DEFSEC TECHNOLOGIES — Capital/Financing Update 2022

Aug 16, 2022

Form 51-102F3 Material Change Report

1. Name and Address of Company

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

2. Date of Material Change

August 15, 2022

3. News Release

A news release disclosing the material change was released by KWESST through NewsFile Corp. on August 16, 2022.

4. Summary of Material Change

On August 15, 2022, KWESST announced that it has publicly filed a registration statement on Form F- 1 (the “ Form F-1 ”) with the United States Securities and Exchange Commission (the “ SEC ”) relating to a proposed public offering of common units, consisting of one common share and a warrant to purchase one common share (“ Common Units ”), and pre-funded units, consisting of a pre-funded warrant to purchase on common share and a warrant to purchase one common share(“ Pre-funded Units ”) (herein referred as the “ Offering ”).

5. Full Description of Material Change

5.1. Full Description of Material Change

On August 15, 2022, KWESST publicly filed the Form F-1 with the SEC relating to the Offering. The number of Common Units and Pre-funded Units and price range for the proposed Offering have yet to be determined. The Offering is expected to take place after the SEC completes its review process, subject to market and other customary conditions. Contingent on the closing of the Offering, KWESST has applied to list its common shares on the Nasdaq Capital Market under the ticker symbol “KWE” and the warrants offered in the Offering under the ticker symbol “KWESW”.

ThinkEquity will serve as sole book-running manager for the proposed Offering. The Offering will be made only by means of a prospectus, which, for the avoidance of doubt, will not constitute a "prospectus" in any Province or Territory of Canada under applicable Canadian securities legislation and has not been reviewed by any securities regulatory authority in any Province or Territory of Canada. No offer of securities to the public is being made in any Province or Territory of Canada. Copies of the preliminary prospectus related to the Offering, when available, may be obtained on the SEC’s website, www.sec.gov, or from ThinkEquity, 17 State Street, 41st Floor, New York, New York 10004, by telephone at (877) 436-3673, or by email at prospectus@think-equity.com.

A registration statement relating to the proposed sale of these securities has been filed with the SEC but has not yet become effective. Securities offered under the registration statement may not be sold, nor may offers to buy be accepted, prior to the time the registration statement becomes effective. This press release does not constitute an offer to sell, or a solicitation of an offer to buy any securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction. Any offers, solicitations or offers to buy, or any sales of securities will be made in accordance with the registration requirements of the Securities Act of 1933, as amended. The Offering is subject to market conditions, and there can be no assurance as to whether or when the offering may be completed, or as to the actual size or terms of the Offering.

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

August 16, 2022