The company continues to burn cash, evidenced by a negative free cash flow of $1.9M in 2026Q2 and a persistent inability to fund operations internally, as indicated by the OCF/NI ratio of 1.24.
| Cash from Operations | -8.04M | -7.96M | -9.06M | -14.08M | -4.26M | -6.26M |
| Operating CF Growth % | 37.13% | 12.18% | 35.64% | -230.75% | 31.95% | - |
| Net Income | -8.25M | -9.63M | -7.44M | -9.31M | -10.52M | -9.32M |
| Depreciation & Amortization | 829.23K | 1.08M | 1.28M | 952.51K | 326.49K | 140.99K |
| Deferred Taxes | 0 | 0 | 0 | 0 | -49.44K | 0 |
| Other Non-Cash Items | 370.44K | 832.41K | -2.85M | -3.79M | 386.75K | 258.48K |
| Working Capital Changes | -451.41K | -358.25K | -343.67K | -2.31M | 3.64M | 198.48K |
| Cash from Investing | -243.33K | -180.41K | -111.15K | -1.44M | -1.11M | -1.07M |
| Purchase of Investments | 0 | 0 | 0 | 0 | 0 | 0 |
| Sale/Maturity of Investments | 0 | 0 | 0 | 0 | 0 | 0 |
| Net Investment Activity | 0 | 0 | 0 | 0 | 0 | 0 |
| Acquisitions | 0 | 4.39K | 0 | 7.81K | 250.35K | 0 |
| Other Investing | -13.11K | -44.17K | -9.82K | -1.27M | -1.18M | -263.23K |
| Cash from Financing | 6.85M | 14.6M | 4.02M | 20.76M | 2.85M | 6.94M |
| Dividends Paid | 0 | 0 | 0 | 0 | 0 | 0 |
| Share Repurchases | 0 | 0 | 0 | 0 | 0 | 0 |
| Stock Issued | 8.2M | 18.72M | 4.97M | 23.7M | 344K | 6M |
| Net Stock Activity | 8.2M | 18.72M | 4.97M | 23.7M | 344K | 6M |
| Debt Issuance (Net) | -224.03K | -172.15K | -197.65K | -1000K | 1000K | -242.4K |
| Other Financing | -1.12M | -3.94M | -746.31K | -539.15K | 8.1K | 1.18M |
| Net Change in Cash | -1.53M | 6.43M | -5.15M | 5.24M | -2.52M | -385.65K |
| Exchange Rate Effect | -99.12K | -35.12K | 0 | 0 | 0 | 0 |
| Cash at Beginning | 5.12M | 256.83K | 5.41M | 170.54K | 2.69M | 3.07M |
| Cash at End | 2.96M | 6.69M | 256.83K | 5.41M | 170.54K | 2.69M |
| Interest Paid | 0 | 0 | 0 | 0 | 0 | 0 |
| Income Taxes Paid | 0 | 0 | 0 | 0 | 0 | 0 |
| Free Cash Flow | -8.27M | -8.12M | -9.17M | -15.38M | -5.62M | -7.15M |
| FCF Growth % | 8.49% | 11.42% | 40.36% | -173.61% | 21.37% | - |
Liquidity and dilution risk
As reported in financial statements, the relationship between net income and operating cash flow remains highly volatile, with OCF/NI ratios fluctuating between 0.57 and 1.63, suggesting that accruals and non-cash adjustments frequently obscure the underlying cash-generating capability of the firm's core defense operations.
The lack of a consistent conversion ratio indicates that reported net losses are not perfectly mirrored by cash outflows, likely due to the timing of milestone-based revenue recognition. Investors should monitor whether this divergence persists as the company attempts to transition from pilot-stage projects to full-scale procurement.
Based on DEFSEC's reported figures, the company has consistently generated negative free cash flow, with quarterly outflows reaching as high as $3.3M in 2025Q1, highlighting a structural inability to fund operations through internal cash generation despite the reported revenue growth trajectory.
The persistent FCF deficit underscores the company's reliance on external financing to sustain its high-burn R&D and overhead structure. Without a clear path to positive FCF margins, the current trajectory suggests that the firm remains highly sensitive to capital market conditions.
According to recent SEC filings, working capital changes have been a significant source of cash flow instability, swinging from a $1.2M drain in 2026Q1 to an $848.5K inflow in 2025Q4, reflecting the lumpy nature of government contract payments and inventory management.
This volatility suggests that the company's cash position is highly susceptible to the timing of customer collections and the accumulation of inventory for upcoming defense programs. The inability to stabilize working capital cycles may continue to exacerbate the firm's liquidity constraints in the near term.
As indicated by the provided data, capital expenditures remain relatively low, with CapEx/Revenue ratios peaking at 6.8% in 2026Q2, which suggests that the firm's current business model is not yet capital-intensive in terms of physical asset replacement or heavy manufacturing infrastructure.
The modest level of CapEx implies that the primary cash drain is operational rather than capital-based, focusing on engineering payroll and R&D. This may change if the company successfully scales its PARA OPS manufacturing, which would likely necessitate a shift toward higher capital intensity.
Based on the financial data, the cash flow statement appears to be heavily influenced by non-cash items such as stock-based compensation and depreciation, which mask the true extent of the company's operational cash burn and reliance on external capital.
The presence of these adjustments warrants further investigation into the sustainability of the current burn rate, as they may be artificially inflating the perceived operational health of the business. Investors should focus on the raw cash burn rather than adjusted metrics to gauge the true runway.
Quick answers to the most common questions about buying DFSCW stock.
DEFSEC Technologies Inc. Warrant (DFSCW) generated $-8.0M in net cash from operating activities in 2025. This reflects the cash generated directly from core business operations.
DEFSEC Technologies Inc. Warrant (DFSCW) reported negative free cash flow of $8.1M in 2025, indicating capital requirements exceeded cash from operations.
DEFSEC Technologies Inc. Warrant (DFSCW) spent $0.1M on capital expenditures in 2025. CapEx represents the cash invested in physical assets like property, plant, and equipment to maintain or grow the business.