OTTAWA - KWESST Micro Systems Inc. (NASDAQ: KWE) (NASDAQ: KWESW) (TSXV: KWE), a developer of tactical systems for military and security forces, has announced a consolidation of its outstanding common shares. The board of directors has authorized a consolidation on the basis of ten pre-consolidation shares for each one post-consolidation share, subject to the approval of the TSX Venture Exchange.
The company, which is based in Ottawa, Canada, with offices in London, UK, and Abu Dhabi, UAE, states that the purpose of the consolidation is to maintain compliance with NASDAQ Stock Market minimum bid price requirements. As a result, KWESST has decided against holding a special meeting of shareholders previously intended to seek a greater basis for consolidation.
Currently, KWESST has 15,791,742 shares issued and outstanding. If the consolidation proceeds without any other changes to the issued and outstanding shares, approximately 1,579,174 shares will be in circulation after the adjustment, with allowances for rounding.
KWESST specializes in the digitization of tactical forces, providing real-time situational awareness and targeting information from various sources, including drones, directly to users' smart devices and weapons. The company's product lineup also includes countermeasures against electronic detection, lasers, and drones, as well as a new proprietary non-lethal product line branded PARA OPS™ aimed at law enforcement and other non-lethal markets.
The consolidation plan is one of the latest strategic steps by KWESST as it continues to commercialize its next-generation tactical systems. The company's forward-looking statements indicate that while they believe the consolidation will benefit shareholders and the company's future performance, there are inherent risks and uncertainties that could cause actual results to differ from expectations.
This news article is based on a press release statement from KWESST Micro Systems Inc. and reports only the factual elements of the company's announcement without speculation or promotional language.
In other recent news, KWESST Micro Systems Inc. has announced a registered direct offering and a concurrent private placement. The company plans to sell 4,715,000 common shares at $0.20 each, with unregistered warrants issued in a private placement, allowing for the purchase of an equal number of shares at $0.25 per share. The gross proceeds from this offering are expected to be around $943,000 before fees and expenses, which KWESST intends to use for working capital and general corporate purposes.
In addition to this, KWESST has secured a C4ISR software contract with Thales Canada, part of an initiative to upgrade the Canadian Army's systems. The agreement has a potential value of roughly CAD $48 million over an initial six-year term, with the exact revenue for KWESST depending on task orders from the customer.
Moreover, KWESST recently completed a public offering, raising approximately $1 million through the sale of 735,000 common shares and 803,500 pre-funded warrants. The net proceeds are earmarked for working capital, general corporate purposes, and furthering the company’s business goals.
Lastly, KWESST has announced a change in its auditing services, appointing MNP LLP as its new auditor in place of KPMG LLP. This transition is not due to any disagreements within the company, and shareholders will vote on the appointment of the new auditor at the rescheduled annual general meeting. These are all recent developments in the company's ongoing efforts to meet its strategic objectives and maintain transparency and accountability.
InvestingPro Insights
KWESST Micro Systems Inc.'s decision to consolidate its shares comes at a critical time for the company, as revealed by recent InvestingPro data. The company's market capitalization stands at a modest $2.3 million, reflecting its current position in the tactical systems market.
InvestingPro Tips highlight that KWESST is "quickly burning through cash" and "suffers from weak gross profit margins." These factors likely contribute to the company's decision to consolidate shares to maintain NASDAQ compliance. The company's financial health is further underscored by its negative gross profit margin of -13.52% for the last twelve months as of Q3 2024, indicating challenges in its core operations.
Despite these hurdles, KWESST has shown significant revenue growth, with a 75.25% increase over the last twelve months and an impressive 119.26% quarterly growth in Q3 2024. This aligns with another InvestingPro Tip stating that "analysts anticipate sales growth in the current year," suggesting potential for future improvement.
The company's stock performance has been volatile, with the price falling significantly over various timeframes. The 1-year price total return stands at -91.25%, which corresponds to the InvestingPro Tip noting that the "price has fallen significantly over the last year." This context provides insight into why KWESST is pursuing the share consolidation strategy.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for KWESST, providing a deeper understanding of the company's financial position and market performance.
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