United States securities and exchange commission logo
August 26, 2022
Jeffrey MacLeod
Chief Executive Officer and Director
KWESST Micro Systems Inc.
155 Terence Matthews Crescent, Unit #1
Ottawa, Ontario, K2M 2A8
Re: KWESST Micro
Systems Inc.
Registration
Statement on Form F-1
Filed August 16,
2022
File No. 333-266897
Dear Mr. MacLeod:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Unless we note
otherwise, our references to prior comments are to comments in our
August 4, 2022 letter.
Registration Statement on Form F-1 filed August 16, 2022
Cover Page
1. We note your revisions
disclosing an assumed price of USD$6.77 per Common Unit (with
each Pre-funded Unit to
be equal to the price per Common Unit minus USD$0.01). We
also note your
disclosure that the "actual public offering price per Common Unit and Pre-
funded Unit, as the
case may be, will not be determined by any particular formula but will
rather be determined
through negotiations between us and the underwriter at the time of
pricing." If you do not
expect the Common Units will be offered at USD$6.77 per unit,
please provide a bona
fide price range and revise your disclosures accordingly. Refer to
Item 1 of Form F-1 and
the instructions to Item 501(b)(3) of Regulation S-K.
Jeffrey MacLeod
KWESST Micro Systems Inc.
August 26, 2022
Page 2
Economic Dependence, page 56
2. We note your response to prior comment 10 indicating that, with
respect to your MPSA
agreement with GDMS, "KWESST is not dependent on the MPSA and the MPSA
is not
material to KWESST's business or profitability." Your revised
disclosure on page 56
states that this customer contributed nearly 64 percent of your
year-to-date revenue for
fiscal 2022. Please refer to our prior comment and further clarify how
you determined
that there are no agreements with your customers that are material.
With a view towards
revised disclosure, if you do not believe the MPSA agreement is
material, please advise
whether there are other agreements with GDMS that you view as material
given that this
customer generated a majority of your recent revenue.
Events in the Development of the Business, page 59
3. We note you entered into a three-year contract with Counter-Crisis
Technology Inc.
Please disclose the contract's termination provision. Tell us what
consideration you gave
to filing a copy of this agreement as an exhibit to your registration
statement. Refer to
Items 4.B.6. and 19 of Form 20-F.
General
4. Your revised disclosure on page 3 indicates that you expect to begin
"commercializing"
the single-shot PARA OPS device by the end of the fourth quarter of
fiscal 2022.
However, you disclose on page 65 that the launch of your PARA OPS
business line is
expected "during the third quarter of Fiscal 2022." Further, it appears
that you expect
only the single-shot PARA OPS device to launch in fiscal 2022 (while the
multi-shot
device will enter production in 2023), but you refer to the "anticipated
commercial launch
of PARA OPS product line in the fourth quarter of Fiscal 2022" on page
56. Please
clarify and revise to consistently refer to the production and
commercialization timeline
for your PARA OPS product line. Further, refer to your disclosure on
page 47 showing a
"pre-production phase" as part of the "estimate of the additional
investment to reach
commercialization." Advise whether you consider a product in
"pre-production" or
"outsourced production" to have reached "commercialization." Make any
appropriate
FirstName LastNameJeffrey MacLeod
updates to your chart on page 47, which shows that the singe-shot device
will only
Comapany NameKWESST
achieve Micro
pre-production Systems
in fiscal 2022Inc.
and that outsourced production
will not occur until
August2023.
26, 2022 Page 2
FirstName LastName
Jeffrey MacLeod
FirstName LastNameJeffrey
KWESST Micro Systems Inc.MacLeod
Comapany
August 26, NameKWESST
2022 Micro Systems Inc.
August
Page 3 26, 2022 Page 3
FirstName LastName
5. We note your disclosure on page 51 that you "do not expect the ARWEN
product line to
be material to our operations in Fiscal 2023 and thereafter following
the roll-out of PARA
OPS and other anticipated military contracts." However, you disclose
on F-19 that over
one-third of your revenues for the three months ended June 30, 2022
were generated by
the ARWEN line and you disclose on page 68 that "ARWEN product sales
have
contributed significantly to our YTD Fiscal 2022 revenues." Given this
significant
revenue and the fact that your PARA OPS line has yet to reach
commercialization, please
tell us why you believe you have a reasonable basis to conclude that
your ARWEN
product line will not be material in fiscal 2023 and thereafter. For
guidance, see Item
10(b) of Regulation S-K regarding disclosures accompanying
projections, disclosures of
revenue without a measure of income, and the basis for projections.
You may contact Melissa Kindelan, Senior Staff Accountant, at (202)
551-3564 or
Christine Dietz, Senior Staff Accountant, at (202) 551-3408 if you have
questions regarding
comments on the financial statements and related matters. Please contact
Patrick Faller, Staff
Attorney, at (202) 551-4438 or Jan Woo, Legal Branch Chief, at (202) 551-3453
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Richard Raymer