KWESST Micro Systems Inc. (KWE) (TSXV:KWE) is entering into an agreement to add a proprietary non-lethal munitions technology system to its network of products, as it eyes a market opportunity.
The Ottawa-based company has signed a technology purchase agreement with DEFSEC Corporation. The non-lethal, cartridge-based ordnance system is referred to as Low Energy Cartridge technology (LEC technology).
The company is well versed in the tactical market and feels the LEC technology would be a strong addition to its catalogue.
Since it was founded in 2017, KWESST has specialized in developing and commercializing ultra-miniaturized technology applications in the defence and security industries. The company’s signature Tactical and Situational Control System (TASCSTM) provides real-time awareness and targeting information from any source that can then be streamed directly to smart devices, including weapons. It also offers an autonomous soldier-portable micro drone missile system that defends against small hostile drones using a high-speed kinetic impact. In addition, the company has developmental smart ordnance projects including its Shot Counter system, which records the number and type of rounds fired, helping to optimize firearm performance and maintenance.
At the present time, KWESST believes there is a fair amount of room for improvement when it comes to the non-lethal product market, evidenced by a quick look across the border.
“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,” said KWESST founder and CEO Jeff MacLeod.
The company has offices in Washington, D.C., London and Abu Dhabi, and law enforcement is just one area of the market MacLeod sees as ripe for expansion.
“We see the LEC Technology as having a 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 MacLeod, who is a veteran defence industry executive with more than two decades of experience in the field of small arms and advanced soldier systems. Before joining KWESST, MacLeod was the general manager of Colt Canada, a company which manufactures small arms and also supplies them to the Canadian military.
Based in Ottawa, DEFSEC is a private company, owned by KWESST executive chairman David Luxton who helped develop the proprietary LEC technology. The accomplished entrepreneur has a lifetime of experience spent in the industry. In 1990, he founded Simulation Inc., a business that develops and sells simulated munitions for combat in close quarters which is used to train military and law enforcement worldwide. He also spent three years as the executive chairman of United Tactical Systems, a company known internationally for its products in the less-lethal market.
It is that knowledge and experience which KWESST is banking on when it comes to the LEC technology purchase.
Under terms of the agreement, KWESST will issue 1-million shares of the company to DEFSEC as well as 500-thousand warrants at a price of C$0.70 per share as payment for the LEC technology.
The warrants will vest, 25 per cent on the first anniversary of the closing of the acquisition and 25 per cent on each of the three subsequent anniversaries.
In addition, DEFSEC will also be granted a seven-per-cent royalty on annual LEC technology sales after taxes, duties, customs brokerage fees, shipping and handling costs, customer credits, discounts and returns. The royalty is up to a cumulative maximum of $10 million.
The closing of the deal does remain subject to the approval of the TSX Venture Exchange.
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.
