KWESST Micro Systems Inc. reported on the progress of the CAD 136 million Department of Defence (DND) program in Canada with its joint venture partners, Thales and Akkodis, as announced May 2nd, 2023 (the "DSEF contract"). The Directorate Land Command Systems Program Management (DLCSPM) Software Engineering Facility ("DSEF") Professional Services program is the Canadian Army's central provider of Command and Control (C2) Specialty Applications in the areas of Indirect Fire Control software, Artillery Fire Control software, and Sniper Ballistics Control software development and support services. As the Army's development cell for Command and Control (C2) Software, the DSEF responds to new requirements as they emerge from the battlefield.

The DSEF program is now ramping up and KWESST anticipates that it will begin contributing revenue in fiscal first quarter of 2024 which commenced October 1, 2023. The customer has issued three Statements of Work (SOWs) for three initial taskings to commence transition from the program incumbent (ADGA). KWESST is in the process of hiring, supplying, and submitting for approval to the customer approximately 11 resources under these SOWs which would represent an annualized revenue of approximately CAD 2.2 million.

To date, 5 candidates have accepted offers conditional upon their approval by the client and the issuance of security clearances. An additional 2 candidates are currently undergoing evaluation, with plans to identify and screen the remaining candidates in the upcoming weeks. The Company expects that further work tasks will be issued by the customer once the transition from the program incumbent is complete.

The Company has previously estimated that once operating at scale, it will receive a minimum of CAD 4 million annually from the contract, with potential for its workshare to be up to 20% of the total contract value, or an average of up to approximately CAD 5 million annually over the initial five-year term based on the terms of its agreement with its joint venture partners.