Mr. Sean Homuth reports

KWESST PROVIDES CORPORATE UPDATE AHEAD OF FISCAL Q2 2024 RESULTS

Kwesst Micro Systems Inc. has provided an update on progress in the business ahead of filing its fiscal Q2 financial results on May 14, and has provided an outlook of revenue ramp-up and corporate developments.

• Up to $75-million in stable revenue visibility from military digitization contracts through 2028;
• MOU (memorandum of understanding) signed with University of Ottawa to hire software coding graduates;
• Kwesst working with large Canadian police agency as first adopter of Kwesst Lightning in advance of full market release;
• Arwen scaling to multiples of historical revenue, major agencies continue evaluations of Para Ops.

Multiyear military digitization contract ramp-up

On March 21, 2024, the company reported on a pending subcontract with a global defence contractor to provide digitization services similar to the DSEF program with a maximum work share to Kwesst of up to $48-million over the initial six-year period. Kwesst is pleased to report today that its global defence contractor customer has stated Kwesst will receive a draft of the contract within the coming week, with the first task orders under the contract expected to commence very shortly. Additionally, Kwesst has been engaged by the customer at the working level to begin reviewing work tasks to accelerate the program start-up. "We already have software engineers on staff ready to begin this work," said Sean Homuth, Kwesst president and chief executive officer.

In late fiscal Q1 Kwesst began the ramp-up of the Canadian Department of National Defense (DND) DSEF contract with its joint venture partners, Thales Canada and Akkodis Canada. As announced May 2, 2023, Kwesst expects to perform up to $27-million in software development work under the $136-million DSEF program over the initial five years of the contract, with five additional option years. While Kwesst has been successful at steadily staffing toward the 11 positions on initial taskings, DND has recently announced a suspension of acceptance of new submissions, potentially delaying the onboard of three of the seven candidates already submitted and deferring acceptance of submissions for the remaining four candidates. Kwesst is working with its JV (joint venture) partners and DND customer to address questions related to the recent announcement to assess and mitigate the impact this may have on short-term business outcomes. The company does not expect this to impact the company's overall potential revenue over the remaining life of the contract.

As part of the ramp-up and fulfilment of this military digitization work the company reported that it has signed a memorandum of agreement (MOU) with the University of Ottawa to provide employment for graduates of the university's software coding programs for indigenous students and for veterans of the Canadian Armed Forces.

Kwesst Lightning SaaS (software-as-a-service) app

In response to customer demand, Kwesst is announcing the offering a prerelease version of its Lightning TAK-based situational awareness solution, with special pricing to public safety agencies up to a total number of 1,500 users. Under this offering, Kwesst is working with one large Canadian police agency to supply Lightning to over 300 lead-users as a first step toward a wider rollout, and with the goal of refining the requirements of the full commercial release later this calendar year. "This exciting first roll-out of the Lightning app under our SaaS model is important validation of the interest and an important opportunity to work directly with the public safety community in the product's refinement," said Mr. Homuth. "Lightning makes it easy and affordable for first responders to dynamically share situational awareness in real time employing the U.S. government Team Awareness Kit (TAK) software that many agencies are seeking to adopt throughout North America."

A complementary product offering with Kwesst Lightning is the company's TAK-enabled T-SAS (tactical surveillance and sniper) system that streams real-time video to incident commanders and responders for shared situational awareness during operations. The first such system has been adopted by a G7 capital city and was recently demonstrated at an invitation-only overseas gathering of elite police tactical units, where it was received with serious interest and follow-on plans to include it for operational testing at a major upcoming international event.

Non-lethal products

The Arwen product line continues to scale up with new outsourced production and driven by growing requirements in the public safety market. "And this will include revenue from the new 40 mm baton cartridge currently undergoing evaluation by several major police agencies in North America," added Mr. Homuth. "This new cartridge addresses the much larger world market for cartridges in the 40 mm caliber vs. our traditional 37 mm cartridge. Based on early interest we expect the new 40 mm will be a significant driver of growth in the near term, and another source of recurring revenue."

Further to the announcement of Feb. 28, 2024, the company reported that negotiations with O'Dell Engineering to complete a definitive agreement for distribution of the Arwen and Para Ops product lines in Canada, including an initial stocking order, are ongoing and expected to conclude in the coming weeks.

Meanwhile, demonstrations and evaluations of the new Para Ops non-lethal system continue with police and security agencies, with a major demonstration to more than 100 agencies scheduled at an invitation-only event hosted by LAPD in early June.

Latest investor presentation

The company also noted that its latest investor presentation is posted on the Kwesst website under the investor information tab and includes additional updated information on the company's products and outlook.

About Kwesst Micro Systems Inc.

Kwesst (Nasdaq: KWE) and (Nasdaq: KWESW) (TSX Venture Exchange: KWE) (Frankfurt Stock Exchange: 62U) develops and commercializes breakthrough next-generation tactical systems for military and security forces. The company's current portfolio of offerings includes digitization of tactical forces for real-time shared situational awareness and targeting information from any source (including drones) streamed directly to users' smart devices and weapons. Other Kwesst products include countermeasures against threats such as electronic detection, lasers and drones. These systems can operate stand-alone or integrate seamlessly with original equipment manufacturer products and battlefield management systems, and all come integrated with Tak. The company also has a new proprietary non-lethal product line branded Para Ops with application across all segments of the non-lethal market, including law enforcement. The company is headquartered in Ottawa, Canada, with operations in Guelph, Ont., Canada, and Youngsville, N.C., United States, as well as representative offices in London, United Kingdom, and Abu Dhabi, United Arab Emirates.

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