EX-4.4 5 tm2120454d1_ex4-4.htm EXHIBIT 4.4

 

Exhibit 4.4

 

 

 

 

Draganfly Inc.

 

Condensed Consolidated Interim Financial Statements - Unaudited

 

For the Three Months Ended March 31, 2021

 

(Expressed in Canadian Dollars)

 

 

 

 

Draganfly Inc.

Condensed Consolidated Interim Statements of Financial Position

Expressed in Canadian Dollars

             
       March 31,   December 31, 
As at  Notes   2021   2020 
       (unaudited)     
ASSETS               
Current Assets               
  Cash and cash equivalents   5   $21,067,923   $1,982,416 
  Amounts receivable   6    946,961    810,791 
  Inventory   7    1,377,405    1,233,619 
  Prepaids   8    301,141    335,022 
         23,693,430    4,361,848 
                
Non-current Assets               

  Goodwill

   3,4,11    17,697,079    2,166,563 
  Equipment   10    241,133    153,870 
  Intellectual property   11    2,511,173    273,867 
  Investment   9    777,143    - 
  Right of use asset   12    135,874    144,419 
TOTAL ASSETS       $45,055,832   $7,100,567 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY               
Current Liabilities               
  Trade payables and accrued liabilities   14   $1,908,593   $1,857,177 
  Customer deposits   15    289,803    385,449 
  Deferred income   16    440,000    - 
  Loans   17    38,465    62,978 
  Derivative liability   18    41,767,806    748,634 
  Lease liability   13    83,283    93,239 
         44,527,950    3,147,477 
                
Non-current Liabilities               
  Deferred income   16    8,932    5,062 
  Loans   17    71,068    34,938 
  Lease liability   13    66,397    64,885 
TOTAL LIABILITIES        44,674,347    3,252,362 
                
SHAREHOLDERS’ EQUITY               
  Share capital   18    75,459,911    36,943,304 
  Equity reserve   18    5,955,327    3,024,007 
  Accumulated deficit        (81,320,287)   (36,119,210)
  Unrealized gain on investments available for sale   9    277,143    - 
  Accumulated other comprehensive loss        9,391    104 
TOTAL SHAREHOLDERS’ EQUITY        381,485    3,848,205 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY       $45,055,832   $7,100,567 

 

Nature and Continuance of Operations (Note 1)

Subsequent Events (Notes 1, 25)

 

Approved and authorized for issuance by the Board of Directors on May 26, 2021.

 

“Scott Larson”   “Cameron Chell”  
Director   Director  

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 

 

 

Draganfly Inc.

Condensed Consolidated Interim Statements of Comprehensive Loss - Unaudited

Expressed in Canadian Dollars

         
       For the three months ended 
       March 31,   March 31, 
   Note   2021   2020 
Revenue from sales of goods   19   $1,129,307   $22,356 
Revenue from provision of services   19    410,429    474,701 
TOTAL REVENUE        1,539,736    497,057 
                
COST OF SALES        (1,024,729)   (59,786)
                
GROSS PROFIT        515,007    437,271 
                
OPERATING EXPENSES               
  Amortization   11   $13,694   $882 
  Depreciation   10,12    35,302    14,153 
  Director fees   22    86,691    - 
  Office and miscellaneous   20    2,339,401    650,297 
  Professional fees        868,479    92,425 
  Research and development        15,048    3,969 
  Share-based payments   18    1,049,866    519,384 
  Travel        28,758    7,620 
  Wages and salaries        402,361    366,503 
         (4,839,600)   (1,655,233)
OTHER INCOME (EXPENSE)               
  Change in fair value of derivative liability   18    (41,019,172)   - 
  Finance and other costs   23    (6,405)   (4,006)
  Foreign exchange gain (loss)        145,095    50,845 
  Gain on settlement of debt   24    -    67,493 
  Government income        20,706    - 
  Other income (loss)        (16,708)   (478)
  Unrealized investment gain   9    277,143    - 
NET LOSS       $(44,923,934)  $(1,104,108)
                
OTHER COMPREHENSIVE LOSS               
  Foreign exchange translation        9,287    13,814 
COMPREHENSIVE LOSS        (44,914,647)   (1,090,294)
                
Loss per share               
  Basic/Diluted       $(0.48)  $(0.02)
Weighted average number of common shares outstanding        93,426,279    70,178,481 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 

 

 

Draganfly Inc.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity (Deficiency) - Unaudited

Expressed in Canadian Dollars

                             
   Number of Shares   Share Capital   Equity Reserve   Accumulated Deficit   Unrealized Gain on Investments Available for Sale   Accumulated Other Comprehensive Income   Total Shareholders’ Equity (Deficiency) 
Balance at December 31, 2019   69,670,613   $27,786,517   $2,508,233   $(28,103,397)  $-   $-   $2,191,353 
Shares issued for exercise of warrants   3,110,800    1,155,539    (756,459)   -    -    -    399,080 
Share-based payments   -    -    519,384    -    -    -    519,384 
Net loss   -    -    -    (1,104,108)   -    -    (8,015,813)
Translation of foreign operations   -    -    -    -    -    13,814    13,814 
                                    
Balance at March 31, 2020   72,781,413   $28,942,056   $2,271,158   $(29,207,505)  $-   $13,814   $2,019,523 
Shares issued for exercise of warrants   4,813,075    2,851,591    (888,734)   -    -    -    1,962,857 
Shares issued for acquisition   3,225,438    2,178,961    -    -    -    -    2,178,961 
Shares issued as finder’s fees   200,000    100,000    -    -    -    -    100,000 
Shares issued for debt settlement   555,409    344,354    -    -    -    -    344,354 
Shares issued for financing   3,518,034    2,018,845    -    -    -    -    2,018,845 
Shares issued for exercise of RSUs   999,992    507,497    (507,497)   -    -    -    - 
Share-based payments   -    -    2,149,080    -    -    -    2,149,080 
Net loss   -    -    -    (6,911,705)   -    -    (6,911,705)
Translation of foreign operations   -    -    -    -    -    (13,710)   (13,710)
                                    
Balance at December 31, 2020   86,093,361   $36,943,304   $3,024,007   $(36,119,210)  $-   $104   $3,848,205 
Shares issued for exercise of warrants   7,015,124    3,507,562    -    -    -    -    3,507,562 
Shares issued for acquisition   6,000,000    14,220,000    3,072,857    -    -    -    17,292,857 
Shares issued for exercise of RSUs   624,998    300,000    (300,000)   -    -    -    - 
Shares issued for exercise of stock options   1,892,495    1,846,776    (891,403)   -    -    -    955,373 
Shares issued for financing   32,443,457    18,717,438    -    -    -    -    18,717,438 
    Share issue costs   -    (273,169)   -    -    -    -    (273,169)
Shares issued in lieu of cash   75,000    198,000    -    -    -    -    198,000 
Share-based payments   -    -    1,049,866    -    -    -    1,049,866 
Net loss   -    -    -    (45,201,077)   -    -    (45,201,077)
Unrealized gain on investments available for sale   -    -    -    -    277,143    -    277,143 
Translation of foreign operations   -    -    -    -    -    9,287    9,287 
                                    
Balance at March 31, 2021   134,144,435   $75,459,911   $5,955,327   $(81,320,287)  $277,143   $9,391   $381,485 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 

 

 

Draganfly Inc.

Condensed Consolidated Interim Statements of Cash Flows - Unaudited

Expressed in Canadian Dollars

     
   For the three months ended 
   March 31, 2021   March 31, 2020 
OPERATING ACTIVITIES          
  Comprehensive loss  $(44,923,934)  $(1,104,108)
    Adjustments for:          
      Amortization   13,694    882 
      Depreciation   35,302    14,153 
      Change in fair value of derivative liability   41,019,172    - 
      Finance and other costs   6,405    4,006 
      Gain on settlement of debt   -    (67,493)
      Income from government assistance   (20,706)   - 
      Share-based payments   1,049,866    519,384 
      Unrealized gain on investments   (277,143)   - 
    (3,097,344)   (633,176)
Net changes in non-cash working capital items:          
      Accounts receivable   (136,170)   64,604 
      Inventory   (143,786)   (402,376)
      Prepaid expenses   33,881    155,416 
      Right of use asset   (14,365)   - 
      Trade payables and accrued liabilities   (188,645)   (104,688)
      Customer deposits   (95,646)   - 
      Deferred income   (3,870)   - 
      Loans   443,870    - 
      Lease liability   14,398    - 
Funds used in operations activities   (3,187,677)   (920,220)
           
INVESTING ACTIVITIES          
      Cash paid for acquisition   (250,000)   - 
      Purchase of equipment   (103,274)   - 
      Revaluation of equipment   3,619    - 
      Investments   (500,000)   - 
Funds provided by (used in) investing activities   (849,655)   - 
           
FINANCING ACTIVITIES          
      Proceeds from issuance of common shares for financing   18,717,438    399,080 
          Share issue costs   (273,169)   - 
      Proceeds from issuance of common shares in lieu of cash   198,000    - 
      Proceeds from issuance of common shares for warrants exercised   3,507,562    - 
      Proceeds from issuance of common shares for stock options exercised   955,373    - 
      Proceeds from issuance of loans   60,000    - 
      Repayment of loans   (24,513)   - 
      Repayment of lease liability   (27,139)   (10,750)
Funds provided by financing activities   23,113,552    388,330 
           
Effects of exchange rate changes on cash   9,287    12,457 
Change in cash   19,076,220    (531,890)
Cash, beginning of period   1,982,416    2,429,375 
Cash, end of period  $21,067,923   $1,909,942 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 

 

 

Draganfly Inc.

Condensed Consolidated Interim Statements of Cash Flows - Unaudited

Expressed in Canadian Dollars

         
Cash and cash equivalents consist of the following:          
Cash held in banks  $20,925,211   $1,767,932 
Guaranteed investment certificate   142,712    142,010 
   $21,067,923   $1,909,942 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

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’s shares began trading on the Canadian Securities Exchange (the “CSE”) under the symbol “DFLY”. The Company’s head office is located at 2108 St. George Avenue, Saskatoon, SK, S7M 0K7 and its registered office is located at 2300 – 550 Burrard Street, Vancouver, BC, V6C 2B5.

 

On August 15, 2019, the Company and 1187607 B.C. Ltd. (“Merger Co.”), a wholly-owned subsidiary of the Company, completed a Business Combination Agreement (the “BCA”) with Draganfly Innovations Inc. (“Draganfly Innovations”) (the “Amalgamation”). Under the Amalgamation, shareholders of Draganfly Innovations received 1.794 fully paid and non-assessable common shares in the authorized share structure of the Company for each Draganfly Innovations share. Consequently, the Company owns 100% of Draganfly Innovations and the Draganfly Innovations shareholders became shareholders of the Company. Draganfly is an operational business of developing and manufacturing multi-rotor helicopters, industrial aerial video systems and civilian small unmanned aerial systems or vehicles. Pursuant to the Amalgamation the Company changed its name to “Draganfly Inc.”.

 

The recent outbreak of the coronavirus, also known as "COVID-19", has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods, and social distancing, have caused material disruption to business globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.

 

There are significant uncertainties with respect to future developments and impact to the Company related to the COVID-19 pandemic, including the duration, severity, and scope of the outbreak and the measures taken by governments and businesses to contain the pandemic. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impacts of COVID-19 on our business operations cannot be reasonably estimated at this time. At the date of these financial statements, the outbreak and the related mitigation measures have had the following impacts on the Company’s operations, among others: temporary closure of business locations, supply chain issues, and decrease in sales. The extent to which these events may impact the Company’s business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease. With COVID-19 being an ongoing issue, the Company has prepared its employees at its Saskatchewan and British Columbia facilities to be ‎able to work from home. The Company also applied to the various federal government relief ‎initiatives. Although the Company’s major custom engineering customer temporarily closed that part of its business, the Company believes it will start up again. Further, the Company has entered into a distribution agreement to be the ‎exclusive provider of one of their products which has helped offset custom engineering work from that customer. Aside from the acquisition of Dronelogics and being opportunistic ‎on other partnerships or acquisitions, the Company expanded its products/services offered to include ‎health/telehealth applications relating to COVID-19, as a way to deal with the impacts of COVID-19. However, these ongoing events are highly uncertain and as such, the Company cannot determine the ultimate financial impacts at this time. Any deterioration in the current situation could have an adverse impact on our business, results of operations, financial position, and cash flows in 2021.

 

 

 

  

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

2.BASIS OF PREPARATION

 

Statement of Compliance

 

These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Reporting Interpretation Committee (“IFRIC”). The principal accounting policies applied in the preparation of these interim financial statements, including International Accounting Standards (“IAS”) 34 Interim Financial Reporting, are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

 

The notes presented in these condensed consolidated interim financial statements include only significant events and transactions occurring since the Company’s last fiscal year end and they do not include all of the information required in the Company’s most recent annual financial statements. Except as noted below, these condensed consolidated interim financial statements follow the same accounting policies and methods of application as the Company’s annual financial statements and should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2020, which were prepared in accordance with IFRS as issued by IASB. There have been no significant changes in judgement or estimates from those disclosed in the financial statements for the year ended December 31, 2020.

 

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on May 25, 2021.

 

The financial statements of the Company have been prepared on a historical cost basis, modified where applicable. In addition, the financial statements have been prepared using the accrual basis of accounting except for cash flow information.

 

Basis of consolidation

 

Each subsidiary is fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases.

 

The consolidated 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 
Draganfly Innovations Inc.   Canada    100%
Draganfly Innovations USA, Inc.   US    100%
Dronelogics Systems Inc.   Canada    100%

 

All intercompany balances and transactions were eliminated on consolidation.

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

3.DRONELOGICS ACQUISITIONS

 

On April 30, 2020, the Company acquired all of the issued and outstanding shares of Dronelogics Systems Inc. (“Dronelogics”), excluding the cinematography division, for consideration of $500,000 cash and 3,225,438 common shares (the “Transaction”).

 

In connection with the Transaction, the Company paid fees of $160,000 to certain advisors consisting of $100,000 by way of 200,000 in shares at a price of $0.50 per share and as to $60,000 in cash or shares at a deemed price of $0.50 per share. At closing, the Company (i) granted 445,000 incentive stock options to certain employees of Dronelogics pursuant to the Company’s share compensation plan, exercisable at a price equal to closing price of the shares on the CSE on January 31, 2020. The options have a term of 10 years and 375,000 vest in three equal tranches, on the grant date and first and second anniversaries of the date of grant while 70,000 vest on the first anniversary of the grant date, and (ii) awarded 375,000 RSUs to certain directors and officers of Dronelogics. RSUs were awarded to certain directors and officers of Dronelogics pursuant to the Company’s share compensation plan. The RSUs vest in three equal tranches, on the first, second and third anniversaries of the date of award.

 

The purchase price allocation (“PPA”) is as follows:

 

Number of shares of Draganfly Inc.   3,225,438 
Fair value of common shares  $0.83 
Fair value of shares of Draganfly Inc.  $2,677,114 
Present value of the fair value of shares of Draganfly Inc.   2,178,960 
Cash portion of purchase price   500,000 
Total  $2,678,960 
Tangible assets acquired     
  Cash  $42,593 
  Accounts receivable   98,852 
  Inventory   629,684 
  Prepaids and deposits   93,997 
  Other current assets   3,014 
  Capital assets   54,946 
  Right-of-use assets   83,428 
  Accounts payable and accrued liabilities   (222,766)
  Customer deposits   (245,959)
  Loans   (245,752)
  Other current liabilities   (8,437)
  Lease liabilities   (87,203)
    196,397 
      
Identifiable intangible assets     
  Customer relationships   197,000 
  Website   119,000 
    316,000 
      
Goodwill   2,166,563 
Total consideration  $2,678,960 

 

The Company estimated the fair value as follows:

 

•Customer relationships based on an income approach, specifically multi-period excess earnings method, by identifying key customers, applying attribution rate of 15% per annum and discount rate of 18% per annum; and

 

•Website based on an income approach, specifically relief from royalty methodology, using a reasonable royalty rate of 0.5% and discount rate of 17% per annum.

 

Furthermore, the excess of the consideration paid over the fair value of the identifiable assets (liabilities) acquired were recognized as goodwill, which primarily consisted of the assembled workforce.

 

From the date of the acquisition to December 31, 2020, the acquired business contributed $4,086,350 of revenue and a net income of $434,528.

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

4.VITAL INTELLIGENCE ACQUISITION

 

On March 25, 2021, the Company acquired the assets of Vital Intelligence Inc. (“Vital”) for consideration of: (a) a cash payment of $500,000 with ‎‎$50,000 paid upon execution of the asset purchase agreement, $200,000 to be paid at closing and ‎‎$250,000 to be paid on the six-month anniversary date of ‎closing; and (b) ‎6,000,000 units of the ‎Company with each unit being comprised of one common share of the Company and one common share ‎purchase warrant (the “Acquisition”). Each warrant will entitle the holder to acquire one common share for a period of 24 ‎months following closing at an exercise price of $2.67 per common share and the Company will be able ‎to accelerate the expiry date of the warrants after one year in the event the underlying common shares ‎have a value of at least 30% greater than the exercise price of the warrants. The units will be held in ‎escrow following closing with 1,500,000 units being released at closing and the remainder to be released ‎upon the Company reaching certain revenue milestones received from the purchased assets. The units were issued on March 22, 2021.

 

The units of the Company are to be releasable from escrow in accordance with the terms and conditions of the Escrow Agreement, as follows:

a)1,500,000 units shall be released on the closing date;
b)1,500,000 units shall be released from escrow upon the Vital assets earning revenue in the aggregate amount of $2,000,000;
c)1,500,000 units shall be released from escrow upon the Vital assets earning revenue in the aggregate amount of $4,000,000; and
d)1,500,000 units shall be released from escrow upon the Vital assets earning revenue in the aggregate amount of $6,000,000.

 

The Vital Intelligence product platform is a combination of proprietary Intellectual Property along with external technology. The base technology is computer vision signal processing that incorporates learning algorithms that can detect heart rate, breathing/respiratory rate, coughs, mask usage, social distancing, temperature, oxygen saturation of blood, and blood pressure. Combined, all these data points provide and deliver an analysis of health and better accuracy in determining infection with various respiratory related issues.

 

Vital Intelligence has developed a suite of products that is designed to maximize the use of its technology by serving a variety of different market segments and sectors:

-Drone Vital Sign Detection: Video from a drone is analyzed and can provide an individuals’ heart rate, respiratory rate, and also detect coughing. The data is processed via either a local or cloud storage service in real or near-real time.
-Drone Social Distancing Detection: Video cameras attached to drones collect data which is then used to determine social distancing. The data is processed via either a local or cloud storage service in real or near-real time.
-Thermography Kiosk: This product, also branded as Safe Set Solution, is a moveable kiosk (consisting of a thermal detection camera, laptop and stand) to provide thermal detection and reporting systems. Kiosk is able to be placed in entryways or throughways to capture temperature readouts of passers-by.
-Thermography Detection Camera System: This group of products is a stationary camera system, or systems of networked cameras aimed at critical entryways or locations designed to capture core-body temperature of individuals entering a space. Algorithms read video feeds and allow for company or facility use decisions to be made. An example would be capturing temperature readouts from individuals and then integrating that data into a company’s employee badge systems for compliance and monitoring as well as door locking systems to grant access to a space.
-Social Distancing Camera System: This product is a stationary camera system, or system of networked cameras aimed at high traffic areas in order to capture data on social distancing. Information is provided via overlay on capture footage. The technology can be used on archived or real-time video footage to assist community health workers in predicting outbreaks of infections.

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

4.VITAL INTELLIGENCE ACQUISITION

 

The PPA is as follows:

 

Number of units of Draganfly Inc.   6,000,000 
Fair value of units  $2.88 
Fair value of units of Draganfly Inc.  $17,292,857 
Fair value of cash portion of purchase price   488,659 
Total  $17,781,516 

 

Identifiable intangible assets     
  Brand  $540,000 
  Software   1,711,000 
    2,251,000 
      
Goodwill   15,530,516 
Total consideration  $17,781,516 

 

The Company estimated the fair value as follows:

 

•Brand based on an income approach, specifically relief from royalty methodology, using a reasonable royalty rate of 1.0% and discount rate of 40% per annum.
   
•Software based on an income approach, specifically relief from royalty methodology, using a reasonable royalty rate of 5.0% and discount rate of 40% per annum.

 

5.CASH AND CASH EQUIVALENTS

 

   March 31, 2020   December 31, 2020 
Cash held in banks  $20,925,211   $1,839,871 
Guaranteed investment certificate   142,712    142,545 
   $21,067,923   $1,982,416 

 

On March 27, 2021, the Company has $142,710 in a guaranteed investment certificate (“GIC”) to secure its credit cards. The terms of the GIC are for 1 year at a rate of 0.10% per annum.

 

6.AMOUNTS RECEIVABLE

 

   March 31, 2021   December 31, 2020 
Trade accounts receivable  $946,961   $780,254 
SR&ED receivable   -    30,537 
   $946,961   $810,791 

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars 

 

7.INVENTORY

 

   March 31, 2021   December 31, 2020 
Finished goods  $1,286,017   $1,155,871 
Parts   91,388    77,748 
   $1,377,405   $1,233,619 

 

During the three months ended March 31, 2021, $784,095 (2020: $7,576) of inventory was sold and recognized in cost of sales.

 

8.PREPAID EXPENSES AND DEPOSITS

 

   March 31, 2021   December 31, 2020 
Insurance  $29,195   $992 
Prepaid interest   4,750    - 
Prepaid marketing services   56,532    187,826 
Prepaid rent   -    3,583 
Prepaid subscriptions   4,167    5,953 
Deposits   206,497    136,668 
   $301,141   $335,022 

 

9.INVESTMENTS

 

On March 10, 2021, the Company purchased 1,428,571 units of a company for $500,000. Each unit is comprised of one common share and one share purchase warrant. These warrants have an exercise price of $0.50 per warrant, each convert to one common share, and have a life of two years, expiring on March 17, 2023. These assets have been classified as Available for Sale and any unrealized gains or losses will be recognized through the income statement.

 

Balance at March 10, 2021  $500,000 
  Gain/Loss   277,143 
Balance at March 31, 2021  $777,143 

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

10.EQUIPMENT

 

   Computer Equipment   Furniture and Equipment   Leasehold Improvements   Software   Vehicles   Total 
Cost                              
Balance at January 1, 2020  $7,000   $142,173   $-   $29,967   $-   $179,140 
  Additions   2,028    21,860    -    -    -    23,888 
  Net assets acquired in the Acquisition   15,369    7,573    4,352    -    27,652    54,946 
Balance at December 31, 2020  $24,397   $171,606   $4,352   $29,967   $27,652   $257,974 
  Additions   1,505    101,769    -    -    -    103,274 
  Revaluation   -    -    -    -    (3,619)   (3,619)
Balance at March 31, 2021  $25,902   $273,376   $4,352   $29,967   $24,033   $357,629 
                               
Accumulated depreciation                              
Balance at January 1, 2020  $6,761   $37,944   $-   $19,294   $-   $63,999 
  Charge for the year   5,631    22,019    3,220    3,202    6,033    40,105 
Balance at December 31, 2020  $12,392   $59,963   $3,220   $22,496   $6,033   $104,104 
  Charge for the year   1,744    7,606    1,132    560    1,350    12,392 
Balance at March 31, 2021  $14,136   $67,569   $4,352   $23,056   $7,383   $116,496 
                               
Net book value:                              
December 31, 2020  $12,005   $111,643   $1,132   $7,471   $21,619   $153,870 
March 31, 2021  $11,765   $205,807   $-   $6,911   $16,650   $241,133 

 

11.INTELLECTUAL PROPERTY

 

   Patents   Customer Relationships   Brand & Software   Goodwill   Total 
Cost                         
Balance at January 1, 2020  $41,931   $-   $-   $-   $41,931 
  Intangible assets acquired in the Transaction   -    197,000    119,000    2,166,563    2,482,563 
Balance at December 31, 2020  $41,931   $197,000   $119,000   $2,166,563   $2,524,494 

Intangible assets acquired in the Acquisition

   -    -    2,251,000    15,530,516    17,781,516 
Balance at March 31, 2021  $41,931   $197,000   $2,370,000   $17,697,079   $20,264,079 
                          
Accumulated amortization                         
Balance at January 1, 2020  $40,546   $-   $-   $-   $40,546 
  Charge for the year   1,385    26,267    15,866    -    43,518 
Balance at December 31, 2020  $41,931   $26,267   $15,866   $-   $84,064 
  Charge for the year   -    8,537    5,157    -    13,694 
Balance at March 31, 2021  $41,931   $34,804   $21,023   $-   $97,758 
                          
Net book value:                         
December 31, 2020  $-   $170,733   $103,134   $2,166,563   $2,440,430 
March 31, 2021  $-   $162,196   $2,348,977   $17,697,079   $20,208,252 

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

11.INTELLECTUAL PROPERTY (CONT’D)

 

Customer relationships

On April 30, 2020, the Company acquired a 100% interest in Dronelogics and assigned $197,000 to the fair value of customer relationships.

 

Brand

On April 30, 2020, the Company acquired a 100% interest in Dronelogics and assigned $119,000 to the fair value of the website/domain name.

 

On March 25, 2021, the Company acquired the assets of Vital and assigned $540,000 to the fair value of the brand.

 

Software

On March 25, 2021, the Company acquired the assets of Vital and assigned $1,711,000 to the fair value of the software.

 

Goodwill

On April 30, 2020, the Company acquired a 100% interest in Dronelogics, which included goodwill. Goodwill was valued at $2,166,563.

 

On March 25, 2021, the Company acquired the assets of Vital, which included goodwill. Goodwill was valued at $15,530,516.

 

The key assumptions used in the calculations of the recoverable amounts include sales growth per year, changes in cost of sales and capital expenditures based on internal forecasts.

 

12.RIGHT OF USE ASSETS

 

   Total 
Cost     
Balance at January 1, 2020  $159,539 
  Lease acquired in the Acquisition   83,428 
Balance at December 31, 2020  $242,967 
  Addition   28,610 
  Lease removal   (7,092)
Balance at March 31, 2021  $264,485 
      
Accumulated depreciation     
Balance at January 1, 2020  $29,545 
  Charge for the period   69,003 
Balance at December 31, 2020  $98,548 
  Historical correction   7,152 
  Charge for the period   22,911 
Balance at March 31, 2021  $128,611 
      
Net book value:     
December 31, 2020  $144,419 
March 31, 2021  $135,874 

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars 

 

13.LEASE LIABILITY

 

   Total 
Balance at January 1, 2020  $136,073 
  Leases acquired in the Acquisition   87,203 
  Interest expense   18,290 
  Lease Payments   (83,442)
Balance at December 31, 2020  $158,124 
  Historical correction   22,043 
  Interest expense   4,297 
  Lease payments   (27,139)
  Lease removal   (7,645)
Balance at March 31, 2021   149,680 
      
Which consists of:     
  Current lease liability  $83,283 
  Non-current lease liability   66,397 
Balance at March 31, 2021  $149,680 

 

14.TRADE PAYABLES AND ACCRUED LIABILITIES

 

   March 31, 2021   December 31, 2020 
Trade accounts payable  $1,303,477   $813,881 
Accrued liabilities   478,669    512,205 
Due to related parties (Note 21)   92,250    475,628 
Government grant payable (Note 20)   33,709    33,709 
GST/PST Payable   11,829    21,754 
   $1,919,934   $1,857,177 

 

15.CUSTOMER DEPOSITS

 

The Company takes a customer deposit on certain orders.

 

   March 31, 2021   December 31, 2020 
Customer deposits  $289,803   $385,449 

 

16.DEFERRED INCOME

 

At times, the Company’s subsidiaries may take payment in advance for services to be rendered. These amounts are held and recognized as services are rendered.

 

   March 31, 2021   December 31, 2020 
Deferred income from customers  $440,000   $- 
Deferred income from government   8,932    5,062 
    448,932    5,062 

 

The deferred income from the government is the calculated fair value of the interest on the Canadian Emergency Business Account (CEBA) loans which is accreted over the remaining expected life of the loans.

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

17.LOANS

 

   Start Date  Maturity Date  Rate   Principal   Interest   Total 
CEBA  2020-05-19  2022-12-31   0%  $33,848   $1,686   $35,534 
CEBA  2021-03-15  2022-12-31   0%   35,424    110    35,534 
Vehicle loan  2019-08-30  2024-09-11   6.99%   19,831    3,778    23,609 
Shopify loan  2020-08-05      7.00%   13,884    972    14,856 
Total             $102,987   $6,546   $109,533 

 

On May 19, 2020, Dronelogics received a $40,000 CEBA loan. This loan is currently interest-free and 25% of the loan, up to $10,000, is forgivable if the loan is repaid on or before December 31, 2022. If the loan is not repaid by that date, the loan can be converted to a three-year term loan at an interest rate of 5%.

 

On December 4, 2020, the Government of Canada allowed for an expansion of the CEBA loan by $20,000, of which, an additional $10,000 is forgivable if the loan is repaid on or before December 31, 2022.

 

On March 15, 2021, Draganfly Innovations Inc. received a $60,000 CEBA loan. This loan is currently interest free and up to $20,000 is forgivable if the loan is repaid on or before December 31, 2022. If the loan is not repaid by that date, the loan can be converted to a three-year term loan at an interest rate of 5%.

 

The CEBA loans are unsecured, the vehicle loan is secured by the vehicle, and the Shopify loan is secured by the Company’s accounts receivable.

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars 

 

18.SHARE CAPITAL

 

Authorized share capital

Unlimited number of common shares without par value.

 

Issued share capital

During the three months ended March 31, 2021,

-The Company issued 7,015,124 common shares for the exercise of warrants for $3,507,562.
-The Company issued 624,998 common shares for the vesting of Restricted Share Units.
-The Company issued 1,892,495 common shares for the exercise of stock options for $955,373.
-The Company issued 75,000 common shares in lieu of cash.
-The Company issued 32,443,457 units for the Regulation A+ financing in the United States. Each unit is comprised of one common share and one share purchase warrant. These warrants have an exercise price of $0.71 USD per warrant, each convert to one common share, and have a life of two years.
-The Company issued 6,000,000 units for the acquisition of Vital Intelligence. Each unit is comprised of one common share and one warrant. These warrants have an exercise price of $2.67 per warrant, each convert to one common share, and have a life of two years.

 

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.

 

As at March 31, 2021, the Company had the following options outstanding and exercisable:

 

Grant Date  Expiry Date  Exercise Price   Remaining Contractual Life (years)   Number of Options Outstanding   Number of Options Exercisable 
October 30, 2019  October 30, 2029  $0.50    8.59    1,483,337    599,998 
November 19, 2019  November 19, 2029  $0.50    8.64    250,000    166,666 
April 30, 2020  April 30, 2030  $0.50    9.09    445,000    124,999 
April 30, 2020  April 30, 2030  $0.77    9.09    550,000    150,000 
July 3, 2020  July 3, 2025  $0.64    4.26    1,000,000    166,666 
November 24, 2020  November 24, 2030  $0.50    9.66    160,000    50,000 
December 11, 2020  December 11, 2030  $0.43    9.70    187,500    - 
February 2, 2021  February 2, 2031  $2.64    9.85    150,000    50,000 
March 8, 2021  March 8, 2026  $2.78    4.94    50,000    12,500 
                 4,275,837    1,320,829 

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

18.SHARE CAPITAL (CONT’D)

 

   Number of Options   Weighted Average Exercise Price 
Outstanding, December 31, 2019   3,725,000   $0.50 
Forfeited   (216,668)   0.50 
Granted   2,460,000    0.63 
Outstanding, December 31, 2020   5,968,332   $0.55 
Exercised   (1,892,495)   0.50 
Granted   200,000    2.68 
Outstanding, March 31, 2021   4,275,837   $0.67 

 

During the three months ended March 31, 2021,

-The Company granted 150,000 options to an employee. Each option is exercisable at $2.64 per share for 10 years.
-The Company granted 50,000 options to a consultant. Each option is exercisable at $2.78 per share for 5 years.

 

During the year ended December 31, 2020,

-The Company granted 445,000 options to employees. Each option is exercisable at $0.50 per share for a period of 10 years from the grant date.
-The Company issued 600,000 options to consultants. Each option is exercisable at $0.77 per share for a period of 10 years from the grant date.
-The Company granted 1,000,000 options to employees. Each option is exercisable at $0.64 per share for a period of 5 years from the grant date.
-The Company granted 165,000 options to employees. Each option is exercisable at $0.50 per share for a period of 10 years from the grant date.
-The Company granted 250,000 options to a consultant. Each option is exercisable at $0.43 per share for a period of 10 years from the grant date.

 

During the three months ended March 31, 2021, the Company recorded share-based payment expense of $516,351 (2020: $274,584).

 

Restricted Share Units

 

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 20% (in the aggregate) of the issued and outstanding common shares from time to time.

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

18.SHARE CAPITAL (CONT’D)

 

As at March 31, 2021, the Company had the following RSUs outstanding:

 

   Number of RSUs 
Outstanding, December 31, 2019   3,175,000 
Exercised   (999,992)
Forfeited   (341,667)
Granted   1,240,000 
Outstanding, December 31, 2020   3,073,341 
Exercised   (624,998)
Granted   740,000 
Outstanding, March 31, 2021   3,188,343 

 

During the three months ended March 31, 2021, the Company accelerated the vesting of 624,998 RSUs and issued 740,000 RSUs to employees of the Company with each RSU exercisable into one common share of the Company or the cash equivalent thereof upon the vesting conditions being met for a period of three years from the grant date.

 

During the year ended December 31, 2020, the Company committed to grant 1,240,000 RSUs to employees and consultants of the Company with each RSU exercisable into one common share of the Company or the cash equivalent thereof upon the vesting conditions being met for a period of three years from the grant date.

 

During the three months ended March 31, 2021, the Company recorded share-based payment expense of $533,515 in stock-based compensation 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.

 

Warrants

 

During the year ended December 31, 2020 and the three months ended March 31, 2021, the Company issued warrants (“USD Warrants”) with a USD exercise price. Being in a foreign currency that is not the Company’s functional currency, these USD Warrants are required to be recorded as a financial liability and not as equity. As a financial liability, these USD Warrants are revalued on a quarterly basis to fair market value with the change in fair value being recorded through the Consolidated Statement of Comprehensive Loss. The initial fair value of these USD Warrants was parsed out from equity and recorded as a financial liability.

 

To reach a fair value of the USD Warrants, a Black Scholes calculation is used, calculated in USD as the Company also trades on the OTCQB. The Black Scholes value per USD Warrant is then multiplied by the number of outstanding warrants and then multiplied by the foreign exchange rate at the end of the period from the Bank of Canada.

 

Warrant Derivative Liability

 

Balance at January 1, 2020  $ - 
Change in fair value of warrants outstanding   748,634 
Balance at December 31, 2020  $748,634 
Change in fair value of warrants outstanding   41,019,172 
Balance at March 31, 2021  $41,767,806 

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

18.SHARE CAPITAL (CONT’D)

 

The derivative financial liability consists of the fair value of the non-compensatory share purchase warrants that have exercise prices that differ from the functional currency of the Company and are within the scope of IAS 32 “Financial Instruments: Presentation”. Details of these warrants and their fair values are as follows:

 

Issue Date  Exercise Price   Number of Warrants Outstanding at March 31, 2021   Fair Value at March 31, 2021   Number of Warrants Outstanding at December 31, 2020   Fair Value at December 31, 2020 
November 30, 2020  US$      0.71    2,556,496   $3,050,839    2,556,496   $748,634 
February 5, 2021  US$      0.71    6,671,992    7,962,138    -    - 
March 5, 2021  US$      0.71    25,771,465    30,754,829    -    - 
        34,999,953   $41,767,806    2,556,496   $748,634 

 

During the year ended December 31, 2020, the Company extended the life of the November 5, 2019 warrants from expiring on November 5, 2020 to expiring on November 5, 2021. To do this, it was required that 25% of the remaining November 5, 2019 warrants needed to be exercised by October 21, 2020 and was completed.

 

   Number of Warrants   Weighted Average Exercise Price 
Outstanding, December 31, 2019   18,051,499   $0.41 
Exercised   (7,923,874)   0.30 
Forfeited   (600,000)   0.50 
Granted   2,556,496    0.71 
Outstanding, December 31, 2020   12,084,121   $0.59 
Exercised   (7,015,124)   0.50 
Granted   38,443,457    1.02 
Outstanding, March 31, 2021   43,512,454    0.97 

 

As at March 31, 2021, the Company had the following warrants outstanding:

 

Date issued  Expiry date  Exercise price  Number of warrants outstanding 
November 5, 2019  November 5, 2021  CDN$      0.50  2,512,501 
November 30, 2020  November 30, 2022  US$      0.71  2,556,496 
February 5, 2021  February 5, 2023  US$      0.71  6,671,992 
March 5, 2021  March 5, 2023  US$      0.71  25,771,465 
March 22, 2021  March 22, 2023  CDN$      2.67  6,000,000 
         43,512,454 

 

The weighted average remaining contractual life of warrants outstanding as of March 31, 2021, was 1.83 (December 31, 2020 - 0.90 years).

 

Of the 6,000,000 warrants issued on March 22, 2021 to acquire Vital, 4,500,000 of the warrants are currently held in escrow, to be released upon completion of the milestones (note 4).

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

19.REVENUE

 

The Company sub-classifies revenue within the following components: product revenue and consulting revenue. Product revenue comprises of sales of internally assembled multi-rotor helicopters, industrial aerial video systems, civilian small unmanned aerial systems or vehicles, and wireless video systems. Consulting revenue consists of fees charged for custom engineering and training and simulation consulting.

 

   March 31, 2021   March 31, 2020 
Product sales  $1,129,307   $22,356 
Drone service   409,963    - 
Custom engineering services   466    474,701 
   $1,539,736   $497,057 

 

The Company does not derive significant revenue from any (2019 – one) customers, which exceed 10% of total revenues for the three months ended March 31, 2021 (2020 – $474,701 of custom engineering services revenue).

 

Consulting revenue:

 

On May 22, 2017, the Company executed a standard consulting agreement, whereby the Company would provide consulting, custom engineering and investigating and solving on a project-by-project basis. The Company shall be responsible for the development, design, procurement, fabrication, assembly, integration, checkout, integration and test of hardware, software, and firmware necessary to produce a complete system per each project. The consideration for the services performed are based on the labor cost incurred on an hourly basis and minimal preapproved expenditures.

 

Geographic revenue segmentation is as follows:

 

   March 31, 2021   March 31, 2020 
Canada  $769,380   $7,931 
United States   769,419    489,126 
International   937    - 
   $1,539,736   $497,057 

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

19.REVENUE (CONT’D)

 

The Company operates in an international market with four reportable operating segments.

 

   Draganfly Inc.   Draganfly Innovations Inc.   Draganfly Innovations USA, Inc.   Dronelogics Systems Inc.   Total 
Product sales  $-   $16,722   $2,127   $1,110,459   $1,129,308 
Drone services   -    -    244,552    165,410    409,962 
Custom engineering services   -    466    -    -    466 
    -    17,188    246,679    1,275,869    1,539,736 
                          
Cost of sales   -    (28,645)   (170,756)   (825,328)   (1,024,729)
                          
Gross profit   -    (11,457)   75,923    450,541    515,007 
                          
Expenses   3,452,771    834,203    142,847    409,779    4,839,600 
Other income (expenses)   (41,015,596)   489,382    -    (73,127)   (40,599,341)
Net income (loss)   (44,468,367)   (356,278)   (66,924)   (32,365)   (44,923,934)
Cumulative translation differences   -    -    9,287    -    9,287 
Comprehensive income (loss)  $(44,468,367)  $(356,278)  $(57,637)  $(32,365)  $(44,914,647)

 

The Company separated the operating segments based on the existing subsidiaries and have revenues as follows:

-Draganfly Inc.: No revenues.
-Draganfly Innovations Inc.: Product sales revenues and revenues derived from custom integration and engineering services.
-Draganfly Innovations USA, Inc.: Product sales revenues and revenues derived from drone and health/telehealth services.
-Dronelogics Systems Inc.: Product sales revenues and revenues derived from rental, repair, drone as a service, and training services.

 

For 2020 and 2021, all revenues are derived from external customers.

 

20.OFFICE AND MISCELLANEOUS

 

   March 31, 2021   March 31, 2020 
Advertising, Marketing, and Investor Relations  $2,095,092   $486,639 
Contract Work   34,077    118,663 
Other   210,232    44,995 
   $2,339,401   $650,297 

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

21.GOVERNMENT ASSISTANCE

 

In February 2016, the Company and an Alberta-based government funded not-for-profit organization (the “Organization”) entered into a funding agreement, whereby the Organization would fund 50% of the total costs, up to $375,000 to the Company for the development of a new product. During the year ended December 31, 2016, the Company received $75,000 in funding. On February 28, 2017, the Company and the Organization entered into a repayment agreement, where the Company would refund and repay a portion of the Organization’s initial funding. The repayment agreement set out the terms and conditions upon which the Company was to pay $41,292 over a 12-month repayment plan. In addition, the Company will pay the Organization $33,709 if the Company ever sells a product that the Organization’s funding contributed to. During the year ended December 31, 2019, the final repayment of $13,764 was made and the contingent balance of $33,709 remains in government grants payable (Note 13).

 

22.RELATED PARTY TRANSACTIONS

 

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of members of the Company's Board of Directors and corporate officers.

 

Trade payables and accrued liabilities:

 

On Aug 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 up to six consultants and the costs of all charges are based on the fees set in the Agreement and are settled on a monthly basis. The Company records these charges under Office and Miscellaneous. For the three months ended March 31, 2021, the company incurred fees of $43,500 compared to $70,350 in 2020. As at March 31, 2021, the Company was indebted to this company in the amount of $nil (December 31, 2020 - $nil).

 

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 and are settled on a monthly basis. The Company records these charges under Office and Miscellaneous. For the three months ended March 31, 2021, the Company incurred fees of $53,764 compared to $24,150 in 2020. As at March 31, 2021, the Company was indebted to this company in the amount of $73,500 (December 31, 2020 - $321,741).

 

On July 3, 2020, the Company entered into an executive consultant agreement (“Executive Agreement”) with Scott Larson, a director of the Company, to provide executive consulting services, as President, to the Company. The costs of all charges are based on the fees set in the Executive Agreement and are settled on a monthly basis. The Company records these charges under Office and Miscellaneous. For the three months ended March 31, 2021, the Company incurred fees of $44,123. As at March 31, 2021, the Company was indebted to this company in the amount of $nil (December 31, 2020 - $153,887).

 

As at March 31, 2021, the Company had $92,250 (December 31, 2020 - $475,628) payable to related parties outstanding that were included in accounts payable. The balances outstanding are unsecured, non-interest bearing and due on demand.

 

 

 

 

Draganfly Inc.

Notes to the Condensed Consolidated Interim Financial Statements - Unaudited

For The Three Months Ended March 31, 2021

Expressed in Canadian Dollars

 

22.RELATED PARTY TRANSACTIONS (CONT’D)

 

Key management compensation

 

Key management includes the Company’s directors and members of the executive management team. Compensation awarded to key management for the three months ended March 31, 2021 and 2020 included:

 

   March 31, 2021   March 31, 2020 
Director fees  $86,691   $- 
Management fees paid to a company controlled by CEO and director   53,764    - 
Management fees paid to a company controlled by president and director   44,123    - 
Management fees paid to a company controlled by a former director   45,000    30,000 
Salaries   122,976    71,190 
Salaries paid to the former owner of the Company   -    33,415 
Share-based payments   680,097    271,639 
Total  $1,032,651   $430,394 

 

23.FINANCE AND OTHER COSTS

 

   March 31, 2021   March 31, 2020 
Accretion expense  $706   $- 
Interest expense on lease liabilities   4,297    - 
Interest income on GIC   (2)   (10)
Interest on outstanding trade payables and bank charges   1,404    4,016 
   $6,405   $4,006 

 

24.GAIN ON SETTLEMENT OF DEBT

 

During the three months ended March 31, 2020, as a result of the transactions relating to the private placement and ensuing debt repayments, a gain of $67,493 was recognized on the settlement of outstanding debt.

 

25.SUBSEQUENT EVENTS

 

Subsequent to March 31, 2021,

-887,500 warrants were exercised for proceeds of $443,750.
-910,000 stock options were granted to employees of the Company with an exercise price of $2.03 and expire 10 years from the date of grant. These stock options vest:
o1/3 on the first anniversary;
o1/3 on the second anniversary; and
o1/3 on the third anniversary.
-50,000 RSUs were granted to employees of the Company. These RSUs vest:
o1/3 on the first anniversary;
o1/3 on the second anniversary; and
o1/3 on the third anniversary.
-10,000 stock options were exercised for proceeds of $5,000.
-124,999 RSUs vested and were exercised.