DFSC 6-K

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 Statements on Form F-3 File No. 333-277196, Form F-3 File No. 333-281960, Form F-3 File No. 333-283343 and Form F-3 File No. 333-285263.

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 TECHNOLIGIES INC.
		(Registrant)
Date:	February 2, 2026	By:	/s/ Jennifer Welsh
		Name:	Jennifer Welsh
		Title:	Chief Financial Officer

EXHIBIT INDEX

99.1	Restated Unaudited Condensed Consolidated Interim Financial Statements for the three and nine months ended June 30, 2025 and 2024
99.2	Restated Management's Discussion and Analysis for the three and nine months ended June 30, 2025
99.3	Certification of Interim Filings by CEO dated January 30, 2026
99.4	Certification of Interim Filings by CFO dated January 30, 2026
99.5	News Release dated January 30, 2026

DEFSEC Technologies Inc.: Exhibit 99.1 - Filed by newsfilecorp.com

Restated

Unaudited Condensed Consolidated Interim Financial Statements of

DEFSEC TECHNOLOGIES INC.

(Formerly KWESST MICRO SYSTEMS INC.)

Three and nine months ended June 30, 2025 and 2024

(Expressed in Canadian dollars)

DEFSEC TECHNOLOGIES INC. (formerly KWESST Micro Systems Inc.) Table of contents for the three and nine months ended June 30, 2025 and 2024

	Page
FINANCIAL STATEMENTS
Restated 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
Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements	7-32

DEFSEC TECHNOLOGIES INC. (Formerly KWESST MICRO SYSTEMS INC.) Restated Unaudited Condensed Consolidated Interim Statements of Financial Position At June 30, 2025 and September 30, 2024

**** <br>In Canadian dollars	**** Notes		June 30,<br>2025			September 30,<br>2024
			Restated
ASSETS
Cash and cash equivalents		$	2,543,211		$	256,828
Restricted short-term investment			30,000			30,000
Trade and other receivables	4		1,130,462			567,875
Inventories	5		508,747			533,163
Prepaid expenses and deposits	23		305,448			179,051
Deferred costs			79,442			275,438
Current assets			4,597,310			1,842,355
Property and equipment			291,039			311,712
Right-of-use assets	6, 23		1,195,276			230,124
Deposit			31,040			28,806
Intangible assets	7		2,488,326			3,174,832
Deferred costs			81,364			29,319
Non-current assets			4,087,045			3,774,793
Total Assets		$	8,684,355		$	5,617,148
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued liabilities	8 and 9	$	1,111,134		$	1,660,637
Accrued royalties liability			200,000			200,000
Lease obligations	10, 23		254,313			147,078
Contract liabilities	11		78,517			120,571
Warrant liabilities	12 and 13(b)		346,918			847,295
Current liabilities			1,990,882			2,975,581
Accrued royalties liability			1,044,050			1,118,135
Lease obligations	10, 23		1,064,794			155,145
Non-current liabilities			2,108,844			1,273,280
Total Liabilities			4,099,726			4,248,861
Shareholders' Equity
Share capital	13(a)		44,201,818			37,822,725
Warrants	13(b)		4,925,372			1,084,687
Contributed surplus	13(c)		5,383,927			5,152,753
Accumulated other comprehensive loss			(55,542	)		(38,520	)
Accumulated deficit			(49,870,946	)		(42,653,358	)
Total Shareholders' Equity			4,584,629			1,368,287
Total Liabilities and Shareholders' Equity		$	8,684,355		$	5,617,148

See Note 2(a) Going concern and Note 19 Commitments and contingencies.See Note 23 Restatement of previously issued unaudited condensed consolidated interim financial statements See accompanying notes to the unaudited condensed consolidated interim financial statements.

On behalf of the Board of Directors:

(signed) James Yersh, Director	(signed) David Luxton, Director

DEFSEC TECHNOLOGIES INC. (Formerly KWESST MICRO SYSTEMS INC.) Unaudited Condensed Consolidated Interim Statements of Net Loss and Comprehensive Loss Three and nine months ended June 30, 2025 and 2024

					Three Months					Nine Months
					Ended					Ended
					June 30,					June 30,
In Canadian dollars	Notes				2024					2024
					(Reclassification					(Reclassification
					Note 2(g))					Note 2(g))
Revenue	15			$	329,476				$	944,408
Cost of sales			)		(288,665	)		)		(715,219	)
Gross margin					40,811					229,189
Operating expenses
General and administrative					1,122,240					3,807,234
Selling and marketing					224,790					1,125,758
Research and development					497,454					1,787,382
Share-based compensation					59,131					183,602
Depreciation and amortization					321,974					963,049
Total operating expenses					2,225,589					7,867,025
Operating loss			)		(2,184,778	)		)		(7,637,836	)
Other income (expenses)
Share issuance costs	13(a)				(366,931	)		)		(366,931	)
Net finance costs	16		)		(63,034	)		)		(137,889	)
Foreign exchange gain (loss)			)		(22,492	)		)		68,413
Impairment of right-of-use assets			)		-			)		-
Gain on disposal					-					-
Change in fair value of warrant liabilities	12		)		1,475,280					2,973,112
Total other income (expenses), net			)		1,022,823			)		2,536,705
Net loss			)	$	(1,161,955	)		)	$	(5,101,131	)
Other comprehensive income (loss):
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences					(14,578	)		)		(17,781	)
Total comprehensive loss			)	$	(1,176,533	)		)	$	(5,118,912	)
Net loss per share
Basic and diluted	1(b)(c) and 14		)	$	(27.72	)		)	$	(162.30	)
Weighted average number of shares outstanding
Basic and diluted	1(b)(c) and 14				41,922					31,430

All values are in US Dollars.

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

DEFSEC TECHNOLOGIES INC. (Formerly KWESST MICRO SYSTEMS INC.) Unaudited Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Nine months ended June 30, 2025 and 2024

In Canadian dollars	Notes	Number of<br>Shares^(1)^		Share capital			Warrants			Contributed <br>surplus		Translation <br>reserve			Deficit			Total<br>Shareholders' <br>Equity
Balance, September 30, 2023		26,969	$	33,379,110		$	1,042,657		$	4,769,115	$	(39,663	)	$	(35,215,599	)	$	3,935,620
Shares issued for public offering		17,309		2,961,605			105,081			-		-			-			3,066,686
Share issuance costs				(691,560	)		-			-		-			-			(691,560	)
Warrants exercised	13(b)	8,467		1,771,239			-			-		-			-			1,771,239
Warrants expired	13(b)			-			(19,877	)		19,877		-			-			-
Share-based compensation	13(c)			-			-			183,602		-			-			183,602
Other comprehensive loss				-			-			-		(17,781	)		-			(17,781	)
Net loss				-			-			-		-			(5,101,131	)		(5,101,131	)
Balance, June 30, 2024		52,745	$	37,420,394		$	1,127,861		$	4,972,594	$	(57,444	)	$	(40,316,730	)	$	3,146,675
Balance, September 30, 2024		75,199	$	37,822,725		$	1,084,687		$	5,152,753	$	(38,520	)	$	(42,653,358	)	$	1,368,287
Shares issued for public offering	13(a)	3,810		100,310			-			-		-			-			100,310
Shares issued for private placement	13(a)	50,248		371,154			-			-		-			-			371,154
Warrants issued for private placement	13(a)	-		-			2,394,955			-		-			-			2,394,955
Pre-funded warrants issued for public offering	13(a)	-		-			3,489,393			-		-			-			3,489,393
Pre-funded warrants issued for private placement	13(a)	-		-			4,579,154			-		-			-			4,579,154
Share issuance costs	13(a)	-		(164,199	)		(1,671,762	)		-		-			-			(1,835,961	)
Shares issued for debt	13(a)	5,669		100,000			-			-		-			-			100,000
Pre-funded warrants exercised	13(b)	516,114		5,343,578			(4,551,305	)		-		-			-			792,273
Warrants exercised	13(b)	16,667		628,250			(267,750	)		-		-			-			360,500
Warrants expired	13(b)	-		-			(132,000	)		132,000		-			-			-
Share-based compensation	13(c)	-		-			-			99,174		-			-			99,174
Other comprehensive loss		-		-			-			-		(17,022	)		-			(17,022	)
Net loss		-		-			-			-		-			(7,217,588	)		(7,217,588	)
Balance, June 30, 2025	****	667,707	$	44,201,818		$	4,925,372		$	5,383,927	$	(55,542	)	$	(49,870,946	)	$	4,584,629

See accompanying notes to the unaudited condensed consolidated interim financial statements. ^(1)^ See Note 1 (b) and (c)

DEFSEC TECHNOLOGIES INC. (Formerly KWESST MICRO SYSTEMS INC.) Unaudited Condensed Consolidated Interim Statements of Cash Flows Nine months ended June 30, 2025 and 2024

					Nine months ended
					June 30,
In Canadian dollars	Notes				2024
OPERATING ACTIVITIES
Net loss			)	$	(5,101,131	)
Items not affecting cash:
Depreciation and amortization					963,050
Share-based compensation	13(c)				183,602
Change in fair value of warrant liabilities (including related foreign exchange gain)	12		)		(2,985,250	)
Net finance costs	16				137,889
Impairment of right-of-use assets	6				-
Gain on debt settlement			)		-
Net changes in working capital items	18		)		(95,865	)
Changes in non-current deferred costs			)		-
Interest received (paid)			)		21,427
Add back items not affecting operating activities:
Share issuance costs					-
Cash flows used in operating activities			)		(6,876,278	)
INVESTING ACTIVITIES
Additions of property and equipment			)		(85,462	)
Investments in intangible assets	7		)		(9,823	)
Cash flows used in investing activities			)		(95,285	)
FINANCING ACTIVITIES
Proceeds from U.S. Public Offering-November 2024	13(a)				-
Proceeds from Private Placement-November 2024	13(a)				-
Proceeds from Private Placement-February 2025	13(a)				-
Proceeds from U.S. Public Offering-April 2024	13(a)				1,356,743
Proceeds from U.S. Public Offering-June 2024	13(a)				2,312,916
Payments of lease obligations			)		(111,674	)
Payments of share issuance costs	13(a)		)		(921,246	)
Proceeds from exercise of warrants and pre-funded warrants					106,694
Cash flows provided by financing activities					2,743,433
Net change in cash and cash equivalents during the period					(4,228,130	)
Cash and cash equivalents, beginning of period					5,407,009
Cash and cash equivalents, end of period				$	1,178,879
Cash and cash equivalents consist of the following:
Cash held in banks				$	1,178,879
Short-term guaranteed investment certificates					-
Cash and cash equivalents				$	1,178,879

All values are in US Dollars.

See Note 18 Supplemental cash flow information. See accompanying notes to the unaudited condensed consolidated interim financial statements.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

1. Corporate information

a) Corporate information

DEFSEC Technologies Inc. (Formerly KWESST Micro Systems Inc.) (the "Company", "DEFSEC", "we", "our", and "us") was incorporated on November 28, 2017, under the laws of the Province of British Columbia. Our registered office is located at 550 Burrard Street, Suite 2900, Vancouver, British Columbia, Canada, and our corporate office is located at Unit 300, 80 Hines Rd., Ottawa, Ontario, Canada. We have representative offices in the following foreign locations: Washington DC (United States), London (United Kingdom), and Abu Dhabi (United Arab Emirates).

On June 30, 2025, the Company announced that it changed its name to “DEFSEC Technologies Inc.”

We develop and commercialize next-generation technology solutions that deliver a tactical advantage for military, public safety agencies and personal defense markets. Our 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.

b) 2024  Reverse Stock Split (applied retrospectively)

On October 23, 2024, DEFSEC effected a ten for one (10-for-1) reverse stock split of its common stock (the "2024 Reverse Split"). Accordingly, all shareholders of record at the opening of business on October 23, 2024, received one issued and outstanding common share 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 were proportionately adjusted to reflect the 2024 Reverse Split. All information respecting outstanding common shares and other securities of DEFSEC, including net loss per share, in the current and comparative periods presented herein give effect to the 2024 Reverse Split.

c) 2025 Reverse Stock Split (applied retrospectively)

On April 23, 2025, on Nasdaq and on April 24, 2025, on the TSX-V, DEFSEC effected a twenty-one for one (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 and other securities of DEFSEC, including net loss per share, in the current and comparative periods presented herein give effect to the 2025 Reverse Split.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

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, 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.  We have incurred a $7.2 million net loss and negative operating cash flows of $6.6 million for the nine months ended June 30, 2025 (2024 - $5.1 million net loss and negative operating cash flows of $6.9 million). At June 30, 2025, we had $2.6 million in working capital (September 30, 2024 - negative $1.1 million) and $49.9 million in accumulated deficit (September 30, 2024 - $42.7 million).

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 including, but not limited to:

• The market acceptance and rate of sales of our product offerings;
• Ability to successfully execute our 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
• Instability in Canada's elected leadership and the threatened tariffs from President Donald Trump.

Our strategy to mitigate these material risks and uncertainties is to execute on a timely basis a business plan aimed at continued focus on revenue growth, product development and innovation, improving overall gross margin, managing operating expenses and working capital requirements, and securing additional capital, as needed.

Failure to implement our business plan 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 should it be required in the future. Accordingly, there are material risks and uncertainties that may cast substantial doubt about our 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, 2024 ("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 audited Consolidated Financial Statements as at and for the year ended September 30, 2024.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

These unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on January 30, 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 June 30, 2025, we have the following wholly owned subsidiaries:

	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.	Delaware, United States	USD	100%
KWESST Public Safety Systems U.S. Inc.	Delaware, United States	USD	100%
KWESST Public Safety Systems Canada Inc.	Ottawa, Canada	CAD	100%

(d) Functional and presentation currency

These unaudited condensed consolidated interim financial statements are presented in Canadian dollars ("CAD"), our functional currency and presentation currency.

While each of the Company's subsidiaries has its own functional currency, the functional currency of the parent company, DEFSEC Technologies Inc., is CAD as this is the currency of the primary economic environment in which the Company operates. Most of the revenues, cost of sales and operating expenses from significant subsidiaries are denominated in CAD.

(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.

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

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

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 for the year ended September 30, 2024, with the exception of the following:

• Lease renewal: the Company is required to make a judgement regarding whether or not the renewal option of leases signed will be exercised in the determination of the value of the related right-of-use asset and lease liability.

Estimates

Information about assumptions and estimation uncertainties at June 30, 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 those disclosed in Note 2(f) of the Annual Financial Statements for the year ended September 30, 2024, with the exception of the following:

• Note 6 - Right-of-use assets: whether the determination of the incremental borrowing rate for the Company's leases is reasonable.

(g) Reclassification

Certain comparative figures on the unaudited condensed 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. General and administrative expenses were reduced by $362,269 and $1,054,764 for the three and nine month periods ended June 30, 2024, respectively. Selling and marketing expenses were reduced by nil and $13,655 for the three and nine month periods ended June 30, 2024, respectively. Research and development expenses were reduced by $18,835 and $78,232 for the three and nine month periods ended June 30, 2024, respectively. Share-based compensation expense was increased by $59,131 and $183,602 for the three and nine month periods ended June 30, 2024. Depreciation and amortization expense was increased by $321,974 and $963,049 for the three and nine month periods ended June 30, 2024.

3. Material accounting policies

During the nine months ended June 30, 2025, the accounting policies in these unaudited condensed consolidated interim financial statements are the same as those applied in the Annual Financial Statements.

4. Trade and other receivables

The following table presents trade and other receivables:

	****	June 30, <br>2025		September 30, <br>2024
Trade receivables	$	1,097,980	$	455,049
Unbilled revenue	****	388		42,248
Sales tax recoverable	****	32,094		70,578
Total	$	1,130,462	$	567,875

There was an impairment of trade and other receivables during the three and nine months ended June 30, 2025, of nil and $8,096, respectively (2024 - nil and nil).

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

The following table presents changes in unbilled receivables:

	****	June 30, <br>2025	****		September 30,<br>2024
Balance, beginning of period	$	42,248	****	$	5,211
Revenue billed during the period	****	(42,248	)		(5,211	)
Revenue in excess of billings, net of amounts transferred <br>  to trade receivables	****	388	****		42,248
Balance, end of period	$	388	****	$	42,248
Current	$	388	****	$	42,248
Non-current	$	-	****	$	-

5. Inventories

The following table presents a breakdown of inventories:

		June 30, <br>2025	****	September 30, 2024
Finished goods	$	29,958	$	55,754
Work-in-progress	****	36,077		59,519
Raw materials	****	442,712		417,890
Total	$	508,747	$	533,163

There was no impairment of inventories during the three and nine months ended June 30, 2025 (2024 – nil and nil).

For the three and nine month periods ended June 30, 2025, a total of $0.2 million and $0.3 million, respectively (2024 – $0.1 million and $0.6 million, respectively) of inventory was included in profit or loss as an expense as part of cost of sales.

6. Right-of-use assets (Restated)

The following table shows a breakdown of the Company’s restated right-of-use assets:

Cost		Kanata,<br>Ontario			North <br>Carolina			Guelph,<br>Ontario			North Kanata,<br>Ontario			Total
Balance at September 30, 2024	$	91,965		$	49,563		$	88,596		$	-		$	230,124
Additions		-			-			-			1,166,652			1,166,652
Disposals		-			(41,699	)		-			-			(41,699	)
Impairment		-			-			(88,596	)		-			(88,596	)
Amortization		(43,562	)		(7,864	)		-			(19,779	)		(71,205	)
Balance at June 30, 2025	$	48,403		$	-		$	-		$	1,146,873		$	1,195,276

7. Intangible assets

The following table shows a breakdown of our intangible assets:

Cost	****	PARA OPS^TM^ System	****	****	PARA OPS^TM^ Patent	****	****	ARWEN^TM^Tradename	****	****	Customer Relationships	****	****	Purchase Orders	****	ARWEN^TM^40mm Patent	****	****	Total	****
Balance at September 30, 2024	$	3,074,677		$	40,295		$	19,432		$	36,041		$	4,387	$	-		$	3,174,832	****
Additions		-			-			-			-			-		26,675		****	26,675	****
Amortization		(691,019	)		(9,850	)		(5,867	)		(3,333	)		-		(3,112	)	****	(713,181	)
Balance at June 30, 2025	$	2,383,658		$	30,445		$	13,565		$	32,708		$	4,387	$	23,563		$	2,488,326	****

At June 30, 2025, management concluded there was no indication of impairment on the intangible assets.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

8. Accounts payable and accrued liabilities

The following table presents a breakdown of our accounts payable and accrued liabilities:

		June 30, <br>2025		September 30, <br>2024
Trade payables	$	304,650	$	881,835
Accrued liabilities		645,766		610,558
Warranty Reserve		13,900		-
Salary and vacation payable		146,818		168,244
Total	$	1,111,134	$	1,660,637

9. Related party transactions

At June 30, 2025, there was $113,359 (September 30, 2024 - $471,465) outstanding in accounts payable and accrued liabilities due to officers and directors for accrued wages and vacation, consulting fees, directors' fees and expense reimbursements.

In December 2024, the LEC royalty payment that was due April 2025, in the amount of $200,000, was paid early to DEFSEC Corporation, a related party to the Company, in exchange for a $25,000 reduction, resulting in a net payment of $175,000.

10. Lease obligations (Restated)

During the nine months ended June 30, 2025, we entered into a new lease on June 2, 2025 with an expiry date of May 31, 2031 and an option to renew for an additional five year term. We have applied an estimated incremental borrowing rate of 10.7% in the calculation of the obligation. The Company received a rent free period from June 2, 2025 to May 31, 2026 as a lease inducement. Management has included the renewal option for the lease signed in Q3 Fiscal 2025 as the Company is expecting to renew at expiry.

During the nine months ended June 30, 2025, the Company transferred an office to another lessor and recorded a disposal of the lease obligation as well as the right-of-use asset.

The following table presents the movement in restated lease obligations for the respective periods:

		Offices
Balance at September 30, 2024	$	302,223
Additions		1,149,676
Lease payments (including interest)		(131,400	)
Interest expense		53,813
Disposal		(55,205	)
Balance at June 30, 2025	$	1,319,107
Current portion	$	254,313
Non-current portion		1,064,794
Balance at June 30, 2025	$	1,319,107
DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)
---

The following table presents the restated contractual undiscounted cash flows for the lease obligations:

	****	June 30, <br>2025		September 30,<br>2024
Less than one year	$	141,003	$	206,828
One to five years	****	838,673		154,445
Five years and beyond	****	1,311,295		-
Total	$	2,290,971	$	361,273

11. Contract liabilities

The following table presents the changes in contract liabilities:

		June 30, <br>2025			September 30, <br>2024
Balance, beginning of period	$	120,571		$	120,970
Amounts invoiced and revenue deferred		62,786			108,573
Recognition of deferred revenue included in the  balance at the beginning of period		(104,840	)		(108,972	)
Balance, end of period	$	78,517		$	120,571

12. Warrant liabilities

The following table shows a breakdown and activity for warrant liabilities for the nine months ended June 30, 2025:

		U.S. IPO and Canadian Offering						Private Placement						Debt Settlement		Direct Offering Aug'24			Public Offering Nov'24
		2022 Warrants			Over-allotment Warrants			2023 <br>Warrants			Pre-Funded<br>Warrants			Warrants		Warrants			Pre-Funded<br>Warrants			Total
Balance, beginning of period	$	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) Loss on revaluation of financial instruments		111,303			(8,148	)		(60,020	)		(22,049	)		1,919		(568,199	)		(714,912	)	****	(1,260,106	)
Exchange (gain) loss on revaluation		(995	)		504			3,855			(98	)		-		41,551			25,693		****	70,510	****
Extinguish Warrant Liability/Transfer to equity		-			-			-			-			-		-			(3,301,925	)	****	(3,301,925	)
Balance, end of period	$	176,073		$	-		$	4,208		$	9,191		$	3,064	$	154,382		$	-		$	346,918	****
Number of outstanding securities as at June 30, 2025		3,226,392			-			1,542,194			151,734			56,141		4,715,000			-		****	9,691,461	****

The following table shows a breakdown and activity for warrant liabilities for the year ended September 30, 2024:

		U.S. IPO and Canadian Offering									Private Placement						Debt Settlement			Public Offering			Direct Offering<br>Aug'24
		2022 Warrants			Over-allotment Pre-Funded Warrants			Over-allotment Warrants			2023 <br>Warrants			Pre-Funded<br>Warrants			Warrants			Pre-Funded<br>Warrants			Warrants			Total
Balance, beginning of period	$	1,042,538		$	414,334		$	121,173		$	798,573		$	1,940,914		$	18,141		$	-		$	-		$	4,335,673
Initial recognition		-			-			-			-			-			-			708,054			647,039			1,355,093
Exercised		-			(119,257	)		-			-			(829,720	)		-			(820,649	)		-			(1,769,626	)
(Gain) Loss on revaluation of financial instruments		(973,396	)		(295,186	)		(113,022	)		(728,282	)		(1,069,466	)		(16,996	)		104,227			44,553			(3,047,568	)
Exchange (gain) loss on revaluation		(3,377	)		109			(507	)		(9,918	)		(10,390	)		-			8,368			(10,562	)		(26,277	)
Balance, end of period	$	65,765		$	-		$	7,644		$	60,373		$	31,338		$	1,145		$	-		$	681,030		$	847,295
Number of outstanding securities as at September 30, 2024		3,226,392			-			375,000			1,542,194			151,734			56,141			-			4,715,000			10,066,461

U.S. Public Offering (April 2024)

On April 9, 2024, we closed an underwritten U.S. public offering for gross proceeds of $1.4 million (US$1 million) (see Note 13(a)). In this offering, 803,500 pre-funded warrants with an exercise price of US$0.21 per common share for US$0.649 per pre-funded warrant were issued.

Refer to Note 13(a) for further information on the offering and to Note 1 (b) and (c) for further information on the share consolidations.

Under IFRS, the above securities are classified as financial liabilities (referred herein as "warrant liabilities") because the exercise price is denominated in U.S. dollars, which is different from our functional currency (Canadian dollars). Accordingly, the ultimate proceeds in Canadian dollars from the potential exercise of the above securities are not known at inception. These financial liabilities are classified and measured at Fair Value through Profit and Loss ("FVTPL") (see Note 3(c) of the Annual Financial Statements). Gains on revaluation of the warrant liabilities are presented in other income (expenses) on the unaudited condensed consolidated interim statements of net loss and comprehensive loss.

Warrant liabilities

All 803,500 warrants were subsequently exercised at a weighted average exercise price of US$0.001 per warrant and we recognized a loss of $104,227 in fair value of warrant liabilities during the year ended September 30, 2024, which was reported in the consolidated statements of net loss and comprehensive loss.

U.S. Registered Direct Offering (August 2024)

On August 13, 2024, we closed a direct offering for the purchase and sale of 22,452 common shares at a purchase price of $56.70 (US$42.00) per common share for gross proceeds of $1.3 million (US$0.9 million) (see Note 13(a)). In a concurrent private placement, we issued 4,715,000 unregistered warrants to purchase common shares at an exercise price of $72.03 (US$52.50) per common share. This was a unit offering consisting of a share and a warrant. The fair value of the warrants attached to the units are valued based on the Black-Scholes model and the difference between the proceeds raised and the value assigned to the warrants is the residual fair value of the shares.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

Refer to Note 13(a) for further information on the offering and to Note 1 (b) and (c) for further information on the share consolidations.

Under IFRS, the above securities are classified as financial liabilities (referred herein as "warrant liabilities") because the exercise price is denominated in U.S. dollars, which is different from our functional currency (Canadian dollars). Accordingly, the ultimate proceeds in Canadian dollars from the potential exercise of the above securities are not known at inception. These financial liabilities are classified and measured at FVTPL (see Note 3(c) of the Annual Financial Statements). Gains on revaluation of the warrant liabilities are presented in other income (expenses) on the unaudited condensed consolidated interim statements of net loss and comprehensive loss.

Warrant liabilities

At June 30, 2025, we remeasured the fair value of these warrants using the following assumptions:

		2024 Warrants^(1)^
Number of warrants		4,715,000
Exercise price per warrant (in USD)	$	0.25
Nasdaq closing price (in USD)	$	0.054
Black Scholes fair value (in USD)	$	0.024
Volatility		98%
Risk free rate		2.92%
Exchange rate (USD/CAD)	$	1.3643
Fair value per warrant (CAD)	$	0.033

^(1)^ ^Fair value is based on the Black Scholes model on^^June 30^^, 202^^5^^, for the warrants.^

We recognized a loss of $96,490 and a gain of $568,199 (2024 - nil and nil) in fair value of warrant liabilities during the three and nine months ended June 30, 2025, respectively, which was reported in the unaudited condensed consolidated interim statements of net loss and comprehensive loss.

U.S. Public Offering (November 2024)

On November 1, 2024, the Company announced the closing of a public offering of 3,810 common shares and 3,809,000 pre-funded warrants ("PFW") at a public offering price of $26.25 (US$18.90) per common share and $1.25 (US$0.90) per pre-funded warrant. The gross proceeds from the offering were $4.9 million (US$3.5 million). The fair value of the pre-funded warrants on initial recognition was $1.249, which is the purchase price less the per warrant exercise price of $0.001.

Refer to Note 13(a) for further information on the offering and to Note 1 (b) and (c) for further information on the share consolidations.

Under IFRS, the pre-funded warrants are classified as financial liabilities (referred herein as "warrant liabilities") because the exercise price is denominated in U.S. dollars, which is different from our functional currency (Canadian dollars). Accordingly, the ultimate proceeds in Canadian dollars from the potential exercise of the above securities are not known at inception. These financial liabilities are classified and measured at FVTPL. Gains on revaluation of the warrant liabilities are presented in other income (expenses) on the unaudited condensed consolidated interim statements of net loss and comprehensive loss.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

Warrant liabilities

639,000 pre-funded warrants were subsequently exercised at a weighted average exercise price of US$0.021 per common share. On November 12, 2024, we converted the remaining 3,170,000 pre-funded warrants to CAD denomination which led to the transfer of pre-funded warrants to equity and extinguishing the related warrant liability. On November 12, 2024, we recognized a gain of $693,328 in the change in fair value of warrant liabilities, before reclassifying the pre-funded warrants to equity, which was reported in the unaudited condensed consolidated interim statements of net loss and comprehensive loss.

13. Share Capital and Contributed Surplus

As disclosed in Note 1(b) and (c), the 2024 Reverse Split and 2025 Reverse Split 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, 2024:

	Number		Amount
Balance at September 30, 2024	75,199	$	37,822,725
Issued for U.S. Public Offering	3,810		100,310
Issued for U.S. Private Placement	50,248		371,154
Issued for debt settlements	5,669		100,000
Issued for warrant exercise	532,781		5,971,828
Less: share issuance costs for the period	-		(164,199	)
Balance at June 30, 2025	667,707	$	44,201,818

Debt Settlement (January 2024)

On January 10, 2024, we issued 222 common shares in a settlement of debt in an amount of approximately $97,615. The debt resulted from a tail obligation relating to services rendered by a third-party consultant which the Company has elected to pay in common shares. The common shares issued pursuant to the debt settlement (signed October 31, 2023) were subject to a four-month hold period pursuant to applicable securities legislation and the policies of the TSX Venture Exchange.

U.S. Public Offering (April 2024)

On April 9, 2024, we closed a brokered U.S. public offering, resulting in the issuance of 3,500 common shares of DEFSEC, for aggregate gross proceeds of $1.4M (US$1.0M) (the "April 2024 Public Offering").

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

As a part of the April 2024 Public Offering, the Company issued 3,500 common shares and 803,500 pre-funded warrants with an exercise price of $0.21 per share at a public offering price of $184.80 (US$136.50) per common share and $0.881 (US$0.649) per pre-funded warrant, less the underwriting discount.

Brokers' Compensation and Share Issuance Costs

ThinkEquity acted as sole book-running manager for the April 2024 Public Offering. As compensation for services rendered, the placement agent fees represent $0.4875 per unit (being an aggregate of $101,838 (US$75,002) or 7.5% of the public offering price of the securities). In addition, the Company issued 76,925 warrants to purchase a number of common shares (the "Placement Agent Warrants"), representing 5% of the common shares and pre-funded warrants sold in the April 2024 Public Offering. The Placement Agent Warrants will be exercisable, in whole or in part, immediately upon issuance and will expire 60 months after the closing of the April 2024 Public Offering at an initial exercise price of $231.63 (US$170.63) per common share. The share issuance costs related to the April 2024 Public Offering that was recognized in the consolidated statements of net loss and comprehensive loss was $339,324 and recognized in equity was $269,400.

The fair value of the broker compensation warrants at the closing of the April 2024 Public Offering was $43,868, calculated using the Black Scholes model, and total share issuance costs were $608,724.

	Initial Recognition
Number of Warrants	76,925
Stock price (in )	0.75
Exercise price (in )	0.89
Black Scholes fair value (in )	0.42
Volatility	66%
Dividend Yield	Nil
Risk-free interest rate	3.86%
Expected life (in years)	5.00
Exchange rate (/CAD)	1.3578
Fair value per warrant (CAD)	0.57

All values are in US Dollars.

U.S. Public Offering (June 2024)

On June 14, 2024, we closed a brokered U.S. public offering, resulting in the issuance of 13,810 common shares of DEFSEC for aggregate gross proceeds of approximately $2.3M (US$1.7M) (the "June 2024 Public Offering"). As a part of the June 2024 Public Offering, the Company issued 13,810 common shares at a public offering price of $168.00 (US$121.80) per share, less the placement agent fees.

Brokers' Compensation and Share Issuance Costs

ThinkEquity acted as sole book-running manager for the June 2024 Public Offering. As compensation for services rendered, the placement agent fees represent $0.435 per common share (being an aggregate of $173,469 (US$126,150) or 7.5% of the public offering price of the securities). In addition, the Company issued to the placement agent 145,000 common share purchase warrants with an exercise price of $210.00 (US$152.25) per common share, exercisable, in whole or in part, immediately upon issuance and will expire 60 months after the closing of the June 2024 Public Offering. All of the share issuance costs related to the June 2024 Public Offering were recognized in equity.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

The fair value of the broker compensation warrants at the closing of the June 2024 Public Offering was $61,213, calculated using the Black Scholes model, and total share issuance costs were $384,509.

	Initial Recognition
Number of Warrants	145,000
Stock price (in )	0.58
Exercise price (in )	0.73
Black Scholes fair value (in )	0.31
Volatility	66%
Dividend Yield	Nil
Risk-free interest rate	3.86%
Expected life (in years)	5.00
Exchange rate (/CAD)	1.3751
Fair value per warrant (CAD)	0.42

All values are in US Dollars.

U.S. Registered Direct Offering (August 2024)

On August 13, 2024, we closed a registered direct offering for the purchase and sale of 22,452 common shares at a purchase price of $57.54 (US$44.00) per common share for gross proceeds of $1.4M (US$0.9M) (the "August 2024 Offering"). In a concurrent private placement, the Company issued 4,715,000 unregistered warrants to purchase common shares at an exercise price of $72.03 (US$52.50) per common share that are immediately exercisable upon issuance and will expire five years following the date of issuance.

Brokers' Compensation and Share Issuance Costs

H.C. Wainwright & Co. ("Wainwright") acted as the exclusive placement agent for the August 2024 Offering. As compensation for services rendered, the placement agent fees were US$70,725 or 7.5% of the public offering price of the securities. In connection with the closing of the August 2024 Offering, we issued Wainwright or its designees warrants to purchase up to an aggregate of 353,625 common shares at an exercise price of $72.03 (US$52.50) per common share, the warrants are exercisable upon issuance and have an expiry date of August 9, 2029. The shares offered as Brokers' Compensation related to the August 2024 Offering were recognized in equity.

The fair value of the broker compensation warrants at the closing of the August 2024 Offering was $28,632, calculated using the Black Scholes model. The share issuance costs related to the August 2024 Offering that was recognized in the consolidated statements of net loss and comprehensive loss was $202,242 and recognized in equity was $281,869.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)
	Initial Recognition
---	---
Number of Warrants	353,625
Nasdaq closing price (in )	0.14
Exercise price per warrant (in )	0.25
Black Scholes fair value (in )	0.06
Volatility	91%
Dividend Yield	Nil
Risk-free interest rate	3.12%
Expected life (in years)	2.50
Exchange rate (/CAD)	1.3751
Fair value per warrant (CAD)	0.08

All values are in US Dollars.

U.S. Public Offering (November 2024)

On November 1, 2024, the Company announced the closing of a public offering of 3,810 common shares and 3,809,000 pre-funded warrants at a public offering price of $26.25 (US$18.90) per common share and $1.25 (US$0.90) per pre-funded warrant (the "November 2024 Offering"). The gross proceeds from the offering were approximately $4.9 million (US$3.5 million), before deducting placement agent fees of $1.974 (US$1.4175) per common share and $0.094 (US$0.0675) per pre-funded warrant (being an aggregate of $365,726 (US$262,508) or 7.5% of the public offering price of the securities). In addition, the Company issued to the placement agent as compensation for its services 194,450 common share purchase warrants with an exercise price of $32.907 (US$23.625) per common share.

On November 12, 2024, we amended the pre-funded warrants whereas the exercise price of the warrants, along with all the other settlement amounts, were amended to be denominated in CAD currency, which is consistent with the Company's functional and presentation currency. As a result, we reclassified the remaining unexercised pre-funded warrants as equity instruments under IAS 32. This resulted in a transfer of $3,301,925 from warrant liabilities to equity warrants. The amendments effectively remove the cashless exercise option and ensure settlement in CAD, thereby meeting the criteria for equity classification. We also applied IFRIC 19 to appropriately derecognize the liabilities and recognize the equity effective November 12, 2024.

Accounting Treatment

Refer to Note 12 for the accounting of the warrants issued in the November 2024 Offering accounted for as warrant liabilities up to November 11, 2024.

The remaining 3,170,000 pre-funded warrants were subsequently exercised at a weighted average exercise price of $0.021 per common share, for proceeds of $3,170, during the nine months ended June 30, 2025.

Brokers' Compensation and Share Issuance Costs

In connection with the August 2024 Offering, Wainwright was also granted a tail obligation resulting in earning 7.5% on any equity financing raised from investors introduced to the Company as part of the offering. The November 1, 2024, financing fell entirely within the scope of the tail obligation and resulted in a payment of $362,618 (US$260,661), representing 7.5% of the $4.9 million (US$3.5 million) gross proceeds to Wainwright upon closing of the transaction.

ThinkEquity acted as the sole placement agent for the November 2024 Offering. As compensation for services rendered, the placement agent fees were $365,725 (US$262,508) or 7.5% of the public offering price of the securities). In addition, the Company issued to the placement agent as compensation for its services 194,450 common share purchase warrants with an exercise price of $32.907 (US$23.625) per common share. The warrants are exercisable upon issuance and have an expiry date of November 1, 2029. The shares offered as Brokers' Compensation related to the November 2024 Offering were recognized in equity.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

The fair value of the broker compensation warrants at the closing of the November 2024 Offering was $187,468, calculated using the Black Scholes model.

The share issuance costs related to the November 2024 Offering that were recognized in the unaudited condensed consolidated statements of net loss and comprehensive loss was $1,807,686 and recognized in equity were $227,557, inclusive of the broker compensation warrants.

		Initial Recognition
Number of Warrants		194,450
Nasdaq closing price (in USD)	$	0.93
Exercise price per warrant (in USD)	$	1.13
Black Scholes fair value (in USD)	$	0.69
Volatility		103%
Dividend yield		Nil
Risk-free interest rate		2.92%
Expected life (in years)		5.00
Exchange rate (USD/CAD)	$	1.3932
Fair value per warrant	$	0.96

Debt Settlement (November 2024)

On November 11, 2024, we issued 5,669 common shares at a deemed price per common share of $17.64 per share, representing a 20% discount on the closing price of the Shares on the TSX Venture Exchange on the last trading day prior to the news release, for 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.

Private Placement (November 2024)

On November 12, 2024, we closed a brokered private placement offering to an institutional accredited investor for aggregate gross proceeds of approximately $3.4 million (approximately US$2.5 million) (the "November 2024 PP").

As a part of the November 2024 PP, the Company issued 4,145,200 pre-funded warrants to acquire common shares of the Company on a basis of twenty-one warrants to one common share, with no par value at a price of $0.824 (US$0.592) per pre-funded warrant, inclusive of the exercise price of $0.021 per common share. Each pre-funded warrant was bundled with one common share purchase warrant ("November 2024 Common Warrant") of the Company. Each November 2024 Common Warrant was immediately exercisable on the basis of twenty-one warrants to one common share at an exercise price of $21.63 (US$15.54) per common share for a period of 60 months following the closing of the November 2024 PP. Although the pre-funded warrants are each bundled with a November 2024 Common Warrant, each security is issued separately. Since the instruments were bundled, the Company uses the bifurcation method to determine the fair value of each security. The Black Scholes model was used to determine the fair value of the underlying November 2024 Common Warrant and the remainder of the purchase price was allocated to the pre-funded warrant, resulting in a fair value of the November 2024 Common Warrants of $0.765 and a fair value of $0.06 for the pre-funded warrants.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)
		Initial Recognition
---	---	---
Number of Warrants		4,145,200
Nasdaq closing price (in CAD)	$	1.00
Exercise price per warrant	$	1.03
Black Scholes fair value	$	0.765
Volatility		103%
Dividend yield		Nil
Risk-free interest rate		2.92%
Expected life (in years)		5.00
Fair value per warrant (CAD)	$	0.765

The 4,145,000 pre-funded warrants and 350,000 November 2024 Common Warrants were subsequently exercised at a weighted average exercise price of $0.08, for proceeds of $364,645, during the nine months ended June 30, 2025.

Brokers' Compensation and Share Issuance Costs

In connection with the August 2024 Offering, Wainwright was also granted a tail obligation resulting in earning 7.5% on any equity financing raised from investors introduced to the Company as part of the offering. The November 12, 2024, financing fell entirely within the scope of the tail obligation and resulted in a payment of $259,534 (US$184,047), representing 7.5% of the $3.4 million (US$2.5 million) gross proceeds to Wainwright upon closing of the transaction.

ThinkEquity acted as sole placement agent for the Offering. As compensation for services rendered, the Company (i) paid to ThinkEquity, at the closing of the November 2024 PP, a cash fee equal of $274,027 (US$196,400), representing 8.0% of the aggregate gross proceeds of the November 2024 PP; and (ii) issued to ThinkEquity or its designees 207,260 warrants ("Placement Agent Warrants") to purchase common shares on the basis of twenty-one warrants to one common share, equal to 5% of the pre-funded warrants sold in the November 2024 PP. The Placement Agent Warrants are immediately exercisable, and entitle the holder to acquire one common share at an exercise price of $1.03 (US$0.74) per common share for a period of 60 months following the closing of the November 2024 PP.

The fair value of the broker compensation warrants at the closing of the November 2024 PP was $158,554, calculated using the Black Scholes model.

The share issuance costs related to the November 2024 PP that were recognized in equity were $681,185, inclusive of the broker compensation warrants.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)
		Initial Recognition
---	---	---
Number of Warrants		207,260
Nasdaq closing price (in CAD)	$	1.00
Exercise price per warrant	$	1.03
Black Scholes fair value	$	0.765
Volatility		103%
Dividend yield		Nil
Risk-free interest rate		2.92%
Expected life (in years)		5.00
Fair value per warrant (CAD)	$	0.765

Private Placement (February 2025)

On February 21 and February 25, 2025, we closed the first and second tranche, respectively, of a brokered private placement offering for aggregate gross proceeds of approximately $3.7 million (the "February 2025 PP").

As part of the February 2025 PP, the Company issued 50,248 common shares and 2,884,179 pre-funded warrants to acquire one common share of the Company. The common shares and pre-funded warrants had a no par value per share at a price of $19.488 per common share and $0.928 per pre-funded warrant, inclusive of the exercise price of $0.021 per common share. Each common share and pre-funded warrant were bundled with one common share purchase warrant ("February 2025 Common Warrant") of the Company. Each February 2025 Common Warrant is immediately exercisable and entitles the holder to acquire one common share for every 21 February 2025 Common Warrant exercised at an exercise price of $24.36 per common share for a period of 60 months following the closing of the February 2025 PP. Although the common shares and pre-funded warrants are each bundled with a February 2025 Common Warrant, each security is issued separately. Since the instruments were bundled, the Company uses the bifurcation method to determine the fair value of each security. The Black Scholes model was used to determine the fair value of the underlying February 2025 Common Warrant and the remainder of the purchase price was allocated to the common share or pre-funded warrant, resulting in a fair value of the first tranche of the February 2025 Common Warrants of $0.58 and $0.55 and a fair value of $7.308 for the common shares and $0.348 for the pre-funded warrants.

February 21 Tranche		Initial Recognition
Number of Warrants		3,787,879
Nasdaq closing price (in CAD)	$	0.80
Exercise price per warrant	$	1.16
Black Scholes fair value	$	0.58
Volatility		104%
Dividend yield		Nil
Risk-free interest rate		2.76%
Expected life (in years)		5.00
Fair value per warrant (CAD)	$	0.58
DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)
---
February 25 Tranche		Initial Recognition
---	---	---
Number of Warrants		151,515
Nasdaq closing price (in CAD)	$	0.77
Exercise price per warrant	$	1.16
Black Scholes fair value	$	0.55
Volatility		104%
Dividend Yield		Nil
Risk-free interest rate		2.65%
Expected life (in years)		5.00
Fair value per warrant (CAD)	$	0.55

The 2,884,179 pre-funded warrants were subsequently exercised at a weighted average exercise price per warrant of $0.001, for proceeds of $2,884, during the nine months ended June 30, 2025.

Brokers' Compensation and Share Issuance Costs

In connection with the August 2024 Offering, Wainwright was also granted a tail obligation resulting in earning 7.5% on any equity financing raised from investors introduced to the Company as part of the offering. The February 2025 PP fell mostly within the scope of the tail obligation and resulted in a payment of $244,128, representing 7.5% of the gross proceeds, within the scope of the tail obligation, to Wainwright upon closing of the transaction.

ThinkEquity acted as sole placement agent for the Offering. As compensation for services rendered, the Company (i) paid to ThinkEquity, at the closing of the February 2025 PP, a cash fee equal to $279,338, representing 7.5% of the aggregate gross proceeds of the February 2025 PP; and (ii) issued to ThinkEquity or its designees 196,970 warrants ("February 2025 Placement Agent Warrants") equal to 105% of the common shares and 5% of the pre-funded warrants sold in the February 2025 PP. The February 2025 Placement Agent Warrants are immediately exercisable, and entitle the holder to acquire one common share for every 21 February 2025 Placement Agent Warrants exercised at an exercise price of $24.36 per common share for a period of 60 months following the closing of the February 2025 PP.

The fair value of the broker compensation warrants at the closing of the February 2025 PP was $114,046, calculated using the Black Scholes model.

The share issuance costs related to the February 2025 PP recognized in equity were $927,219, inclusive of the broker compensation warrants.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)
February 21 Tranche		Initial Recognition
---	---	---
Number of Warrants		189,394
Nasdaq closing price (in CAD)	$	0.80
Exercise price per warrant	$	1.16
Black Scholes fair value	$	0.58
Volatility		104%
Dividend Yield		Nil
Risk-free interest rate		2.76%
Expected life (in years)		5.00
Fair value per warrant (CAD)	$	0.58
February 25 Tranche		Initial Recognition
---	---	---
Number of Warrants		7,576
Nasdaq closing price (in CAD)	$	0.77
Exercise price per warrant	$	1.16
Black Scholes fair value	$	0.55
Volatility		104%
Dividend Yield		Nil
Risk-free interest rate		2.65%
Expected life (in years)		5.00
Fair value per warrant (CAD)	$	0.55

b) Warrants

The following is a summary of changes in outstanding warrants since September 30, 2024:

	Number of warrants			Weighted <br>average <br>exercise price <br>per warrant
Outstanding at September 30, 2024	11,600,598		$	3.23
Issued (Note 11(a))	19,521,653			0.49
Exercised (1)	(11,188,379	)		0.03
Expired	(575,000	)		5.01
Outstanding at June 30, 2025	19,358,872		$	4.00
Exercisable at June 30, 2025	19,358,872		$	4.00

^The table^^below^^outlines the ratio upon which the above warrants are converted into common shares.^^^

^(1)^ ^The Pre-Funded Warrants exercised in Fiscal^^202^^5^ ^had a strike price of $0.0^^0^^1^^per warrant^^.^

In the nine months ended June 30, 2025, there were 10,838,382 pre-funded warrants and 350,000 November 2024 Common Warrants exercised, resulting in an increase to share capital of $5,971,828, a decrease to warrants of $4,819,055 and a decrease to warrant liabilities of $667,634 with the difference being recorded in the change in fair value of the warrant liabilities that was recognized in the unaudited condensed consolidated statements of net loss and comprehensive loss.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

In the nine months ended June 30, 2025, there were 575,000 warrants that expired resulting in $132,000 being recorded to contributed surplus.

The following table provides additional information on the total outstanding warrants at June 30, 2025:

		Number of warrants outstanding	Conversion ratio to Common Shares	Underlying Securities		Book value^^		Expiry date
Classified as equity
LEC's Warrants:
	Exercise price of CAD$0.70	500,000	14,700 for 1	34	$	425,000		April 29, 2026
December 2022 U.S. Underwriter Warrants
	Exercise price of US$5.1625	134,950	210 for 1	643	$	189,592		December 9, 2027
July 2023 U.S. Underwriter Warrants
	Exercise price of US$2.66	123,637	210 for 1	589	$	204,187		July 21, 2028
April 2024 U.S. Underwriter Warrants
	Exercise price of US$0.8125	76,925	210 for 1	366	$	43,869		April 9, 2029
June 2024 U.S. Underwriter Warrants
	Exercise price of US$0.725	145,000	210 for 1	690	$	61,213		June 14, 2029
August 2024 U.S. Underwriter Warrants
	Exercise price of US$0.25	353,625	210 for 1	1,684	$	28,826		August 9, 2029
November 2024 U.S. Underwriter Warrants
	Exercise price of US$1.125	194,450	21 for 1	9,260	$	187,468		November 1, 2029
November 2024 Private Placement Warrants
	Exercise price of CAD$1.03	3,795,200	21 for 1	180,724	$	2,903,470		November 12, 2029
November 2024 PP Underwriter Warrants
	Exercise price of CAD$1.03	207,260	21 for 1	9,870	$	158,554		November 12, 2029
February 21, 2025 Private Placement Warrants
	Exercise price of CAD$1.16	3,787,879	21 for 1	180,375	$	2,196,970		February 21, 2030
February 21, 2025 PP Underwriter Warrants
	Exercise price of CAD$1.16	189,394	21 for 1	9,019	$	109,849		February 21, 2030
February 25, 2025 Private Placement Warrants
	Exercise price of CAD$1.16	151,515	21 for 1	7,215	$	83,939		February 25, 2030
February 25, 2025 PP Underwriter Warrants
	Exercise price of CAD$1.16	7,576	21 for 1	361	$	4,197		February 25, 2030
Costs related to the Nov 2024 Public Offering Warrants					$	(187,468	)
Costs related to the Nov 2024 Private Placement Warrants and PFWs					$	(681,185	)
Costs related to the Feb 2025 Private Placement Warrants and PFWs					$	(803,109	)
		9,667,411		400,830	$	4,925,372
Classified as liability
December 2022 Public Offerings:
	Exercise price of US$5.00	3,226,392	210 for 1	15,364	$	176,073		December 9, 2027
December 2022 Debt Settlement
	Exercise price of US$5.00	56,141	210 for 1	267	$	3,064		December 9, 2027
July 2023 Public Offerings:
	Exercise price of US$2.66	1,542,194	210 for 1	7,344	$	4,208		July 21, 2028
July 2023 Pre-Funded Warrants
	Exercise price of US$0.001	151,734	210 for 1	723	$	9,191		No expiry
August 2024 Public Offering
	Exercise price of US$0.25	4,715,000	210 for 1	22,452	$	154,382		August 9, 2029
		9,691,461		46,150		346,918
	Total outstanding warrants	19,358,872		446,980	$	5,272,290
DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)
---

c) Contributed Surplus

Contributed surplus consists of issued 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.

Share-based compensation

On August 26, 2024, DEFSEC shareholders approved the renewal of the Long-Term Incentive Plan (the "LTIP"). The number of RSUs, PSUs, deferred share units ("DSUs"), and stock appreciation rights ("SARs") (collectively "Share Units") authorized for issuance pursuant to the LTIP is 1,939 Share Units. Accordingly, we have 882 Share Units available for future grants.

We did not grant any stock options, RSUs, PSUs, and SARs, pursuant to our LTIP during the nine months ended June 30, 2025. Accordingly, we had 1,057 outstanding stock options at June 30, 2025, and we have 65,704 stock option units available for future grants.

	Number of options			Weighted average exercise price per warrant
Outstanding at September 30, 2024	1,229		$	554.40
Cancelled	(172	)	$	664.41
Outstanding at June 30, 2025	1,057		$	554.95
Options exercisable at June 30, 2025	816		$	560.69

14. Loss per share

As disclosed in Note 1(b) and (c), the 2024 Reverse Split and 2025 Reverse Split has been applied retrospectively herein.

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 <br>ended <br>June 30,<br>2025	Three months <br>ended <br>June 30,<br> 2024	Nine months <br>ended <br>June 30, <br>2025	Nine months <br>ended <br>June 30,<br> 2024
Issued common shares,  beginning of period	530,364	28,806	75,199	26,747
Effect of shares issued from:
November 2024 U.S. Public Offering (Note 11(a))	-	-	3,363	-
February 2025 U.S. Private Placement (Note 11(a))	-	-	23,638	-
April 2024 U.S. Public Offering	-	3,154	-	1,047
June 2024 U.S. Public Offering	-	2,428	-	806
Exercise of warrants	-	-	8,059	-
Exercise of pre-funded warrants	94,959	4,086	297,085	1,619
Debt settlements	-	-	4,797	66
Over-allotment Pre-Funded Warrants	-	3,448	-	1,145
Weighted average number of dilutive common shares	625,323	41,922	412,141	31,430
DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)
---

At June 30, 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.

15. 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<br>ended<br>June 30, <br>2025		Three months <br>ended<br>June 30,<br>2024		Nine months<br>ended<br>June 30, <br>2025		Nine months<br>ended<br>June 30,<br> 2024
Major products / service lines
Digitization	$	1,067,650	$	286,289	$	2,853,419	$	659,775
Less-Lethal		340,929		39,160		706,053		279,644
Training and services		8,700		1,028		8,700		1,028
Other		224		2,999		1,151		3,961
	$	1,417,503	$	329,476	$	3,569,323	$	944,408
Primary geographical markets
Canada	$	1,274,341	$	309,940	$	3,330,797	$	851,784
United States		143,162		19,536		238,526		92,624
	$	1,417,503	$	329,476	$	3,569,323	$	944,408
Timing of revenue recognition
Products and services transferred over time	$	1,076,350	$	287,317	$	2,862,119	$	660,803
Products transferred at a point in time		341,153		42,159		707,204		283,605
	$	1,417,503	$	329,476	$	3,569,323	$	944,408

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 June 30, 2025, DEFSEC's contracted not yet recognized revenue was $78,519 (2024 - $208,886), of which 100% of this amount is expected to be recognized over the next 12 months.

For the three months ended June 30, 2025, two customers accounted for 66% and 10% (2024 – three customers accounted for 70%, 12%, and 4%) of revenue. For the nine months ended June 30, 2025, two customers accounted for 65% and 10% (2024 – three customers accounted for 45%, 18%, and 15%) of revenue.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

16. Net finance costs

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

		Three months ended <br>June 30,			Three months ended <br>June 30,			Nine months ended <br>June 30,			Nine months ended <br>June 30,
		2025			2024			2025			2024
Finance costs from:
Accretion cost - accrued royalties liability	$	41,089		$	47,036		$	125,915		$	136,967
Lease obligations		30,720			17,007			53,813			54,868
Other		100			-			6,553			694
Total financing costs		71,909			64,043			186,281			192,529
Interest income		(29,344	)		(1,009	)		(50,796	)		(54,640	)
Gain on debt settlement		-			-			500			-
Net finance costs	$	42,565		$	63,034		$	135,985		$	137,889

17. Financial instruments

For the three and nine months ended June 30, 2025, there were no material changes to our financial risks as disclosed in Note 23 of the Annual Financial Statements, except for the following:

Foreign currency risk

For the nine months ended June 30, 2025, we raised gross proceeds of $4.9 million (US$3.5 million) in the November 2024 Offering (see Note 13(a)), including the issuance of warrants with an exercise price denominated in U.S. dollars in the November U.S. Public Offering (see Note 12). Warrants exercised in the first quarter of fiscal 2025 resulted in proceeds of $0.8 million (US$0.6 million). On November 12, 2024, the warrants were subsequently converted to CAD denomination and extinguished from liabilities as they were transferred to equity. We also raised gross proceeds of $3.4 million (US$2.5 million) in the November 2024 PP (see Note 13(a)), including the issuance of warrants with an exercise price denominated in CAD dollars in the November Private Placement (see Note 13(a)). Although the financing was denominated in CAD, the terms of the deal allowed for the proceeds to be sent to the Company in U.S. dollars for convenience. We also raised gross proceeds of $3.7 million in the February 2025 PP (see Note 13(a)), including the issuance of warrants with an exercise price denominated in CAD dollars in the February Private Placement (see Note 13(a)). Although the financing was denominated in CAD, the terms of the deal allowed for the proceeds to be sent to the Company in U.S. dollars for convenience. Also, certain of our revenues were denominated in U.S. dollars and we also procure certain raw materials denominated in U.S. dollars for product development. Accordingly, we are exposed to the U.S. dollar currency. Where a natural hedge cannot be achieved, a significant change in the U.S. dollar currency could have a significant effect on our financial performance, financial position and cash flows. Currently, we do not use derivative instruments to hedge the U.S. dollar exposure. Throughout the year we maintained the majority of our cash assets in U.S. dollars and converted to CAD as needed as we primarily received funds from financing in U.S. dollars.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

At June 30, 2025, we had the following net U.S. dollar exposure:

		Total
Net assets in U.S. subsidiary	$	-
US denominated from other:
Assets	$	1,654,635
Liabilities		(399,422
Net US dollar exposure	$	1,255,213
Impact to profit or loss if 5% movement in the US dollar	$	62,761

All values are in US Dollars.

During the three and nine months ended June 30, 2025, we recorded a foreign exchange loss of $258,856 and $67,750, respectively (2024 - loss of $22,492 and gain of $68,413).

Liquidity risk (Restated)

At June 30, 2025, the Company’s restated contractual obligations were as follows:

Payment due:		Total		Within 1 Year		1 to 3 years		3 to 5 years		5 years and<br>beyond
Minimum royalty commitments	$	2,000,000	$	-	$	700,000	$	600,000	$	700,000
Accounts payable and accrued liabilities		1,111,134		1,111,134		-		-		-
Other contracts		131,335		104,780		13,560		12,995		-
Lease obligations		2,290,971		141,003		431,253		407,420		1,311,295
Total contractual obligations	$	5,533,440	$	1,356,917	$	1,144,813	$	1,020,415	$	2,011,295

At June 30, 2025, we had $2.5 million in cash and $2.6 million in working capital (current assets less current liabilities) (September 30, 2024 - $0.3 million in cash and negative $1.1 million in working capital).

18. Supplemental cash flow information (Restated)

The following table presents restated net changes in working capital items:

		Nine months <br>ended<br>June 30, 2025			Nine months <br>ended <br>June 30, 2024
Trade and other receivables	$	(562,587	)	$	(101,331	)
Inventories		24,416			(76,474	)
Prepaid expenses and deposits		(103,923	)		166,003
Deferred costs		(73,165	)		(26,886	)
Accounts payable and accrued liabilities		(397,364	)		(43,305	)
Contract liabilities		(42,054	)		(13,872	)
	$	(1,154,677	)	$	(95,865	)

The following is a summary of non-cash items that were excluded from the Unaudited Condensed Consolidated Interim Statements of Cash Flows for the nine months ended June 30, 2025:

• $1,149,676 non-cash increases to right-of-use assets and lease obligations for a new lease signed in Kanata, Ontario

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

• 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 issuance costs as part of the net proceeds settlement at the closing of the November 1, 2024 U.S. Public Offering (see Note 13(a));
• $221,088 non-cash share issuance costs as part of the net proceeds settlement at the closing of the November 12, 2024 Private Placement (see Note 13(a));
• $114,046 non-cash share issuance costs as part of the net proceeds settlement at the closing of the February 2025 Private Placement (see Note 13(a)); and
• Expiry of 200,000 warrants in connection with the acquisition of Police Ordnance Company (see Note 4 of the Annual Financial Statements) expired December 15, 2024.

The following is a summary of non-cash items that were excluded from the Unaudited Condensed Consolidated Interim Statements of Cash Flows for the nine months ended June 30, 2024:

• 46,706 shares issued for debt settlement. The debt resulted in a tail obligation relating to services rendered by a third-party consultant;
• 778,814 warrants exercised in connection with the July 2023 Private Placement;
• 199,000 warrants exercised in connection with the U.S. IPO and Canadian Offering; and
• 803,500 warrants exercised in connection with the April 2024 U.S. Public Offering.

19. Commitments and contingencies

There were no commitments and contingencies at June 30, 2025 other than the royalty payment disclosed in Note 17.

20. Segmented information

Our Chairman has been identified as the chief operating decision maker. Our Chairman evaluates the performance of DEFSEC and allocates resources based on the information provided by our internal management system at a consolidated level.  We have determined that we have only one operating segment.

At June 30, 2025, we had equipment of $46,171 (2024 – $nil) in the United States while all other property and equipment are located in Canada. We previously had a right-of-use asset located in the United States which was disposed of in the quarter ended March 31, 2025 (2024 – $57,143).

21. Key management compensation

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly. The key management personnel of the Company are the members of the Company's executive management team and Board of Directors.

Key management compensation for the three and nine months ended June 30, 2025 and 2024 were as follows:

		Three months<br>ended<br>June 30, 2025		Three months <br>ended<br>June 30, 2024		Nine months<br>ended<br>June 30, 2025		Nine months<br>ended<br>June 30, 2024
Short-term key management compensation	$	202,500	$	198,750	$	1,132,083	$	472,917
Share-based payments		26,570		28,282		76,533		87,385
Directors' fees		122,500		152,500		497,500		437,500
	$	351,570	$	379,532	$	1,706,116	$	997,802
DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)
---

22. Subsequent Events

On July 25, 2025, the Company issued 673,084 common shares and 86,795 pre-funded warrants of the Company as part of a public offering, together with common share purchase warrants to purchase up to 759,879 common shares at a combined public offering price of $8.955 per share or pre-funded warrant and accompanying warrant for gross proceeds of $6.8 million. The warrants have an exercise price of $10.52 per share, are exercisable upon issuance and expire five years following the date of issuance.

Subsequent to the issuance, 55,530 pre-funded warrants were exercised at an exercise price of $0.001.

On October 31, 2025, the Company issued 31,265 shares of common stock upon the exercise of 31,265 pre-funded warrants, which were issued as part of the July 25, 2025, share offering.  The exercise price of each pre-funded warrant was $0.001 per share.  The issuance was completed in accordance with the terms of the warrant agreements.

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 CAD$3.64 (US$2.65) per Common Share in a registered direct offering. In a concurrent private placement, the Company issued unregistered warrants to purchase up to 566,040 Common Shares at an exercise price of CAD$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.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

23. Restatement of previously issued unaudited condensed consolidated interim financial statements

The Company has restated its previously issued unaudited condensed consolidated interim financial statements for the three and nine months ended June 30, 2025, to correct errors related to the accounting for a lease agreement.  During the preparation of the Company’s consolidated financial statements for the year ended September 30, 2025, the Company identified errors in the measurement of right‑of‑use (“ROU”) assets, lease liabilities, and prepaid expenses associated with one of the Company’s operating leases.

The errors primarily related to (i) the initial measurement of ROU assets and lease liabilities, and (ii) the recording of lease‑related prepayments. Specifically:

• Certain variable lease payments were incorrectly included in the initial measurement of ROU assets and lease liabilities, resulting in an overstatement of both balances.
• Prepaid variable rent amounts were not properly recorded in prepaid expenses, resulting in an understatement of prepaid expenses and overstatement of ROU assets.

These unaudited condensed consolidated interim financial statements and related notes for the three and nine months ended June 30, 2025 have been restated to reflect these corrections.  The restatement had no impact on the unaudited condensed consolidated interim statements of net loss and comprehensive loss, statements of changes in shareholders' equity, or statements of cash flows. Further, there was no impact on basic and diluted net loss per share on the unaudited condensed consolidated interim financial statements of net loss and comprehensive income.

DEFSEC TECHNOLOGIES INC.(Formerly KWESST MICRO SYSTEMS INC.)<br>Restated Notes to the Unaudited Condensed Consolidated Interim Financial Statements<br>Three and nine months ended June 30, 2025 and 2024<br>(Expressed in Canadian dollars, except share amounts)

A summary of the quantitative impacts to restated line items on the restated unaudited condensed consolidated interim statements of financial position is presented as follows:

		As previously<br>reported			Restatement			Restated<br>Disclosure
ASSETS		****			****			****
Cash and cash equivalents	$	2,543,211		$	–		$	2,543,211
Restricted short-term investment		30,000			–			30,000
Trade and other receivables		1,130,462			–			1,130,462
Inventories		508,747			–			508,747
Prepaid expenses and other		282,974			22,474			305,448
Deferred costs		79,442			–			79,442
Current assets		4,574,836			22,474			4,597,310
Property and equipment		291,039			–			291,039
Right-of-use assets		2,639,396			(1,444,120	)		1,195,276
Deposit		31,040			–			31,040
Intangible assets		2,488,326			–			2,488,326
Deferred costs		81,364			–			81,364
Non-current assets		5,531,165			(1,444,120	)		4,087,045
Total Assets	$	10,106,001		$	(1,421,646	)	$	8,684,355
LIABILITIES AND SHAREHOLDERS' EQUITY								****
Liabilities								****
Accounts payable and accrued liabilities	$	1,111,134		$	–		$	1,111,134
Accrued royalties liability		200,000			–			200,000
Lease obligations		415,540			(161,227	)		254,313
Contract liabilities		78,517			–			78,517
Warrant liabilities		346,918			–			346,918
Current liabilities		2,152,109			(161,227	)		1,990,882
Accrued royalties liability		1,044,050			–			1,044,050
Lease obligations		2,325,213			(1,260,419	)		1,064,794
Non-current liabilities		3,369,263			(1,260,419	)		2,108,844
Total Liabilities		5,521,372			(1,421,646	)		4,099,726
Shareholders' Equity								****
Share capital		44,201,818			–			44,201,818
Warrants		74,925,372			–			74,925,372
Contributed surplus		5,383,927			–			5,383,927
Accumulated other comprehensive loss		(55,542	)		–			(55,542	)
Accumulated deficit		(49,870,946	)		–			(49,870,946	)
Total Shareholders' Equity		4,584,629			–			4,584,629
Total Liabilities and Shareholders' Equity	$	10,106,001		$	(1,421,646	)	$	8,684,355

DEFSEC Technologies Inc.: Exhibit 99.2 - Filed by newsfilecorp.com

DEFSEC TECHNOLOGIES INC.

(Formerly KWESST MICRO SYSTEMS INC.)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

RESTATED

For the three and nine months ended June 30, 2025

January 30, 2026

DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 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 June 30, 2025. This MD&A has been prepared with an effective date of January 30, 2026.

This MD&A should be read in conjunction with our unaudited condensed consolidated interim financial statements for the three and nine months ended June 30, 2025 ("Q3 Fiscal 2025 FS") and the annual audited consolidated financial statements and related notes for the years ended September 30, 2024 and 2023 ("Fiscal 2024 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 for view on SEDAR+ at www.sedarplus.ca.

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 non-recurring 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 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.

GOING CONCERN

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. DEFSEC's Q3 Fiscal 2025 FS 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. Refer to Note 2(a) of the Q3 Fiscal 2025 FS for further information.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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RESTATEMENT

We have restated our previously issued unaudited condensed consolidated interim financial statements for the three and nine months ended June 30, 2025, to correct errors related to the accounting for a lease agreement.  During the preparation of our consolidated financial statements for the year ended September 30, 2025,  the Company identified errors in the measurement of right‑of‑use (“ROU”) assets, lease liabilities, and prepaid expenses associated with one of the Company’s operating leases.

The errors primarily related to (i) the initial measurement of ROU assets and lease liabilities, and (ii) the recording of lease‑related prepayments. Specifically:

• Certain variable lease payments were incorrectly included in the initial measurement of ROU assets and lease liabilities, resulting in an overstatement of both balances.
• Prepaid variable rent amounts were not properly recorded in prepaid expenses, resulting in an understatement of prepaid expenses and overstatement of ROU assets.

The unaudited condensed consolidated interim financial statements and related notes for the three and nine months ended June 30, 2025 have been restated to reflect these corrections.  The restatement had no impact on the unaudited condensed consolidated interim statements of net loss and comprehensive loss, statements of changes in shareholders' equity, or statements of cash flows. Further, there was no impact on basic and diluted net loss per share on the unaudited condensed consolidated interim financial statements of net loss and comprehensive income.

3	Page
DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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A summary of the quantitative impacts to restated line items on the restated unaudited condensed consolidated interim statements of financial position is presented as follows:

		As previously<br>reported			Restatement			Restated<br>Disclosure
ASSETS		****			****			****
Cash and cash equivalents	$	2,543,211		$	–		$	2,543,211
Restricted short-term investment		30,000			–			30,000
Trade and other receivables		1,130,462			–			1,130,462
Inventories		508,747			–			508,747
Prepaid expenses and other		282,974			22,474			305,448
Deferred costs		79,442			–			79,442
Current assets		4,574,836			22,474			4,597,310
Property and equipment		291,039			–			291,039
Right-of-use assets		2,639,396			(1,444,120	)		1,195,276
Deposit		31,040			–			31,040
Intangible assets		2,488,326			–			2,488,326
Deferred costs		81,364			–			81,364
Non-current assets		5,531,165			(1,444,120	)		4,087,045
Total Assets	$	10,106,001		$	(1,421,646	)	$	8,684,355
LIABILITIES AND SHAREHOLDERS' EQUITY								****
Liabilities								****
Accounts payable and accrued liabilities	$	1,111,134		$	–		$	1,111,134
Accrued royalties liability		200,000			–			200,000
Lease obligations		415,540			(161,227	)		254,313
Contract liabilities		78,517			–			78,517
Warrant liabilities		346,918			–			346,918
Current liabilities		2,152,109			(161,227	)		1,990,882
Accrued royalties liability		1,044,050			–			1,044,050
Lease obligations		2,325,213			(1,260,419	)		1,064,794
Non-current liabilities		3,369,263			(1,260,419	)		2,108,844
Total Liabilities		5,521,372			(1,421,646	)		4,099,726
Shareholders' Equity								****
Share capital		44,201,818			–			44,201,818
Warrants		74,925,372			–			74,925,372
Contributed surplus		5,383,927			–			5,383,927
Accumulated other comprehensive loss		(55,542	)		–			(55,542	)
Accumulated deficit		(49,870,946	)		–			(49,870,946	)
Total Shareholders' Equity		4,584,629			–			4,584,629
Total Liabilities and Shareholders' Equity	$	10,106,001		$	(1,421,646	)	$	8,684,355
4	Page
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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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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 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;
• our strategic relationships with third parties;
• our anticipated trends and challenges in the markets in which we operate;
• governance of us as a public company; and
• expectations regarding future developments of products and our ability to bring these products to market.

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 27, 2024:

• limited operating history;
• failure to realize our growth strategy;
• failure to complete transactions or realize anticipated benefits;
• reliance on key personnel;
• regulatory compliance;
• competition;

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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• changes in laws, regulations and guidelines;
• demand for our products;
• fluctuating prices of raw materials;
• pricing for products;
• ability to supply sufficient product;
• potential cancellation or loss of customer contracts if we are unable to meet contract performance requirements;
• expansion to other jurisdictions;
• damage to our reputation;
• operating risk and insurance coverage;
• negative operating cash flows;
• management of growth;
• product liability;
• product recalls;
• environmental regulations and risks;
• ownership and protection of intellectual property;
• constraints on marketing products;
• reliance on management;
• fraudulent or illegal activity by our employees, 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 privacy laws;
• government regulations regarding public or employee health and safety regulations, including public health measures in the event of pandemics or epidemics;
• 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 of additional capital raises;
• conflicts of interest;
• litigation;
• risks related to United States' and other international activities, including regional conflicts that may impact our operations;
• risks related to security clearances;
• risks relating to the ownership of our securities, such as potential extreme volatility in the price of our securities;
• risks related to our foreign private issuer status;
• risks related to our emerging growth company status;
• risks related to meeting the continued listing requirements of Nasdaq;
• risks related to the liquidity of the Common Shares;
• significant changes or developments in United States trade policies and tariffs that may have a material adverse effect on our business and financial statements;
• risks related to United States tariffs, including potential supply chain disruptions, required operational adjustments, increased costs and potential logistical disruptions;
• risks related specifically to United States tariffs on aluminum and steel; 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 conditions 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 operations. 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.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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BUSINESS OVERVIEW

Corporate Information

We are a Canadian corporation incorporated on November 28, 2017, under the laws of the Province of British Columbia. Our registered office is located at 550 Burrard Street, Suite 2900, Vancouver, British Columbia, Canada and our corporate office is located at Unit 300, 80 Hines Road, Ottawa, Ontario, Canada. We have representative offices in London (United Kingdom) and Abu Dhabi (United Arab Emirates).

DEFSEC Technologies Inc., formerly known as KWESST Micro Systems Inc., is an early-stage technology company that develops and commercializes proprietary next-generation tactical systems that advance operational effectiveness and survivability for military and public safety personnel deployed at the Tactical Edge (those commanders, soldiers, operators and first responders conducting operations primarily in the dismounted domain, on foot and on and off vehicles).

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

Our core mission is to protect and save lives. We group our offerings for commercialization purposes into Military and Public Safety missions, as shown on our website at www.defsectec.com.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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The following is a summary of our main product and service categories for each business line:

Less-Lethal	Digitization	Counter-Threat
PARA SHOT ^TM^ ^1^ 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><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>Range of 37mm irritant and blunt impact rounds</li><br> <li>40mm blunt impact rounds</li><br> </ul>	Products:<br><ul type="disc"><br> <li>TASCS Indirect Fire Modules System ("<b>TASCS IFM</b>")</li><br> <li>TASCS Networked Observation and Reconnaissance System ("<b>TASCS NORS</b>")</li><br> <li>New T-SAS Tactical Surveillance and Sniper system ("<b>T-SAS</b><sup>™"</sup>)</li><br> </ul><br> <br>Services:<br><ul type="disc"><br> <li>ATAK Centre of Excellence</li><br> <li>Lightning SaaS for Critical Incident Management System ("<b>CIMS</b>") <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 Detection Systems ("<b>BLDS</b>")</li><br> <li>Phantom Electronic Warfare device</li><br> </ul>

^1^ To position PARA OPS^TM^ as an extension of our ARWEN^®^ brand we have renamed it PARA SHOT^TM^.

DEFSEC's Military offerings are comprised of:

• Digitization: real-time data sharing at the tactical level, including integration with Battlefield Management Applications (BMS) including ATAK and TAK;

• Digitized firing platforms ("Digital Fires" or "Joint Fires");

• BLDS; and

• Digitized Electro Magnetic Spectrum Operations ("EMSO").

DEFSEC's Public Safety offerings are comprised of:

• KWESST Lightning^TM^: 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”). The Company is currently pursuing in trials and pilots of the product as it continues development towards the commercial release that is currently expected to be available in the 2025 calendar year.

• Less-Lethal Munitions Systems:

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

• ARWEN^®^ 37mm system, plus new 40mm munition.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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Strategy

Our strategy is to pursue and win large defense contracts for multi-year revenue visibility with prime defense contractors for next-generation situational awareness, with a particular focus on ATAK applications that can be leveraged to address similar requirements in the Public Safety Market complemented by our proprietary ARWEN^®^ and PARA SHOT^TM^  less-lethal products, where it is possible to drive sales and where the sales cycle is typically shorter than the more programmatic defense market.

Major Highlights - Quarter ended June 30, 2025 ("Q3 Fiscal 2025")

The following is a summary of the major highlights that occurred during Q3 Fiscal 2025:

• On April 1, 2025, the Company announced the results of its special meeting of shareholders. The consolidation resolution was approved by a majority of the votes cast by the holders of common shares of the Company, either present in person or represented by proxy.
• On April 21, 2025, the Company announced that it will effect a consolidation of the Company's issued and outstanding common shares on the basis of twenty-one (21) pre-consolidation Shares for each one (1) post-consolidation Share. The Consolidation was effective at 12:01 a.m. Eastern Daylight Time April 23, 2025, on the Nasdaq and was effective at 12:01 a.m. Eastern Daylight Time on April 24, 2025, on the TSX Venture Exchange. While the Shares were expected to begin trading on the Nasdaq on a consolidated basis on or around April 23, 2025, due to the discrepancy in the effective date of the consolidation on both markets, trading in the securities of the Company was halted on April 23, 2025 and resumed trading on a consolidated basis on the Nasdaq and the TSX Venture Exchange at market open on April 24, 2025.
• On May 8, 2025, the Company announced that it received a notification letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC notifying the Company that it has regained compliance with the minimum bid price requirement set forth under Nasdaq Listing Rule 5550(a)(2). The Notification Letter confirmed that the Company evidenced a closing bid price at or greater than the USD$1.00 per common share minimum requirement for 10 consecutive business days from April 24, 2025, to May 7, 2025. As a result, the listing matter has been closed.
• On June 18, 2025, the Company announced receipt of a first order from a defense systems integrator for testing prototypes of its newest generation of the BLDS for a major North American armored vehicle program.  On August 4, 2023, KWESST delivered earlier versions of the BLDS technology to an overseas NATO country through a European defense integrator.
• On June 25, 2025, the Company announced that it changed its name to "DEFSEC Technologies Inc." at the opening of its expanded new facility at 80 Hines Road in Kanata North, Ottawa, Ontario. The change became official on June 30, 2025.

The following is a summary of major highlights that occurred since Q3 Fiscal 2025:

• On July 24, 2025, the Company announced the pricing of a public offering whereby on July 25, 2025 it issued 759,879 common shares of the Company (or pre-funded warrants (“Pre-funded Warrants”) in lieu thereof), together with common share purchase warrants (“Warrants”) to purchase up to 759,879 common shares at a combined public offering price of CAD$8.955 per share (or Pre-funded Warrant in lieu thereof) and accompanying Warrant. The Warrants have an exercise price of CAD$10.52 per share, are exercisable upon issuance and will expire five years following the date of issuance. The public offering closed on August 7, 2025. In connection with the offering, DEFSEC paid a cash fee to the placement agent in an amount of CAD$510,354 and issued to the placement agent or its designees 56,991 placement agent’s warrants entitling the holder to acquire one common share of DEFSEC for a period of five years from the commencement of sales of the offering at an exercise price of CAD$11.1938 per common share.

• 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 with the DSEF for the digital modernization of the Canadian Armed Forces. The Company plans to add 15 roles to its team, subcontracting 13 of these from ADGA Group Consultants Inc. This collaboration is expected to enhance DEFSEC’s revenue and margins, positioning the Company for further growth as the Canadian government increases defence spending.

• On December 17, 2025, the Company entered into definitive securities purchase agreements for the purchase and sale of 566,040 Common Shares at a purchase price of CAD$3.64 (US$2.65) per Common Share in a registered direct offering (the “December 2025 Securities Purchase Agreements”). In a concurrent private placement, we issued unregistered warrants to purchase up to 566,040 Common Shares at an exercise price of CAD$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.

__________________________

^1^ Unaudited, non-IFRS measure. See Item 4. A – Events in the Development of the Business – Non-IFRS Measures.

^2^ See Consolidated Financial Statements of DEFSEC Technologies Inc. for the years ended September 30, 2025, 2024 and 2023 filed on the Company’s SEDAR+ profile at https://sedarplus.ca/

^3^ Unaudited, non-IFRS measure. See Item 5. A – Operating Results – Non-IFRS Measures.

^4^ Unaudited, non-IFRS measure. See Item 5. A – Operating Results – Non-IFRS Measures.

9	Page
DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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RESULTS OF OPERATIONS

The following selected financial data has been extracted from the unaudited condensed consolidated interim financial statements for the three and nine months ended June 30, 2025 and 2024.

		Three months ended June 30,					Change		Nine months ended June 30,					Change
		2025			2024		%		2025			2024		%
Revenue	$	1,417,503		$	329,476		330%	$	3,569,323		$	944,408		278%
Cost of sales		(1,018,013	)		(288,665	)	253%		(2,451,290	)		(715,219	)	243%
Gross margin		399,490			40,811		879%		1,118,033			229,189		388%
Gross margin %		28.2%			12.4%				31.3%			24.3%
Operating Expenses		****							****
General and administrative ("G&A")		1,113,296			1,122,240		-1%		3,727,001			3,807,234		-2%
Selling and marketing ("S&M")		375,353			224,790		67%		1,392,014			1,125,758		24%
Research and development ("R&D")		402,334			497,454		-19%		1,374,825			1,787,382		-23%
Share-based compensation		21,777			59,131		-63%		99,174			183,602		-46%
Depreciation and amortization		309,085			321,974		-4%		909,505			963,049		-6%
Total operating expenses		2,221,845			2,225,589		0%		7,502,519			7,867,025		-5%
Operating loss		(1,822,355	)		(2,184,778	)	-17%		(6,384,486	)		(7,637,836	)	-16%
Other income (expenses)		****							****
Share issuance costs		-			(366,931	)	100%		(1,807,686	)		(366,931	)	100%
Net finance costs		(42,565	)		(63,034	)	-32%		(135,985	)		(137,889	)	-1%
Foreign exchange gain (loss)		(258,856	)		(22,492	)	1051%		(67,750	)		68,413		-199%
Impairment of right-of-use assets		-			-		100%		(88,596	)		-		100%
Gain on disposal		-			-		100%		6,809			-		100%
Change in fair value of warrant liabilities		(177,290	)		1,475,280		-112%		1,260,106			2,973,112		-58%
Total other income (expenses), net		(478,711	)		1,022,823		-147%		(833,102	)		2,536,705		-133%
Net loss	$	(2,301,066	)	$	(1,161,955	)	98%	$	(7,217,588	)	$	(5,101,131	)	41%
EBITDA loss ^(1)^	$	(1,949,416	)	$	(776,947	)	151%	$	(6,172,098	)	$	(4,000,193	)	54%
Adjusted EBITDA loss^(1)^	$	(1,491,493	)	$	(1,901,288	)	-22%	$	(5,375,807	)	$	(6,491,185	)	-17%
Loss per share - basic and diluted^(2)^	$	(3.68	)	$	(27.72	)	-87%	$	(17.51	)	$	(162.30	)	-89%
Weighted average common shares - basic		625,323			41,922		1392%		412,141			31,430		1211%

^(1)^ ^EBITDA and^^Adjusted EBITDA^^are^^non-IFRS measure^^s^^.^ ^See^^"^^Non-IFRS Measures^^"^^.^ ^See below for^^r^^econciliation of Non-IFRS Measure^^s^^.^

^(2)^ ^See share consolidation in^^the summary of major highlights that occurred since^^Q3^^Fiscal 2025 for more information^^.^

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 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 June 30,						Nine months ended June 30,
		2025			2024			2025			2024
Net loss as reported under IFRS	$	(2,301,066	)	$	(1,161,955	)	$	(7,217,588	)	$	(5,101,131	)
Net finance costs		42,565			63,034			135,985			137,889
Depreciation and amortization		309,085			321,974			909,505			963,049
EBITDA loss		(1,949,416	)		(776,947	)		(6,172,098	)		(4,000,193	)
Other adjustments:		****						****
Share issuance costs		-			269,316			1,807,686			366,931
Stock-based compensation		21,777			59,131			99,174			183,602
Foreign exchange loss (gain)		258,856			22,492			67,750			(68,413	)
Impairment of right-of-use assets		-			-			88,596			-
Gain on disposal		-			-			(6,809	)		-
Change in fair value of warrant liabilities		177,290			(1,475,280	)		(1,260,106	)		(2,973,112	)
Adjusted EBITDA loss	$	(1,491,493	)	$	(1,901,288	)	$	(5,375,807	)	$	(6,491,185	)

Current Quarter Variance Analysis (Q3 Fiscal 2025 vs. Q3 Fiscal 2024)

The Q3 Fiscal 2025 net loss was $2.3 million compared to $1.2 million in Q3 Fiscal 2024. Q3 Fiscal 2025 EBITDA loss was $1.9 million, compared to $0.8 million in the comparable prior year period. The increase in net loss and EBITDA loss of $1.1 million is due primarily to an increase in other expenses (primarily a decrease in the gain on the change in fair value of the warrant liabilities, which fluctuates depending on the Company’s stock price) of $1.5 million offset by an increase in gross margin of $0.4 million as described in further detail below.

Revenue

Total revenue increased by $1.1 million in Q3 Fiscal 2025 compared to Q3 Fiscal 2024, mainly due to an additional $0.8 million generated from the digitization business line and $0.3 million of additional ARWEN^®^ sales. The increase is due to the significant ramp-up on the Land C4ISR contract beginning in the first quarter of fiscal 2025 as well as a refocus on the ARWEN^®^ product line and the significant reduction of the order backlog due to improvements made to the Company’s supply chain for these products.

Gross Margin

Gross margin percentage increased from 12.4% in Q3 Fiscal 2024 to 28.2% in Q3 Fiscal 2025 mainly due to the continued ramp-up and established margins being achieved from the digitization business line offset by lower margins achieved on the ARWEN^®^ product line due to the difference in product mix being sold over the comparable periods, with an increase in launcher sales in Q3 Fiscal 2025. The ARWEN^®^ product line was refocused around reliable suppliers as well as manufacturing agreements and improved customer satisfaction with the continued elimination of the backlog of orders and speedier order fulfilment.

Outlook

Management expects revenue to continue to increase as it adds additional resources to fulfill its Canadian Government Defence programs.  Management continues to work closely with industry partners and prime contractors on the outlook for growth. The Company also expects revenue to increase with continued growth in the ARWEN^®^ business including the expected demand/future orders for the new 40mm ammunition and PARA SHOT^TM^ products as well as the commercial launch of KWESST Lightning^TM^. Management also expects the initial order of BLDS in the quarter to result in requests for additional networked prototypes ultimately resulting in future sales orders.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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Operating Expenses ("OPEX")

Total OPEX increased overall by a negligible amount from the comparable prior year period for the three months ended June 30, 2025, comprised of:

• Sales and marketing expenses increased by $0.2 million, due to a change in the classification of executive compensation as a result of a shift in focus to business development, especially for ARWEN^®^ 40mm, PARA SHOT^TM^ and KWESST Lightning^TM^; and
• Research and development expenses decreased by $0.1 million, primarily due to a reduction in engineering costs related to the PARA SHOT^TM^ products as the Company is now in the commercialization stage and planning for production as compared to product development costs being incurred in the comparative prior year period.

Other income (expenses), net

For Q3 Fiscal 2025, total other expenses were $0.5 million, compared to total other income of $1.0 million in Q3 Fiscal 2024 resulting in a decrease in total other income of $1.5 million. The change in total other income (expenses) was driven mainly by:

• a $1.7 million increase in the change in fair value of warrant liabilities as a result of the remeasurement of the warrant liabilities at June 30, 2025. Under IFRS, we are required to remeasure the warrant liabilities at each reporting date until they are exercised or expired;
• a $0.2 million increase in the foreign exchange loss due to the recent fluctuation in the CAD/USD exchange rate in the current period as the majority of the Company’s cash is held in USD; offset by
• a $0.4 million decrease in share issuance costs reported on the unaudited condensed consolidated interim statements of net loss and comprehensive loss as there were no such costs in Q3 Fiscal 2025.

SUMMARY OF QUARTERLY RESULTS

The following table summarizes selected results for the eight most recently completed quarters to June 30, 2025 (unaudited):

	2025						2024								2023
($ in thousands)	Q3		Q2		Q1		Q4		Q3		Q2		Q1		Q4
Revenue	1,417		1,264		888		560		329		486		129		606
Net loss	(2,301	)	(1,460	)	(3,457	)	(2,337	)	(1,162	)	(3,540	)	(399	)	(2,419	)
Net loss per share (basic and diluted)	(3.68	)	(6.16	)	(23.94	)	(59.33	)	(27.30	)	(127.66	)	(149.10	)	(124.44	)

Quarterly Results Trend Analysis

There is no material change to our quarterly results trend from our disclosure in our annual MD&A dated December 27, 2024 except that we expect further volatility with our quarterly revenue during Fiscal 2025 due to the uncertain magnitude and timeline of ramp-up on our military government contracts, ramp-up of revenue for new ARWEN^®^ and PARA SHOT^TM^products, as well as the uncertain magnitude and timeline of any equity financings and related share issuance costs. The significant fluctuations in the net loss per share is due mainly to the 2024 and 2025 share consolidations.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

FINANCIAL CONDITION

The following table summarizes our restated financial position:

		June 30,<br>2025		September 30,<br>2024
Assets
Current	$	4,597,310	$	1,842,355
Non-current		4,087,045		3,774,793
Total assets	$	8,684,355	$	5,617,148
Liabilities		****
Current	$	1,990,882	$	2,975,581
Non-current		2,108,844		1,273,280
Total liabilities		4,099,726		4,248,861
Net assets	$	4,584,629	$	1,368,287
Working capital ^(1)^	$	2,606,428	$	(1,133,226	)

^(1)^ ^Working capital is calculated as current assets less current liabilities^

Our working capital was $2.6 million at June 30, 2025, a $3.7 million increase from September 30, 2024. The increase was primarily due to the proceeds from two financings in Q1 Fiscal 2025 and one in Q2 Fiscal 2025 along with a decrease in accounts payable and royalties payable. Current liabilities include warrant liabilities, a non-cash liability item (see Note 12 of the Q3 Fiscal 2025 FS). Excluding warrant liabilities, working capital would be $3.0 million (September 30, 2024 – negative $0.3 million). These warrant liabilities will be extinguished when the warrants are exercised or expired. If exercised, the proceeds will provide additional capital to fund future working capital requirements. There is no assurance that any warrants will be exercised.

Total assets increased by $3.1 million from September 30, 2024, mainly due to an increase in cash of $2.3 million resulting from unspent proceeds from the February 2025 financing, an increase in accounts receivable of $0.6 million due to the digitization contracts and an increase in prepaid expenses of $0.1 million due to the timing of renewals offset by a decrease in deferred costs of $0.1 million due to a reduction in deferred financing costs, along with an increase in right-of-use assets of $1.0 million due to the signing of a new office lease offset by a decrease in the unamortized value of non-current assets of $0.7 million.

Total liabilities decreased by $0.1 million from September 30, 2024, mainly due to an increase in lease obligations of $0.9 million due to the signing of a new office lease offset by a decrease in accounts payable and accrued liabilities of $0.5 million due to the timing of payments to suppliers, a $0.1 million decrease in royalties payable due to the payment of the annual royalty, less a $25,000 discount received for early payment, in Q1 Fiscal 2025 offset by the accretion of interest. The royalty payable is from the purchase of the LEC patents from a company owned by the Company’s Chairman. There was also a decrease in warrant liabilities of $0.5 million due to the exercise of warrants classified as liabilities and the fluctuation in the Company’s stock price as the fair value of the warrant liability is revalued every period.

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 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 AND NINE MONTHS ENDED JUNE 30, 2025
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On November 1, 2024, we closed a public offering pursuant to which we received aggregate gross proceeds of $4.9 million (USD$3.5 million), before underwriting and offering costs. On November 12, 2024, we closed a private placement pursuant to which we received aggregate gross proceeds of $3.4 million, before underwriting and offering costs. On February 21 and 25, 2025, we closed a private placement for which we received aggregate gross proceeds of $3.7 million, before underwriting and offering costs.

At June 30, 2025, our cash position was $2.5 million, an increase of $2.3 million since September 30, 2024, primarily due to the three financings which provided gross proceeds of $12.0 million before underwriting and offering costs as well as proceeds from the exercise of warrants of $0.4 million, offset by the underwriting and offering costs of $3.2 million along with the cash used in operations of $6.6 million.

As an early-stage company, we have not yet reached significant revenue levels for most of our other 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. However, 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 they are required in the future. Potential sources of capital may include additional equity and/or debt financings. On October 23, 2024, the Company entered into a receivable factoring agreement. The facility provides up to $250,000 advanced at a rate of 2.5% for the first thirty days and 1% for each ten days thereafter until receipt of funds from the receivable payee and limited to a total of 20% of the value of the receivable funded. Funds are advanced at 80% upfront of the face value of the receivable with a 20% fee deposit retained by the financing company until the amount funded is fully repaid, following which any balance remaining of the 20% fee deposit is returned to KWESST Inc. The agreement grants security against KWESST Inc.’s receivables and other assets for funds advanced by the financing company. The initial term is for 12 months and may be terminated within the term by KWESST Inc. subject to the payment of an early termination fee of 3% of the total limit of the facility. 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 KWESST 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 unaudited condensed consolidated interim statements of cash flows for the respective periods:

		Nine months ended June 30,
		2025			2024
Cash inflows (outflows) by activity:
Operating activities	$	(6,583,042	)	$	(6,876,278	)
Investing activities		(146,850	)		(95,285	)
Financing activities		9,016,275			2,743,433
Net cash inflows (outflows)	$	2,286,383		$	(4,228,130	)
Cash and cash equivalents, beginning of period		256,828			5,407,009
Cash and cash equivalents, end of period	$	2,543,211		$	1,178,879
14	Page
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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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Cash used in operating activities

Cash flows used in operating activities decreased by $0.3 million to $6.6 million for the nine months ended June 30, 2025, primarily due to an increase in gross margin due to an increase in higher margin digitization and ARWEN^®^ revenue, a decrease in operating expenses, offset by an increase in the foreign exchange loss over the comparable prior year period.

Cash used in investing activities

Cash flows used in investing activities in the first nine months of Fiscal 2025 were $0.1 million compared to $0.1 million in the first nine months of Fiscal 2024 as a result of minor investments in property and equipment and patents.

Cash provided by financing activities

Cash flows provided by financing activities was $9.0 million in the first nine months of Fiscal 2025 compared to $2.7 million in the first nine months of Fiscal 2024. The increase was due to the three financings providing gross proceeds of $11.9 million along with proceeds from the exercise of warrants of $0.4 million, offset by share issuance costs of $3.2 million and lease repayments of $0.1 million. There were two financings in the first nine months of Fiscal 2024 with gross proceeds of $3.7 million as well as proceeds from the exercise of warrants of $0.1 million.

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 warrants and, to a lesser extent, revenue.  The following is a breakdown of our restated capital:

		June 30, <br>2025			September 30,<br>2024
Debt:
Lease obligations	$	1,319,107		$	302,223
Warrant liabilities		346,918			847,295
Equity:		****
Share capital		44,201,818			37,822,725
Warrants		4,925,372			1,084,687
Contributed surplus		5,383,927			5,152,753
Accumulated other comprehensive loss		(55,542	)		(38,520	)
Accumulated deficit		(49,870,946	)		(42,653,358	)
Total capital	$	6,250,654		$	2,517,805
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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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Contractual Obligations and Commitments

At June 30, 2025, our restated contractual obligations and commitments were as follows:

Payment due:		Total		Within 1 Year		1 to 3 years		3 to 5 years		5 years andbeyond
Minimum royalty commitments	$	2,000,000	$	-	$	700,000	$	600,000	$	700,000
Accounts payable and accrued liabilities		1,111,134		1,111,134		-		-		-
Other contracts		131,335		104,780		13,560		12,995		-
Lease obligations		2,290,971		141,003		431,253		407,420		1,311,295
Total contractual obligations	$	5,533,440	$	1,356,917	$	1,144,813	$	1,020,415	$	2,011,295

Shares Outstanding

At June 30, 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 at June 30, 2025:

	# of securities<br>outstanding	Underlying<br>Common<br>Shares^(1)^		Averageprice(CAD )	Proceeds if<br>Exercised
Common shares	667,707	667,707
Warrants	8,234,594	368,348	$	1.07	8,811,016
Pre-funded warrants	151,734	723	$	0.014	2,070
Warrant liabilities	9,539,727	45,427	$	3.10	29,573,154
U.S. Underwriter warrants	1,432,817	32,482	$	1.74	2,493,102
Stock options	1,057	1,057	$	555	586,582
Total common shares and dilutive securities		1,115,744			41,465,924

All values are in US Dollars.

^(1)^ ^Represents the number of shares to be issued upon exercise.^

The following table shows the outstanding Common Shares and dilutive securities at January 30, 2026:

	# of securitiesoutstanding	UnderlyingCommonShares^(1)^		Average price(CAD )	Proceeds ifExercised
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	$	3.10	29,573,154
U.S. Underwriter warrants	1,532,261	131,926	$	2.16	3,309,684
Stock options	886	886	$	544	481,950
Total common shares and dilutive securities	****	3,866,852			52,583,543

All values are in US Dollars.

^(1) Represents the number of shares to be issued upon exercise^

Shares for Debt Settlement - January 2024

On January 10, 2024, we issued 222 Common Shares in settlement of debt in an amount of approximately $97,615. See Note 13(a) of the Q3 Fiscal 2025 FS for further details.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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US Public Offering - April 2024

On April 9, 2024, we closed a brokered US public offering, resulting in the issuance of 3,500 Common Shares, for aggregate gross proceeds of $1.4 million (US$1.0 million) (the "April 2024 Public Offering"). See Note 13(a) of the Q3 Fiscal 2025 FS for further details.

The following table shows the use of net proceeds from the April 2024 Public Offering:

Use of proceeds (as disclosed)		Intended Amount		Actual Amount Used
Working capital requirements and general corporate purposes	$	1,357,834	$	1,357,834

^A first-in first-out assumption is used^^to determine the use of proceeds^^.^

US Public Offering - June 2024

On June 14, 2024, we closed a brokered US public offering, resulting in the issuance of 13,810 Common Shares, for aggregate gross proceeds of $2.3 million (US$1.7 million) (the "June 2024 Public Offering"). See Note 13(a) of the Q3 Fiscal 2025 FS for further details.

The following table shows the use of net proceeds from the June 2024 Public Offering:

Use of proceeds (as disclosed)		Intended Amount		Actual Amount Used
Working capital requirements and general corporate purposes	$	2,312,918	$	2,312,918

^A first-in first-out assumption is used to determine the use of proceeds.^

US Registered Direct Offering - August 2024

On August 13, 2024, we closed the August 2024 Offering for the purchase and sale of 22,452 Common Shares for aggregate gross proceeds of $1.4 million (US$0.9 million) (the "August 2024 Direct Offering"). See Note 13(a) of the Q3 Fiscal 2025 FS for further details.

The following table shows the use of net proceeds from the August 2024 Direct Offering:

Use of proceeds (as disclosed)		Intended Amount		Actual Amount Used
Working capital requirements and general corporate purposes	$	1,293,589	$	1,293,589

^A first-in first-out assumption is used to determine the use of proceeds.^

US Public Offering - November 2024

On November 1, 2024, we closed the November 2024 Public Offering for the purchase and sale of 3,809,000 pre-funded warrants and 3,810 Common Shares for aggregate gross proceeds of $4.9 million (US$3.5 million). See Note 13(a) of the Q3 Fiscal 2025 FS for further details.

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DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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The following table shows the use of net proceeds from the November 2024 Public Offering:

Use of proceeds (as disclosed)		Intended Amount		Actual Amount Used
Product and business development	$	1,528,750	$	1,528,750
Working capital requirements and general corporate purposes	$	1,528,750	$	1,528,750

^A first-in first-out assumption is used to determine the use of proceeds.^

Shares for Debt Settlement - November 2024

On November 11, 2024, we issued 5,669 Common Shares in a settlement of debt in an amount of $100,000. See Note 13(a) of the Q3 Fiscal 2025 FS for further details.

Private Placement - November 2024

On November 12, 2024, we closed the November 2024 Private Placement for the purchase and sale of 4,145,200 pre-funded warrants for aggregate gross proceeds of $3.4 million. Each pre-funded warrant was bundled with one common share purchase warrant of the Company. See Note 13(a) of the Q3 Fiscal 2025 FS for further details.

The following table shows the use of net proceeds from the November 2024 Private Placement:

				Actual Amount Used
Use of proceeds (as disclosed)		Intended Amount		to Date
Working capital requirements and general corporate purposes	$	2,972,312	$	2,972,312

^A first-in first-out assumption is used to determine the use of proceeds.^

Private Placement - February 2025

On February 21, 2025, we closed the first tranche of the February 2025 Private Placement for the purchase and sale of 43,033 Common Shares and 2,884,175 pre-funded warrants and on February 25, 2025, we closed the second tranche of the private placement for the purchase and sale of 7,215 Common Shares, all for aggregate gross proceeds of $3.7 million. Each Common Share and pre-funded warrant was bundled with one common share purchase warrant of the Company. See Note 13(a) of the Q3 Fiscal 2025 FS for further details.

The following table shows the use of net proceeds from the February 2025 Private Placement:

				Actual Amount Used
Use of proceeds (as disclosed)		Intended Amount		to Date
Working capital requirements and general corporate purposes	$	2,842,584	$	299,373

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our results of operations, financial condition, revenues or expenses, liquidity, capital expenditures or capital resources.

RELATED PARTY TRANSACTIONS

Refer to Note 9 of the Q3 Fiscal 2025 FS for disclosure about DEFSEC's related party transactions conducted in the normal course of business.

18	Page
DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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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 17 of the Q3 Fiscal 2025 FS for further disclosure of our financial instruments.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Refer to Note 2(f) of the Fiscal 2024 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 June 30, 2025, DEFSEC’s authorized capital consists of an unlimited number of Common Shares with no stated par value. There were 667,707 issued and outstanding Common Shares as at June 30, 2025.

SUBSEQUENT EVENTS

On July 25, 2025, the Company issued 673,084 common shares and 86,795 pre-funded warrants of the Company as part of a public offering, together with common share purchase warrants to purchase up to 759,879 common shares at a combined public offering price of $8.955 per share or pre-funded warrant and accompanying warrant for gross proceeds of $6.8 million. The warrants have an exercise price of $10.52 per share, are exercisable upon issuance and expire five years following the date of issuance.

Subsequent to the issuance, 55,530 pre-funded warrants were exercised at an exercise price of $0.001.

On October 31, 2025, the Company issued 31,265 shares of common stock upon the exercise of 31,265 pre-funded warrants, which were issued as part of the July 25, 2025, share offering.  The exercise price of each pre-funded warrant was $0.001 per share.  The issuance was completed in accordance with the terms of the warrant agreements.

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 CAD$3.64 (US$2.65) per Common Share in a registered direct offering. In a concurrent private placement, the Company issued unregistered warrants to purchase up to 566,040 Common Shares at an exercise price of CAD$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.

On January 23, 2026, Niel Marotta was appointed as a member of the board of directors. This increased the size of the board of directors from six to seven members.  The shareholders will approve the election of Mr. Marotta and the existing directors at the Company’s annual and special meeting of shareholders on February 19, 2026.

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, 2024. Since the September 30, 2024 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.

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.

19	Page
DEFSEC TECHNOLOGIES INC.<br>MANAGEMENT’S DISCUSSION AND ANALYSIS<br>THREE AND NINE MONTHS ENDED JUNE 30, 2025
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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, 2024 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, 2024.  During the first nine months ended on June 30, 2025, there have been no changes that have materially affected or are 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.

APPROVAL

The directors of DEFSEC have approved the disclosures in this MD&A.

20	Page

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

FORM 52-109F2R

Certification of Refiled Interim Filings

Full Certificate

This certificate is being filed on the same date that DEFSEC Technologies Inc. (the "issuer") has refiled its interim financial report for the interim period ended June 30, 2025.

I, Sean Homuth, Chief Executive Officer of the issuer, certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of the issuer for the interim period ended June 30, 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 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 and I used to design the issuer's ICFR is the framework issued 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

6. 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 on June 30, 2025 **** that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: January 30, 2026

/s/ Sean Homuth
Sean Homuth
Chief Executive Officer

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

FORM 52-109F2R

Certification of Refiled Interim Filings

Full Certificate

This certificate is being filed on the same date that DEFSEC Technologies Inc. (the "issuer") has refiled its interim financial report for the interim period ended June 30, 2025.

I, Jennifer Welsh, Chief Financial Officer of the issuer, certify the following:

1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of the issuer for the interim period ended June 30, 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 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 and I used to design the issuer's ICFR is the framework issued 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

6. 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 on June 30, 2025 **** that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.

Date: January 30, 2026

/s/ Jennifer Welsh
Jennifer Welsh
Chief Financial Officer

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

DEFSEC Technologies Files Restated Interim Financial Statements

OTTAWA, ON January 30, 2026 – DEFSEC Technologies Inc. (TSXV: DFSC and DFSC.WT.U; NASDAQ: DFSC and DFSCW) ("DEFSEC" or the "Company") announces that it has 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 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 have been 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.

"Reissuing our Q3 2025 financial results demonstrates our continued commitment to transparency, accuracy and corporate governance," said Jennifer Welsh, CFO and Chief Compliance Officer. "This adjustment is a one-time change with no impact on the Company's cash balance, revenues, expenses or cash flows and results in the Company's working capital as at June 30, 2025 increasing by $0.2 million."

A copy of the Restated Interim Financial Statements and Restated MD&A may be obtained under the Company's SEDAR+ profile at www.sedarplus.ca.

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]

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, with a representative office in London, UK.

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", "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 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. 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. 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.