DEFSEC Technologies Inc. (formerly KWESST Micro Systems Inc.) Reports Continued Growth in Fiscal Q3 2025

Executive Summary

• DEFSEC Technologies Inc. reported significant financial growth for its fiscal 2025 third quarter (ended June 30, 2025), with revenue increasing 330% year-over-year and gross margin surging 879% compared to Q3 2024.
• The company highlighted a strategic pivot from development to revenue ramp-up, driven by strong performance in its digitization business line (Land C4ISR contracts) and accelerated deliveries of its ARWEN® product line.
• A subsequent public offering completed on July 25, 2025, raised $6.8 million in gross proceeds, while the company also announced regained compliance with Nasdaq listing requirements and the receipt of a first order for its Battlefield Laser Detection System (BLDS) prototypes.

Key Details

• Revenue Performance:
  • Q3 Fiscal 2025 Revenue: $1,417,500 (up from $329,500 in Q3 2024, a +330% increase).
  • Nine Months Ended June 30, 2025 Revenue: $3,569,300 (up from $944,400 in the prior year, a +278% year-to-date increase).
  • Revenue growth attributed to $0.8 million (Q3) and $2.2 million (YTD) from the digitization business line, and $0.3 million (Q3) and $0.4 million (YTD) from ARWEN® sales.
• Profitability Metrics:
  • Q3 Fiscal 2025 Gross Margin: $399,500 (up from $40,800 in Q3 2024, an +879% increase).
  • Gross Margin Percentage: Increased from 12.4% in Q3 2024 to 28.2% in Q3 2025.
  • Adjusted EBITDA (Q3 2025): $(1,491,500) (improved from $(1,901,300) in Q3 2024).
  • Adjusted EBITDA (Nine Months 2025): $(5,375,800) (improved from $(6,491,200) in the prior year).
• Operating Expenses:
  • Total Operating Expenses for Q3 2025: $2,229,700 (vs. $2,225,600 in Q3 2024).
  • Selling and Marketing: $375,400 (Q3 2025) vs. $224,800 (Q3 2024).
  • Research and Development: $402,300 (Q3 2025) vs. $497,500 (Q3 2024).
  • General and Administrative: $1,113,300 (Q3 2025) vs. $1,122,200 (Q3 2024).
• Cash Position:
  • Cash balance increased by $2.3 million over the Fiscal 2024 year-end (excluding the subsequent public offering).
• Subsequent Financing Event:
  • On July 25, 2025, the company issued 673,084 common shares and 86,795 pre-funded warrants.
  • Gross proceeds: $6.8 million.
  • Price: $8.955 per share/pre-funded warrant.
  • Warrants: Accompanying warrants to purchase up to 759,879 common shares at an exercise price of $10.52 per share, exercisable immediately, expiring five years post-issuance.
• Operational Highlights & Corporate Actions:
  • Nasdaq Compliance: Regained compliance with the minimum bid price requirement (Rule 5550(a)(2)) on May 8, 2025, after trading was halted on April 23, 2025, due to a share consolidation effective April 23/24, 2025 (21-for-1 ratio).
  • Product Orders: Received a first order from a defense systems integrator on June 18, 2025, for testing prototypes of the next-generation Battlefield Laser Detection System (BLDS) for a major North American armored vehicle program.
  • Name Change: Officially changed name to "DEFSEC Technologies Inc." on June 30, 2025.
  • Supply Chain: Accelerated backlog delivery and reduced lead-times for the ARWEN® line due to improved manufacturing partner networks.

Notable Quotes

• "Q3 2025 marked a transformative period for DEFSEC as we advanced our strategic objectives across several key focus areas... We are successfully commercializing the next generation of our Battlefield Laser Detection System, driving robust growth through the execution of government defense programs, significant growth in our ARWEN® product line and advancing the commercialization of our PARA SHOTTM products through a revitalized supply chain and manufacturing partner network." — Sean Homuth, President and CEO