Not For Distribution to U.S. Newswire Services or for Release, Publication, Distribution, or Dissemination Directly, or Indirectly, in Whole or in Part, In or Into the United States

Ottawa, Ontario--(Newsfile Corp. - August 29, 2022) - KWESST Micro Systems Inc. (TSXV: KWE) ("KWESST" or "the Company") today announced that it has closed two non-secured loans in the amount of USD$200,000 per loan with a third-party lender ("Lender") for an aggregate amount of USD$400,000 (the "Loans").

The Loans bear interest at a rate of 6.0% per annum, compounded monthly and not in advance, and have a maturity of twelve months, with the Company having the option to repay the whole or any part of the Loans, without penalty or premium, at any time prior to the close of business on the maturity date. On repayment of the Loans, KWESST shall pay 110% of the principal amount plus accrued interest on the Loan. As part of the terms of one of the Loans, KWESST issued an aggregate of 296,754 common shares to the Lender (the "Bonus Shares"), being an amount equal to twenty percent (20%) of USD$200,000, converted to CAD$ at an exchange rate of $1.2983, divided by the market price of the Company's common shares on the TSX Venture Exchange (the "Exchange") at market close on August 24, 2022, being CAD$0.175. The Bonus Shares were issued in accordance with applicable prospectus exemptions under Canadian securities laws.

Concurrently with the closing of the Loans, KWESST's Executive Chairman and its President and Chief Executive Officer (the "KWESST Principals") entered into call option agreements with the Lender whereby the Lender will have the option, pursuant to the terms and conditions of the call option agreements, to purchase 741,345 common shares held by the KWESST Principals at a price of CAD$0.175 for a period of five years. Additional free-trading common shares may be offered by the KWESST Principals to the Lender should KWESST elect to proceed with a share-for-debt transaction in connection with one of the Loans. KWESST is not a party to the call option agreements.

In connection with the Loans, KWESST agreed to pay a cash fee to ThinkEquity, a US based investment bank, and for certain of its expenses, in an aggregate amount of USD$37,000.

The securities issued in connection with the Loans are subject to a regulatory four-month and one day hold period expiring on December 26, 2022. The Loans remain subject to the final approval of the Exchange.

About KWESST
KWESST (TSXV: KWE) (OTCQB: KWEMF) (FSE: 62U) commercializes breakthrough next-generation tactical systems for military and security forces and personal defense. The company's current portfolio of unique proprietary offerings includes non-lethal systems (PARA OPSTM and ARWENTM) with application across all segments of the non-lethal market, including law enforcement and personal defence. KWESST also facilitates digitization of tactical forces with its signature TASCS system for real-time awareness and targeting information from any source (including drones) streamed directly to users' smart devices and indirect fire weapons. Other KWESST products include countermeasures against threats such as drones, lasers and electronic detection. These include: the PhantomTM electronic battlefield deception system to mask the electromagnetic signature of friendly forces with decoy signatures at false locations that deceive and confuse adversaries; a Battlefield Laser Detection System to counter the emerging threat of laser targeting of personnel; and, a non-kinetic system to counter the threat of tactical drones. These systems can operate stand-alone or integrate seamlessly with third-party OEM products and networked battlefield management systems such as ATAK. The Company is headquartered in Ottawa, Canada, with operations in Stafford, VA and representative offices in London, UK and Abu Dhabi, UAE.

For more information, please visit https://kwesst.com/.

Contact: Steve Archambault, CFO, archambault@kwesst.com or (613) 317-3941
Jason Frame, Investor Relations: frame@kwesst.com

Investor Contact:
Dave Gentry, CEO
RedChip Companies
1-800 RED-CHIP (733-2447) 407-491-4499 KWEMF@redchip.com

Press Contact:
Angela Trostle Gorman
angela@AMWPR.com
1-917-348-0083

Cautionary Note Regarding Forward-Looking Statements
Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates, and projections about its industry; its beliefs; and assumptions. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions security holders and prospective security holders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances, or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of the release.