Exhibit 99.1
Draganfly Inc.
Condensed Consolidated Interim Financial Statements - Unaudited
For the Three and Nine Months Ended September 30, 2025
(Expressed in Canadian Dollars)
Draganfly Inc.
Condensed Consolidated Interim Statements of Financial Position - Unaudited
Expressed in Canadian Dollars
| September 30, | December 31, | |||||||||
| As at | Notes | 2025 | 2024 | |||||||
| ASSETS | ||||||||||
| Current Assets | ||||||||||
| Cash | $ | $ | ||||||||
| Receivables | 4 | |||||||||
| Inventory | 5 | |||||||||
| Prepaids and deposits | 6 | |||||||||
| Equipment | 7 | |||||||||
| Intangible assets | ||||||||||
| Investments | ||||||||||
| Receivable | 4 | |||||||||
| Right of use assets | 8 | |||||||||
| TOTAL ASSETS | $ | $ | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current Liabilities | ||||||||||
| Trade payables and accrued liabilities | 10,16 | $ | $ | |||||||
| Customer deposits | ||||||||||
| Deferred income | 11 | |||||||||
| Derivative liability | 12 | |||||||||
| Lease liabilities | 9 | |||||||||
| Non-current Liabilities | ||||||||||
| Deferred Income | 11 | |||||||||
| Lease liabilities | 9 | |||||||||
| TOTAL LIABILITIES | ||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||
| Share capital | 12 | |||||||||
| Reserves – share-based payments | 12 | |||||||||
| Reserves - warrants | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||||
Nature and Continuance of Operations (Note 1)
Subsequent events (Note 18)
Approved and authorized for issuance by the Board of Directors on November 12, 2025.
| “Scott Larson” | “Cameron Chell” | |
| Director | Director |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 2 |
Draganfly Inc.
Condensed Consolidated Interim Statements of Comprehensive loss - Unaudited
Expressed in Canadian Dollars
| For the three months ended | For the nine months ended | |||||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||||
| Sales of goods | 13 | $ | $ | $ | $ | |||||||||||||
| Provision of services | 13 | |||||||||||||||||
| TOTAL REVENUE | ||||||||||||||||||
| COST OF SALES | 5 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
| GROSS PROFIT | ||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||
| Amortization | $ | $ | $ | $ | ||||||||||||||
| Depreciation | 7,8 | |||||||||||||||||
| Director fees | 16 | |||||||||||||||||
| Insurance | ||||||||||||||||||
| Office and miscellaneous | 14 | |||||||||||||||||
| Professional fees | ||||||||||||||||||
| Research and development | ||||||||||||||||||
| Share-based payments | 12,16 | |||||||||||||||||
| Travel | ||||||||||||||||||
| Employee and management expenses | 16 | |||||||||||||||||
| ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||||
| Change in fair value of derivative liability | 12 | ( | ) | ( | ) | |||||||||||||
| Finance and other gain | ||||||||||||||||||
| Foreign exchange gain (loss) | ( | ) | ||||||||||||||||
| Gain (loss) on disposal of assets | ||||||||||||||||||
| Gain (loss) on recovery (impairment) of notes receivable | ||||||||||||||||||
| Other income (expense) | 15 | ( | ) | ( | ) | ( | ) | |||||||||||
| $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
| NET 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 | ( | ) | ( | ) | ( | ) | ||||||||||||
| COMPREHENSIVE LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Loss per share – Basic & diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||||
| Weighted average number of common shares outstanding – Basic & diluted | ||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 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 |
Reserves – Warrants | Accumulated Deficit | Change in Fair Value of Investments at FVTOCI | Exchange Differences on Translation of Foreign Operations | Total Shareholders’ Equity | |||||||||||||||||||||||||
| 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 | ( | ) | ||||||||||||||||||||||||||||||
| Warrants – equity treatment | - | |||||||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||||||
| Shares returned to treasury | ( | ) | ||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Change in fair value of equity investments at FVOCI | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Translation of foreign operations | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Shares issued for financing | ||||||||||||||||||||||||||||||||
| Share issue costs | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for the exercise of warrant | ||||||||||||||||||||||||||||||||
| Shares issued for the exercise of RSUs | ( | ) | ||||||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Translation of foreign operations | - | |||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Unites issued for financing | ||||||||||||||||||||||||||||||||
| Share issue costs | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for exercise of overallotment | ||||||||||||||||||||||||||||||||
| Share issue costs – overallotment | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for the exercise of warrants | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| 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 September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
| 4 |
Draganfly Inc.
Condensed Consolidated Interim Statements of Cash Flows - Unaudited
Expressed in Canadian Dollars
| For the nine months ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments for: | ||||||||
| Amortization | ||||||||
| Depreciation | ||||||||
| Impairment of accounts receivable | ( | ) | ||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Impairment of inventory | ||||||||
| 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 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 Nine Months Ended September 30, 2025
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, 2024.
These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on November 12, 2025.
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 Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 2. | BASIS OF PRESENTATION (CONT’D) |
Reclassification
Certain
prior year amounts have been reclassified to conform to the fiscal 2025 presentation. Overall results were not impacted by the
reclassification of items within the Operating Expenses of the Condensed Consolidated Statements of Comprehensive Loss. For the
three and nine months ended September 30, 2024 $
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 outlined in the Company’s consolidated financial statements for the year ended December 31, 2024. 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, 2024.
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, 2024.
4. RECEIVABLES
| As at | September 30, 2025 | December 31, 2024 | ||||||
| Trade accounts receivable | $ | $ | ||||||
| Sales tax receivable | ||||||||
| $ | $ | |||||||
| Current portion | $ | $ | ||||||
| Long term portion | ||||||||
| $ | $ | |||||||
Expected credit loss
| Balance at December 31, 2023 | ||||
| Increase during the year | ||||
| Balance at December 31, 2024 | ||||
| Decrease during the period | ( | ) | ||
| Balance at September 30, 2025 | $ |
During
the nine months ended September 30, 2025, the Company recorded a reduction in the allowance for doubtful accounts of $
| 7 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 4. | RECEIVABLES (CONT’D) |
The Company assumes that the credit risk on a financial asset has increased if it is outstanding beyond the agreed payment terms. The Company considers a receivable to be default when the customer is unlikely to pay its obligations to the Company in full. The carrying amount of a receivable is written off (either partially or in full) to the extent that there is no realistic prospect 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.
5. INVENTORY
| As at | September 30, 2025 | December 31, 2024 | ||||||
| Finished goods | $ | $ | ||||||
| Parts | ||||||||
| $ | $ | |||||||
During
the three and nine months ended September 30, 2025, $
Cost of sales consist of the following:
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||
| Inventory | $ | $ | $ | $ | ||||||||||||
| Consulting and services | ||||||||||||||||
| Other | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
6. PREPAIDS AND DEPOSITS
| As at | September 30, 2025 | December 31, 2024 | ||||||
| Insurance | $ | $ | ||||||
| Prepaid other | ||||||||
| Deposits | ||||||||
| $ | $ | |||||||
Deposits consist of amounts required to be pre-paid in order for vendors to manufacture or supply goods.
| 8 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim
Financial Statements For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
7. EQUIPMENT
| Computer Equipment | Furniture and Equipment | Leasehold Improvements | Vehicles | Total | ||||||||||||||||
| Cost | ||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Additions | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Balance at December 31, 2024 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Charge for the year | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Balance at December 31, 2024 | ||||||||||||||||||||
| Charge for the period | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
| Net book value: | ||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| September 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
8. RIGHT OF USE ASSETS
| Buildings | Land | Total | ||||||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Depreciation | ( | ) | ( | ) | ( | ) | ||||||
| Foreign exchange translation | ||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | |||||||||
| Depreciation | ( | ) | ( | ) | ||||||||
| Balance at September 30, 2025 | $ | $ | $ | |||||||||
There
were
| 9 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim
Financial Statements For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
9. LEASE LIABILITIES
The
Company leases certain assets under lease agreements. The lease liabilities consist of leases of facilities and vehicles with terms ranging
from one to five years. The leases are calculated using incremental borrowing rates ranging from
| Total | ||||
| Balance at December 31, 2023 | $ | |||
| Interest expense | ||||
| Lease payments | ( | ) | ||
| Foreign exchange translation | ( | ) | ||
| Balance at December 31, 2024 | ||||
| Interest expense | ||||
| Lease payments | ( | ) | ||
| Balance at September 30, 2025 | $ | |||
Which consists of:
| September 30, 2025 | December 31, 2024 | |||||||
| Current lease liability | $ | $ | ||||||
| Non-current lease liability | ||||||||
| Ending balance | $ | $ | ||||||
| Maturity analysis | September 30, 2025 | December 31, 2024 | ||||||
| Less than one year | $ | $ | ||||||
| One to three years | ||||||||
| Four to five years | ||||||||
| Total undiscounted lease liabilities | ||||||||
| Amount representing interest | ( | ) | ( | ) | ||||
| $ | $ | |||||||
10. TRADE PAYABLES AND ACCRUED LIABILITIES
| As at | September 30, 2025 | December 31, 2024 | ||||||
| Trade accounts payable (note 16) | $ | $ | ||||||
| Accrued liabilities | ||||||||
| $ | $ | |||||||
| 10 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
11. 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.
| September 30, 2025 | December 31, 2024 | |||||||
| Deferred, revenue beginning | $ | $ | ||||||
| Revenue recognized | ( | ) | ( | ) | ||||
| Unearned revenues received | ||||||||
| Foreign exchange | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| Current portion | $ | $ | ||||||
| Long term portion | ||||||||
| $ | $ | |||||||
Deferred
revenue of $
Authorized share capital
Unlimited number of common shares without par value.
Issued share capital
During the nine months ended September 30, 2025,
| ● | The Company issued common shares for the vesting of restricted share units. | |
| ● | On May 5, 2025, the Company issued units consisting of one common share and one warrant and in a financing for $ with share issue costs of $ for net proceeds of $. The value of the issuance was allocated $ to the shares and $ to the warrants. This issuance included an overallotment of warrants convertible to shares. Warrants were valued using the residual method. | |
| ● | The Company issued shares related to the overallotment of the May 5, 2025 share issuance for gross proceeds of $ with share issue costs of $ for net proceeds of $. | |
| ● | On June 12, 2025 the Company issued units consisting of one common share and one warrant in a financing for $ with share issue costs of $ for net proceeds of $. The value of the issuance was allocated $ to the shares and $ to the warrants. Warrants were valued using the residual method. | |
| ● | On July 21, 2025 the Company issued units consisting of one common share and one warrant in a financing for $with share issue costs of $ for net proceeds of $. | |
| ● | shares were issued for the exercise of warrants |
During the year ended December 31, 2024,
| ● | The Company issued common shares for the vesting of restricted share units. | |
| ● | The Company issued common shares for the exercise of warrants |
| 11 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 12. | SHARE CAPITAL (CONT’D) |
| ● | On
February 26, 2024, 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 $ for net proceeds of $. Of the
total share issuance costs $ | |
| ● | On
April 29, 2024, 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 $ for net proceeds of $. Of the total
share issuance costs $ | |
| ● | On August 21, 2024, 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 issue costs of $ for net proceeds of $. The value of the issuance was allocated $ to the shares, and $ to the warrants including $ allocated to prefunded warrants. | |
| ● | On November 19, 2024 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 issue costs of $ for net proceeds of $. The value of the issuance was allocated $ to the shares and $ to the warrants including $ allocated to the prefunded warrants. |
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 15% (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.
| Grant Date | Expiry Date | Exercise Price | Remaining Contractual Life (years) | Number of Options Outstanding | Number of Options Exercisable | |||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| 12 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 12. | SHARE CAPITAL (CONT’D) |
| Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding, December 31, 2023 | $ | |||||||
| Forfeited | ) | |||||||
| Outstanding, December 31, 2024 | $ | |||||||
| Expired | ) | |||||||
| Forfeited | ) | |||||||
| Outstanding, September 30, 2025 | $ | |||||||
options were granted by the Company during the nine months ended September 30, 2025.
During the three and nine months ended September 30, 2025, the Company recorded $ (2024 – $) and $ (2024 - $) 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 nine months ended September 30, 2025, the Company recorded share-based payment expense of $ (2024 - $) and $ (2024 - $) 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.
As at September 30, 2025, the Company had the following RSUs outstanding:
| Number of RSUs | Average Price | |||||||
| Outstanding, December 31, 2023 | $ | |||||||
| Vested | ( | ) | ||||||
| Issued | ||||||||
| Forfeited | ( | ) | ||||||
| Outstanding, December 31, 2024 | ||||||||
| Vested | ( | ) | ||||||
| Issued | ||||||||
| Forfeited | ( | ) | ||||||
| Outstanding, September 30, 2025 | $ | |||||||
| 13 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 12. | SHARE CAPITAL (CONT’D) |
Warrants
During the year ended December 31, 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 and are also accounted for as a liability. In addition, the Company issued pre-funded warrants with an exercise price in Canadian dollars (“Pre-funded Warrants”). These are 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 accounted for as a liability as these contain clauses that do not meet the fixed for fixed test.
To determine the 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.
| 2024 Issuances | February Issuance | April Issuance | August Issuance | November Issuance | ||||||||||||||||||||
| Warrants | Broker | Warrants | Broker | Broker | Broker | |||||||||||||||||||
| Volatility | % | % | % | % | % | % | ||||||||||||||||||
| Risk free rate | % | % | % | % | % | % | ||||||||||||||||||
| Expected life | ||||||||||||||||||||||||
| Expected dividend yield | % | % | % | % | % | % | ||||||||||||||||||
Warrant Derivative Liability
| Balance at December 31, 2023 | $ | |||
| Warrants issued | ||||
| Exercised | ( | ) | ||
| Change in fair value of warrants outstanding | ( | ) | ||
| Reclassify to equity | ( | ) | ||
| Balance at December 31, 2024 | $ | |||
| Exercised | ( | ) | ||
| Change in fair value of warrants outstanding | ||||
| Balance at September 30, 2025 | $ |
| 14 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 12. | SHARE CAPITAL (CONT’D) |
Details of these warrants and their fair values are as follows:
| Issue Date | Exercise Price | Number
of Warrants September 30, 2025 | Fair
Value at September 30, 2025 | Number
of Warrants Outstanding at December 31, 2024 | Fair
Value at December 31, 2024 | |||||||||||||||
| Derivative Liability | ||||||||||||||||||||
| (1) | US$ | $ | $ | |||||||||||||||||
| $ | $ | |||||||||||||||||||
| 1) |
The fair values of these warrants were estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions:
| September 30, 2025 | December 31, 2024 | |||||||
| Risk free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life | years | years | ||||||
| Expected dividend yield | % | % | ||||||
| Date issued | Expiry date | Exercise price | Number of warrants outstanding September 30, 2025 | Number of warrants outstanding December 31, 2024 |
||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
| US$ | ||||||||||||||
| US$ | ||||||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
| CAD$ | ||||||||||||||
The weighted average remaining contractual life of warrants outstanding as of September 30, 2025, was years (December 31, 2024 – years).
| 15 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 12. | SHARE CAPITAL (CONT’D) |
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Outstanding, December 31, 2023 | $ | |||||||
| Issued | ||||||||
| Exercised | ( | ) | ||||||
| Expired | ( | ) | ||||||
| Outstanding, December 31, 2024 | $ | |||||||
| Issued | ||||||||
| Exercised | ( | ) | ( | ) | ||||
| Outstanding September 30, 2025 | $ | |||||||
13. SEGMENTED INFORMATION
The
Company operates in
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
| 16 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 13. | SEGMENTED INFORMATION (CONT’D) |
The board of the Company relies on executive management which assesses the financial performance and position of the group and makes strategic decisions. Executive management, which has been identified as being the chief operating decision maker, consists of the chief executive officer, chief operating officer and chief financial officer.
| September 30, 2025 | Drones | 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 | $ | $ | $ | |||||||||
| September 30, 2024 | Drones | 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 | $ | $ | $ | |||||||||
Geographic revenue is measured by aggregating sales based on the country and the entity where the sale was made.
| September 30, 2025 | December 31, 2024 | |||||||
| Non-current assets | ||||||||
| Canada | $ | $ | ||||||
| United States | $ | |||||||
| $ | $ | |||||||
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | ||||||||||||||||
| Canada | $ | $ | $ | $ | ||||||||||||
| United States | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| 17 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
14. OFFICE AND MISCELLANEOUS
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Advertising, Marketing, and Investor Relations | $ | $ | $ | $ | ||||||||||||
| Compliance fees | ||||||||||||||||
| Business development | ||||||||||||||||
| General freight | ||||||||||||||||
| General office | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
15. OTHER EXPENSE
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Share issue costs | $ | $ | $ | $ | ||||||||||||
| Write off of accounts (payable) receivable | ( | ) | ( | ) | ( | ) | ||||||||||
| Other | ( | ) | ( | ) | ||||||||||||
| $ | ( | ) | $ | $ | ( | ) | $ | |||||||||
16. RELATED PARTY TRANSACTIONS
On
August 1, 2019, the Company entered in a business services agreement (the “Agreement”) with Business Instincts Group (“BIG”),
a company that Cameron Chell, CEO and director has a material interest in that he previously controlled, to provide: corporate development
and governance, strategic facilitation and management, general business services, office space, corporate business development video
content, website redesign and management, and online visibility management. The services are provided by a team of consultants and the
costs of all charges are based on the fees set in the Agreement. For the three and nine months ended September 30, 2025, the Company
incurred fees of $
On
October 1, 2019, the Company entered into an independent consultant agreement (“Consultant Agreement”) with 1502372 Alberta
Ltd, a company controlled by Cameron Chell, CEO and director, to provide executive consulting services to the Company. The costs of all
charges are based on the fees set in the Consultant Agreement. For the three and nine months ended September 30, 2025, the Company incurred
fees of $
On
May 2, 2022, the Company and entered into an agreement with Scott Larson, a director, to provide executive consulting services to the
Company and all fees are set in the consulting agreement. For the three and nine months ended September 30, 2025, the Company incurred
fees of $
| 18 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 16. | RELATED PARTY TRANSACTIONS (CONT’D) |
Trade receivables/payables and accrued receivables/payables:
As
at September 30, 2025, 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 nine months ended September 30, 2025 and 2024 included:
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Director fees | $ | $ | $ | $ | ||||||||||||
| Salaries | ||||||||||||||||
| Share-based payments | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Other related party transactions
| For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| 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 a director | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
17. 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.
| 19 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 17. | 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.
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.
| September 30, 2025 | Level 1 | Level 3 | Total | |||||||||
| Equity securities in investee companies | $ | $ | $ | |||||||||
| Derivative liability | ( | ) | ( | ) | ||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | |||||
| December 31, 2024 | Level 1 | Level 3 | Total | |||||||||
| Equity securities in investee companies | $ | $ | $ | |||||||||
| Derivative liability | ( | ) | ( | ) | ||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | |||||
| 20 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three and Nine Months Ended September 30, 2025
Expressed in Canadian Dollars (unaudited)
| 17. | 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 derivative liability | The fair value of the warrants derivative liability at initial recognition and at year end has been calculated using the Black Scholes Option Pricing Model | Key observable inputs ● Share price ● Risk free interest rate ● Dividend yield Key unobservable inputs ● Expected volatility |
The estimated fair value would increase (decrease) if: ● The price was higher (lower) ● The risk-free rate was higher (lower) ● The dividend yield was lower (higher) ● The expected volatility was higher (lower) |
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:
| Impact on comprehensive loss | ||||||||||||
| Unobservable Inputs | Change | Nine months ended September 30, 2025 | Year ended December 31, 2024 | |||||||||
| Volatility | % | $ | $ | |||||||||
18. SUBSEQUENT EVENTS
Subsequent
to September 30, 2025, there have been a total of
warrants exercised for total proceeds of CAD$
| Warrants | ||||||||
| Issuance | Number exercised | Proceeds | ||||||
| October 30,2023 | $ | |||||||
| February 26, 2024 | ||||||||
| April 29, 2024 | ||||||||
| November 19, 2024 | ||||||||
| May 5, 2025 | ||||||||
| June 12, 2025 | ||||||||
| July 21, 2025 | ||||||||
| $ | ||||||||
| Broker Warrants | ||||||||
| Issuance | Number exercised | Proceeds | ||||||
| February 26, 2024 | $ | |||||||
| April 29, 2024 | ||||||||
| May 5, 2025 | ||||||||
| July 21, 2025 | ||||||||
| $ | ||||||||
| Total exercises | $ | |||||||
| 21 |