Kraken Robotics : 2021 MD&A

KRAKEN ROBOTICS INC.

MANAGEMENT DISCUSSION AND ANALYSIS

FOR THE YEAR December 31, 2021

This Management Discussion and Analysis ("MD&A") of Kraken Robotics Inc. (the "Company" or "Kraken") provides analysis of the Company's financial results for the year ended December 31, 2021 and should be read in conjunction with the Company's audited financial statements and the notes thereto for the year ended December 31, 2021, which are available on SEDAR atwww.sedar.com. This MD&A is current as at April 28, 2022, the date of preparation.

The December 31, 2021 financial statements have been prepared in accordance with International Financial Reporting

Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). All amounts are expressed in Canadian dollars, unless otherwise stated.

Forward-Looking Statements

This MD&A, and, in particular, the sections below entitled "Nature of Business", "Use of Estimates and Judgments", "Capital Management", "Financial Instruments and Risk Management" and "Risks and Uncertainties" contain "forward-looking statements" and "forward-looking information" (collectively, "forward-looking statements") within the meaning of applicable Canadian securities legislation.

In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "expect", "intend", "seek", "potential", "estimate", "anticipate", "believe", "could", "would", "should", "continue", "plans", "target", "is/are likely to", or the negative of these terms, or similar expressions intended to identify forward-looking statements. Within this MD&A, forward-looking statements may include, without limitation, statements with respect to

Kraken's future plans, strategies and objectives, including:

• • expectations regarding revenue, expenses and operations;

• • the ability to execute on its contracts announced for products including: AquaPix® MINSAS, SeaVision®

  3D laser system, KATFISH™, ThunderFish® AUV, ALARS, batteries and thruster products;

• • anticipated cash needs and the Company's needs for, and the Company's ability to secure, additional financing and/or government funding for working capital needs, debt repayment obligations and other contractual obligations of the Company;

• • the Company's ability to maintain current and projected revenue if it fails to effectively compete for additional contracts;

• • our ability and intention to expand Robotics as a Service and data analytics revenue;

• • our expectations respecting our OceanVision™ project for the development of new marine technologies and products to enable an underwater robotics data acquisition and data analytics as a service business;

• • the Company's ability to protect, maintain and enforce its intellectual property rights;

• • the Company's ability to defend itself against third-party claims of infringement or violation of, or other conflicts with, intellectual property rights by the Company;

• • expectations regarding capital markets and the Company's ability to continue to obtain financing while markets are affected by the global COVID-19 pandemic;

• • the Company's ability to attract new customers;

• • the Company's ability to attract and retain personnel;

• • the Company's competitive position and its expectations regarding competition and its future success in competitive bidding processes.

Forward-looking statements reflect the Company's current views with respect to future events and are subject to various known and unknown risks and uncertainties, which are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Kraken, are inherently beyond the ability of the Company to control or predict, that may cause the

Company's actual results, performance or achievements to be materially different from those expressed or implied thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein, including but not limited to the factors referred to below under " Risks and Uncertainties". For additional information with respect to certain ofthese risks or uncertainties, reference should be made to the section entitled " Risks and Uncertainties" in this MD&A and to

Kraken's continuous disclosure materials filed from time to time with the Canadian Securities Regulatory Authorities, including the Company's Annual Information Form for the financial year ended December 31, 2021 under the section entitled "Risk

Factors", quarterly and annual reports, and supplementary information, which are available on SEDAR atwww.sedar.c om.

Additional risks and uncertainties not presently known to the Company or that Kraken believes to be less significant may also adversely affect the Company.

The Company undertakes no obligation to update forward-looking statements except as required by applicable law. Such forward-looking statements represent management's best judgment based on information currently available. No forward-looking statement can be guaranteed, and actual future results may vary materially. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements.

NATURE OF BUSINESS

Kraken Robotics Inc. (formerly Kraken Sonar Inc.) was incorporated on May 14, 2008 under the Business Corporations Act, British Columbia, is a publicly traded company, and its registered office is at 100 King Street West, #1600, Toronto, Ontario, M5X 1G5.

The Company's principal business is the design, manufacture and sale of software centric sensors, batteries, and underwater robotic systems.

Company Overview

Kraken Robotics Inc. (PNG: TSX-V) is a marine technology company supplying advanced sonar and optical sensors, batteries, and underwater robotics equipment and services for military and commercial applications. The Company is recognized as world leading innovators of Synthetic Aperture Sonar (SAS) - a revolutionary underwater imaging technology that dramatically improves seabed surveys by providing ultra-high resolution imagery at superior coverage rates. Both military and commercial markets are showing encouraging growth as they are now incorporating unmanned vehicles and intelligent sensors in their procurement plans and budgets. In July 2021, Kraken acquired PanGeo Subsea, a leading services company specializing in high-resolution 3D acoustic imaging solutions for the sub-seabed. PanGeo with offices in Canada, the United States and the United Kingdom is now a wholly owned subsidiary of Kraken.

AQUAPIX® MINSAS SENSOR FOR UNDERWATER VEHICLES

The AquaPix® MINSAS (Miniature Interferometric Synthetic Aperture Sonar) sensor is based upon Kraken's core Synthetic

Aperture Sonar technology. The MINSAS compact receiver array length of only 60cm recently improved the AquaPix® SAS image resolution from 3.0 x 3.3 cm (across along track) to an industry-leading 1.9 x 2.1 cm while maintaining a constant Ultra HD resolution across ranges up to 120M per side. The lightweight array is integrated into a small modular payload section, which can be easily mobilized in customers' Unmanned Underwater Vehicles (UUVs) of all sizes. The MINSAS includes a Real

Time SAS Processor and the combination with the lightweight array provides operators with a high area coverage rate at full SAS resolution, enabling highly efficient survey operations. Development continues upon Kraken's core Synthetic Aperture Sonar technology. The MINSAS light weight receiver array recently reduced the weight by 40% while maintaining the AquaPix® SAS image resolution of 3.0 x 3.3 cm. Development continues of our new Multispectral SAS product, this product will provide a unique capability, enabling simultaneous ultra-high-resolution acoustic imagery and buried object detection from the same sensor. While our SAS technologies are focused on the Mine Counter Measures (MCM) market, Kraken also has a core competency in implementation of digital signal processing and user interface software for Anti-Submarine Warfare (ASW) sonar applications and is working on developments in passive array technologies for the ASW market.

OPTICAL

The SeaVision® 3D laser system is the world's first RGB underwater laser imaging system that offers the resolution, range and scan rate to deliver dense full colour 3D point cloud images of subsea infrastructure with millimeter accuracy, in real time. The ability to generate accurate 3D reconstruction of underwater infrastructure is an important requirement for commercial, military and ocean research applications. The initial system is designed for deployment on underwater robotic platforms such as Remotely Operated Vehicles (ROVs) and AUVs. Kraken continues to see significant interest in SeaVision® from customers across many industries from defense, to offshore oil and gas and renewable energy. This interest has led to numerous pilotsand demonstrations with major energy players in North America, South America, and Europe. As this activity continues, Kraken is focusing its efforts in building a subsea infrastructure inspection service offering.

Kraken's development of a unique, non-contact mooring chain inspection tool continues with commercialization scheduled for 2022. This tool, utilizing the SeaVision® platform can be used to support existing offshore oil and gas inspection requirements, as well as upcoming offshore wind inspection requirements. This new platform is anticipated to significantly reduce the cost of inspecting critical infrastructure, which must be inspected regularly.

UNDERWATER VEHICLES

KATFISH™

Kraken has developed the Kraken Active Towed Fish (KATFISH™) for high speed, high resolution seabed mapping. The system enables real-time seabed imagery, bathymetry and advanced 3D digital terrain models of the seabed - optimized for both manned and unmanned surface vessels. Coupled with Kraken's revolutionary AquaPix® MINSAS, it is especially well-suited for both military and commercial seabed surveys.

KATFISH™ is a tightly integrated intelligent winch system (TENTACLE™) and an autonomous LARS system that can launch AUVS from vessels, host facilities and docking stations. Both the Tentacle Winch® and the ALARS are constructed of non-welded aluminum for high strength, low weight, and low magnetic signature.

In the commercial seabed survey market, KATFISH™ offers offshore energy companies the advantage of comprehensive, high-resolution surveys of existing infrastructure, such as pipelines and subsea stations, completed in at least half the time as more conventional methods. KATFISH™ operates at speeds up to 10 knots, versus the slow moving 1-2 knots of ROV or the medium 3-4 knots of the passively stable sonar systems, thus reducing operating time and cost.

In the defence market, there is a growing global requirement for modernization of mine countermeasure (MCM) solutions. The previous generation of single-role mine hunting vessels designed and built between the 1970's - 1990's are now being withdrawn from service. This leaves a growing requirement for high resolution, high speed seabed imaging platforms.

The ability of the KATFISH™ platform to generate centimetre-scale sonar resolution in all three dimensions can provide significant improvement in the detection, classification and identification of small seabed objects for both military and commercial seabed survey missions.

Kraken has high expectations for the KATFISH™ which provides high performance underwater mapping and mine hunting capabilities from a towed platform for both the military and commercial markets and expects it to be a key revenue driver for the Company. The Company has in the past and will in the future partner as a supplier to large defense contractors who are involved in various multi-unit bids.

Recent updates and developments with KATFISH™ include:

• • In September 2020, Kraken secured a contract through a competitive bid process with the Danish Ministry of Defence, Acquisition and Logistics Organization to supply mine-hunting sonar equipment to the Royal Danish Navy. Under the program, Kraken will provide its mine-hunting KATFISH™ towed SAS system, the Tentacle® Winch system, and Autonomous Launch and Recovery System ("ALARS") to be integrated onboard the Royal Danish Navy's optionally unmanned surface vessels. The aggregate value of the contract is $36 million, deliverable over a 5-to-10-year period, with the majority of funds (approximately $22 million) to be received over the two-to-three-year product acquisition phase, with the remaining funds (approximately $14 million) being allocated to post sales service arrangements which will continue for the duration of the remaining term.

• • In September 2020, Kraken signed a contract for supply of mine-hunting systems to Remontowa Shipbuilding S.A., to be integrated on the Polish Navy's new KORMORAN II CounterMeasure (MCMV) vessels. This system was delivered during the fourth quarter of 2021.

THUNDERFISH® AUTONOMOUS UNDERWATER VEHICLE (AUV)

Kraken continues its ThunderFish® AUV development program. Kraken's original ThunderFish® AUV prototype is a technical upgrade of Fraunhofer's DeDave AUV. Kraken will pay Fraunhofer a royalty based on a percentage of each sale with minimum

commitments starting in 2022. The ThunderFish® AUV was designed for deep sea military, commercial and scientific applications for use as a sensor and robotics technology demonstration platform to support ongoing development of the

Company's underwater sensor and robotics programs.

Kraken has established a long-term technical co-operation program with Fraunhofer for technologies that can be deployed in

Kraken's ThunderFish® AUV program. While Kraken is committed to grant research and development projects to Fraunhofer of €300,000 per year for a period of three years (2019-2021), these projects will be awarded to Fraunhofer as various statement of works are agreed upon and purchase orders issued.

As a result of funding included in Kraken's OceanVision project, in Q3 2020 Kraken kicked off development of a ThunderFish®

XL.

Building from the previous development efforts of the ThunderFish® Alpha AUV, the ThunderFish® XL AUV is being designed to be larger with an increased depth rating, larger payload capacity and longer mission endurance. It is being developed with the following key capabilities:

• 1. The ability to transition from high-speed survey mode to "zero" speed hovering mode in-mission;

• 2. Through-the sensor acoustic, laser and optical target detection, image recognition and inspection; and,

• 3. Using onboard sensors to improve vehicle navigational accuracy.

In the AUV space, Kraken is focused on using the ThunderFish® XL AUVs and procured AUVs to build a fleet of vehicles capable of providing Robotics as a Service rather than having a primary focus on selling AUVs. We expect that this will provide Kraken with a unique and valuable market position. The ThunderFish® XL AUV is expected to be in service in 2022 with R&D costs

(excluding monies paid to Fraunhofer) being part of the OceanVision™ project.

POWER SYSTEMS

Kraken designs and manufactures unique pressure tolerant thrusters, drives, batteries, battery management systems, and electronics. These are specialized deep-sea components for AUVs and ROVs. Kraken's unique pressure tolerant gel encapsulation technology for lithium polymer batteries provides an attractively priced, eco-friendly and superior alternative to oil compensated batteries currently used for subsea battery applications. Kraken's technology and products enable a significant reduction in bill of material costs for our ThunderFish® AUV over acquiring conventional batteries. During 2021, Kraken delivered batteries to both defence and commercial customers.

ROBOTICS AS A SERVICE (RaaS)

Kraken believes that certain customers would prefer to hire the company to provide product output (i.e. imaging and bathymetry data) to them using the Kraken's own equipment, rather than the customer buying the equipment and having to own and operate and maintain the equipment. This is the genesis of Kraken's RaaS offering. Kraken expects RaaS to become a growing part of its revenue mix over time. Kraken will provide RaaS services to customers using Kraken's KATFISH™ towed underwater vehicles and AUVs such as ThunderFish® XL and Dive-LD and innovative sensors like the SeaVision® 3D laser system. While RaaS revenue is starting from a small base, Kraken is bidding on opportunities involving both shallow and deeper water surveys with the KATFISH™,ThunderFish®, and Dive-LD as well as our SeaVision® 3D laser system. In July 2021 Kraken was awarded a $0.6 million RaaS job to survey a subsea electric cable using the company's KATFISH™ and ALARS survey platform. Over the last 12 months, Kraken has been actively bidding on RaaS-type survey contracts and recently hired a Marine Survey Manager to lead the efforts to grow this offering. In addition, Kraken expects RaaS growth to accelerate and expects significant revenue synergies from its acquisition of PanGeo Subsea, which was completed in July 2021.

PANGEO SUBSEA

On July 30, 2021 Kraken closed its acquisition of PGH Capital Inc. PGH Capital operates its business through its subsidiaries,

PanGeo Subsea Inc. and PanGeo Subsea Scotland Limited (collectively with PGH Capital, "PanGeo"). PanGeo was a private

Canadian services company specializing in high-resolution 3D acoustic imaging solutions for the sub-seabed with offices in St.

John's, Newfoundland and Aberdeen, United Kingdom. PanGeo's assets consist primarily of human capital, know-how and equipment comprised mostly of sub bottom imaging units and acoustic imaging units that are used to provide sub-seabed survey services.

The aggregate purchase price for PanGeo is up to $23 million comprised of the following:

• • $3 million payable on closing;

• • 12,068,965 Common Shares having a value of $0.58 each and $7 million in the aggregate issued on closing;

• • $4 million to be paid in cash, plus interest at a rate of 6% per annum, on the second anniversary of the Closing Date, by a non-transferable promissory notes; and

• • Up to an aggregate of $9 million to be paid pursuant to an earn-out on the following terms:

  • o an amount equal to 300% of the amount by which certain qualifying revenues in the one-year period immediately following the Closing Date exceeds $9,500,000, up to a maximum payment of $4,500,000 (the

    "First Earn-Out Amount"); and

  • o the amount equal to 300% of the amount by which certain qualifying revenues in the two-year period immediately following the Closing Date exceeds $21,500,000, up to a maximum payment of $4,500,000 less any amount paid pursuant to the First Earn-Out Amount (the "Second Earn-Out Amount", and together with the First Earn-Out Amount, the "Earn-Out Amounts").

The Earn-Out Amounts will be paid within thirty business days following the filing deadline date or the actual filling date on

SEDAR, whichever is the earliest, of Kraken's quarterly financial statements for the quarter that includes first or second year anniversary of the Closing Date, as the case may be. At Kraken's option and, subject always to the approval of the TSX Venture Exchange (the "TSXV") at the time, payments required to be made in respect of the Earn-Out Amounts may be satisfied by way of a cash payment equal to 50% of the Earn-Out Amount and the issuance of Common Shares having an aggregate value equal to the remaining 50% of the Earn-Out Amount then due and payable.

The Corporation has determined that this transaction is a business combination as the assets acquired and liabilities assumed constitute a business. The transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair value at the acquisition date. Fair value of cash, accounts receivable and trade and other payables were deemed to be approximate to their carrying amounts due to the short-term nature of these assets and liabilities. Fair value of fixed assets and right-of-use assets has been determined based on market comparison and replacement cost techniques. Replacement cost of these assets has been determined and depreciated replacement cost reflects fair value.

OCEANVISON™ PROJECT

The Company's OceanVision™ project is focused on the development of a RaaS offering for underwater seabed imagery and mapping. The OceanVision™ project began in the second half of 2019, with the contract formally signed in January 2020.

OceanVision™ is a three-year, $18.8 million 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. This will be a turnkey service solution for ultra-high definition seafloor imaging, mapping and analytics, including simultaneous acquisition of ocean environmental and marine habitat data. It will result in an end-to-end digitalization solution offering advanced sensors, robots and data analytics as a turnkey service solution for seafloor imaging and mapping. Rapid high-throughput data analytics will make it possible to significantly reduce the cost of obtaining high resolution seafloor imaging and mapping allowing end-users to make more informed operational decisions in real-time.

The new technologies Kraken will develop within the scope of the OceanVision™ project are currently unavailable in a fully matured and tightly integrated offering in the commercial industry. The combination of a hovering-capable AUV with the potential for subsea residency, and a cutting-edge suite of acoustic and optical sensors, is a powerful package. As Kraken is the manufacturer of all the major vehicle components (i.e., sensors, batteries, propulsion system and software), it is Kraken's belief that its robotics platforms and services can be provided at a much lower overall cost than competing systems.