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DFSC 6-K

DEFSEC Technologies Inc. (DFSC)

6-K 2026-02-13 For: 2025-12-31
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Added on April 07, 2026

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of February, 2026.

Commission File Number: 001-41566

DEFSEC Technologies Inc.

(Exact Name of Registrant as Specified in Charter)

80 Hines Rd, Suite 300, Ottawa, Ontario, K2K 2T8

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F ⊠  Form 40-F ☐

INCORPORATION BY REFERENCE

Exhibits 99.1 and 99.2 of this Form 6-K are incorporated by reference into the Registrant's Registration Statement on Form F-3 File No. 333-277196, Form F-3 File No. 333-281960, Form F-3 File No. 333-283343, Form F-3 File No. 333-285263 and Form F-3 File No. 333-293140.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DEFSEC TECHNOLOGIES INC.
(Registrant)
Date: February 13, 2026 By: /s/ Jennifer Welsh
Name: Jennifer Welsh
Title: Chief Financial Officer

EXHIBIT INDEX

99.1 Unaudited Condensed Consolidated Interim Financial Statements for the three months ended December 31, 2025 and 2024
99.2 Management's Discussion and Analysis for the three months ended December 31, 2025
99.3 Certification of Interim Filings by CEO dated February 12, 2026
99.4 Certification of Interim Filings by CFO dated February 12, 2026
99.5 News Release dated February 12, 2026 
DEFSEC Technologies Inc.: Exhibit 99.1 - Filed by newsfilecorp.com

Unaudited Condensed Consolidated Interim Financial Statements of

DEFSEC TECHNOLOGIES INC.

Three months ended December 31, 2025 and 2024

(Expressed in Canadian dollars)

DEFSEC Technologies Inc.

Table of contents

Page
FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Interim Statements of Financial Position 3
Unaudited Condensed Consolidated Interim Statements of Net Loss and Comprehensive Loss 4
Unaudited Condensed Consolidated Interim Statements of Changes in Shareholders' Equity 5
Unaudited Condensed Consolidated Interim Statements of Cash Flows 6
Notes to the Unaudited Condensed Consolidated Interim Financial Statements 7-20
DEFSEC TECHNOLOGIES INC.<br>Unaudited Condensed Consolidated Interim Statements of Financial Position<br>As at December 31, 2025 and September 30, 2025<br>(Expressed in Canadian dollars)
---
Notes December 31,2025 September 30,<br>2025
--- --- --- --- --- --- --- ---
ASSETS **** **** ****
Cash and cash equivalents $ 5,037,424 $ 6,686,429
Restricted short-term investment 47,500 47,500
Trade and other receivables 1,136,564 1,494,152
Inventories 4 587,173 519,609
Prepaid expenses and other 657,119 163,562
Deferred costs 63,599 34,773
Current assets 7,529,379 8,946,025
Property and equipment 257,065 279,132
Right-of-use assets 1,124,145 1,165,181
Deposit 47,321 46,132
Intangible assets 5 2,293,847 2,390,030
Deferred costs 105,466 94,976
Non-current assets 3,827,844 3,975,451
Total Assets $ 11,357,223 $ 12,921,476
LIABILITIES AND SHAREHOLDERS' EQUITY **** ****
Liabilities **** ****
Accounts payable and accrued liabilities $ 1,314,952 $ 2,310,662
Accrued royalties liability 200,000 200,000
Lease obligations 109,552 188,907
Contract liabilities 29,425 7,671
Warrant liabilities 6,7(b) 116,239 210,965
Current liabilities 1,770,168 2,918,205
Accrued royalties liability 1,131,451 1,087,009
Lease obligations 1,190,020 1,114,543
Non-current liabilities 2,321,471 2,201,552
Total liabilities 4,091,639 5,119,757
Shareholders' equity **** ****
Share capital 7(a) 47,854,235 47,003,991
Warrants 7(b) 8,438,192 7,764,412
Contributed surplus 7(c) 5,398,445 5,398,445
Accumulated other comprehensive loss (62,232 ) (85,077 )
Accumulated deficit (54,363,056 ) (52,280,052 )
Total shareholders' equity 7,265,584 7,801,719
Total Liabilities and Shareholders' Equity $ 11,357,223 $ 12,921,476

See Note 2(a) Going concern and Note 14 Commitments and contingencies.

See accompanying notes to the unaudited condensed consolidated interim financial statements.

DEFSEC TECHNOLOGIES INC.<br>Unaudited Condensed Consolidated Interim Statements of Net Loss and Comprehensive Loss<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)
**** Three Months Ended
--- --- --- --- --- --- --- ---
Notes December 31,2025 December 31,<br>2024
Revenue 9 $ 1,307,736 $ 887,658
Cost of sales **** (903,044 ) (483,136 )
Gross profit **** 404,692 404,522
Operating expenses **** ****
General and administrative 1,338,350 1,511,444
Selling and marketing 303,370 682,547
Research and development 649,629 672,575
Share-based compensation 7(c) - 51,055
Depreciation and amortization 177,269 314,491
Total operating expenses 2,468,618 3,232,112
Operating loss (2,063,926 ) (2,827,590 )
Other income (expenses) **** ****
Share issuance costs - (1,807,686 )
Net finance costs 11 (37,294 ) (62,059 )
Foreign exchange gain (loss) (73,252 ) 113,283
Impairment of right-of-use assets - (88,596 )
Change in fair value of warrant liabilities 6 91,468 1,215,633
Total other expenses, net **** (19,078 ) (629,425 )
Net loss **** $ (2,083,004 ) $ (3,457,015 )
Other comprehensive income (loss): **** ****
Items that are or may be reclassified subsequently to profit or loss ****
Foreign currency translation differences 22,845 (96,276 )
Total comprehensive loss $ (2,060,159 ) $ (3,553,291 )
Net loss per share **** ****
Basic and diluted 8 $ (1.39 ) $ (23.94 )
Weighted average number of shares outstanding **** ****
Basic and diluted 8 1,497,035 144,401

See accompanying notes to the unaudited condensed consolidated interim financial statements.

DEFSEC TECHNOLOGIES INC.<br>Unaudited Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)
Notes Number ofCommonShares^(1)^ Share capital Warrants Contributedsurplus Translationreserve Deficit TotalShareholders'Equity
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Balance, September 30, 2024 75,200 $ 37,822,725 $ 1,084,687 $ 5,152,753 $ (38,520 ) $ (42,653,358 ) $ 1,368,287
Shares issued for public offering 3,809 100,310 - - - - 100,310
Pre-funded warrants issued for public offering - - 3,489,393 - - - 3,489,393
Pre-funded warrants issued for private placement - - 3,578,344 - - - 3,578,344
Share issuance costs - (40,089 ) (868,653 ) - - - (908,742 )
Shares issued for debt 5,669 100,000 - - - - 100,000
Pre-funded warrants exercised 290,904 4,227,111 (3,439,926 ) - - - 787,185
Warrants expired - - (132,000 ) 132,000 - - -
Share-based compensation - - - 51,055 - - 51,055
Other comprehensive loss - - - (96,276 ) - (96,276 )
Net loss - - - - - (3,457,015 ) (3,457,015 )
Balance, December 31, 2024 375,582 $ 42,210,057 $ 3,711,845 $ 5,335,808 $ (134,796 ) $ (46,110,373 ) $ 5,012,541
Balance, September 30, 2025 1,396,321 $ 47,003,991 $ 7,764,412 $ 5,398,445 $ (85,077 ) $ (52,280,052 ) $ 7,801,719
Shares issued for private placement 7(a) 566,040 1,013,212 - - - - 1,013,212
Warrants issued for private placement - - 1,124,863 - - - 1,124,863
Share issuance costs 7(a) - (309,315 ) (303,825 ) - - - (613,140 )
Pre-funded warrants exercised 7(b) 31,265 146,347 (147,258 ) - - - (911 )
Other comprehensive loss - - - - 22,845 - 22,845
Net loss - - - - - (2,083,004 ) (2,083,004 )
Balance, December 31, 2025 1,993,626 $ 47,854,235 $ 8,438,192 $ 5,398,445 $ (62,232 ) $ (54,363,056 ) $ 7,265,584

See accompanying notes to the unaudited condensed consolidated interim financial statements.

DEFSEC TECHNOLOGIES INC.<br>Unaudited Condensed Consolidated Interim Statements of Cash Flows<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)
**** Three Months Ended
--- --- --- --- --- --- --- ---
Notes December 31,2025 December 31,<br>2024
OPERATING ACTIVITIES **** **** ****
Net loss $ (2,083,004 ) $ (3,457,015 )
Items not affecting cash:
Depreciation and amortization 5 177,269 314,491
Share-based compensation 7(c) - 51,055
Change in fair value of warrant liabilities (including <br>    related foreign exchange gain) 6 (94,726 ) (1,137,094 )
Net finance costs 11 37,294 62,059
Impairment of ROU asset - 88,596
Gain on debt settlement - (500 )
Unrealized foreign exchange loss (4,797 ) -
Changes in non-cash working capital items 13 (1,200,727 ) (957,235 )
Share offering costs - 1,807,686
Interest received (paid) 44,370 (16,260 )
Cash used in operating activities (3,124,321 ) (3,244,217 )
INVESTING ACTIVITIES ****
Additions of property and equipment (17,983 ) (25,220 )
Investments in intangible assets 5 - (26,675 )
Cash flows used in investing activities (17,983 ) (51,895 )
FINANCING ACTIVITIES ****
Proceeds from the issuance of common shares and warrants 6,7(a) 2,060,386 8,292,668
Payments of share offering costs 7(a) (535,451 ) (2,372,251 )
Payments of lease obligations (41,100 ) (34,483 )
Proceeds from exercise of warrants 7(b) (911 ) 7,606
Cash flows provided by financing activities 1,482,924 5,893,540
Net change in cash during the period **** (1,659,380 ) 2,597,428
Cash and cash equivalents, beginning of period **** 6,686,429 256,828
Effect of exchange rates on cash **** 10,375 -
Cash and cash equivalents, end of period $ 5,037,424 $ 2,854,256
Cash and cash equivalents consist of the following: **** ****
Cash held in banks $ 5,037,424 $ 2,824,256
Short-term guaranteed investment certificates - 30,000
Cash and cash equivalents, end of period $ 5,037,424 $ 2,854,256

See accompanying notes to the unaudited condensed consolidated interim financial statements.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

1. Corporate information

DEFSEC Technologies Inc. (the "Company", "DEFSEC") was incorporated on November 28, 2017, under the laws of the Province of British Columbia. The registered office is located at 550 Burrard Street, Suite 2900, Vancouver, British Columbia, Canada, and the corporate office is located at Suite 300, 80 Hines Rd., Ottawa, Ontario, Canada.

The Company develops and commercializes next-generation technology solutions that deliver a tactical advantage for military, public safety agencies and personal defense markets.  The Company's core mission is to protect and save lives.

DEFSEC's common stock is listed on the TSX-Venture Exchange ("TSX-V'') under the stock symbol of DFSC, on the Nasdaq Capital Market ("Nasdaq") under the stock symbol of DFSC and on the Frankfurt Stock Exchange under the stock symbol of 62U2. Additionally, warrants issued in the United States are also listed on the Nasdaq under the stock symbol of DFSCW. Effective May 1, 2023, the warrants issued in Canada are listed on the TSX-V under the stock symbol of DFSC.WT.U.

(a) 2025 Reverse Stock Split (applied retrospectively)

On April 23, 2025, on Nasdaq and on April 24, 2025, on the TSX-V, DEFSEC effected 21-for-1 reverse stock split of its common stock (the "2025 Reverse Split"). Accordingly, all shareholders of record at the opening of business on April 23, 2025, received one issued and outstanding common share of DEFSEC in exchange for twenty-one outstanding common shares of DEFSEC. No fractional shares were issued in connection with the 2025 Reverse Split. All fractional shares created by the 2025 Reverse Split were rounded to the nearest whole number of common shares, with any fractional interest representing 0.5 or more common shares entitling holders thereof to receive one whole common share.

Effective on the date of the 2025 Reverse Split, the exercise price and number of common shares issuable upon the exercise of outstanding stock options and warrants were proportionately adjusted to reflect the 2025 Reverse Split. All information respecting outstanding common shares, including net loss per share, in the current and comparative periods presented herein give effect to the 2025 Reverse Split.

(b) 2024 Reverse Stock Split (applied retrospectively)

In October 2024, DEFSEC effected a ten for one (10-for-1) reverse stock split of its common stock on October 23, 2024 (the "2024 Reverse Split"). Accordingly, all shareholders of record at the opening of business on October 23, 2024, received one issued and outstanding common shares of DEFSEC in exchange for ten outstanding common shares of DEFSEC. No fractional shares were issued in connection with the 2024 Reverse Split. All fractional shares created by the 2024 Reverse Split were rounded to the nearest whole number of common shares, with any fractional interest representing 0.5 or more common shares entitling holders thereof to receive one whole common share.

Effective on the date of the 2024 Reverse Split, the exercise price and number of common shares issuable upon the exercise of outstanding stock options and warrants were proportionately adjusted to reflect the 2024 Reverse Split. All information respecting outstanding common shares, including net loss per share, in the current and comparative periods presented herein give effect to the 2024 Reverse Split.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

2. Basis of preparation

(a) Going concern

These unaudited condensed consolidated interim financial statements have been prepared assuming we will continue as a going concern. The going concern basis of presentation assumes we will continue in operation for the foreseeable future and can realize our assets and discharge our liabilities and commitments in the normal course of business.

As an early-stage company, it has not yet reached significant revenue levels for most of its products and has incurred significant losses and negative operating cash flows from inception that have primarily been funded from financing activities.  The Company has incurred a $2.1 million net loss and negative operating cash flows of $3.1 million for the three months ended December 31, 2025 (2024 – $3.5 million net loss and negative operating cash flows of $3.2 million). At December 31, 2025, the Company had $5.8 million in working capital (September 30, 2025 – $6.0 million) and $54.4 million in accumulated deficit (September 30, 2025 – $52.3 million).

The Company's ability to continue as a going concern and realize its assets and discharge its liabilities in the normal course of business is dependent upon closing timely additional sales orders, timely commercial launch of new products, and the ability to raise additional debt or equity financing, when required. There are various risks and uncertainties affecting our future financial position and our performance including, but not limited to:

  • The market acceptance and rate of sales of the Company's product offerings;
  • The Company's ability to grow its digitization services business;
  • Ability to successfully execute the Company's business plan;
  • Ability to raise additional capital at acceptable terms;
  • General local and global economic conditions, including the ongoing conflict in Gaza and the global disruption from Russia's invasion of Ukraine; and
  • Risks related to United States tariffs, including potential supply chain disruptions, required operational adjustments, increased costs and potential logistical disruptions.

The Company's strategy to mitigate these material risks and uncertainties is to execute a business plan, in a timely manner, aimed at continued focus on revenue growth, product development and innovation, improving overall gross profit, managing operating expenses and working capital requirements, and securing additional capital, as needed.

Failure to implement its business plan could have a material adverse effect on the Company's financial condition and/or financial performance. There is no assurance that the Company will be able to raise additional capital as required in the future. Accordingly, there are material risks and uncertainties that may cast substantial doubt about the Company's ability to continue as a going concern.

These unaudited condensed consolidated interim financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities and reported expenses that may otherwise be required if the going concern basis was not appropriate.

(b) Statement of compliance

These unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, ("IAS 34") as issued by the International Accounting Standards Board ("IASB") and the interpretations of the IFRS Interpretations Committee.  They do not include all the information required for a complete set of financial statements prepared in accordance with IFRS^®^ Accounting Standards ("IFRS") and should be read in conjunction with our Annual Audited Consolidated Financial Statements for the year ended September 30, 2025 (the "Annual Financial Statements"). However, selected explanatory notes are included to explain events and transactions that are material to an understanding of the changes in our financial position and performance since the last Annual Financial Statements.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

These unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on February 12, 2026.

(c) Basis of consolidation

These unaudited condensed consolidated interim financial statements incorporate the financial statements of DEFSEC and the entities it controls.

Control is achieved where we have the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities, are exposed to, or have rights to, variable returns from our involvement with the entity and have the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to us until the date on which control ceases. Profit or loss of subsidiaries acquired during the period are recognized from the date of acquisition or effective date of disposal as applicable. All intercompany transactions and balances have been eliminated.

At December 31, 2025, the Company has the following wholly-owned subsidiaries:

Entity Location Functional<br>Currency Equity%
KWESST Inc. Ottawa, Canada CAD 100%
2720178 Ontario Inc. Ottawa, Canada CAD 100%
Police Ordnance Company Inc. Ottawa, Canada CAD 100%
KWESST U.S. Holdings Inc. Delaware, United States USD 100%
KWESST Defense Systems U.S. Inc North Carolina, United States USD 100%
KWESST Public Safety Systems U.S. Inc. North Carolina, United States USD 100%
KWESST Public Safety Systems Canada Inc. Ottawa, Canada CAD 100%

(d) Functional and presentation currency

The unaudited condensed consolidated interim financial statements are presented in Canadian dollars ("CAD"), which is the functional and presentation currency.

While each of the Company's subsidiaries has its own functional currency, the functional currency of the parent company, DEFSEC, is CAD as this is the currency of the primary economic environment in which the Company operates. Most of the revenues, cost of revenues and operating expenses from significant subsidiaries are denominated in CAD.  The Company's Canadian wholly owned subsidiaries are measured using CAD as the functional currency and its U.S. owned subsidiaries are measured using the United States dollar ("USD") as their functional currency.

(e) Basis of measurement

The unaudited condensed consolidated interim financial statements have been prepared on a historical cost basis except for certain financial instruments measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

(f) Use of estimates and judgments

The preparation of the unaudited condensed consolidated interim financial statements in accordance with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income, expenses, and disclosure of contingent liabilities.  Actual results may differ from these estimates.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

Judgments

Information about judgments made in applying accounting policies that have the most material effects on the amounts recognized in these unaudited condensed consolidated interim financial statements are the same as disclosed in Note 2(f) of the Annual Financial Statements.

Estimates

Information about assumptions and estimation uncertainties at December 31, 2025 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year are the same as disclosed in Note 2(f) of the Annual Financial Statements.

3. Material accounting policies

During the three months ended December 31, 2025, the accounting policies in these unaudited condensed consolidated interim financial statements are the same as those applied in the Annual Financial Statements.

4. Inventories

The following table presents a breakdown of inventories:

December 31,<br> 2025 September 30,<br>2025
Finished goods $ 57,030 $ 34,463
Work-in-progress 56,640 29,414
Raw materials 473,503 455,732
Total $ 587,173 $ 519,609

There was no impairment of inventories during the three months ended December 31, 2025 (2024 - $nil).

At December 31, 2025, a total of $0.1 million (2024 - $0.4 million) of inventory was included in profit or loss as an expense as part of cost of sales.

5. Intangible assets

The following table shows a breakdown of our intangible assets:

PARASHOT™System PARASHOT™<br>Patent ARWEN™<br>Tradename CustomerRelationships ARWEN™<br>40mmPatent Total
Balance at September 30, 2025 $ 2,286,277 $ 40,295 $ 10,632 $ 31,041 $ 21,785 $ 2,390,030
Amortization (73,355 ) (18,044 ) (2,200 ) (1,250 ) (1,334 ) (96,183 )
Balance at December 31, 2025 $ 2,212,922 $ 22,251 $ 8,432 $ 29,791 $ 20,451 $ 2,293,847

At December 31, 2025, management concluded there was no indication of impairment on the intangible assets.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

6. Warrant liabilities

The following table shows a breakdown and balance of warrant liabilities at December 31, 2025:

**** U.S IPO and CanadianOfferings Private Placement DebtSettlement DirectOffering PublicOffering ****
2022Warrants Over-allotmentWarrants 2023Warrants Pre-FundedWarrants Warrants Warrants Pre-FundedWarrants Total
Balance, at September 30, 2024 $ 65,765 $ 7,644 $ 60,373 $ 31,338 $ 1,145 $ 681,030 $ - $ 847,295
Initial recognition - - - - - - 4,770,722 4,770,722
Exercised - - - - - - (779,578 ) (779,578 )
Gain on revaluation of<br>  financial instruments 112,054 (7,644 ) (64,314 ) (29,959 ) 1,990 (699,473 ) (714,912 ) (1,402,258 )
Exchange loss on<br>  revaluation 2,289 - 3,941 90 - 44,696 25,693 76,709
Extinguish warrant<br>  liability/transfer to equity - - - - - - (3,301,925 ) (3,301,925 )
Balance, at September 30, 2025 $ 180,108 $ - $ - $ 1,469 $ 3,135 $ 26,253 $ - $ 210,965
Gain on revaluation of<br>  financial instruments (69,427 ) - - (1,446 ) (1,208 ) (19,387 ) - (91,468 )
Exchange gain on<br>  revaluation (2,782 ) - - (23 ) (48 ) (405 ) - (3,258 )
Balance, at December 31, 2025 $ 107,899 $ - $ - $ - $ 1,879 $ 6,461 $ - $ 116,239
Number of outstanding securities at September 30, 2025^(1)^ 3,226,392 - 1,542,194 151,734 56,141 4,715,000 - 9,691,461
Number of outstanding securities at December 31, 2025^(1)^ 3,226,392 - 1,542,194 151,734 56,141 4,715,000 - 9,691,461
^(1)^Number of outstanding securities have not been adjusted for the share consolidations discussed in Note 1 (a) and (b)
DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)
---

7. Share Capital and Contributed Surplus

As disclosed in Notes 1(a) and (b), the 2025 and 2024 Reverse Splits have been applied retrospectively herein.

(a) Share capital

Authorized

DEFSEC is authorized to issue an unlimited number of common shares.

Issued Common Shares

The following is a summary of changes in outstanding common shares since September 30, 2025:

Number Amount
Balance, beginning of period 1,396,321 $ 47,003,991
Issued in private placement 566,040 1,013,212
Issued for exercise of warrants 31,265 146,347
Less: share offering costs for the period - (309,315 )
Balance, as at December 31, 2025 1,993,626 $ 47,854,235

Private Placement (December 2025)

On December 18, 2025, the Company issued 566,040 common shares at an offering price of $3.64 (US$2.65), which included a concurrent issuance of warrants to purchase up to an aggregate of 566,040 common shares. The warrants have a five-year life with an exercise price of $4.27 per common share.  Gross proceeds from this transaction was $2.1 million.

The fair value of the December 2025 common share purchase warrants was calculated using the Black Scholes model, with the following assumptions:

Initial Recognition
Number of warrants 566,040
Stock price $ 2.59
Exercise price $ 4.27
Volatility 105%
Dividend yield Nil
Risk free interest rate 2.9%
Expected life (in years) 5
Fair value per warrant $ 1.85
Total Value of Warrants $ 1,047,174

Brokers' Compensation and Share Issuance Costs

In connection with the December 2025 Offering, the broker was paid a cash fee equal to 7.5% on the equity financing raised, which totaled $154,529.  In addition, broker management fees and other expenses totaled $75,547.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

As compensation for services rendered, the broker or its designees were granted 42,453 warrants ("December 2025 Broker Warrants").  The December 2025 Broker Warrants are immediately exercisable and entitle the holder to acquire common shares on a one-for-one basis. The December 2025 Broker Warrants have a five-year life with an exercise price of $4.55 per common share.

The fair value of the December 2025 Broker Warrants at the closing of the December 2025 offering was $77,689 calculated using the Black Scholes model.

The fair value of the December 2025 Broker warrants was calculated using the Black Scholes model, with the following assumptions:

Initial Recognition
Number of warrants 42,453
Stock price $ 2.59
Exercise price $ 4.55
Volatility 105%
Dividend yield Nil
Risk free rate 2.90%
Expected life (in years) 5
Fair value per warrant $ 1.83
Total Value of Warrants $ 77,689

(b) Warrants

The following is a summary of changes in outstanding warrants since September 30, 2025:

Number of warrants Weighted averageexercise price
Balance, beginning of period 20,207,007 $ 2.45
Issued (Note 7(a)) 608,493 4.29
Exercised (31,265 ) 0.001
Expired - -
Balance, end of period 20,784,235 $ 2.49
Exercisable, end of period 20,784,235 $ 2.49
DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)
---

The following table provides additional information on the total outstanding warrants at December 31, 2025:

**** Exercise<br> Price Numberoutstanding Conversionratio toCommonShares UnderlyingSecurities Book value Expiry Date
Classified as Equity: ****
LEC's Warrants CAD$0.70 500,000 14,700 for 1 34 $ 425,000 April 29, 2026
December 2022 U.S. Underwriter Warrants US$5.1625 134,950 210 for 1 642 189,592 December 9, 2027
July 2023 U.S. Underwriter Warrants US$2.66 123,637 210 for 1 588 204,187 July 21, 2028
April 2024 U.S. Underwriter Warrants US$0.8125 76,925 210 for 1 366 43,869 April 9, 2029
June 2024 U.S. Underwriter Warrants US$0.725 145,000 210 for 1 690 61,213 June 14, 2029
August 2024 U.S. Underwriter Warrants US$0.25 353,625 210 for 1 1,683 28,826 August 9, 2029
November 2024 U.S. Underwriter Warrants US$1.125 194,450 21 for 1 9,259 187,468 November 1, 2029
November 2024 Private Placement Warrants US$1.03 3,795,200 21 for 1 180,723 2,903,328 November 11, 2029
November 2024 PP Underwriter Warrants US$1.03 207,260 21 for 1 9,869 158,554 November 11, 2029
February 21, 2025 PP Warrants CAD$1.16 3,787,879 21 for 1 180,375 2,196,970 February 21, 2030
February 21, 2025 PP Underwriter Warrants CAD$1.16 189,394 21 for 1 9,018 109,991 February 21, 2030
February 25, 2025 PP Warrants CAD$1.16 151,515 21 for 1 7,215 83,939 February 25, 2030
February 25, 2025 PP Underwriter Warrants CAD$1.16 7,576 21 for 1 360 4,197 February 25, 2030
July 2025 Public Offering Warrants CAD$10.52 759,879 1 for 1 759,879 3,011,466 July 25, 2030
July 2025 Broker Warrants CAD$10.52 56,991 1 for 1 56,991 451,255 July 25, 2030
December 2025 Private Placement Warrants CAD$4.27 566,040 1 for 1 566,040 1,047,174 December 18, 2030
December 2025 Broker Warrants CAD$4.55 42,453 1 for 1 42,453 77,689 December 18, 2030
November 2024 Issuance Costs (868,653 )
February 2025 Issuance Costs (803,109 )
July 2025 Issuance Costs (770,939 )
December 2025 Issuance Costs (303,825 )
11,092,774 1,826,185 $ 8,438,192
Classified as liability:
December 2022 Public Offerings US$5.00 3,226,392 210 for 1 15,363 107,899 December 9, 2027
December 2022 Debt Settlement US$5.00 56,141 210 for 1 267 1,879 December 9, 2027
July 2023 Public Offerings US$2.66 1,542,194 210 for 1 7,343 - July 21, 2028
July 2023 Pre-Funded Warrants US$0.001 151,734 210 for 1 722 - No expiry
August 2024 Public Offering US$0.25 4,715,000 210 for 1 22,452 6,461 August 9, 2029
9,691,461 46,147 116,239
Total outstanding warrants **** 20,784,235 **** 1,872,332 $ 8,554,431 ****

(c) Contributed surplus

Contributed surplus consists of options issued to employees, directors and broker compensation options at fair value, the cumulative amortized fair value of share-based compensation grants since inception, less amounts transferred to share capital for exercises. If outstanding options expire or are forfeited, there is no reversal of contributed surplus.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

Share-based compensation

The Company did not grant any stock options, RSUs, PSUs, and SARs, pursuant to our LTIP during the three months ended December 31, 2025. As at December 31, 2025, there are 141,854 stock option units available for future grants.

Number of options Weightedaverage exerciseprice
Outstanding, at September 30, 2025 995 $ 555.42
Forfeited (91 ) 627.58
Outstanding, at December 31, 2025 904 $ 548.18
Options Exercisable, at December 31, 2025 904 $ 548.18

For the three months ended December 31, 2025, the Company recorded share-based compensation of $nil (2024 - $51,055).

8. Loss per share

As disclosed in Note 1(a) and (b), the 2025 and 2024 Reverse Splits has been applied retrospectively.

The following table summarizes the calculation of the weighted average number of basic and diluted common shares to calculate the loss per share as reported in the unaudited condensed consolidated interim statements of net loss and comprehensive loss:

Three months ended
December 31,2025 December 31,2024
Issued common shares, beginning of period 1,396,321 75,200
Effect of shares issued from:
Debt settlements - 3,081
Private Placements 79,984 -
Public Offerings - 2,484
Exercise of warrants 20,730 63,629
Weighted average number of basic common shares 1,497,035 144,394
Dilutive securities
Stock options - -
Warrants - -
Weighted average number of dilutive common shares 1,497,035 144,394

At December 31, 2025 and 2024, all dilutive securities, being warrants, pre-funded warrants and stock options, were anti-dilutive because we incurred a net loss for the above periods.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

9. Revenue

a) Revenue streams

DEFSEC generates revenue from the sale of products and services to its customers.

b) Disaggregation of revenue from contracts with customers

In the following table, revenue from contracts with customers is disaggregated by primary geographical market, major products and service lines, and timing of revenue recognition.

Three months ended
December 31,2025 December 31,<br>2024
Major products/service lines ****
Digitization $ 1,247,476 $ 718,983
Less-Lethal 41,760 167,748
Training and services 18,500 -
Other - 927
**** $ 1,307,736 $ 887,658
Primary geographic market
Canada $ 1,307,736 $ 849,288
United States - 38,370
**** $ 1,307,736 $ 887,658
Timing of revenue recognition
Products and services transferred over time 1,265,976 718,983
Products transferred at a point in time 41,760 168,675
**** $ 1,307,736 $ 887,658

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized ("contracted not yet recognized") and includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. At December 31, 2025, the Company's contracted not yet recognized revenue was $29,425 (September 30, 2025 - $7,671), of which 100% of this amount is expected to be recognized over the next 12 months.

For the three months ended December 31, 2025, two customers accounted for 73% and 22% (2024 - three customers accounted for 59%, 11%, and 11%) of revenue.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

10. Related party transactions

At December 31, 2025, there was $17,194 (September 30, 2025 - $791,946) outstanding in accounts payable and accrued liabilities due to officers and directors for accrued wages and vacation, consulting fees, directors' fees and expense reimbursements.

11. Net finance costs

The following table presents a breakdown of net finance costs for the following periods:

Three months ended
December 31,2025 December 31,<br>2024
Interest expense from: ****
Accretion cost - accrued royalties liability $ 44,442 $ 45,517
Lease obligations 37,222 14,041
Other 193 4,305
Total interest expense 81,857 63,863
Interest income (44,563 ) (2,304 )
Gain on debt settlement - 500
Net finance costs $ 37,294 $ 62,059

12. Financial instruments

For the three months ended December 31, 2025, there were no material changes to our financial risks as disclosed in Note 22 of the Annual Financial Statements, except for the following:

Foreign currency risk

A portion of the Company's revenue and operating costs are realized in currencies other than its functional currency, primarily USD.  The Company has entered into financing transactions in the past that were denominated in USD or allowed for the settlement in USD.  As a result, the Company is exposed to currency risk on these transactions.  Further, additional earnings volatility arises from the translation of monetary assets and liabilities denominated in foreign currencies at the rate of exchange on each date of the Condensed Consolidated Interim Statements of Financial Position; the impact of which is reported as a foreign exchange gain or loss on the Condensed Consolidated Interim Statements of Net Loss and Comprehensive Loss.  The Company's objective in managing currency risk is to minimize the exposure to currencies other than our functional currency. The Company does so by matching foreign denominated assets with foreign denominated liabilities where possible. Currently, we do not use derivative instruments to hedge the U.S. dollar exposure.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

At December 31, 2025, we had the following net U.S. dollar exposure:

December 31,2025 September 30,<br>2025
US denominated
Assets $ 3,620,273 $ 4,627,168
Liabilities (232,992 ) (218,577 )
Net US$ exposure $ 3,387,281 $ 4,408,591
Impact to loss if 5% movement in US$ $ 169,364 $ 220,430

During the three months ended December 31, 2025, we recorded a foreign exchange loss of $73,252 (2024 – gain of $113,283).

Liquidity risk

At December 31, 2025, our contractual obligations were as follows:

Payment due: Total Within 1year 1 to 3 years 3 to 5 years 5 years andbeyond
Minimum royalty commitments $ 2,000,000 $ 200,000 $ 500,000 $ 600,000 $ 700,000
Accounts payable and accrued liabilities 1,314,952 1,314,952 - - -
Lease obligations 2,209,119 184,839 407,420 407,420 1,209,440
Total contractual obligations $ 5,524,071 $ 1,699,791 $ 907,420 $ 1,007,420 $ 1,909,440

At December 31, 2025, we had $5.0 million in cash and $5.8 million in working capital (current assets less current liabilities).

Credit risk

Credit risk is the risk of financial loss to DEFSEC if a counterparty to a financial instrument fails to meet its contractual obligations.  The Company's credit risk exposure is limited to cash, and trade and other receivables. The Company enter into contracts with either large, financially sound global general contractors or law enforcement agencies, which mitigates the credit risk.

DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

13. Supplemental cash flow information

The following table presents changes in non-cash working capital:

Three months ended
December 31,2025 December 31,<br>2024
Trade and other receivables $ 356,915 $ (472,059 )
Inventories (67,564 ) 3,385
Prepaid expenses and other (494,746 ) 38,950
Deferred costs (39,316 ) (45,525 )
Accounts payable and accrued liabilities (977,770 ) (454,401 )
Contract liabilities 21,754 (27,585 )
$ (1,200,727 ) $ (957,235 )

The following is a summary of non-cash items that were excluded from the Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2025:

  • 42,453 December 2025 Broker warrants (see Note 7(a))

The following is a summary of non-cash items that were excluded from the Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2024:

  • 119,047 shares issued for debt settlement of business expenses incurred while representing the Company in an aggregate amount of $100,000 owed to a company controlled by Mr. David Luxton, Chairman of the Company;
  • $187,468 non-cash share offering costs as part of the net proceeds settlement at the closing of the November 1, 2024 U.S. Public Offering;
  • $221,088 non-cash share offering costs as part of the net proceeds settlement at the closing of the November 12, 2024 Private Placement; and
  • 20,000 warrants in connection with the acquisition of Police Ordnance Company expired December 15, 2024.
DEFSEC TECHNOLOGIES INC.<br>Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three months ended December 31, 2025 and 2024<br>(Expressed in Canadian dollars)

14. Commitments and contingencies

The Company, under its LC4ISR Sub-Tier Subcontract, shall meet certain Industrial and Technological Benefits (“ITBs”) targets as a condition for fulfilling the obligations in the contract. Such requirements are part of Canada’s effort to promote economic development and increased competitiveness of the defence sector and develop, grow and sustain a diverse, talented, and innovative Canadian workforce. Under the obligations, DEFSEC will spend 100% of the contract-value as Supplier Development in Canada, specifically involving Small and Medium Business (employing fewer than 250 full-time personnel), and spend 20% of the contract value as transactions involving Skills Development and Training in the areas of Defence Systems Integration, Artificial Intelligence, Cyber Resilience, or In-Service Support. As all work under the contract is being executed in Canada by DEFSEC, 100% of the Small and Medium Business requirement is expected to be met. Achievement of the Company’s Skills Development and Training requirement is expected to be met by transactions related to Senior Integrated Logistics Support Specialist (“ILS”) related roles filled under its taskings, as these have been deemed by Canada to be eligible, and DEFSEC currently has four (4) such roles of its total 20 under current taskings.  While these roles are expected to fulfill the Company’s obligations over the achievement period, any penalty by way of liquidated damages, is limited in its financial impact to a maximum of 20% of the shortfall (up to 4% of total contract value). Further mitigating any potential shortfall is the ability to achieve a five (5) times multiplier for any contribution to Skills Development and Training for Indigenous Peoples or majority Indigenous-controlled educational or training facilities.  Based on the billings to date, the Company may have an ITB obligation of $316,000 with a maximum penalty of $63,000.  Management believes it will meet the required targets within the specified timeframes.  Accordingly, no liability has been recorded in these consolidated financial statements related to this commitment.

15. Change in presentation and comparative figures

Certain comparative figures on the unaudited condensed consolidated interim statements of net loss and comprehensive loss have been reclassified to conform to the current period presentation. These reclassifications have no effect on net loss or shareholders’ equity as previously reported. An adjustment has been made to reduce the general and administrative, selling and marketing and research and development to break out the share-based compensation and depreciation and amortization and impairment of right-of-use assets.

The following is a reconciliation of the change to the three-month period ended December 31, 2024, results:

Previously<br>Disclosed Adjustment Revised<br>Disclosure
General and administrative $ 1,948,036 $ (436,592 ) $ 1,511,444
Selling and marketing 684,713 (2,166 ) 682,547
Research and development, net 687,959 (15,384 ) 672,575
Share-based compensation – 51,055 51,055
Depreciation and amortization – 314,491 314,491
Total operating expenses $ 3,320,708 $ (88,596 ) $ 3,232,112
Impairment of right-of-use assets $ – $ 88,596 $ 88,596 
DEFSEC Technologies Inc.: Exhibit 99.2 - Filed by newsfilecorp.com

DEFSEC TECHNOLOGIES INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

Three months ended December 31, 2025

(Expressed in Canadian Dollars)

DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025

All references in this management's discussion and analysis (the "MD&A") to "DEFSEC", "we", "us", "our", and the "Company" refer to DEFSEC Technologies Inc. and its subsidiaries as at December 31, 2025. This MD&A has been prepared with an effective date of February 12, 2026.

This MD&A should be read in conjunction with our unaudited condensed consolidated interim financial statements for the three months ended December 31, 2025 ("Q1 Fiscal 2026 FS") and the annual audited consolidated financial statements and related notes for the year ended September 30, 2025 ("Fiscal 2025 FS"). The financial information presented in this MD&A is derived from these unaudited condensed consolidated interim financial statements prepared in accordance with IFRS^®^ Accounting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). This MD&A contains forward-looking statements that involves risk, uncertainties and assumptions, including statements regarding anticipated developments in future financial periods and our future plans and objectives. There can be no assurance that such information will prove to be accurate, and readers are cautioned not to place undue reliance on such forward-looking statements. See "Forward-Looking Statements".

All references to "$" or "dollar" amounts in this MD&A are to Canadian currency unless otherwise indicated.

Additional information, including press releases, relating to DEFSEC is available to view on SEDAR+ at http://www.sedarplus.ca/ and EDGAR (https://www.sec.gov).

NON-IFRS MEASURES

In this MD&A, we have presented earnings before interest, taxes, depreciation and amortization ("EBITDA") and EBITDA that has been adjusted for the removal of share-based compensation, foreign exchange loss (gain), change in fair value of derivative liabilities, and any one-time, irregular and nonrecurring items ("Adjusted EBITDA") to provide readers with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures.

Management also references "program billings on an annualized go-forward basis" and "annualized gross margin contribution" which refers to programmatic revenue and gross margin based on the roles staffed for a full year at the program billing rate. Management believes these are useful measures because it reflects management's estimate of annualized revenues and gross margin contributions based on current contractual taskings as of the date referenced.  The most directly comparable financial measure that is disclosed in the financial statements of the Company to which the non-IFRS measure relates is revenue and gross margin respectively.

Management uses non-IFRS measures, in addition to IFRS financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, and to evaluate our financial performance. We believe that these non-IFRS financial measures enable us to identify underlying trends in our business that could otherwise be hidden by the effect of certain expenses that we exclude in the calculations of the non-IFRS financial measures.

Accordingly, we believe that these non-IFRS financial measures reflect our ongoing business in a manner that allows for meaningful comparisons and analysis in the business and provides useful information to investors and securities analysts, and other interested parties in understanding and evaluating our operating results, enhancing their overall understanding of our past performance and future prospects.

We caution readers that these non-IFRS financial measures do not replace the presentation of our IFRS financial results and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with IFRS. There are limitations in the use of non-IFRS measures because they do not include all the expenses that must be included under IFRS as well as they involve the exercise of judgment concerning exclusions of items from the comparable non-IFRS financial measure. Furthermore, other peers may use other non-IFRS measures to evaluate their performance, or may calculate non-IFRS measures differently, all of which could reduce the usefulness of our non-IFRS financial measures as tools for comparison.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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GOING CONCERN

As an early-stage company, we have not yet reached significant revenue levels for most of our products and services and have incurred significant losses and negative operating cash flows from inception that have primarily been funded from financing activities.  DEFSEC’s unaudited condensed consolidated interim financial statements for Q1 Fiscal 2026 have been prepared on the “going concern” basis which presumes that DEFSEC will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.  Our ability to continue as a going concern and realize our assets and discharge our liabilities in the normal course of business is dependent upon closing timely additional sales orders, timely commercial launch of new products, and the ability to raise additional debt or equity financing, when required. There are various risks and uncertainties affecting our future financial position and our performance.  Accordingly, there are material risks and uncertainties that may cast substantial doubt about our ability to continue as a going concern.  Refer to Note 2(a) of the Q1 Fiscal 2026 FS for further information.

TRADEMARKS

We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This MD&A also contains additional trademarks, trade names and service marks belonging to other companies. Solely for convenience, trademarks, trade names and service marks referred to in this MD&A may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties' trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

FORWARD-LOOKING STATEMENTS

Certain statements in this document constitute "forward-looking statements" and "forward-looking information" within the meaning of applicable Canadian and United States securities laws (together, "forward-looking statements"). Such forward-looking statements include, but are not limited to, information with respect to our objectives and our strategies to achieve these objectives, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. These forward-looking statements may be identified by the use of terms and phrases such as "may", "would", "should", "could", "expect", "intend", "estimate", "anticipate", "plan", "foresee", "believe", or "continue", the negative of these terms and similar terminology, including references to assumptions, although not all forward-looking statements contain these terms and phrases. Forward-looking statements are provided for the purposes of assisting the reader in understanding us, our business, operations, prospects and risks at a point in time in the context of historical and possible future developments and therefore the reader is cautioned that such information may not be appropriate for other purposes.

Forward-looking statements relating to us include, among other things, statements relating to:

• our expectations regarding our business, financial condition and results of operations;

• the future state of the legislative and regulatory regimes, both domestic and foreign, in which we conduct business and/or may conduct business in the future;

• our expansion into domestic and international markets;

• our ability to attract customers and clients;

• our relationships with suppliers and the terms of our arrangements with them;

• our marketing and business plans and short-term objectives;

• our ability to obtain and retain the licenses and personnel we require to undertake our business;

• our ability to deliver under contracts with customers;

• anticipated revenue and related margin from professional service contracts with customers and related growth rates;

• our strategic or other important relationships with third parties;

• our anticipated trends and challenges in the markets in which we operate;

• governance of us as a public company;

• expectations regarding future developments of products and our ability to bring these products to market; and

• Achievement of milestones for various product development initiatives.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Forward-looking statements are based upon a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the following risk factors, some of which are discussed in greater detail under the section "Risk Factors" in our 20-F dated December 29, 2025:

• limited operating history;

• failure to realize our growth strategy;

• failure to complete transactions or realize anticipated benefits;

• reliance on key personnel;

• regulatory compliance;

• competition;

• changes in policy, laws, regulations, practices and guidelines;

• demand for our products and services;

• fluctuating prices of raw materials, and third party-labour rates;

• pricing for products and services;

• ability to supply sufficient product and services;

• potential cancellation or loss of customer contracts if we are unable to meet contract performance requirements;

• potential cancellation or loss of customer contracts due to changes in customer requirements or other reasons;

• expansion to other jurisdictions;

• cost and complexity of sales or operations due to expansion to international markets;

• cost of redesign and retooling as a result of regulatory requirements or change;

• damage to our reputation;

• operating risk and insurance coverage;

• negative operating cash flows;

• management of growth and change;

• product liability or contractual liability to third parties including contingent liability;

• product recalls and warranty claims;

• environmental policy, regulations, compliance and related risks;

• ownership, use, protection and enforcement of intellectual property rights;

• shutdown or impairment of access to United States' government deployed geospatial software suite for real-time situational awareness (TAK) impairing deployment and operation of certain of our products and services;

• constraints on marketing products and services;

• reliance on management and key personnel;

• fraudulent or illegal activity by our employees, suppliers, contractors and/or consultants;

• breaches of security at our facilities or in respect of electronic documents and data storage and risks related to breaches of applicable security and privacy laws;

• government regulations regarding public or employee health and safety regulations, including public health measures in the event of pandemics or epidemics;

• safety and security of personnel working within our facilities or at third party sites;

• regulatory or agency proceedings, investigations and/or audits;

• additional capital requirements to support our operations and growth plans, leading to further dilution to shareholders;

• the terms and timing of additional capital raises;

• conflicts of interest;

• litigation and disputes;

• risks relating to Canadian policy impacting our operations, business or prospects;

• risks related to United States' policy and other international activities, including regional conflicts that may impact our operations;

• risks related to security clearances and controlled goods registrations and compliance;

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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• risks relating to the ownership, trading or transfer of our securities, such as potential extreme volatility in the price of, or market for, our securities;

• risks related to our U.S. foreign private issuer status;

• risks related to our emerging growth company status;

• risks related to meeting the continued listing requirements of the Nasdaq Capital Market ("Nasdaq") and the TSX Venture Exchange ("TSXV");

• risks related to the liquidity of the Common Shares of the Company (the "Common Shares");

• significant changes or developments in Canadian or United States trade policies and tariffs that may have a material adverse effect on our business and financial statements;

• risks related to Canadian and United States tariffs and trade agreements, including potential supply chain disruptions, required operational adjustments, increased complexity and costs and potential logistical disruptions;

• risks related specifically to United States tariffs on aluminum and steel;

• risks relating to prolonged United States' government shutdowns; and

• risks related to retaliatory tariffs imposed by Canada's government affecting potential foreign sales.

Although the forward-looking statements contained herein are based upon what we believe are reasonable assumptions, investors are cautioned against placing undue reliance on this information since actual results may vary from the forward-looking statements. Certain assumptions were made in preparing the forward-looking statements concerning availability of capital resources, business performance, market and regulatory conditions, supplies' availability and customer demand.

Consequently, all of the forward-looking statements contained herein are qualified by the foregoing cautionary statements, and there can be no guarantee that the results or developments that we anticipate will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business, financial condition or results of operation. Unless otherwise noted or the context otherwise indicates, the forward-looking statements contained herein are provided as of the date hereof, and we do not undertake to update or amend such forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable law.

BUSINESS OVERVIEW

DEFSEC is an early-stage technology company that develops and commercializes next-generation tactical systems and services for military and security forces and public safety markets.

Our product development has focused on three niche market segments as follows:

Our services development has focused on the delivery of subcontracted software programming and innovation engineering services for Canadian military programs.

Our core mission is to protect and save lives. We group our offerings into Military and Public Safety missions.

DEFSEC's Public Safety offerings are comprised of:

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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  • DEFSEC Lightning^TM^:  A cloud-hosted software that enables rapid incident responses with instant onboarding for inter-agency collaboration and real-time encrypted communication (text, voice, photo/video). It leverages the Company's military digitization technology experience to provide responders to any type of incident with instant onboarding to the mission and TAK-enabled real-time situational awareness software as a service ("SaaS").  "TAK-enabled" refers to integration with the Team Awareness Kit ("TAK") which is a United States government developed geospatial web-enabled suite providing real-time situational awareness for military, security and public safety teams.  The Lightning^TM^cloud-based platform includes TAK, as well as:
    • Proprietary plug-in tools relevant to law enforcement, including ground search and rescue tools (“GSAR”), TAK enabled sniper and surveillance tools (“TSAS”);
    • Native Cloud-based Microsoft environment (MS Azure) with Team Awareness Kit (“TAK”);
    • Seamless INTEGRATION and FUSION of crucial real-time position location, imagery, and targeted time-sensitive emergency services data and information for effective and coordinated delivery of emergency services;
    • Opt-in geo-fencing to ensure privacy for all users; and
    • Supports stakeholders from Emergency Operations Centers (“EOC”), Incident Command Post (ICP), Incident Commanders, and all first responders whether mobile or dismounted.

The Company is presently pursuing trials and pilots of the product as it continues development towards the full commercial release that is currently expected in Fiscal 2026. One Canadian police agency has subscribed ahead of full release and other agencies are undertaking their internal business case evaluation process which is expected to continue until later in the second quarter of Fiscal 2026.

  • Less-Lethal Munitions Systems: DEFSEC proprietary less-lethal munitions systems including launchers and various payloads to bring dangerous incidents to a safe conclusion.

  • PARA SHOT^TM^, a next-generation system designed to be less-lethal.

  • ARWEN^®^ 37mm system, plus a new 40mm munition and new marking cartridges in 37mm and 40mm for realistic scenario training leveraging the PARA SHOT^TM^ Low Energy Cartridge ("LEC") technology.

DEFSEC's Military offerings are comprised of:

  • Digitization services to enhance mission readiness and situational awareness for military forces including through task-order based software solutions;

  • Tactical Advanced System For Command And Control (“TASCS”), Indirect Fire Modules System ("TASCS IFM") and TASCS Networked Observation and Reconnaissance System ("TASCS NORS").  These are specialized, digitized and modular technology designed to enhance the effectiveness of indirect fire weapons such as mortars and rocket launchers.  These systems allow for enhanced precision, situational awareness and digitization of less intelligent legacy systems;

  • TAK-enabled Sniper and Surveillance (“T-SAS^TM^”) solution enabling real-time situational awareness for tactical operators engaged in fast-paced front-line operations;

  • Lightning SaaS as described above has a dual for not only the public safety market but for military customers that use TAK, particularly the Canadian and United States militaries;

  • Battlefield Laser Detection System ("BLDS") providing real-time alerts on presence, location and type of laser threats, and enabling future capabilities such as automated threat classification and coordinated response will support both a vehicle-mounted and personnel-worn applications; and

  • Phantom^TM^ Tactical Multi-Function Electro-Magnetic Spectrum Operations (EMSO) system and Electronic Warfare device.  Development and patent applications have been paused as we determine the best method to bring this product to market.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Strategy

Our strategy is to pursue and win large task-order based software development and digitization defense contracts for multi-year revenue visibility with prime defense contractors, with a particular focus on ATAK applications that can also be leveraged to address similar requirements in the Public Safety Market.  In the Public Safety market, these efforts are complemented by activities relating to our proprietary ARWEN^®^ and PARA SHOT^TM^ less-lethal products, where it is possible to drive related sales with combined selling efforts and where the sales cycle is typically shorter than the more programmatic defense market.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Principal Products and Services

The following is a summary of our main product and service categories for each business line:

Less-Lethal Digitization Counter-Threat
PARA SHOT^TM^ products:<br><br> <br>Non-reciprocating devices:<br><ul type="disc"><br> <li>A single-shot device</li><br> <li>A five-shot device</li><br> <li>12-gauge shotgun <i>(planning stage; not yet industrialized)</i></li><br> </ul><br> <br>Reciprocating devices<br><br> <br>(Planning stage, not yet commercially available)<br><ul type="disc"><br> <li>Replica pistol</li><br> </ul><ul type="disc"><br> <li>AR style rifle</li><br> </ul><br> <br>Cartridge<br><ul type="disc"><br> <li>Blunt / training</li><br> </ul><ul type="disc"><br> <li>Inert marking powder</li><br> <li>Irritant powder</li><br> </ul><br> <br>ARWEN^®^ products:<br><ul type="disc"><br> <li>Single shot 37mm launcher</li><br> <li>Multi-round 37mm launcher</li><br> <li>Baton blunt impact 37mm, and 40mm <i>(final stages of commercialization)</i></li><br> <li>37mm chemical, irritant, and barricade-penetrating rounds</li><br> <li>PARA SHOT<sup>TM</sup> training adapter for ARWEN Platform <i>(in final stages of commercialization)</i></li><br> </ul> Products:<br><ul type="disc"><br> <li>TASCS Indirect Fire</li><br> </ul><br> <br>Modules System<br><br> <br>("TASCS IFM")<br><ul type="disc"><br> <li>TASCS Networked</li><br> </ul><br> <br>Observation and<br><br> <br>Reconnaissance System<br><br> <br>("TASCS NORS")<br><ul type="disc"><br> <li>New T-SAS Tactical</li><br> </ul><br> <br>Surveillance and Sniper<br><br> <br>system ("T-SAS™")<br><br> <br>Services:<br><ul type="disc"><br> <li>ATAK Centre of Excellence</li><br> <li>Lightning SaaS for Critical Incident Management System ("CIMS") <i>(not yet commercially available)</i></li><br> <li>Task-order based software services on long-term government defence contracts</li><br> </ul> Products:<br><ul type="disc"><br> <li>Battlefield Laser</li><br> </ul><br> <br>Detection Systems<br><br> <br>("BLDS")<br><ul type="disc"><br> <li>Phantom<sup>TM</sup> Electronic Warfare device</li><br> </ul>

Less-Lethal Products

Non-reciprocating PARA SHOT^TM^ devices

We are in the low-rate initial production (“LRIP”) phase for the .67 caliber single shot devices and cartridges. We expect to complete our sales, marketing and distribution plan and will begin the higher volume production phase for these products during Fiscal 2026. Both will be offered first to the professional user market (public safety and security) where demonstrations and evaluations are underway.  We also intend to offer these devices and cartridges to the personal safety market in accordance with applicable rules and regulations.  In the United States this entails classification with the Bureau of Alcohol, Tobacco and Firearms (“ATF”).  If the launchers are classified as a firearm, it is possible that a reduction in the caliber may be required in order to obtain the appropriate classification (as not a “destructive device” i.e. under .50 caliber) to reduce the barriers to sell to the personal safety market.  This would also require testing and evaluation to determine whether a reduced caliber version would operate effectively as intended. The Company has not yet done such testing.  This would entail moderate investment in tooling to resize the launchers and cartridges accordingly. The Company has already completed prototypes in .49 caliber should they be required.  In June 2025 we submitted for a ruling, with the initial ruling being returned to us in November 2025.  The ATF did not rule on destructive device classification.  The Company will continue to seek clarity on this.  In the meantime, we continue to self-classify it as a destructive device until otherwise advised on the classification with the ATF.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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We plan to offer three types of payloads for projectiles based on customer needs:

  • solid slug for training practice;
  • inert colored powder for practice or realistic close quarters combat simulation; and
  • incapacitating irritant pepper powder for operational use.

Reciprocating PARA SHOT^TM^ devices

We have a plan to prototype PARA SHOT^TM^ as a high-capacity automatic pistol and carbine (referred to as reciprocating devices) for less-lethal operations and force-on-force training, along with a reciprocating PARA SHOT^TM^ cartridge. The start of this project has yet to be determined as we have prioritized the roll-out of PARA SHOT^TM^ for the personal safety market.

See below for further details of our projected product development cycle and estimated additional investment to reach full commercialization for our PARA SHOT^TM^ devices.

ARWEN^®^ launchers

We are currently selling the following ARWEN^®^ products and related ammunition to law enforcement agencies:

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Digitization

For the Digitization business line, our products and services share the same core technology platforms and leverage our domain knowledge, proprietary sensor-software integration, proprietary algorithms and electronic circuity expertise in order to develop and deliver integrated shared situational awareness solutions to our clients who operate in the primarily dismounted domain (i.e., away from supporting platforms such as aircraft and vehicles, including armored vehicles):

  • ATAK is a United States government owned situational awareness software application that is hosted on Android end user devices. Based on our observation, ATAK is becoming the de facto standard in the United States, Canada, and some other North Atlantic Treaty Organization (“NATO”) countries for software based situational awareness and as a command and control battle management application in the dismounted domain. While the base software is United States Government owned and is available at no cost, being able to develop specific plug-ins and secure tactical networks is beyond the capacity of most user organizations. We have the experience and expertise to offer ATAK integration and networking services to prospective clients.
  • After successfully developing digital technologies for tactical military applications which provide real-time exchange of situational awareness, navigation, imagery, and operational information for soldiers on the ground, we saw opportunities to apply these digitization solutions to the public safety market. These solutions solve critical challenges for law enforcement, fire, emergency response, search and rescue, and natural disaster management, all of whom require networked situational awareness in real time to understand, decide, and act faster and more effectively in response to a critical incident. When responders are facing a public emergency, they need information quickly. Whether it is a wildfire, active shooter scenario or a natural disaster, they need to know what they're walking into and where their resources are located. They also need to communicate and collaborate in real-time - across teams and information sources and often across departments.
  • Based on experience gained from our work in the civilian public safety market with our CIMS concept for enhanced public safety, DEFSEC is working to bring its DEFSEC Lightning™ SaaS platform announced in October 2023 to full market release in early 2026.
  • DSEF (Directorate Land Command Systems Program Management Software Engineering Facility) program and Land C4ISR (Land Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance) programs are a series of task-order based long-term contracts to modernize the Canadian Army's capabilities.  The DSEF contract is a 5-year contract with a joint venture to which DEFSEC is a party.  DEFSEC is a subcontractor to Thales Canada who is major contractor on the Land C4ISR contract.  The Company would increase staffing, and related revenue, if future taskings are received.
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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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The following table provides an update of our current product development cycle by product line and estimated timeline by quarter to reach production:

Notes:

(1) Prototype Version 1 (V1) and Version 2 (V2), integration, and testing have been completed. Next Generation BLDS prototyping is ongoing with units available for qualification and customer trials.

(2) Includes field testing, prototype V2, and Next Generation (SPOC8) BLDS Prototype.

(3) "Low-Rate Initial Production". Includes final product development, LRIP, and sales demonstration units. A product is not ready for pre-production until it reaches Technology Readiness Level (TRL) of 5 to 6. Version 2 has been delivered to the customer for integration under this phase, SPOC 4 prototypes have been delivered to a North American customer for range-trials, Next Generation (SPOC8) prototypes have been integrated and are undergoing testing and demonstration at DEFSEC.

(4) Awaiting customer validation and follow-on orders.

(5) Includes the cartridges for the devices.  Low rate initial production timeline extended by one to two quarters in order to include product refinements. Higher volume production anticipated timelines could be longer if modifications are required as a result of the ATF confirmation of classification to reduce barriers to sales to the civilian personal safety market.

We consider a product to have reached the commercialization phase when we have begun LRIP and we have a sales, marketing, and distribution plan for the product.  Commercialization may precede a first sale of the product.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Major Highlights - Quarter ended December 31, 2025 ("Q1 Fiscal 2026")

The following is a summary of the major highlights that occurred during Q1 Fiscal 2026:

  • On October 29, 2025, the Company announced it was attending and presenting at The ThinkEquity Conference in New York City on Thursday October 30, 2025.  The Company also announced that program billings on an annualized go-forward basis from its government services business would represent approximately CAD$5.1M^1^, a 394% increase from actual Fiscal 2024 billings of CAD$1.0M^2^, with margins consistent to those presented in the Q3 2025 financial statements.

  • On December 5, 2025, the Company announced a significant increase in its government services business, with program billings on an annualized go-forward basis expected to rise to approximately CAD$8.3^3^ million starting February 2026 with an expected increase to annualized gross margins on a go-forward basis to approximately CAD$2.3M^4^. This growth is driven by an expansion of work scope on the DSEF program with the Directorate Land Command Systems Program Management Software Engineering Facility for the digital modernization of the Canadian Armed Forces. The Company plans to add 15 roles to its team, including both employees and subcontractors . This subcontractor/employee mix is expected to enhance DEFSEC's revenue and margins, and provides flexibility, while positioning the Company for further growth as the Canadian government increases defence spending.

  • On December 17, 2025, the Company entered into definitive agreements for the purchase and sale of 566,040 Common Shares at a purchase price of $3.64 (US$2.65) per Common Share in a registered direct offering. In a concurrent private placement, the Company will issue unregistered warrants to purchase up to 566,040 Common Shares at an exercise price of $4.27 per share that will be immediately exercisable upon issuance and will expire five years following the date of issuance. The closing of the offering occurred on December 18, 2025. On February 10, 2026, these warrants were subsequently registered with the United States Securities and Exchange Commission (“SEC”).

The following is a summary of major highlights that occurred after December 31, 2025:

  • On January 23, 2026, the Company announced that it appointed Niel Marotta as a member of the Board, effective immediately, and that it filed an amended and restated notice of the annual and special meeting of shareholders, to be held on February 19, 2026, and a related amended and restated management information and form of proxy.

  • On January 30, 2026, the Company announced that it voluntarily filed restated unaudited condensed consolidated interim financial statements for the three and nine months ended June 30, 2025 and 2024 (the "Restated Interim Financial Statements") and the related management's discussion and analysis of financial condition and results of operations for the three and nine months ended June 30, 2025 (the "Restated MD&A"). The Restated Interim Financial Statements were amended as a result of errors identified related to the initial measurement of right-of-use assets and lease liabilities associated with the Company's lease entered into in June 2025, as well as the recording of lease-related prepayments associated with the same lease. Changes were limited to the interim statements of financial position and related notes, with no change being made to the interim statements of net loss and comprehensive loss, the interim statements of changes in shareholders' equity or the interim statements of cash flows reported in the Restated Interim Financial Statements.

  • On February 2, 2026, the Company announced that it appointed Elisabeth Preston as Senior Vice-President and Chief Legal Officer.

_______________________________ ^1^ Unaudited, non-IFRS measure. ^2^ See Consolidated Financial Statements of DEFSEC Technologies Inc. for the years ended September 30, 2024, 2023 and 2022 filed on the Company's SEDAR+ profile at https://sedarplus.ca/ ^3^ Unaudited, non-IFRS measure. ^4^ Unaudited, non-IFRS measure.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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RESULTS OF OPERATIONS

The following selected financial data has been extracted from Q1 Fiscal 2026 FS.

Three months ended December 31,
2025 2024 Change<br>2025 vs<br>2024
Revenue $ 1,307,736 $ 887,658 47%
Cost of sales (903,044 ) (483,136 ) 87%
Gross profit 404,692 404,522 0%
Gross Margin % 30.9% 45.6%
Operating expenses ****
General and administrative (“G&A”) 1,338,350 1,511,444 (11)%
Selling and marketing (“S&M”) 303,370 682,547 (56)%
Research and development (“R&D”) 649,629 672,575 (3)%
Share-based compensation – 51,055 (100)%
Depreciation and amortization 177,269 314,491 (44)%
Total operating expenses 2,468,618 3,232,112 (24)%
Operating loss (2,063,926 ) (2,827,590 ) (27)%
Other income (expenses) ****
Share issuance costs – (1,807,686 ) (100)%
Net finance costs (37,294 ) (62,059 ) (40)%
Foreign exchange gain (loss) (73,252 ) 113,283 (165)%
Impairment of right-of-use-asset – (88,596 ) (100)%
Change in fair value of warrant liabilities 91,468 1,215,633 (92)%
Total other income (expenses), net (19,078 ) (629,425 ) (97)%
Net loss $ (2,083,004 ) $ (3,457,015 ) (40)%
EBITDA loss^(1)^ $ (1,868,441 ) $ (3,080,465 ) (39)%
Adjusted EBITDA loss^(1)^ $ (1,886,657 ) $ (2,462,044 ) (23)%
Loss per share – basic and diluted $ (1.39 ) $ (23.94 ) (94)%
Weighted average Common Shares – basic and diluted 1,497,035 144,394 –

^(1)^ ^EBITDA and Adjusted EBITDA are non-IFRS measures. See "Non-IFRS Measures". See below for "Reconciliation of Non-IFRS Measure".^

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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In the following table, we have reconciled EBITDA and Adjusted EBITDA to the most comparable IFRS financial measure.

Three Months ended December 31,
2025 2024
Net loss as reported under IFRS $ (2,083,004 ) $ (3,457,015 )
Net financing costs 37,294 62,059
Depreciation and amortization 177,269 314,491
Deferred tax recovery - -
EBITDA loss (1,868,441 ) (3,080,465 )
Other adjustments: ****
Stock-based compensation - 51,055
Share issuance costs - 1,807,686
Impairment of right-of-use-asset - 88,596
Change in fair value of warrant liabilities (91,468 ) (1,215,633 )
Foreign exchange loss (gain) 73,252 (113,283 )
Gain/loss on disposals - -
Adjusted EBITDA loss (1,886,657 ) (2,462,044 )

Revenue

Total revenue increased by $0.4 million or 47% in Q1 Fiscal 2026 compared to Q1 Fiscal 2025, due to an increase of $0.5 million generated by our digitization services.  Sales of our less-lethal products was slowed in the first quarter of 2026 due to the 43-day shutdown of the United States government, which delayed receipt of import documentation for certain customers and slowed our sales into the United States. The Company expects delayed orders to be delivered in Q2 Fiscal 2026.

We expect revenue to continue to increase as we add additional resources to fulfill our Canadian Government Defence programs.  Beginning in February 2026, the Company is expecting its government services business to grow to approximately CAD$9.0^5^ million of program billings on an annualized go-forward basis.  Management continues to work closely with industry partners and prime contractors in order to monitor the outlook for growth. The Company also expects revenue to increase with continued growth in the ARWEN^®^ business due to the expected demand for the new 40mm ammunition and PARA SHOT^TM^ products as well as the commercial launch of DEFSEC Lightning^TM^. Management also expects the initial order of BLDS received in the prior year to result in requests for additional prototypes ultimately resulting in future revenue.

Gross Profit

In Q1 Fiscal 2026, the gross profit was $0.4 million or 30.9% as compared to a gross profit of $0.4 million or 45.6% in Q1 Fiscal 2025.  The reduction in gross margin as a percentage of revenue is due to the change in sales mix to include more  lower margin products and services.

The growth of our service delivery on our Canadian Government Defence programs over the last twelve months has resulted in higher employee related costs as a proportion of revenue than we experienced in Q1 Fiscal 2025.  The Company had two higher margin projects in Q1 Fiscal 2025 that were completed in Q2 Fiscal 2025, which contributed to the decrease in our gross profit when compared Q1 Fiscal 2026.

Gross proft of our less lethal products was also lower when comparing Q1 Fiscal 2026 to Q1 Fiscal 2025 partially due to a product mix shift from higher margin physical products to lower margin training as a result of the delays of shipments to the US caused by the government shutdown.  The reduction in less-lethal revenue also resulted from our fixed overhead costs representing a higher percentage of total revenue, which also resulted in a lower gross profit from this product line.

^_______________________________5^ Unaudited, non-IFRS measure.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Operating Expenses ("OPEX")

Total OPEX decreased by $0.8 million when comparing Q1 Fiscal 2026 to Q1 Fiscal 2025 due to the following factors:

  • G&A decreased by $0.2 million. In the first quarter of Fiscal 2025, the Company incurred higher short-term incentive expense than in the first quarter of Fiscal 2026 since these costs were accrued for at September 30, 2025, as opposed to being a period expense in the first quarter of Fiscal 2025, this accounted for $0.2 million of the change.  In addition, the first quarter of Fiscal 2025 also included professional fees relating to the Nasdaq Minimum Price requirement which was not required in the first quarter of Fiscal 2026.

  • S&M decreased by $0.4 million, primarily due to lower period costs related to the short-term incentive plan.  In the first quarter of Fiscal 2025, the Company incurred $0.3 million more in short-term incentive expense than in the first quarter of Fiscal 2026 since these costs were accrued for at September 30, 2025, as opposed to being a period expense in the first quarter of Fiscal 2025.  An increase in travel and trade show related costs of $0.1 million in Q1 Fiscal 2026 as compared to Q1 Fiscal 2025 was offset by lower investor relations costs when comparing both periods; and

  • R&D was relatively flat when comparing the first quarter of Fiscal 2026 to the first quarter of Fiscal 2025. We continue to invest in the development of our DEFSEC Lightning^TM^, BLDS and PARA SHOT^TM^ products.

Other income (expenses), net

For the first quarter of Fiscal 2026, our total other expenses were not significant, compared to total other expense of $0.6 million in the first quarter of Fiscal 2025.

Other income (expenses) was driven mainly by $0.1 million in net financing costs and foreign exchange loss offset by $0.1 million gain from the change in the fair value of warrant liabilities as a result of the remeasurement of the warrant liabilities at December 31, 2025. Under IFRS, we are required to remeasure the warrant liabilities at each reporting date until they are exercised or expired. In Q1 Fiscal 2025, we incurred $1.8 million in share issuance costs as compared to $Nil this quarter.

SUMMARY OF QUARTERLY RESULTS

The following table summarizes selected results for the eight most recently completed quarters to December 31, 2025 (unaudited):

2026 2025 2024
Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
Revenue $ 1,308 $ 1,373 $ 1,417 $ 1,264 $ 888 $ 560 $ 329 $ 486
Net Loss (2,083 ) (2,409 ) (2,301 ) (1,460 ) (3,457 ) (2,337 ) (1,162 ) (3,540 )
Net Loss per Common Share <br>(Basic and diluted) $ (1.39 ) $ (2.70 ) $ (3.69 ) $ (6.16 ) $ (23.94 ) $ (59.33 ) $ (27.30 ) $ (127.66 )

Quarterly Results Trend Analysis

We experience some fluctuations within our quarterly revenue primarily related to the timing and fulfilment of orders for our less-lethal products. Our digitization revenue has grown quarter over quarter as we ramp up service delivery on our Canadian Government Defence programs.  Our digitization revenue is subject to seasonal fluctuations, particularly in the first quarter of the year as there are less service delivery days in the month of December than during other months of the year.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Quarterly fluctuations in net loss was due to the timing of spending for certain research and development projects and the timing of trade shows and other sales and marketing program spend.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

FINANCIAL CONDITION

The following table summarizes our financial position:

December 31,2025 September 30,<br>2025
ASSETS **** ****
Current $ 7,529,379 $ 8,946,025
Non-currents 3,827,844 3,975,451
Total Assets $ 11,357,223 $ 12,921,476
Liabilities ****
Current $ 1,770,168 $ 2,918,205
Non-current 2,321,471 2,201,552
Total Liabilities 4,091,639 5,119,757
Net assets $ 7,265,584 $ 7,801,719
Working capital^(1)^ $ 5,759,211 $ 6,027,820
Indebtedness: ****
Lease liabilities $ 1,299,572 $ 1,303,450
Warrant liabilities 116,239 210,965
Total debt $ 1,415,811 $ 1,514,415
^(1)^ ^Working capital is calculated as current assets less current liabilities.^

Our working capital was $5.8 million at December 31, 2025, a $0.3 million decrease from September 30, 2025. The decrease was primarily due to our use of cash to fund our operations offset by the December private placement financing which provided $2.1 million in gross proceeds. Current liabilities include warrant liabilities, a non-cash liability item (see Note 6 of the Q1 Fiscal 2026 FS). Excluding warrant liabilities, we would have working capital of $5.9 million. These warrant liabilities will be extinguished when the warrants are exercised or expired. These warrants are set to expire between December 9, 2027, and August 9, 2029. If exercised, the proceeds will provide us with additional capital to fund our future working capital requirements. There is no assurance that any warrants will be exercised.

Total assets decreased by $1.6 million from September 30, 2025, mainly due to a decrease in cash of $1.6 million to fund our development efforts for our various product lines that have yet to generate sales and the payment of accounts payable and accrued liabilities that were owing at September 30, 2025.

Total liabilities decreased by $1.0 million from September 30, 2025, mainly due to a decrease in accounts payable and accrued liabilities of $1.0 million due to the timing of payments to employees and suppliers.

LIQUIDITY AND CAPITAL RESOURCES

Available Liquidity

Our approach to managing liquidity is to ensure, to the extent possible, that we always have sufficient liquidity to meet our liabilities as they come due. We regularly perform cash flow forecasts to ensure that we have sufficient cash to meet our operational needs while maintaining sufficient liquidity. At this time, we do not use any derivative financial instruments to hedge our currency risk.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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On December 17, 2025, we entered into definitive agreements for the purchase and sale of 566,040 Common Shares at a purchase price of $3.64 (US$2.65) per Common Share in a registered direct offering. In a concurrent private placement, we issued unregistered warrants to purchase up to 566,040 Common Shares at an exercise price of $4.27 per Common Share that are immediately exercisable upon issuance and expire five years following the date of issuance. The closing of the offering occurred on December 18, 2025. We intend to use the net proceeds from this Offering for working capital and general corporate purposes.  On February 10, 2026, these warrants were subsequently registered with the SEC.

At December 31, 2025, we held $5.0 million in cash, a decrease of $1.6 million since September 30, 2025, primarily due to funding our operations and partially offset by the December financing which provided gross proceeds of $2.1 million before underwriting and offering costs.  The Company also generated cash from the delivery of products and services as revenue grew $0.4 million when comparing the first quarter of Fiscal 2026 to the first quarter of Fiscal 2025.

As an early-stage company, we have not yet reached significant revenue levels for most of our  products and have incurred significant losses and negative operating cash flows from inception that have primarily been funded from financing activities. Our ability to continue as a going concern and realize our assets and discharge our liabilities in the normal course of business is dependent upon closing timely additional sales orders, timely commercial launch of new products, and the ability to raise additional debt or equity financing, when required. There are various risks and uncertainties affecting our future financial position and our performance. Accordingly, there are material risks and uncertainties that may cast substantial doubt about our ability to continue as a going concern.  Further, we may require additional capital in the event we fail to implement our business plan, which could have a material adverse effect on our financial condition and/or financial performance. There is no assurance that we will be able to raise additional capital as it is required in the future. Potential sources of capital may include additional equity and/or debt financings.

In our view, the availability of capital will be affected by, among other things, capital market conditions, the success of our PARA SHOT^TM^ system and DEFSEC Lightning^TM^ market development efforts, timing of winning new customer contracts, potential acquisitions, and other relevant considerations. In the event we raise additional funds by issuing equity securities, our existing shareholders will likely experience dilution, and any additional incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operational and financial covenants that could further restrict our operations. Any failure to raise additional funds on terms favorable to us or at all may require us to significantly change or curtail our current or planned operations in order to conserve cash until such time, if ever, that sufficient proceeds from operations are generated, and could result in us not being in a position to advance our commercialization strategy or take advantage of business opportunities.

Consolidated Statements of Cash Flows

The following table summarizes our consolidated statements of cash flows for the respective periods:

Three months ended December 31,
2025 2024
Total cash provided by (used in): ****
Operating activities $ (3,124,321 ) $ (3,244,217 )
Investing activities (17,983 ) (51,895 )
Financing activities 1,482,924 5,893,540
Net cash outflows (1,659,380 ) 2,597,428
Cash, beginning of period 6,686,429 256,828
Effect of exchange rates on cash 10,375 -
Cash, end of period 5,037,424 2,854,256
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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Cash used in operating activities

Cash flow used in operating activities decreased by $0.1 million to $3.1 million for the three months ended December 31, 2025, primarily due to payments on accounts payable and accrued liabilities.

Cash used in investing activities

Cash flow used in investing activities in the first quarter of Fiscal 2026 was slightly lower than in the first quarter of Fiscal 2025 with both periods showing minor purchases of property and equipment.

Cash provided by financing activities

Cash flow provided by financing activities was $1.5 million in the first quarter of Fiscal 2026 compared to the $5.9 million provided from financing activities in the first quarter of Fiscal 2025. The cash provided in both periods was related to proceeds generated from the issuance of common shares and warrants, offset by the related share offering costs for each transaction.

Capital Resources

Our objective in managing our capital is to safeguard our ability to continue as a going concern and to sustain future development of the business. Senior management is responsible for managing capital through regular review of financial information to ensure sufficient resources are available to meet operating requirements and investments to support the growth strategy. Our Board of Directors is responsible for overseeing this process. From time to time, we could issue new Common Shares or debt to maintain or adjust our capital structure. We are not subject to any externally imposed capital requirements.

Our primary sources of capital to date have been borrowings, security offerings, exercise of stock options and warrants and, to a lesser extent, revenue.  The following is a breakdown of our capital:

December 31,<br> 2025 September 30, <br>2025
Debt: **** ****
Lease liabilities $ 1,299,572 $ 1,303,450
Warrant liabilities 116,239 210,965
Equity: **** ****
Share capital $ 47,854,235 $ 47,003,991
Warrants 8,438,192 7,764,412
**** Contributed surplus 5,398,445 5,398,445
Accumulated other comprehensive loss (62,232 ) (85,077 )
Accumulated deficit (54,363,056 ) (52,280,052 )
Total capital $ 8,681,395 $ 9,316,134
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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Contractual Obligations and Commitments

At December 31, 2025, our contractual obligations and commitments were as follows:

Payment due: Total Within 1year 1 to 3 years 3 to 5 years 5 years andbeyond
Minimum royalty commitments $ 2,000,000 $ 200,000 $ 500,000 $ 600,000 $ 700,000
Accounts payable and accrued liabilities 1,314,952 1,314,952 - - -
Lease obligations 2,209,119 184,839 407,420 407,420 1,209,440
Total contractual obligations $ 5,524,071 $ 1,699,791 $ 907,420 $ 1,007,420 $ 1,909,440

Shares Outstanding

At December 31, 2025, authorized capital consists of an unlimited number of Common Shares with no stated par value.

The following table shows the outstanding Common Shares and dilutive securities as at December 31, 2025:

Securities <br>outstanding Underlying <br>Common <br>Shares^(1)^ Average price ( CAD ) Proceeds if <br>exercised
Common shares 1,993,626 1,993,626 $ - -
Warrants 9,560,513 1,694,267 2.01 19,216,631
Pre-funded warrants 151,734 722 0.014 2,124
Warrant liabilities 9,539,727 45,425 3.12 29,763,948
U.S. underwriter warrants 1,532,261 131,926 2.17 3,325,006
Stock options 904 904 548.18 495,558
Total Common Shares and dilutive securities 3,866,870 52,803,267
^(1)^Represents the number of shares to be issued upon exercise

All values are in US Dollars.

The following table shows the outstanding Common Shares and dilutive securities as at February 12, 2026:

Securities <br>outstanding Underlying <br>Common <br>Shares^(1)^ Average price ( CAD ) Proceeds if <br>exercised
Common shares 1,993,626 1,993,626 $ - -
Warrants 9,560,513 1,694,267 2.01 19,216,631
Pre-funded warrants 151,734 722 0.014 2,124
Warrant liabilities 9,539,727 45,425 3.08 29,382,359
U.S. underwriter warrants 1,532,261 131,926 2.16 3,309,684
Stock options 886 886 543.96 481,950
Total Common Shares and dilutive securities 3,866,852 52,392,748
^(1)^Represents the number of shares to be issued upon exercise

All values are in US Dollars.

19 Page
DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
---

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

RELATED PARTY TRANSACTIONS

Refer to Note 10 of the Q1 Fiscal 2026 FS for disclosure about DEFSEC's related party transactions conducted in the normal course of business.

FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS

We recognize financial assets and liabilities when we become party to the contractual provisions of the instrument. On initial recognition, financial assets and liabilities are measured at fair value plus transaction costs directly attributable to the financial assets and liabilities, except for financial assets or liabilities at fair value through profit and loss, whereby the transactions costs are expensed as incurred.

Refer to Note 12 of the Q1 Fiscal 2026 Unaudited Condensed Consolidated Interim Financial Statements for further disclosure of our financial instruments.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Refer to Note 2 of the Fiscal 2025 audited consolidated financial statements for a discussion of the accounting policies and estimates that are critical to the understanding of our business operations and the results of our operations.

OUTSTANDING SHARE INFORMATION

At December 31, 2025, DEFSEC's authorized capital consists of an unlimited number of Common Shares with no stated par value. There were 1,993,626 outstanding and issued Common Shares as at December 31, 2025.

SUBSEQUENT EVENTS

Refer to major highlights section earlier in this MD&A.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

As required by National Instrument 52-109 Certification of Disclosure in Issuers Annual and Interim Filings and Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, we have evaluated, under the supervision and with the participation of management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), the effectiveness of the design and operation of our disclosure controls and procedures ("DC&P") (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) as of the end of the quarter. These DC&P are designed to provide reasonable assurance that information required to be publicly disclosed is recorded, processed, summarized and reported on a timely basis.

Based upon the evaluation, our CEO and CFO have concluded that the operation of our DC&P were effective as of September 30, 2025.  Since the September 30, 2025 evaluation, there have been no changes in our DC&P that materially affected or are reasonably likely to materially affect our DC&P, accordingly their design remains effective.

20 Page
DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE MONTHS ENDED DECEMBER 31, 2025
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Management's Assessment on Internal Controls over Financial Reporting

In accordance with National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings and as required by Rule 13a-15(f) of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, the CEO and CFO are responsible for establishing and maintaining adequate internal controls over financial reporting ("ICFR"), The Company's management, including the CEO and CFO, designed ICFR based on the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO Framework") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS.

ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. ICFR has inherent limitations. ICFR is a process that involves human diligence and compliance and is subject to lapses in judgement and breakdowns resulting from human failures. ICFR also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by ICFR. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

Management, under the supervision, and with the participation, of our CEO and CFO and oversight of the Board of Directors, evaluated the effectiveness of our ICFR as at September 30, 2025, against the COSO Framework.  Based on these evaluations, our management, including our CEO and CFO, concluded that no material weaknesses existed and our ICFR were effective as of September 30, 2025.  For the three-month period ending on December 31, 2025, there have been no changes that have materially affected or is reasonably likely to materially affect our ICFR, accordingly their design remains effective.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Additionally, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

21 Page 
DEFSEC Technologies Inc.: Exhibit 99.3 - Filed by newsfilecorp.com

FORM 52-109F2CERTIFICATION OF INTERIM FILINGS FULL CERTIFICATE

I, Sean Homuth, Chief Executive Officer of DEFSEC Technologies Inc., certify the following:

  1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of DEFSEC Technologies Inc. (the "issuer") for the financial quarter ended December 31, 2025.

  2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

  3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

  4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

  5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control - Integrated Framework (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2 ICFR - material weakness relating to design: N/A

-2-

5.3 Limitation on scope of design: N/A

  1. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: February 12, 2026

/s/ Sean Homuth                          Sean Homuth Chief Executive Officer

DEFSEC Technologies Inc.: Exhibit 99.4 - Filed by newsfilecorp.com

FORM 52-109F2CERTIFICATION OF INTERIM FILINGS FULL CERTIFICATE

I, Jennifer Welsh, Chief Financial Officer of DEFSEC Technologies Inc., certify the following:

  1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of DEFSEC Technologies Inc. (the "issuer") for the financial quarter ended December 31, 2025.

  2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

  3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

  4. Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.

  5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings

(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that

(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.

5.1 Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control - Integrated Framework (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2 ICFR - material weakness relating to design: N/A

-2-

5.3 Limitation on scope of design: N/A

  1. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: February 12, 2026

/s/ Jennifer Welsh                         Jennifer Welsh Chief Financial Officer

DEFSEC Technologies Inc.: Exhibit 99.5 - Filed by newsfilecorp.com

DEFSEC Technologies Inc. Announces Strong First Quarter Fiscal 2026 Results

  • Revenue up 47% over Q1 Fiscal 2025, with continuing momentum post quarter-end;
  • Annualized program billings on go-forward basis reaches approximately $9.0^1^ million in February 2026 with additional near term growth to approximately $9.9^2^ million;
  • First Lightning SaaS subscription received.

OTTAWA, ON February 12, 2026 - DEFSEC Technologies Inc. (TSXV: DFSC and DFSC.WT.U; NASDAQ: DFSC and DFSCW) ("DEFSEC" or the "Company") is pleased to announce the highlights of its fiscal 2026 first quarter ("Q1 Fiscal 2026") results. This announcement is a summary only and should be read in conjunction with DEFSEC's unaudited condensed consolidated interim financial statements for the three months ended December 31, 2025 and 2024 and related management's discussion and analysis for the three months ended December 31, 2025, all of which have been filed on SEDAR+ and EDGAR.  All figures are stated in Canadian Dollars unless otherwise noted.

Q1 Fiscal 2026 Financial Highlights:

Three months ended December 31,
(in thousands of $) 2025 2024
$ $
Revenue 1,307.7 887.7
Gross profit 404.7 404.5
Operating expenses 2,468.6 3,232.1
Net loss (2,083.0) (3,457.0)
EBITDA loss (1,868.4) (3,080.5)
December 31, 2025 September 30, 2025
--- --- ---
(in thousands of $) $ $
Cash 5,037.4 6,686.4
Total assets 11,357.2 12,921.5
Total liabilities 4,091.6 5,119.8
Working capital 5,759.2 6,027.8

Growth in defence software business

Much of the revenue growth in Q1 Fiscal 2026 was driven by increases in sub-contract task orders for the Company’s software services for the Canadian Department of National Defence under two foundational long-term program contracts: (i) Directorate Land Command Systems Program Management Software Engineering Facility (“DSEF”); and (ii) Land Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (“Land C4ISR”) program, for the digital modernisation of the Canadian Forces. While these programs are “as and when requested” task-based contracts with no minimum guaranteed values, the Company’s workshare for these  multi-year contracts, excluding renewal options, would provide for up to $75 million in combined revenue through the initial contract periods that run through 2028  for DSEF and 2029 for Land C4ISR.

^1^ Unaudited, non-IFRS measure. See "Non-IFRS Measures" in this news release.

^2^ Unaudited, non-IFRS measure. See "Non-IFRS Measures" in this news release.

The Company has now commenced work on the expanded work scope related to the DSEF program, originally announced on December 5, 2025, which resulted in 14 additional resources, which were staffed by subcontracted personnel. The Company now has 42 resources working across the Land C4ISR and DSEF programs resulting in program billings on an annualized go-forward basis of approximately $9.0^3^ million with the Company currently recruiting for an additional five roles which will further increase program billings on an annualized go-forward basis to approximately $9.9^4^ million. Further taskings in the upcoming months may be forthcoming.

"We are pleased with the continued momentum in program billings and are optimistic that we will see ongoing growth beyond currently forecasted levels," said Mr. Homuth, President and CEO of DEFSEC. "Future quarterly results will reflect the escalation in program billings we are seeing in February."

First Lightning SaaS subscription

The Company previously announced in December 2025 that it had sold its first subscription to its DEFSEC Lightning^TM^ SaaS product with additional orders expected. Potential law enforcement customers are in various stages of evaluation of the product.

"The ongoing interest in and receipt of a first order for the DEFSEC Lightning^TM^ platform validates that we are solving a very important problem for law enforcement and first responders with our SaaS solution. Further, it underscores our advantage from having done this type of development for military applications." stated Mr. Homuth. "It also underscores the deep value associated with the trust and relationships we have built with law enforcement agencies across North America through direct sales of our ARWEN^®^ public order products."

Select highlights during and after the quarter

On December 18, 2025, the Company closed a registered direct offering to sell 566,040 Common Shares at a purchase price of $3.64 (US$2.65) per Common Share. In a concurrent private placement, the Company issued warrants to purchase up to 566,040 Common Shares at an exercise price of $4.27 per share that are immediately exercisable upon issuance and will expire five years following the date of issuance.

On January 23, 2026, the Company announced that it appointed Niel Marotta as a member of the Board.

On February 2, 2026, the Company announced that it appointed Elisabeth Preston as Senior Vice-President and Chief Legal Officer.

The Company will hold its Annual and Special Meeting of Shareholders in virtual format on February 19, 2026 at 3:00 p.m.

For further information, please contact:

Jennifer Welsh, Chief Financial Officer and Chief Compliance Officer [email protected]

Sean Homuth, President and Chief Executive Officer [email protected]

Jason Frame, Investor Relations +1 (587) 225-2599 [email protected]

^3^ Unaudited, non-IFRS measure. See "Non-IFRS Measures" in this news release.

^4^ Unaudited, non-IFRS measure. See "Non-IFRS Measures" in this news release.

About DEFSEC

DEFSEC (TSXV: DFSC) (TSXV: DFSC.WT.U) (NASDAQ: DFSC) (NASDAQ: DFSCSW) (FSE: 62UA) develops and commercializes breakthrough next-generation tactical systems for military and security forces. The company's current portfolio of offerings includes digitization of tactical forces for real-time shared situational awareness and targeting information from any source (including drones) streamed directly to users' smart devices and weapons. Other DEFSEC products include countermeasures against threats such as electronic detection, lasers and drones. These systems can operate stand-alone or integrate seamlessly with OEM products and battlefield management systems, and all come integrated with TAK. The company also has a new proprietary non-lethal product line branded PARA SHOT^TM^ with applications across all segments of the non-lethal market, including law enforcement. The Company is headquartered in Ottawa, Canada.

For more information, please visit https://www.defsectec.com

Forward-Looking Statements

This news release contains "forward-looking statements" and "forward-looking information" within the meaning of Canadian and United States securities laws (collectively, "forward-looking statements"), which may be identified by the use of terms and phrases such as "may", "would", "should", "could", "expect", "intend", "estimate", "anticipate", "plan", "foresee", "have sight of", "believe", or "continue", the description of "optimism", " momentum" or "interest", the negative of these terms and similar terminology, including references to assumptions, although not all forward-looking statements contain these terms and phrases. Forward-looking statements are provided for the purpose of assisting the reader in understanding us, our business, operations, prospects and risks at a point in time in the context of historical and possible future developments and therefore the reader is cautioned that such information may not be appropriate for other purposes. Such forward-looking statements are based on the current expectations of DEFSEC's management and are based on assumptions and subject to risks and uncertainties that are documented in detail in the Company's public filings. Forward-looking statements included in this include, but are not limited to: management's belief of sufficiency of available financial resources to support forecasted activities in 2026 based on cash on hand, anticipated revenue streams and planned expenditures in the fiscal year, subject to execution of the Company's operating plan and other risks and factors described in its public filings; interest in DEFSEC Lightning^TM^ or other products and services as well as timing of full implementation or commercial release thereof; the Company's estimates of increases to annualized gross margin on a go-forward basis and extent thereof, if any; the stage of scaled production for the PARA SHOT^TM^ technology into new training cartridges and timing of release thereof; and management's belief that its extensive customer base of law enforcement agencies for ARWEN throughout North America is a ready market for its new products like PARA SHOT^TM^ as well as DEFSEC Lightning^TM^.

Although DEFSEC's management believes that the assumptions underlying such forward-looking statements are reasonable, they may prove to be incorrect. The forward-looking statements discussed in this news release may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting DEFSEC, including DEFSEC's inability to execute on its current operating plan and/or fiscal 2026 forecasted activities, DEFSEC's inability to secure contracts and subcontracts (on the timelines, size and scale expected or at all), statements of work and orders for its products in fiscal 2026 and onwards for reasons beyond its control, the renewal or extension of agreements beyond their original term, the granting of patents applied for by DEFSEC, inability to finance the scale up to full commercial production levels for its physical products, inability to secure key partnership agreements to facilitate the outsourcing and logistics for its ARWEN^®^ and PARA SHOT^TM^ products, inability to commercialize DEFSEC's next generation Battlefield Laser Detection System, inability to secure or complete the execution of government contracts, inability to drive growth in DEFSEC's ARWEN^®^ product line, inability to advance the commercialization of DEFSEC's PARA SHOT^TM^ products, delay or inability to launch DEFSEC's Lightning SaaS offering, lower than expected or delayed demand for DEFSEC's BLDS, overall interest in DEFSEC's products being lower than anticipated or expected; general economic and stock market conditions; a stagnation or decrease in North American defense and public safety spending, adverse industry events; future legislative and regulatory developments in Canada, the United States and elsewhere; the inability of DEFSEC to implement and execute its business strategies; risks and uncertainties detailed from time to time in DEFSEC's filings with the Canadian Security Administrators and the United States Securities and Exchange Commission, and many other factors beyond the control of DEFSEC. Although DEFSEC has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and DEFSEC undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

Non-IFRS Measures

This news release makes reference to certain non-IFRS measures. These measures are not recognized measures under the International Financial Reporting Standards ("IFRS"), do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS.

The non-IFRS measures used in this news release. includes "annualized gross margin contribution" and "program billings on annualized go-forward basis", which are unaudited, non-IFRS measures.

"Annualized gross margin contribution", refers to gross margin dollars based on the staff and other related costs for the entire year at the program billing rate. Management believes annualized gross margin contribution is a useful measure because it aligns with annualized revenue and billings. The most directly comparable financial measure that is disclosed in the financial statements of the Company to which this non-IFRS measure relates is gross margin.

"Program billings on annualized go-forward basis", refers to programmatic revenue based on the roles staffed for a full year at the program billing rate. Management believes program billings on annualized go-forward basis is a useful measure because it reflects management's estimate of annualized revenues based on current contractual taskings as of the date of this release. The most directly comparable financial measure that is disclosed in the financial statements of the Company to which the non-IFRS measure relates is revenue.

These non-IFRS financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with IFRS results and the reconciliations to the corresponding IFRS financial measures, may provide a more complete understanding of factors and trends affecting the Company's business. Because non-IFRS financial measures exclude the effect of items that will increase or decrease the Company's reported results of operations, management strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety under the Company's profile on EDGAR and SEDAR+.

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