Kwesst Micro Systems eyes public offering on Nasdaq to help finance U.S. expansion push

Kwesst technology

A Kanata company whose devices were used to break up demonstrations in downtown Ottawa during last winter’s protests against vaccine mandates is bidding to go public on the Nasdaq stock exchange to help finance its U.S. expansion.

Kwesst Micro Systems filed an application for a listing on the New York-based exchange earlier this month. The company – which already trades on the TSX Venture Exchange and the smaller New York-based OTCQB exchange – is also planning an initial public offering on the Nasdaq under the ticker symbol KWE and this week filed a prospectus with the Securities and Exchange Commission.

Kwesst chief financial officer and vice-president of corporate services Steve Archambault said demand for the firm’s technology has reached the point where it needs access to more investors to bankroll its scaleup efforts.

Pending regulatory approval, the company expects to make its Nasdaq debut before the end of September.

“It certainly opens up a much bigger capital market for us,” Archambault said of the move. “Canada has been great for a young startup to raise money, but obviously tapping into the U.S. market, it enables us to raise substantially more money as we plan to grow very significantly in the United States.”

"It certainly opens up a much bigger capital market for us."

The firm is proposing a public offering of common units consisting of one common share and a warrant to purchase an additional common share on the Nasdaq. Kwesst has hired New York-based investment banking firm ThinkEquity to underwrite the proposed offering.

“We’re quite excited to be partnering with them,” Archambault said. “It’s all good for us.”

Kwesst’s prospectus, filed Monday with the SEC, calls for an offering of nearly 1.7 million common units consisting of a common share and a purchase warrant at an assumed price of US$6.77 per unit.

As of Thursday afternoon, Kwesst is trading at 18 cents on the TSX-V and just under 14 cents in U.S. funds on the OTCQB. Archambault said the company plans to consolidate its existing shares in order to meet the Nasdaq’s minimum opening bid of US$4. 

The $6.77 price is not written in stone, he added, noting the stock’s debut value will hinge largely on the reaction to Kwesst’s pre-listing “road show,” where it will pitch to institutional investors to gauge market demand.   

High-tech sensors

“We just want to make sure that when we trade on Nasdaq, we don’t fall below $4,” Archambault explained.

The move marks another key milestone for the Kanata firm, which has been on a slow but steady ascent since it was founded in 2017 by former Colt Canada executives Jeff MacLeod and Warren Downing.

Kwesst started out developing sensors that could be attached to high-powered rifles and other weapons to help soldiers pinpoint exactly where ammunition such as bullets or grenades would make contact with a target.

The firm soon branched out into other products like software that delivers images of a target’s location to a display screen in a soldier’s goggles. Initially funded by its founders and a few well-heeled angels, Kwesst went public on the TSX Venture Exchange in the fall of 2020.

Since then, the company has been diligently developing and acquiring technology in three main product areas – systems that feed real-time information to soldiers in the field, measures that counteract deadly lasers and other space-age weaponry and equipment such as high-tech anti-riot munitions designed to subdue protesters and other belligerents.

Kwesst made headlines earlier this year when one of its newest offerings was used to disperse demonstrators against vaccine mandates in downtown Ottawa. Police used the firm’s anti-riot devices to fire baton-shaped projectiles into a group of people gathered near Bank and Sparks streets during February’s Freedom Convoy protests.

But it’s the buzz Kwesst is generating south of the border that really has the firm’s brain trust fired up.

Aerospace and defence giant General Dynamics, for example, is installing Kwesst’s electronic decoy system, dubbed Phantom, on hundreds of next-generation armoured vehicles it’s building for a U.S. military customer. 

Archambault said the company is also seeing “significant interest” among potential U.S. customers for its non-lethal anti-riot technology.

Now at about 20 employees, Kwesst generated about $1.3 million in revenues last year while posting a net loss of more than $9 million. 

The firm is banking on a bump from its pending Nasdaq listing to build momentum in the U.S. Archambault said he believes Kwesst is poised to make a major leap forward in the months ahead.

“Even our competitors are knocking on our door looking at what we have,” he said. “We’re very excited.”

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