Kwesst Micro Systems inks $20M deal with DND

An Ottawa startup has signed a multimillion-dollar deal with the Department of National Defence that could see it increase its revenues more than 450 per cent from a year ago.

Kwesst Micro Systems said Tuesday it has been awarded a five-year contract to perform software systems engineering work for DND in a joint venture with two other unnamed defence industry partners. Kwesst will earn at least $4 million annually for its portion of the deal, which also includes five one-year options.

The company said it will provide “specialized software development and integration solutions” to the Canadian Army under the agreement, which runs until May 2028.

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Kwesst executive chairman David Luxton said the contract win represents “an important validating milestone” for the organization, which has about 20 employees.

“Today’s announcement, coupled with other pending opportunities, is a pivotal development in our strategy to ramp up revenue and multi-year backlog into 2024 and beyond, for a predictable base of business centred on our digitization capabilities,” Luxton said in a statement. “This is therefore a very important and exciting juncture for the company.”

Founded in 2017 by former Colt Canada executives Jeff MacLeod and Warren Downing, Kwesst specializes 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 aggressive protesters and other belligerents.

The company, which went public on TSX Venture Exchange in 2020 and previously traded on the New York-based OTCQB exchange, debuted on the Nasdaq exchange late last year in an effort to boost its access to capital markets in the U.S.

Kwesst generated about $722,000 in revenues in fiscal 2022, down from nearly $1.3 million the previous year, while posting a net loss of more than $10.5 million. 

In its fiscal 2023 first quarter ending Dec. 31, the company had sales of about $317,000 and recorded a $2.2-million loss. 

Its shares have fallen nearly 90 per cent in the past 12 months but were up 22 cents, or more than six per cent, to $3.60 in late-afternoon trading on the TSX Venture Exchange on Tuesday.

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