DEFSEC TECHNOLOGIES — Regulatory Filings 2021

May 10, 2021

Form 51-102F3 Material Change Report

1. Name and Address of Company

KWESST Micro Systems Inc. (“KWESST” or “Company”) 155 Terence Matthews Crescent, Unit #1 Kanata, ON, K2M 2A8

2. Date of Material Change

April 29, 2021

3. News Release

A news release disclosing the material change was released by KWESST through NewsFile Corp. on April 29, 2021 and a copy was subsequently filed under the Corporation’s profile on SEDAR at www.sedar.com.

4. Summary of Material Change

KWESST announced that it had completed its previously announced over-subscribed brokered private placement, resulting in the issuance of 3,536,057 units (“ Units ”) of KWESST, at a price of $1.25 per Unit (the “ Issue Price ”), for aggregate gross proceeds of $4,420,071 (the “ Offering ”).

Concurrently, KWESST also closed its acquisition of the Low Energy Cartridge (“ LEC ”) technology as previously announced on January 18, 2021. This resulted in the issuance of 1 million common shares and 500,000 common share purchase warrants exercisable at $0.70 per share.

5. Full Description of Material Change

5.1. Full Description of Material Change

Brokered Private Placement

Under the Offering, KWESST sold a total of 3,536,057 units at a price of $1.25 per Unit. Each Unit is comprised of one common share of the Company (a " Common Share ") and one Common Share purchase warrant (" Warrant "). Each Warrant is exercisable to acquire one Common Share (a " Warrant Share ") at a price of $1.75 per Warrant Share for a period of 24 months from the closing of the Offering. If at any time after four (4) months and one (1) day following the Closing Date, the trading price of the Shares on the TSX Venture Exchange is equal to or exceeds $3.00 for a period of 10 consecutive trading days, as evidenced by the price at the close of market, KWESST shall be entitled to notify the holders of Warrants of its intention to force the exercise of the Warrants. Upon receipt of such notice, the holders of Warrants shall have 30 days to exercise the Warrants, failing which the Warrants will automatically expire.

The Offering was completed by PI Financial Corp., the lead agent and sole bookrunner (the " Lead Agent "), and Beacon Securities Limited (together with the Lead Agent, the " Agents "). As

consideration for the services provided by the Agents in connection with the Offering, the Agents received: (a) a cash commission equal to 7% of the gross proceeds of the Offering (reduced to 3.5% for certain subscribers on the “President’s List”, up to a maximum of an aggregated amount of $600,000) for a total cash commission of $288,405; and (b) 230,734 compensation options (the “ Compensation Options ”) as is equal to 7% of the number of Units issued under the Offering (reduced to 3.5% with respect to certain subscribers on the President’s List). Each Compensation Option is exercisable to acquire one unit of the Company (a “ Compensation Option Unit ”) at a price equal to $1.25 for a period of two years after the closing of the Offering. Each Compensation Option Unit is comprised of one Common Share and one Common Share purchase warrant (a “ Compensation Option Warrant "). Each Compensation Option Warrant is exercisable to acquire one Common Share (a " Compensation Option Warrant Share ") at a price of $1.75 per Compensation Option Warrant Share for a period of 24 months from the closing of the Offering.

Directors and officers of KWESST (the “ Insiders ”) purchased 72,000 Units for a total consideration of $90,000. The issuance of Units to the Insiders constitutes a related party transaction but is exempt from the formal valuation and minority approval requirements of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (" MI 61-101 ”) as KWESST’s securities are not listed on any stock exchange identified in Section 5.5(b) of MI 61-101 and neither the fair market value of the units issued to the Insiders, nor the fair market value of the entire private placement, exceeds 25% of the Company’s market capitalization. KWESST did not file a material change report with respect to the participation of the Insiders at least 21 days prior to the closing of the Offering as the insiders’ participations were not determined at that time.

All securities issued in connection with the Offering are subject to a statutory hold period in Canada expiring four (4) months and one (1) day from the closing of the Offering. Additionally, all the directors and officers have agreed to enter into a lock-up agreement for this same period, imposing restriction from selling, disposing, transferring, or pledging their current holdings in KWESST. The Offering remains subject to final acceptance of the TSX Venture Exchange.

The securities described herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the " U.S. Securities Act "), or any state securities laws, and accordingly, may not be offered or sold within the United States except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities requirements or pursuant to exemptions therefrom. This press release does not constitute an offer to sell or a solicitation to buy any securities in any jurisdiction.

Acquisition of LEC Technology

On April 29, 2021, KWESST closed its previously announced LEC technology announced on January 15, 2021. For further information, please refer to the Material Change Report dated January 19, 2021 as filed under the Corporation’s profile on SEDAR at www.sedar.com.

5.2. Disclosure for Restructuring Transactions

Not applicable

6. Reliance on subsection 7.1(2) or (3) of National Instrument 51-102

Not applicable

7. Omitted Information

Not applicable

8. Executive Officer

For further information, please contact Steve Archambault, Chief Financial Officer at (613) 319-0537 extension 116.

9. Date of Report

May 10, 2021