KWESST ENTERS INTO NON-LETHAL TECHNOLOGY PURCHASE AGREEMENT
KWESST ENTERS INTO NON-LETHAL TECHNOLOGY PURCHASE AGREEMENT
January 18, 2021 – Ottawa – KWESST Micro Systems Inc. (TSXV: KWE) (“KWESST” or “the Company”) today announced it has entered into a technology purchase agreement (the “Purchase Agreement”) with DEFSEC Corporation (“DEFSEC”) to acquire a proprietary non-lethal munitions technology system referred to as the Low Energy Cartridge technology (“LEC Technology”). The LEC Technology is a proprietary non-lethal cartridge-based ordnance system. DEFSEC is an Ottawa-based based private company owned by David Luxton the Executive Chairman of KWESST.
“We see the LEC Technology as having universal application across four market segments that currently use a variety of dated “non-lethal” or “less-lethal” products, each having a vast global market. These segments are (i) public order (riots and control of dangerous subjects), (ii) military and law enforcement training (realistic force-on-force training), (iii) personal defence (home, car, boat, RV, camping, hiking), and (iv) high-action gaming” said Jeff MacLeod, KWESST Founder and CEO. “The kind of fatalities that have led to widespread protests in the U.S. are just one example of the need for more advanced solutions that enable law enforcement to engage with more benign devices from a safer stand-off distance and ensure that everyone goes home alive.”
The market development of the LEC Technology will benefit from the deep combined experience of Jeff MacLeod and David Luxton in the specialty ordnance business. Mr. MacLeod is a highly knowledgeable defence industry executive with over 20 years’ experience in the field of small arms and advanced soldier systems. Prior to establishing KWESST, he was the General Manager of Colt Canada, the primary supplier of small arms to the Canadian military. David Luxton was the founder in 1990 of Simunition Inc., a business that develops and sells simulated munitions for realistic close quarters combat training for military and law enforcement around the world. He sold the business to a large military contractor and from 2015 – 2018 he was the Executive Chairman of United Tactical Systems LLC, a U.S. company that develops and sells products for the global less-lethal market.
The purchase price for the LEC Technology shall be satisfied by the issuance to DEFSEC of 1,000,000 shares of KWESST and 500,000 share purchase warrants of KWESST at a price of $0.70 per share. The warrants shall vest as to 25% on the first anniversary of the closing of the LEC Technology acquisition and 25% on each of the subsequent three anniversaries of the completion of the LEC Technology acquisition. Under the Purchase Agreement, DEFSEC shall also be entitled to a 7% royalty on annual sales of the LEC Technology, net of taxes, duties, customs brokerage fees, shipping and handling costs, customer credits, discounts and returns, up to a cumulative maximum of $10 million.
The entering into the Purchase Agreement is considered to be a “related party transaction” for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61- 101”) and Policy 5.9 – Protection of Minority Security Holders in Special Transactions of the TSX Venture Exchange. KWESST is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101. KWESST is exempt from the formal valuation requirement in section 5.4 of MI 61-101 in reliance on sections 5.5(a) and (b) of MI 61-101 as the fair market value of the transaction is not more than the 25% of KWESST’s market capitalization, and no securities of KWESST are listed or quoted for trading on prescribed stock exchanges or stock markets. Additionally, KWESST is exempt from minority shareholder approval requirement in section 5.6 of MI 61-101 in reliance on section 5.7(a) as the fair market value of the transaction is not more than the 25% of KWESST’s market capitalization. The transaction was reviewed and approved by the independent directors of KWESST. The closing of the LEC Technology acquisition by KWESST is subject to the approval of the TSX Venture Exchange.
KWESST develops and commercializes high-value ultra-miniaturized technology applications that make a critical difference to the safety and operational effectiveness of personnel in the defence and security industries. The company’s current portfolio of unique proprietary offerings include: its signature TASCSTM (Tactical and Situational Control System) for real-time awareness and targeting information from any source (including drones) streamed directly to users’ smart devices and weapons; the autonomous GreyGhostTM soldier-portable micro drone missile system that defends against small hostile drones including swarms using high-speed kinetic impact; a Ground Laser Defence system to counter the emerging threat of weaponized lasers against personnel; and, the PhantomTM electronic battlefield decoy system to mask the electromagnetic signature of friendly forces with decoy signatures at false locations to deceive and confuse adversaries. All systems can operate stand-alone or integrate seamlessly with OEM products and battlefield management systems including Frontline, Edge, Killswitch and ATAK (Android Tactical Assault Kit) among others. KWESST also has developmental “smart ordnance” projects including its “Shot Counter” system, which records the number and type of rounds fired, for optimized firearms maintenance and performance. The Company is headquartered in Ottawa, Canada, with representative offices in Washington, DC, London, UK and Abu Dhabi, UAE. KWESST trades on the TSX Venture Exchange under the symbol KWE.
Contact: Jason Frame, Investor Relations: firstname.lastname@example.org
For more information, please visit https://www.kwesst.com/
Cautionary Note Regarding Forward-Looking Statements
This news release includes certain “forward-looking statements” under applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the timing for the commencement of trading and the plans and operations of KWESST after giving effect to the Qualifying Transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. KWESST disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.