Exhibit 99.1
Draganfly Inc.
Condensed Consolidated Interim Financial Statements - Unaudited
For the Three and Six Months Ended June 30, 2024
(Expressed in Canadian Dollars)
Draganfly Inc.
Condensed Consolidated Interim Statements of Financial Position - Unaudited
Expressed in Canadian Dollars
| June 30, | December 31, | |||||||||
| As at | Notes | 2024 | 2023 | |||||||
| ASSETS | ||||||||||
| Current Assets | ||||||||||
| Cash | 4 | $ | $ | |||||||
| Receivables | 5 | |||||||||
| Inventory | 6 | |||||||||
| Prepaids and Deposits | 7 | |||||||||
| Equipment | 9 | |||||||||
| Intangible assets | ||||||||||
| Investments | 8 | |||||||||
| Receivable | 5 | |||||||||
| Right of use assets | 10 | |||||||||
| TOTAL ASSETS | $ | $ | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current Liabilities | ||||||||||
| Trade payables and accrued liabilities | 12,19 | $ | $ | |||||||
| Customer deposits | ||||||||||
| Deferred income | 13 | |||||||||
| Loans payable | 14 | |||||||||
| Derivative liability | 15 | |||||||||
| Lease liabilities | 11 | |||||||||
| Non-current Liabilities | ||||||||||
| Deferred Income | 13 | |||||||||
| Lease liabilities | 11 | |||||||||
| TOTAL LIABILITIES | ||||||||||
| SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||||
| Share capital | 15 | |||||||||
| Reserve – share-based payments | 15 | |||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income | ||||||||||
| TOTAL SHAREHOLDERS’ EQUITY (DEFICIT) | ( | ) | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||||
Nature and Continuance of Operations (Note 1)
Subsequent event (Note 21)
Approved and authorized for issuance by the Board of Directors on August 13, 2024.
| “Scott Larson” | “Cameron Chell” | |
| Director | Director |
| 2 |
Draganfly Inc.
Condensed Consolidated Interim Statements of Comprehensive loss - Unaudited
Expressed in Canadian Dollars
| For the three months ended | For the six months ended | |||||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | |||||||||||||||
| Sales of goods | 16 | $ | $ | $ | $ | |||||||||||||
| Provision of services | 16 | |||||||||||||||||
| TOTAL REVENUE | ||||||||||||||||||
| COST OF SALES | 6 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
| GROSS PROFIT | ||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||
| Amortization | $ | $ | $ | $ | ||||||||||||||
| Depreciation | 9,10 | |||||||||||||||||
| Director fees | 19 | |||||||||||||||||
| Insurance | ||||||||||||||||||
| Office and miscellaneous | 17 | |||||||||||||||||
| Professional fees | ||||||||||||||||||
| Research and development | ||||||||||||||||||
| Share-based payments | 15,19 | |||||||||||||||||
| Travel | ||||||||||||||||||
| Wages and salaries | 19 | |||||||||||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||||
| Change in fair value of derivative liability | 15 | ( | ) | ( | ) | |||||||||||||
| Finance and other gain | ||||||||||||||||||
| Foreign exchange gain (loss) | ( | ) | ( | ) | ||||||||||||||
| Gain (loss) on disposal of assets | ( | ) | ( | ) | ||||||||||||||
| Gain (loss) on recovery (impairment) of notes receivable | ||||||||||||||||||
| Government income | ||||||||||||||||||
| Other income (expense) | 18 | ( | ) | ( | ) | |||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
| NET INCOME (LOSS) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||||
| Items that may be reclassified to profit or loss | ||||||||||||||||||
| Foreign exchange translation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Items that will not be reclassified to profit or loss | ||||||||||||||||||
| Change in fair value of equity investments at FVOCI | 8 | ( | ) | |||||||||||||||
| COMPREHENSIVE INCOME (LOSS) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Income (Loss) per share – Basic & diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||||
| Weighted average number of common shares outstanding – Basic & diluted | ||||||||||||||||||
| 3 |
Draganfly Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity - Unaudited
Expressed in Canadian Dollars
| Accumulated
Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||
| Number
of Shares | Share
Capital | Reserve
– Share- Based Payments | Accumulated Deficit | Change
in Fair Value of Investments at FVTOCI | Exchange Differences on Translation of Foreign Operations | Total
Shareholders’ Equity (Deficit) | ||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Shares issued for financing – ATM (“At-the-Market”) | | |||||||||||||||||||||||||||
| Share issue costs | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Shares issued for financing | ||||||||||||||||||||||||||||
| Share issue costs | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Shares issued for the exercise of RSUs | ( | ) | ||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Change in fair value of equity investments at FVOCI | - | |||||||||||||||||||||||||||
| Translation of foreign operations | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Shares issued for financing | ||||||||||||||||||||||||||||
| Share issue costs | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Shares issued for the exercise of RSUs | ( | ) | ||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Change in fair value of equity investments at FVOCI | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Translation of foreign operations | - | |||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Shares issued for financing | ||||||||||||||||||||||||||||
| Share issue costs | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Shares issued for the exercise of warrants | ||||||||||||||||||||||||||||
| Shares issued for the exercise of RSUs | ( | ) | ||||||||||||||||||||||||||
| Shares returned to treasury | ( | ) | ||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Change in fair value of equity investments at FVOCI | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Translation of foreign operations | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||
| 4 |
Draganfly Inc.
Condensed Consolidated Interim Statements of Cash Flows - Unaudited
Expressed in Canadian Dollars
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments for: | ||||||||
| Amortization | ||||||||
| Depreciation | ||||||||
| Impairment of accounts receivable | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Impairment of inventory | ||||||||
| Impairment (Gain) on recovery of notes receivable | ( | ) | ||||||
| Finance and other costs | ||||||||
| Gain on disposal of assets | ( | ) | ( | ) | ||||
| Share-based payments | ||||||||
| ( | ) | ( | ) | |||||
| Net changes in non-cash working capital items: | ||||||||
| Receivables | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaids | ||||||||
| Trade payables and accrued liabilities | ( | ) | ( | ) | ||||
| Customer deposits | ( | ) | ||||||
| Deferred income | ( | ) | ( | ) | ||||
| Cash used in operating activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Disposal of equipment | ||||||||
| Repayment of notes receivable | ||||||||
| Cash provided by (used in) investing activities | ( | ) | ||||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common shares for financing | ||||||||
| Share issue costs | ( | ) | ( | ) | ||||
| Proceeds from issuance of common shares for warrants exercised | ||||||||
| Repayment of loans | ( | ) | ( | ) | ||||
| Repayment of lease liabilities | ( | ) | ( | ) | ||||
| Cash provided by (used in) financing activities | ||||||||
| Effects of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Change in cash | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| SUPPLEMENTARY CASH FLOW DISCLOSURE | ||||||||
| Interest paid | $ | $ | ||||||
| Share issue costs in accounts payable | ||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 5 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 1. | NATURE AND CONTINUANCE OF OPERATIONS |
Draganfly Inc. (the “Company”) was incorporated on June 1, 2018 under the Business Corporations Act (British Columbia). The Company creates quality, cutting-edge unmanned and remote data collection and analysis platforms and systems that are designed to revolutionize the way companies do business. The Company’s shares trade on the Canadian Securities Exchange (the “CSE”), on the Nasdaq Capital Market (the “Nasdaq”) under the symbol “DPRO” and on the Frankfurt Stock Exchange under the symbol “3U8A”. The Company’s head office is located at 235 103rd St. E, Saskatoon, SK, S7N 1Y8 and its registered office is located at 2800 – 666 Burrard Street, Vancouver, BC, V6C 2Z7.
These
condensed consolidated interim financial statements have been prepared on the assumption that the Company will continue as a going concern,
meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the
ordinary course of operations. To date, the Company has not been profitable and has an accumulated deficit of $
| 2. | BASIS OF PREPARATION |
Statement of Compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. These condensed consolidated interim financial statements include all necessary disclosures required for interim financial statements but do not include all disclosures required for annual financial statements. These condensed consolidated interim financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2023.
These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on August 13, 2024.
Basis of consolidation
Each subsidiary is fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continues to be consolidated until the date when such control ceases.
The condensed consolidated interim financial statements include the accounts and results of operations of the Company and its wholly owned subsidiaries listed in the following table:
| Name of Subsidiary | Place of Incorporation | Ownership Interest | ||
All intercompany balances and transactions were eliminated on consolidation.
| 6 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 3. | MATERIAL ACCOUNTING POLICY INFORMATION, ESTIMATES, AND JUDGEMENTS |
These condensed consolidated interim financial statements have been prepared following the same accounting principles and methods of computation as in outlined in the Company’s consolidated financial statements for the year ended December 31, 2023. A description of the accounting standards and interpretations that have been adopted by the Company can be found in the notes of the annual financial statements for the year ended December 31, 2023.
The preparation of the condensed consolidated interim financial statements requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of income and expenses during the reporting period. These condensed consolidated interim financial statements include estimates, which by their nature, are uncertain. These assumptions and associated estimates are based on historical experience and other factors that are considered to be relevant. As such, actual results may differ from estimates and the effect of such differences may be material. Significant estimates and judgements used in the preparation of these condensed consolidated interim financial statements remained unchanged from those disclosed in the Company’s annual consolidated financial statements for the year ended December 31, 2023.
| 4. | CASH |
| As at | June 30, 2024 | December 31, 2023 | ||||||
| Cash held in banks | $ | $ | ||||||
| 5. | RECEIVABLES |
| As at | June 30, 2024 | December 31, 2023 | ||||||
| Trade accounts receivable | $ | $ | ||||||
| Sales tax receivable | ||||||||
| $ | $ | |||||||
| Current portion | $ | $ | ||||||
| Long term portion | ||||||||
| $ | $ | |||||||
During
the six months ended June 30, 2024, the Company recorded a provision for doubtful accounts of $ (2023 – $
The long-term receivable represents a refundable deposit that the Company has asked to have returned . The agreement allows for a two-year repayment term once the request has been made.
| 6. | INVENTORY |
| As at | June 30, 2024 | December 31, 2023 | ||||||
| Finished goods | $ | $ | ||||||
| Parts | ||||||||
| $ | $ | |||||||
During
the three and six months ended June 30, 2024, $
Cost of sales consist of the following:
| For the six months ended | June 30, 2024 | June 30, 2023 | ||||||
| Inventory | $ | $ | ||||||
| Consulting and services | ||||||||
| Other | ||||||||
| $ | $ | |||||||
| 7 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 7. | PREPAIDS AND DEPOSITS |
| As at | June 30, 2024 | December 31, 2023 | ||||||
| Insurance | $ | $ | ||||||
| Prepaid other | ||||||||
| Deposits | ||||||||
| $ | $ | |||||||
| 8. | INVESTMENTS |
| Balance at December 31, 2023 | $ | |||
| Change in fair value | ( | ) | ||
| Balance at June 30, 2024 | $ |
Fair value of investments is comprised of:
| Public company shares | $ | |||
| Private company shares | ||||
| Balance at June 30, 2024 | $ |
The Company holds shares of a publicly listed company with an initial cost of $.
The Company holds common shares of a private company with an initial value of USD$. The Company considers if observable market data exists on a quarterly basis to value the investment. Since inception, the Company has not had any adjustments to the fair value of the investment based on observable market data.
| 9. | EQUIPMENT |
| Computer Equipment | Furniture and Equipment | Leasehold Improvements | Vehicles | Total | ||||||||||||||||
| Cost | ||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Additions | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Charge for the year | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Balance at December 31, 2023 | ||||||||||||||||||||
| Charge for the period | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| Net book value: | ||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| June 30, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| 8 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 10. | RIGHT OF USE ASSETS |
| Vehicles | Buildings | Land | Total | |||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ||||||||||||
| Additions | ||||||||||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign exchange translation | ( | ) | ( | ) | ||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ||||||||||||
| Depreciation | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Foreign exchange translation | ||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ||||||||||||
The
Company added two new leases during the year ended December 31, 2023. A lease for land in the amount of $
| 11. | LEASE LIABILITIES |
| As at | Total | |||
| Balance at December 31, 2022 | $ | |||
| Interest expense | ||||
| Additions | ||||
| Lease payments | ( | ) | ||
| Foreign exchange translation | ||||
| Balance at December 31, 2023 | ||||
| Interest expense | ||||
| Lease payments | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Balance at June 30, 2024 | $ | |||
Which consists of:
| June 30, 2024 | December 31, 2023 | |||||||
| Current lease liability | $ | $ | ||||||
| Non-current lease liability | ||||||||
| Ending balance | $ | $ | ||||||
| Maturity analysis | Total | |||
| Less than one year | $ | |||
| One to three years | ||||
| Four to five years | ||||
| Total undiscounted lease liabilities | ||||
| Amount representing interest | ( | ) | ||
| $ | ||||
| 9 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 12. | TRADE PAYABLES AND ACCRUED LIABILITIES |
| As at | June 30, 2024 | December 31, 2023 | ||||||
| Trade accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Government grant payable | ||||||||
| $ | $ | |||||||
| 13. | DEFERRED INCOME |
At times, the Company may take payment in advance for services to be rendered. These amounts are held and recognized as services are rendered.
| As at | June 30, 2024 | December 31, 2023 | ||||||
| Deferred income from customers | $ | $ | ||||||
| Deferred income from government | ||||||||
| $ | $ | |||||||
| Current portion | $ | $ | ||||||
| Long-term portion | ||||||||
| $ | $ | |||||||
Deferred
revenue of $
| 14. | LOANS PAYABLE |
| As at | June 30, 2024 | December 31, 2023 | ||||||
| Opening balance | $ | $ | ||||||
| Repayment of loans payable | ( | ) | ( | ) | ||||
| Accretion expense | ||||||||
| Ending balance | $ | $ | ||||||
| Start Date | Maturity Date | Rate | Carrying
Value June 30, 2024 | Carrying Value December 31, 2023 | ||||||||||||
| CEBA | % | $ | $ | | ||||||||||||
| CEBA | % | |||||||||||||||
| Vehicle loan | % | |||||||||||||||
| Total | $ | $ | ||||||||||||||
The CEBA loans are unsecured, and the vehicle loan is secured by the vehicle. The CEBA loans were repaid March 25, 2024.
| 10 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 15. | SHARE CAPITAL |
Authorized share capital
Unlimited number of common shares without par value.
Issued share capital
During the six months ended June 30, 2024,
| ● | The Company issued common shares for the vesting of restricted share units. | |
| ● | The Company issued common shares for the exercise of warrants | |
| ● | The
Company issued units
consisting of one common share and one warrant and units
consisting of one prefunded warrant and one warrant in a financing for $with
share issuance costs of $ | |
| ● | shares were returned to treasury that were held in escrow related to the Vital Intelligence Inc. acquisition for failure to meet required milestones. All value that had been recorded related to these shares had been previously written off. | |
| ● | The
Company issued units
consisting of one common share and one warrant and units
consisting of one prefunded warrant and one warrant in a financing for $
with
share issuance costs of $ |
During the year ended December 31, 2023,
| ● | The Company issued common shares for the vesting of restricted share units. | |
| ● | The
Company issued common shares in a financing for $ with share issuance
costs of $ | |
| ● | The Company issued common shares in an ATM (“At – the - market”) financing for $ with share issuance costs of $ for net proceeds of $. | |
| ● | The
Company issued common shares in a financing for proceeds of $ with share
issuance costs of $ for net proceeds of $. Of the total share issuance costs
$ were expensed in other income (expense). Value of the issuance was allocated $
to the shares and $ |
Stock Options
The Company has adopted an incentive share compensation plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the CSE requirements, grant to directors, officers, employees, and technical consultants to the Company, non-transferable stock options to purchase common shares. The total number of common shares reserved and available for grant and issuance pursuant to this plan shall not exceed 20% (in the aggregate) of the issued and outstanding common shares from time to time. The number of options awarded and underlying vesting conditions are determined by the Board of Directors in its discretion.
| 11 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 15. | SHARE CAPITAL (CONT’D) |
| Grant Date | Expiry Date | Exercise
Price | Remaining Contractual Life (years) | Number
of Options Outstanding | Number
of Options Exercisable | |||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| Number
of Options | Weighted
Average Exercise Price | |||||||
| Outstanding, December 31, 2022 | $ | |||||||
| Forfeited | ) | |||||||
| Issued | ||||||||
| Outstanding, December 31, 2023 | $ | |||||||
| Forfeited | ) | |||||||
| Outstanding, June 30, 2024 | $ | |||||||
No options were granted by the Company during the six months ended June 30, 2024.
During the three and six months ended June 30, 2024, the Company recorded $ (2023 – $) and $ (2023 - $) respectively in stock-based compensation in relation to the vesting of stock options. The fair values of stock options granted were estimated using the Black-Scholes Option Pricing Model.
Restricted Share Units
During the three and six months ended June 30, 2024, the Company recorded share-based payment expense of $ (2023 - $) and $ (2023 - $) for RSUs, based on the fair values of RSUs granted which were calculated using the closing price of the Company’s stock on the day prior to grant.
The Company has adopted an incentive share compensation plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the Exchange requirements, grant to directors, officers, employees and technical consultants to the Company, restricted stock units (RSUs). The number of RSUs awarded and underlying vesting conditions are determined by the Board of Directors in its discretion. RSUs will have a 3-year vesting period following the award date. The total number of common shares reserved and available for grant and issuance pursuant to this plan, and the total number of Restricted Share Units that may be awarded pursuant to this plan, shall not exceed 15% (in the aggregate) of the issued and outstanding common shares from time to time.
| 12 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 15. | SHARE CAPITAL (CONT’D) |
As at June 30, 2024, the Company had the following RSUs outstanding:
| Number of RSUs | ||||
| Outstanding, December 31, 2022 | ||||
| Vested | ( | ) | ||
| Issued | ||||
| Forfeited | ( | ) | ||
| Outstanding, December 31, 2023 | ||||
| Vested | ( | ) | ||
| Issued | ||||
| Forfeited | ( | ) | ||
| Outstanding, June 30, 2024 | ||||
Warrants
During the six months ended June 30, 2024 and the year ended December 31, 2023, the Company issued pre-funded warrants (“USD pre-funded Warrants”) where a portion of the funds related to the eventual exercise have already been received with the remaining exercise price in USD. As part of these same issuances, shares with warrants attached were issued. Being in a foreign currency that is not the Company’s functional currency and these pre-funded warrants were not issued in exchange for services, the value related to the future exercise price of the USD pre-funded Warrants are required to be recorded as a financial liability and not as equity. As a financial liability, the portion of the USD pre-funded Warrants related to the future exercise price will be revalued on a quarterly basis to fair market value with the change in fair value being recorded in profit or loss. The warrants issued with the shares are also in USD so are also accounted for as a liability. In addition, the Company also issued pre-funded warrants with an exercise price in Canadian dollars (“Pre-funded Warrants”). These are also treated as a liability as the agreement contains clauses that do not meet the fixed for fixed test. As a financial liability, the portion of the Pre-funded Warrants related to the future exercise price will be revalued on a quarterly basis to fair market value with the change in fair value being recorded in profit or loss. The warrants issued with the shares are also accounted for as a liability as these also contain clauses that do not meet the fixed for fixed test.
To
reach a fair value of the warrants, a Black Scholes calculation is used, calculated in USD for those with a USD exercise price and in
CAD for those with a Canadian exercise price. The Black Scholes value per warrant is then multiplied by the number of outstanding warrants
and then multiplied by the foreign exchange rate at the end of the period for those denominated in USD. At the dates of issue the warrants
were valued with a risk free rate of % and % (2023 – %), volatility of % and % (2023 – %), expected
life of
Warrant Derivative Liability
| Balance at December 31, 2022 | $ | |||
| Warrants issued | ||||
| Change in fair value of warrants outstanding | ||||
| Balance at December 31, 2023 | $ | |||
| Warrants issued | ||||
| Warrants exercised | ( | ) | ||
| Change in fair value of warrants outstanding | ||||
| Balance at June 30, 2024 | $ |
| 13 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 15. | SHARE CAPITAL (CONT’D) |
Details of these warrants and their fair values are as follows:
| Issue Date | Exercise Price | Number
of Warrants Outstanding at June 30, 2024 | Fair Value at June 30, 2024 | Number
of Warrants Outstanding at December 31, 2023(5) | Fair
Value at December 31, 2023 | |||||||||||||||
| (1) | CAD$ | |||||||||||||||||||
| (2) | US$ | |||||||||||||||||||
| (3) | US$ | | ||||||||||||||||||
| (4) | US$ | |||||||||||||||||||
| (5) | CAD$ | |||||||||||||||||||
| (6) | CAD$ | |||||||||||||||||||
| $ | $ | |||||||||||||||||||
| 1) | ||
| 2) | ||
| 3) | ||
| 4) | ||
| 5) | ||
| 6) |
The fair values of these warrants were estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions:
| June 30, 2024 | December 31, 2023 | |||||||
| Risk free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life | – years | years | ||||||
| Expected dividend yield | % | % | ||||||
| Number
of Warrants | Weighted
Average Exercise Price | |||||||
| Outstanding, December 31, 2022 | $ | |||||||
| Issued | ||||||||
| Expired | ( | ) | ||||||
| Outstanding, December 31, 2023 | $ | |||||||
| Issued | ||||||||
| Exercised | ( | ) | ||||||
| Outstanding June 30, 2024 | $ | |||||||
| 14 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 15. | SHARE CAPITAL (CONT’D) |
| Date issued | Expiry date | Exercise price | Number
of warrants outstanding | |||||||
| US$ | ||||||||||
| US$ | ||||||||||
| US$ | ||||||||||
| CAD$ | ||||||||||
| US$ | ||||||||||
| US$ | ||||||||||
| CAD$ | ||||||||||
| CAD$ | ||||||||||
| CAD$ | ||||||||||
The weighted average remaining contractual life of warrants outstanding as of June 30, 2024, was years (December 31, 2023 – years).
| 16. | SEGMENTED INFORMATION |
The Company organizes its three segments based on product lines as well as a Corporate segment. The three segments are Drones, Vital (Vital Intelligence), and Corporate. The Drones segment derives its revenue from products and services related to the sale of unmanned aerial vehicles (UAV). The Vital segment derives its revenue from the sale of products that measure vitals to help detect symptoms from large groups of people from a distance. The Corporate segment includes all costs not directly associated with the Drone and Vital segments. The Company aggregates the information for the segments by analyzing the revenue steam and allocating direct costs to that respective segment. The Corporate segment is aggregated by relying on the entity that includes corporate costs (Draganfly Inc.).
| June 30, 2024 | Drones | Vital | Corporate | Total | ||||||||||||
| Sales of goods | $ | $ | $ | $ | ||||||||||||
| Provision of services | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Segment loss (income) | ||||||||||||||||
| Finance and other costs | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Amortization | ||||||||||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||||||||||
| Loss on write-off of notes receivable | ||||||||||||||||
| Loss on write down of inventory | ||||||||||||||||
| Net loss for the period | $ | $ | $ | $ | ||||||||||||
| 15 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 16. | SEGMENTED INFORMATION (CONT’D) |
| June 30, 2023 | Drones | Vital | Corporate | Total | ||||||||||||
| Sales of goods | $ | $ | $ | $ | ||||||||||||
| Provision of services | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Segment loss | ||||||||||||||||
| Finance and other costs | ( | ) | ( | ) | ( | ) | ||||||||||
| Depreciation | ||||||||||||||||
| Amortization | ||||||||||||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||||||||||
| Loss on write-off of notes receivable | ||||||||||||||||
| Net loss for the period | $ | $ | $ | $ | ||||||||||||
Geographic revenue is measured by aggregating sales based on the country and the entity where the sale was made.
| Geographic segmentation is as follows: | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| Non-current assets | ||||||||
| Canada | $ | $ | ||||||
| United States | ||||||||
| $ | $ | |||||||
| Geographic segmentation is as follows: | For
the three months ended June 30, | For
the six months ended June 30, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | ||||||||||||||||
| Canada | $ | $ | $ | $ | ||||||||||||
| United States | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| 17. | OFFICE AND MISCELLANEOUS |
| For
the three months ended June 30, | For
the six months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Advertising, Marketing, and Investor Relations | $ | $ | $ | $ | ||||||||||||
| Compliance fees | ||||||||||||||||
| Impairment of accounts receivable | ||||||||||||||||
| Contract Work | ||||||||||||||||
| Other | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| 18. | OTHER EXPENSE |
| For
the three months ended June 30, | For
the six months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Share issue costs | $ | $ | $ | $ | ||||||||||||
| Write off of accounts (payable) receivable | ( | ) | ||||||||||||||
| Gain on settlement of debt | ( | ) | ( | ) | ||||||||||||
| Other | ( | ) | ( | ) | ||||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
| 16 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 19. | RELATED PARTY TRANSACTIONS |
Trade receivables/payables and accrued receivables/payables:
As
at June 30, 2024, the Company had $
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. Compensation awarded to key management for the three and six months ended June 30, 2024 and 2023 included:
| For
the three months ended June 30, | For
the six months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Director fees | $ | $ | $ | $ | ||||||||||||
| Salaries | ||||||||||||||||
| Share-based payments | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
During
the three months ended June 30, 2024, the directors agreed to a
Other related party transactions
| For
the three months ended June 30, | For
the six months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Management fees paid to a company controlled by CEO and director | $ | $ | $ | $ | ||||||||||||
| Management fees paid to a company that the CEO holds an economic interest in | ||||||||||||||||
| Management fees paid to a company controlled by the former President and director | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| 20. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT |
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
Credit risk
Credit risk is the risk that of an unexpected loss if a customer or third party fails to meet its contractual obligations.
The Company is subject to credit risk on its cash and receivables. The majority of cash is deposited in bank accounts held with a major bank in Canada and the United States. As most of the Company’s cash is held by one bank there is a concentration of credit risk. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies.
| 17 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 20. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONT’D) |
Receivables
Receivables primarily consist of trade receivables and taxes receivable. The Company provides credit in the normal course of business in the form of payment terms and has an established process for determining terms to offer customers to mitigate credit risk. Receivables are shown net of any provision made for impairment of the receivables. Due to this factor, the Company believes that no additional credit risk, beyond amounts provided for collection loss, is inherent in receivables.
Expected credit loss (“ECL”) analysis is performed at each reporting date using an objective approach to measure expected credit losses. The provision amounts are based on direct management interface with the customer. The calculations reflect the probability-weighted outcome, the time value of money and reasonable supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, business failure, the failure of a debtor to engage in a repayment plan, and a failure to make contractual payments over the negotiated contract period.
Trade
receivables include balances of $
Fair value
A number of the Company’s accounting policies and disclosures require the measurement of fair values for financial assets and liabilities. The Company has established a control framework with respect to the measurement of fair values. Fair values are categorized into different levels of a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
Equity securities in investee companies and warrants are measured at fair value. The financial assets and liabilities measured at fair value by hierarchy are shown in the table below. The amounts shown are based on the amounts recognized in the condensed consolidated interim statements of financial position. These financial assets are measured at fair value through profit and loss.
| June 30, 2024 | Level 1 | Level 3 | Total | |||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Equity securities in investee companies | ||||||||||||
| Derivative liability | ||||||||||||
| Total | $ | $ | $ | |||||||||
| December 31, 2023 | Level 1 | Level 3 | Total | |||||||||
| Cash and cash equivalents | $ | $ | ||||||||||
| Equity securities in investee companies | $ | $ | $ | |||||||||
| Derivative liability | ||||||||||||
| Total | $ | $ | $ | |||||||||
| 18 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Six Months Ended June 30, 2024
Expressed in Canadian Dollars (unaudited)
| 20. | FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONT’D) |
The following table shows the valuation techniques used in measuring Level 3 fair values for the derivative liability as well as the significant unobservable inputs used.
| Type | Valuation technique | Key inputs | Inter-relationship between significant inputs and fair value measurement | |||||
| Warrant | The fair value of the | Key observable inputs |
The estimated fair value would increase | |||||
| derivative | warrants derivative | ● | Share price | (decrease) if: | ||||
| liability | liability at initial | ● | Risk free interest rate | ● | The price was higher (lower) | |||
| recognition and at | ● | Dividend yield | ● | The risk-free rate was higher (lower) | ||||
| year end has been | Key unobservable inputs | ● | The dividend yield was lower (higher) | |||||
| calculated using the | ● | Expected volatility | ● | The expected volatility was higher (lower) | ||||
| Black Scholes | ||||||||
| Option Pricing Model | ||||||||
For the fair value of the derivative liability, reasonable possible changes to the expected volatility, the most significant unobservable input would have the following effects:
| Unobservable Inputs | Change | Impact on comprehensive loss | ||||||||||
| Six
months ended June 30, 2024 | Year
ended December 31, 2023 | |||||||||||
| Volatility | % | $ | $ | |||||||||
| 21. | SUBSEQUENT EVENT |
August 7, 2024 the terms of the remaining
outstanding warrants from the October 2023 issuance of
| 19 |