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Independent Reviews for Venture Investors

PNG.V - Momentum.

Kraken Sonar Inc. (PNG.V) is a marine technology focused on the production and sale of software-centric sensors and underwater robotic systems.

We initiated coverage March 2017, with notes on October 2017, April 2018, July 2018 and December 2018. Below is an update.

Jan. 4 - Ocean Infinity Group, Limited Announces Acquisition of Common Shares in Kraken Robotics Inc. The Acquiror purchased 2,5M shares in at a price of $0.40 per Common Share for total consideration of $1.0M which increased the overall ownership interest in the Company to 11.33%.

Jan. 7 - Completes Majority Acquisition of Kraken Power GmbH. Through the conversion of an existing note receivable to equity and a cash payment of approximately €0.1 million, Kraken has increased its ownership in Kraken Power GmbH to 75%.

Jan. 8- Awarded $0.5 Million Contract under Canada’s Defence Innovation Research Program (DIRP). The DIRP supports Canada’s long-term commitment to respond to the scientific and technological needs of the Department of National Defence and Canadian Armed Forces.

The objective of Kraken’s DIRP contract is to develop a low frequency, ultra-wideband Synthetic Aperture Sonar (SAS).

Jan. 9 - Presenting at Germany’s Leading Maritime Robotics and Sensor Conference MAROS (Maritime Robotik und Sensorik) Conference.

Feb. 19 - Receives $1.7 Million of Purchase Orders from Ocean Infinity. Product delivery is expected during Q1 and Q2, 2019.

Feb. 21 - Kraken Robotics Ranked #1 Technology Company on 2019 TSX Venture Top 50 List.

Mar. 5 - Receives $2.3 Million from Exercise of Warrants by Ocean Infinity. The warrants were issued in connection with the Company’s private placement of units to Ocean Infinity in June 2018. The warrants expire in June 2021 and had an exercise price of $0.40.

Mar. 6 - Announces AquaPix® MINSAS-240 Sensor combines ultra-high resolution imagery with an extremely high area coverage rate.

Mar. 22 - Kraken Customer ECA Part of Winning Consortium for Belgium & Dutch Navy Mine Hunting Program. Belgium Naval & Robotics consortium that was recently announced as the winner of a €1.8 billion contract to supply 12 mine hunting vessels and 100 drones.

Kraken's portion of the program is expected to be in excess of C$35 Million.

Mar. 25 - Awarded $1 Million Contract for ThunderFish® Robot from Government of Canada. ThunderFish® 300 was initially pre-qualified in April 2018 under the Canadian government’s Build in Canada Innovation Program (BCIP).

Kraken expects to deliver the ThunderFish® 300 to its test partner, Defense Research and Development Canada (DRDC), in Halifax in Q2 2019. This represents a pre-commercial R&D sale of ThunderFish®. We are continuing development of the ThunderFish AUV platform to bring additional features to the market including the integration of our Multispectral SAS and 3D laser scanner sensors.”

Apr. 3 - LeeWay Marine Completes Successful Trials of Kraken's SeaScout System.

Apr. 10 - Signs Strategic Alliance MOU with Baltic Diver. Strategic Alliance for maritime robotics technology, products, and services. As part of the strategic alliance, Kraken and Baltic Diver are planning to deploy 3D digital inspection capable assets in the Baltic Region this summer

Apr. 17 - Awarded $1 Million Funding Contribution to Support Initial Phase of OceanVision™ Project. Awarded by the Government of Newfoundland and Labrador. A proposed three-year project to develop a new business model that supports Robotics as a Service (RaaS).

Apr. 24 - Awarded $0.6 Million Contract for Subsea Battery Solution for Military Customer to provide a high capacity battery solution for an underwater robotics application. For confidentiality reasons, the customer name will not be disclosed. Product delivery is anticipated in Q2, 2019.

In addition, since the beginning of February, the Company has received approximately $935,000 from the exercise of warrants. These represent the remaining unexercised warrants that were part of a total of 5,903,330 warrants issued in connection with the Company’s private placement of units in April 2017. The warrants expired on April 10, 2019 and had an exercise price of $0.30. All of these warrants have now been exercised.

May 7 - IIROC Trading Halt

May 7 - Delay in Filing 2018 Financial Results and Cease Trade Order. The delay has been primarily due to our auditors continuing to finalize their valuation review of our Kraken Power GmbH acquisition and the related allocation of the purchase price paid.

May 10 - Reports Strong Growth in 2018 and Provides Outlook for 2019. Revenue of $6.7 million for the 12 months ended December 30, 2018, up 90% from $3.5 million in 2017; Net loss (excluding minority interest) of $2.7 million, versus $2.4 million in 2017; End of year cash balance of $4.9 million as compared to $nil at the end of 2017; End of year total assets of $14.0 million as compared to $5.3 million at the end of 2017;

At year-end 2018, Kraken had $1.9 million in previously awarded funding to draw upon from government agencies Backlog at $10.5M entering 2019. “For 2019, we are anticipating revenue of greater than $15 million, more than doubling 2018 revenue,” said Mr. Kenny.

May 10 - Beacon from $0.70 cents to $1.05

May 15 - Resume Trading on TSX-V on Thursday, May 16th.

May 31 - Reports Q1 2019 Results and Reiterates Fiscal 2019 Outlook. Revenue of $1.4 million for the 3 months ended March 31, 2019, as compared to nil in Q1 2018; Net loss of $0.8 million, versus net loss of $1.5 million in Q1, 2018; Quarter end cash balance of $5.0 million, up slightly from $4.9 million at the end of 2018; Quarter end total assets of $18.7 million as compared to $14.0 million at the end of 2018;

Kraken has $2.1 million in previously awarded funding to draw upon from government agencies. This amount is not recorded in our financial statements until the cash is received and as such is an off-balance sheet asset at the end of Q1, 2019. "Given this visibility, we are reiterating our fiscal 2019 revenue forecast of at least $15 million, more than doubling our 2018 revenue and expect to be profitable.”

Jun. 5 - Establishes Unmanned Maritime Vehicles Facility at COVE in Dartmouth, Nova Scotia.

Established a new 4,000 square foot facility named the Unmanned Maritime Vehicles Facility (UMVF).

Jun. 13 - $2.1 Million KATFISH Contract from ThayerMahan Inc. ThayerMahan will deploy Kraken’s KATFISH 180 as part of its SeaScout® expeditionary system for seabed mapping and intelligence - delivery is expected in Q3 2019.

This is the first order resulting from a strategic alliance entered between the two companies in February 2018.

June 17 - Awarded $0.9 Million U.S. Navy Contract. Selected by the US Office of the Secretary of Defense, Comparative Test Office, to participate in a Foreign Comparative Testing (FCT) program in support of a US Navy Program of Record managed by the Naval Sea Systems Command.

The FCT is designed to test selected foreign technologies as evaluated by US military operators, with a view to future procurement.

Jun. 27 - Halted

Jun. 28- Canada’s Ocean Supercluster Commits Funding to Kraken’s $20M OceanVision™ Project. A three-year project focused on the development of new marine technologies and products to enable an underwater robotics data acquisition and data analytics as a service business.

The Ocean Supercluster will provide an investment up to a maximum of $5.9 million to the OceanVision™ project. This is subject to, among other things, finalizing additional project funding from industry stakeholders, strategic partners and government agencies.

Kraken believes the project could grow as additional stakeholders, technologies and products are added to the project scope. Kraken is targeting to finalize the contracting process with all project participants by the end of Q3 2019.

Jul. 11 - Announces Executive Appointment and Management Promotions. Also announces that it has issued a total of 1,5M options to members of the Company’s Board of Directors. These options have an exercise price of $0.63 and have a three-year term.

Jul. 24 - Conducting Joint Technology Demonstrations with NOAA & ThayerMahan

Aug. 2 - Awarded $1.8M in Project Funding to Develop Mooring Chain Laser Inspection Sensor. Following successful trials with Husky Energy (Husky), the project awarded for use in offshore oil and gas applications.

Under the project, a total of $1.8 million of funding is being provided in cash and in-kind services from Husky ($1.26M) and the Government of Newfoundland and Labrador, through the Innovation and Business Investment Corporation ($540,000).

Aug. 12 - Awarded $0.5M Contract for SeaVision® Sensors. Contract to deliver 3,000 meter rated laser scanning sensors to the GEOMAR Helmholtz Centre for Ocean Research in Kiel, Germany. Delivery expected during Q1, 2020

PNG.V has had another stellar performance in the past seven months. In fact, it ended 2018 with $6.7M in revenue just shy of its $7M target. A 90% increase YOY while the net loss was a 12% higher ($2.7M from $2.4M in 2017). One of the factor that was helpful is the Acceleration of Ocean Infinity Battery Order and $5 Million Advance Payments. In Q1 2019, PNG.V reported a $1.8M in revenue (nil in 2018) and a $0.8M ($1.5M in 2018) loss. Q1 2019 indicate significant growth at the top of the funnel relative to a significant decline in net loss. This can suggest that PNG.V is initiating scaling.

As of Q1 2019, the company set a $15M target in revenue with expected profitability for 2019. The key for achieving this target will depends on PNG.V's ability to generate incremental revenue from additional and existing organizations (i.e. Ocean Infinity, Government of Canada, Anonymous Military Customers, ThayerMahan, US Navy, Husky Energy and GEOMAR) - especially from ECA and Canada's Ocean Supercluster.

As indicated above a list of initatives can be tallied but details about whether PNG.V remains on target revenue wise for 2019 is unclear. Hopefully, upcoming Q2 Earnings will be more revealing. Again, new announcements from Ocean Infinity, ECA, and SuperCluster can be instrumental.

Beacon raised its price target from $0.75 to $1.00 which is comparable to Clarus ($1.10). Our initial suggestion of a consistent price target for 2019 of $0.55 to $0.65 cents has been exceeded in part by ECA's news release: - Kraken's portion of the program is expected to be in excess of C$35 Million.

Thus far, PNG.V continues to be a growth story with $5.0M in Cash at the end of Q1 2019. The issue now is the extent of its momentum.

DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.


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