evolve our SAS sonar technology into integrated systems. During 2015 we continued implementation of our sensors to systems strategy to be positioned to meet the emerging market opportunities in marine robotics," stated Karl Kenny, president and chief executive officer of Kraken. "We believe our investments in 2015 will pave the way for an acceleration of bookings and revenue in 2016 and 2017. As the company's largest shareholder, I remain very enthusiastic about unmanned maritime systems (UMS) and their multibillion-dollar potential within the ocean technology industry. Both the military and commercial UMS markets are very dynamic with new research, development and procurement programs appearing around the world."

Business highlights -- 2015:

• Going public in February, 2015, has opened new doors for access to capital to allow the company to invest in growth initiatives.
• The company added new names to its customer roster, including major brands across the military and commercial markets. The company has now sold to customers across multiple regions including North America, Europe, the Middle East, Asia and Australia. The company's customer base includes many world navies and leading defence contractors.
• The company increased its market access with new distribution partners Tritech (a subsidiary of Moog, Elbit Systems and Caris (recently acquired by Teledyne)). While the company is a leading sonar technology company, its distribution partnerships are essential to accessing large markets without having to invest significant resources in setting up new channels.
• The company added some of the best minds in the underwater robotics industry to its team in 2015. This expands the company's knowledge of the sector and enables it to continue with some of the most advanced technical innovation in the industry.
• The company launched several new industry-changing products including the KATFISH intelligent towfish system, the AquaTrakk correlation velocity log and the SoundPix real-time 3-D seabed-mapping solution. New products like KATFISH have considerably higher ASPs than traditional sensor business all the while still maintaining strong gross margins of plus-50 per cent.
• The company acquired the underwater robotics technology and related intellectual property rights previously owned by Marine Robotics Inc. This acquisition brings the company an extensive underwater technology portfolio and builds upon its sensors to systems strategy to be a market leader in the UMS industry.
• The company recently added an additional 5,000 square feet of manufacturing space at a new facility to allow for enhanced manufacturing capacity required as its business ramps.

Outlook for 2016

In 2016, the company will continue to invest to meet the expected demand driven by its recent product and partnering announcements, and continuing evolution of the sensors to systems strategy:

• The company believes its KATFISH product will disrupt current industry solutions based on market feedback to date. While the company will not deliver its first unit until later this year, it is seeing considerable interest from both military and commercial market sectors. At $1.5-million (U.S.) per unit, KATFISH should drive considerable revenues compared with the company's historical financials.
• The company anticipates concluding additional strategic partnerships in 2016, both for new products and distribution, across military and commercial channels.
• The company expects to add additional world-class underwater robotics talent, technology and products.
• The company expects a material ramp in bookings and revenues versus 2015. While sales cycles are often long and timing of orders can be uncertain, the increased level of activity and discussions with current and potential customers make the company confident that it should see strong growth in 2016 and 2017. The company's technology and products are often key differentiators in its customers' solutions to their end customers.

"I would like to thank the Kraken team for their hard work in helping us move up the marine robotics value chain," said Mr. Kenny. "During 2015, we made significant but prudent investments in growth initiatives including the hiring of new personnel, expanded engineering design and manufacturing operations, acquisition of underwater robotics intellectual property, continued product innovation, and development of international distribution channels. I would also like to thank our customers, partners and shareholders for their continued support in the pursuit of our objectives."

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