Financial Performance - KWESST Micro Systems reported revenue of CAD 887,658 for the three months ended December 31, 2024, a significant increase from CAD 129,068 in the same period of 2023, representing a growth of 687%[5] - The company's gross profit for the same period was CAD 404,522, compared to a gross loss of CAD 53,805 in the prior year[5] - KWESST reported a net loss of CAD 3,457,015 for the three months ended December 31, 2024, compared to a net loss of CAD 398,973 in the same period of 2023, indicating a substantial increase in losses[5] - KWESST reported a net loss of $3.5 million for the three months ended December 31, 2024, compared to a net loss of $0.4 million in the same period of 2023, indicating a significant increase in losses[15] - The company had negative operating cash flows of $3.2 million for the three months ended December 31, 2024, compared to negative operating cash flows of $2.9 million in the prior year[15] - The company recorded share-based compensation of $51,055 for the three months ended December 31, 2024, compared to $63,489 in 2023, showing a reduction of 20%[98] - For the three months ended December 31, 2024, total interest expense was $63,863, a slight decrease from $64,336 in the same period of 2023[104] Assets and Liabilities - The total assets of KWESST increased to CAD 8,070,198 as of December 31, 2024, up from CAD 5,617,148 at the end of September 2024, marking a growth of 43%[3] - Cash and cash equivalents rose to CAD 2,854,256 at the end of December 2024, compared to CAD 256,828 at the end of September 2024, reflecting a significant increase of 1,010%[3] - The company’s total liabilities decreased to CAD 3,057,657 as of December 31, 2024, down from CAD 4,248,861 at the end of September 2024, a reduction of 28%[3] - Shareholders' equity increased to CAD 5,012,541 as of December 31, 2024, compared to CAD 1,368,287 at the end of September 2024, representing a growth of 267%[3] - As of December 31, 2024, KWESST had $2.8 million in working capital, a recovery from negative working capital of $1.1 million as of September 30, 2024[15] - Accumulated deficit increased to $46.1 million as of December 31, 2024, up from $42.7 million on September 30, 2024[15] - Total trade and other receivables increased to $1.04 million as of December 31, 2024, compared to $0.57 million on September 30, 2024[33] - Inventory decreased slightly to $529,778 as of December 31, 2024, from $533,163 on September 30, 2024[35] - Accounts payable and accrued liabilities totaled $1.13 million as of December 31, 2024, down from $1.66 million on September 30, 2024[39] - Contract liabilities decreased to $92,986 as of December 31, 2024, from $120,571 on September 30, 2024[41] Capital Raising Activities - The company raised CAD 4,871,033 from a U.S. public offering and CAD 3,421,635 from a private placement in November 2024, contributing to its cash position[7] - KWESST Micro Systems Inc. closed a U.S. public offering on April 9, 2024, generating gross proceeds of CAD$1.4 million (US$1 million) by issuing 80,350 pre-funded warrants[44] - On August 13, 2024, KWESST closed a direct offering for 471,500 common shares at US$2.00 per share, resulting in gross proceeds of CAD$1.3 million (US$0.9 million)[47] - The company announced a public offering on November 1, 2024, raising gross proceeds of CAD$4.9 million (US$3.5 million) by selling 80,000 common shares and 3,809,000 pre-funded warrants[51] - KWESST exercised 639,000 pre-funded warrants at a weighted average exercise price of US$0.01, recognizing a gain of CAD$693,328 in the change in fair value of warrant liabilities before reclassifying them to equity[54] - The company raised gross proceeds of $4.9 million (US$3.5 million) in a November U.S. Public Offering, with warrants exercised resulting in additional proceeds of $0.8 million (US$0.6 million)[105] Shareholder Information - KWESST's weighted average number of shares outstanding increased to 3,032,168 for the three months ended December 31, 2024, compared to 561,678 in the same period of 2023[5] - As of December 31, 2024, the total number of outstanding common shares increased to 7,887,223, up from 1,579,176 on September 30, 2024, reflecting a significant issuance for various purposes[57] - The company reported a total of 1,006,645 outstanding securities as of December 31, 2024[49] - The company issued 119,047 common shares at a deemed price of CAD$0.84 per share for debt settlement, representing a 20% discount on the closing price prior to the announcement[80] Revenue Breakdown - The revenue from the digitization product line was $718,983, compared to $92,769 in the prior year, indicating a year-over-year increase of 676%[101] - KWESST's contracted not yet recognized revenue as of December 31, 2024, was $158,011, down from $392,636 in 2023, reflecting a decrease of 60%[101] Other Financial Metrics - The company has incurred significant losses and negative cash flows since inception, primarily funded through financing activities[15] - The company recognized a loss of CAD$104,227 in fair value of warrant liabilities during the year ended September 30, 2024[46] - At December 31, 2024, KWESST reported a gain of CAD$461,340 in fair value of warrant liabilities, compared to nil in 2023[50] - The fair value of the 2024 warrants was calculated at CAD$0.06 per warrant, with an exercise price of US$2.50[50] - The exchange rate used for the fair value calculations was USD/CAD 1.4389[50] - KWESST's warrant liabilities are classified as financial liabilities under IFRS due to the exercise price being denominated in U.S. dollars[45] - The company had a minimum royalty commitment of $2,000,000, with $1,000,000 due beyond five years[107] - Total contractual obligations amounted to $3,447,428, with $1,344,218 due within one year[107] - Non-cash working capital changes for the three months ended December 31, 2024 resulted in a decrease of $957,235, compared to a decrease of $768,042 in 2023[108] - During the three months ended December 31, 2024, the company recorded a foreign exchange gain of $113,283, compared to a gain of $91,710 in 2023[106] - The net U.S. dollar exposure was $1,158,750, with a potential impact of $57,938 on profit or loss from a 5% movement in the U.S. dollar[106] - At December 31, 2024, the company had one right-of-use asset valued at $41,699, down from $72,315 in 2023[112]

Results of Operations - Total revenue for Fiscal 2024 increased by $0.3 million compared to Fiscal 2023, driven by $0.2 million from the digitization business line and $0.1 million from the less-lethal business line [1] - Revenue for Fiscal 2024 increased by 22% over Fiscal 2023, attributed to government contracts in the Directorate Land Command Systems Program Management Software Engineering Facility (DSEF) and Land C4ISR [28] - The company recorded a net loss of $7.4 million for Fiscal 2024, a reduction of $1.9 million from Fiscal 2023 [28] Gross Profit - Gross profit for Fiscal 2024 was $0.5 million, representing a gross margin of 32.3%, compared to a gross loss of $0.2 million with a gross margin of -15.5% in Fiscal 2023 [29][31] Operating Expenses - Total operating expenses decreased by $1.6 million, or 14%, over Fiscal 2023, primarily due to reductions in selling and marketing costs and general administrative expenses [46] - General and administrative expenses decreased by $1.0 million, or 13%, mainly due to an impairment charge on the Phantom intangible asset in Fiscal 2023 and a decrease in general administrative expenditures [3] - Research and development expenses increased by $0.8 million, or 51%, due to costs associated with the KWESST LightningTM and BLDS projects, as well as the write-off of obsolete inventory [4] Other Income and Expenses - Total other income for Fiscal 2024 was $2.4 million, compared to $2.8 million for Fiscal 2023, reflecting a decrease of $0.4 million [48] - The change in other income was primarily driven by a $3.0 million gain on the change in fair value of warrant liabilities due to a decrease in the underlying common share price [48] Balance Sheet Highlights - As of September 30, 2024, total assets were approximately CAD$5.6 million, down from CAD$11.8 million in 2023 [49] - Total liabilities decreased to CAD$4.2 million from CAD$7.8 million in the previous year [49] Strategic Developments - The company announced plans to issue 4,670 common shares at a deemed price of CAD$20.90 to settle a debt of approximately CAD$97,615 [8] - The appointment of Sean Homuth as President and CEO and Kris Denis as interim CFO and Chief Compliance Officer was announced [9] - The company engaged Dave Ibbetson as a Strategic Defence Advisor [10] Future Outlook - The company expects revenue to increase with the commercial launch of KWESST LightningTM anticipated in calendar 2025, along with expected demand for new ARWEN 40mm ammunition and PARA OPS products [44] - Gross profit margins are expected to continue increasing in Fiscal 2025 due to ramp-up on Canadian Government contracts [45]

Workforce and Employment - The company had a total of 30 employees in Fiscal 2024, up from 29.2 in Fiscal 2023, indicating a growth in workforce [225]. - The company may face challenges in retaining qualified directors and officers due to potential unavailability of adequate D&O insurance [227]. - The company’s executive compensation program is designed to attract and retain high-quality executives while linking compensation to corporate performance [263]. Financial Reporting and Compliance - The company is subject to the requirements of Sarbanes-Oxley (SOX), which necessitates a comprehensive evaluation of internal controls over financial reporting [232]. - Management assessed the effectiveness of internal controls over financial reporting as effective as of September 30, 2024 [383]. - The company is considered an Emerging Growth Company and is exempt from the audit requirements of Section 404(b) of SOX [384]. - There were no changes in internal controls over financial reporting that materially affected the company in Fiscal 2024 [384]. Insurance and Legal Risks - The company maintains D&O insurance, but there is no guarantee that coverage will be adequate in the event of litigation, which could adversely affect financial condition [227]. - The company has not reported any penalties or sanctions against its current directors or executive officers in the past ten years [223]. - The company has not obtained a legal opinion regarding its PFIC status, which may affect U.S. taxpayers holding Common Shares [233]. Stock Performance and Market Conditions - The company has experienced stock price volatility, which may be exacerbated by low trading volumes and market conditions [230]. - The company has experienced significant fluctuations in stock price, which may not correlate with its actual operating performance [231]. - The company received a notice from Nasdaq on May 16, 2024, indicating non-compliance with the Minimum Bid Requirement, which requires a closing bid price of at least USD $1.00 per share for 30 consecutive business days [243]. - The company was granted an additional 180-day period until May 12, 2025, to regain compliance with the Minimum Bid Requirement [243]. - Shareholder approval was not obtained for a proposed share consolidation ratio higher than 10-for-1, limiting the company's ability to address the Minimum Bid Requirement effectively [244]. Taxation and Regulatory Matters - The Company believes it was not a Passive Foreign Investment Company (PFIC) for its most recently completed tax year and expects the same for the current tax year [233]. - Proposed changes in U.S. tax laws, including the Inflation Reduction Act of 2022, may adversely affect the Company and holders of Common Shares [234]. - U.S. taxpayers should consult their tax advisors regarding the implications of PFIC rules on their investments in Common Shares [233]. Compensation and Equity Ownership - Total compensation for David Luxton, Executive Chairman, was $360,000 in fiscal year 2024, compared to $493,500 in 2023 [239]. - Sean Homuth, President & CEO, received total compensation of $352,769 in fiscal year 2024, up from $234,558 in 2023 [239]. - Harry Webster, Chief Operating Officer, earned total compensation of $278,962 in fiscal year 2024, compared to $23,077 in 2023 [239]. - The Company’s NEOs' compensation data indicates a significant increase in total compensation across various roles from 2023 to 2024 [239]. - As of December 23, 2024, the beneficial ownership of Common Shares by named executive officers and directors was 133,101 shares, representing 1.90% of the total outstanding shares [256]. - Total common shares beneficially owned by directors and executives amount to 147,224, which is 1.73% of outstanding shares [281]. Product Development and Contracts - The company has developed proprietary laser defense products to protect ground forces from portable laser attacks [268]. - The company’s core technology, TASCS, integrates a sensor package with a display for real-time situational awareness in military applications [267]. - The company announced a potential contract value exceeding $40 million for Phantom units with General Dynamics Land Systems if awarded [276]. - The company showcased new products at the SHOT SHOW 2023, including the PARA OPS products and ARWEN less-lethal launcher [277]. - The company announced a new scalable situational awareness solution, "Lightning," for public safety agencies, offered as a cloud-based SaaS product [280]. Financial Activities and Capital Raising - The company raised $940,255 through various financing methods in 2018 to fund working capital requirements [267]. - The company closed a U.S. IPO and Canadian Offering, raising aggregate gross proceeds of $14.1 million, selling 250,000 U.S. IPO Common Units at $41.30 each [277]. - The company completed a reverse stock split on October 23, 2024, at a ratio of 1-for-10, which may affect the liquidity of its Common Shares [264]. - The company announced a brokered private placement, raising approximately $5.6 million from the issuance of Common Shares [279].

Core Viewpoint - KWESST Micro Systems Inc. has confirmed that its management is unaware of any material changes in operations that would explain the recent increase in market activity [1] Company Overview - KWESST develops and commercializes next-generation tactical systems for military and security forces, focusing on digitization for real-time shared situational awareness and targeting information [2] - The company's offerings include countermeasures against threats such as electronic detection, lasers, and drones, which can operate independently or integrate with OEM products and battlefield management systems [2] - KWESST has introduced a proprietary non-lethal product line branded PARA OPSTM, applicable across various segments of the non-lethal market, including law enforcement [2] - The company is headquartered in Ottawa, Canada, with representative offices in London, UK, and Abu Dhabi, UAE [2]

Core Points - KWESST Micro Systems Inc. has received a notification from Nasdaq granting an additional 180 calendar days, until May 12, 2025, to regain compliance with the minimum bid price requirement of $1 per share [1][2][3] - The company was initially notified of its non-compliance on May 16, 2024, and had until November 12, 2024, to address the issue but failed to do so [2][4] - Nasdaq's decision is based on the company's compliance with other listing requirements, except for the bid price, and its intention to rectify the deficiency, potentially through a reverse share split [3][4] Company Overview - KWESST develops next-generation tactical systems for military and security forces, focusing on real-time situational awareness and targeting information [6] - The company's product portfolio includes countermeasures against electronic detection, lasers, and drones, and features a new non-lethal product line branded PARA OPSTM [6] - KWESST is headquartered in Ottawa, Canada, with offices in London, UK, and Abu Dhabi, UAE [6]

Ottawa, Ontario--(Newsfile Corp. - November 12, 2024) - KWESST Micro Systems Inc.  (NASDAQ: KWE) (NASDAQ: KWESW) (TSXV: KWE) (TSXV: KWE.WT.U) ("KWESST" or the "Company"), today announced the closing of a brokered private placement offering to an institutional accredited investor for aggregate gross proceeds of approximately CAD$3.4 million (approximately US$2.5 million) (the "Offering"). As a part of the Offering, the Company issued 4,145,200 pre-funded warrants to acquire one common share of the Company, ...

Ottawa, Ontario--(Newsfile Corp. - November 11, 2024) - KWESST Micro Systems Inc. (NASDAQ: KWE) (NASDAQ: KWESW) (TSXV: KWE) (TSXV: KWE.WT.U)("KWESST" or the "Company") today announces that it intends to issue a total of 119,047 common shares at a deemed price per common share of $0.84 per share (the "Shares"), representing a 20% discount on the closing price of the Shares on the TSX Venture Exchange (the "TSXV") on the last trading day prior to this news release, for settlement for reimbursement of busines ...

Ottawa, Ontario--(Newsfile Corp. - November 1, 2024) - KWESST Micro Systems Inc. (NASDAQ: KWE) (NASDAQ: KWESW) (TSXV: KWE) ("KWESST" or the "Company"), today announced the closing of its previously announced best efforts public offering of 3,889,000 common shares ("Common Shares") (or pre-funded warrants ("Pre-funded Warrants") in lieu thereof,) at a public offering price of US$0.90 per Common Share (or Pre-funded Warrant (inclusive of the Pre-Funded Warrant exercise price)), less the placement agent fees. ...

Ottawa, Ontario--(Newsfile Corp. - October 30, 2024) - KWESST Micro Systems Inc. (NASDAQ: KWE) (NASDAQ: KWESW) (TSXV: KWE) ("KWESST" or the "Company"), today announced the pricing of a best efforts public offering of 3,889,000 common shares (or pre-funded warrants ("Pre-funded Warrants") in lieu thereof) at a public offering price of US$0.90 per common share (inclusive of the Pre-Funded Warrant exercise price), for gross proceeds of approximately US$3,500,000, before deducting placement agent fees and offer ...

KWESST Announces Completion of Volume Production Ramp-Up for Arwen Cartridges Through Outsourcing with Ammunition Manufacturer to Meet Growing DemandOctober 23, 2024 5:05 PM EDT | Source: KWESST Micro Systems Inc.Company also establishes financing facility for its programmatic military contractsOttawa, Ontario--(Newsfile Corp. - October 23, 2024) - KWESST Micro Systems Inc. (NASDAQ: KWE) (NASDAQ: KWESW) (TSXV: KWE) ("KWESST" or the "Company") today announced it has completed its plan to ramp u ...