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OTTAWA - KWESST Micro Systems Inc. (NASDAQ: KWE) (TSXV: KWE), a developer of next-generation tactical systems, disclosed today that it has finalized agreements for a registered direct offering and a concurrent private placement. The company is set to sell 4,715,000 common shares at US$0.20 each, with the offering expected to close around Tuesday, August 13, 2024, subject to standard closing conditions.
In addition to the share sale, KWESST will issue unregistered warrants in a private placement. These warrants allow for the purchase of up to 4,715,000 common shares at US$0.25 per share, exercisable immediately and valid for five years from the date of issuance.
The gross proceeds from the share offering are anticipated to be US$943,000 before fees and other expenses. KWESST intends to allocate the net proceeds towards working capital and general corporate purposes.
The common shares are offered through a shelf registration statement filed with the Securities and Exchange Commission (SEC) on February 20, 2024, and declared effective on March 4, 2024. A prospectus supplement and accompanying prospectus will be filed with the SEC, available on their website or through the placement agent, H.C. Wainwright & Co.
The unregistered warrants, along with the common shares they may convert into, are not registered under the Securities Act of 1933 and are offered privately in compliance with exemptions from registration requirements.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the securities, and there shall not be any sale of these securities in any jurisdiction where such offer, solicitation, or sale would be unlawful.
KWESST develops systems for military and security forces, including digitization of tactical forces, countermeasures against electronic detection, lasers, drones, and a non-lethal product line branded PARA OPS™. The company is based in Ottawa, Canada, with offices in London, UK, and Abu Dhabi, UAE.
The information in this article is based on a press release statement.
In other recent news, KWESST Micro Systems Inc. has been involved in several key developments. The company has secured a C4ISR software contract with Thales Canada, part of the Canadian Department of National Defence's initiative to upgrade the Canadian Army's command, control, communications, computers, intelligence, surveillance, and reconnaissance systems.
The task-based agreement has a potential value of roughly CAD $48 million over an initial six-year term, although the exact revenue for KWESST will depend on the specifics of task orders from the customer.
In addition to this, KWESST has also completed a public offering, raising approximately $1 million through the sale of 735,000 common shares and 803,500 pre-funded warrants. ThinkEquity served as the sole book-running manager for the offering, with the net proceeds earmarked for working capital, general corporate purposes, and to further the company’s business goals.
Furthermore, KWESST has announced changes in its auditing services, appointing MNP LLP as its new auditor in place of KPMG LLP. This transition is not due to any disagreements with the company's management, board, or practices.
As a result of this change, KWESST has rescheduled its annual general meeting to July 30, 2024, where shareholders will vote on the appointment of the new auditor, among other topics. These developments are part of the company's ongoing efforts to meet its strategic objectives and maintain its commitment to transparency and accountability.
InvestingPro Insights
As KWESST Micro Systems Inc. embarks on its latest funding round, insights from InvestingPro provide a deeper understanding of the company's financial health and market position. With a market capitalization of just $2.78 million, KWESST is a niche player in the defense technology industry. Despite a notable revenue growth of 34.83% over the last twelve months as of Q2 2024, the company is grappling with significant challenges.
InvestingPro Tips indicate that KWESST is quickly burning through cash and has short-term obligations that exceed its liquid assets, which could explain the need for the current capital raise. Additionally, the company has not been profitable over the last year, suffering from weak gross profit margins of -15.58%. This financial backdrop is reflected in the company's stock performance, which has taken a considerable hit, declining by 26.24% over the last month and 69.02% over the last three months.
Investors should note that KWESST's stock trades with high price volatility, and its valuation implies a poor free cash flow yield. With the company not paying dividends to shareholders and trading at a high Price / Book multiple of 5.36, the risk profile is significant. These factors underscore the importance of thorough due diligence when considering an investment in KWESST.
For those interested in further analysis, there are 17 additional InvestingPro Tips available that could provide more comprehensive insights into KWESST's financial and market performance. These can be accessed at https://www.investing.com/pro/KWE, offering a detailed perspective for informed investment decisions.
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