PART II AND III

PART II – INFORMATION REQUIRED IN OFFERING CIRCULAR

An Offering Statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the Offering Statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the Offering Statement in which such Final Offering Circular was filed may be obtained.

PRE-QUALIFICATION AMENDMENT NO. 1 TO THE REGULATION A OFFERING CIRCULAR UNDER THE SECURITIES ACT OF 1933

REGULATION A OFFERING CIRCULAR UNDER THE SECURITIES ACT OF 1933

PRELIMINARY OFFERING CIRCULAR AS OF AUGUST 7, 2020, SUBJECT TO COMPLETION

DRAGANFLY INC.

Up to 35,000,000 Units , Each Unit Consisting of

One Common Share and One Common Share Purchase Warrant

Up to 3 5,000,000 Common Shares and up to   3 5,000,000 Warrants Contained in the Units

Up to 3 5,000,000 Common Shares Underlying the Warrants

2108 St. George Avenue,

Saskatoon, SK, S7M 0K7

1-306-955-9907

www.draganfly.com

Draganfly Inc., a company organized under the laws of British Columbia, Canada (the “Company”, “we,” or “our”), is offering up to 3 5,000,000 units (the “Units”) consisting of up to 3 5,000,000 Common Shares and up to 3 5,000,000 Warrants (each as defined below) and offering up to 3 5,000,000 Common Shares underlying the Warrants (the “Maximum Offering”) of the Company, to be sold in this offering (the “Offering”).

The Company’s Common Shares began trading on the Canadian Securities Exchange (“CSE”) in Canada under the symbol “DFLY” on November 5, 2019 and the OTCQB Venture Market of the OTC Markets (“OTCQB”) under the symbol “DFLYF” on January 9, 2020.  The closing price of the Common Shares on ●, being the last trading day before the date of this Offering Circular was US$● on the CSE (the “Closing Price”).  The initial public offering price for each Unit is US$● (the “Unit Price”), which is comprised of the Closing Price plus a 5% discount.   Each Unit is comprised of one common share in the capital of the Company, with no par value (a “Common Share”) and one Common Share purchase warrant (each whole warrant, a “Warrant” and collectively, the “Warrants”) to purchase one additional Common Share (a “Warrant Share”). One Warrant is required to purchase one additional Warrant Share at an exercise price of US$● per Warrant, which includes a 50% increase in premium to the Unit Price, subject to certain adjustments. The Warrants are exercisable immediately and terminating on the date that is the twenty-four (24) month anniversary of issuance of a respective purchaser’s Units in the Offering (the “Closing Date”). The Units are being offered on a “best efforts” basis. All dollar amounts are expressed in United States currency, unless otherwise indicated, that Canadian currency is used.

The Common Shares and Warrants will be separately transferable following the termination of (i) any transfer hold periods under applicable law and (ii) the following contractual lock-up period: Our investors are subject to a 9-month “lock-up” from the Closing Date of the Offering relating to our Units, Common Shares, and Warrants purchased in the Offering. This means that, for a period of 9 months following the C losing D ate of this Offering, such persons may not, with limited exceptions, sell or agree to sell any of the Units or components thereof - the Common Shares or Warrants - or enter into any agreement or arrangement to transfer to another, in whole or in part, any of the economic consequences of ownership of the Units, Common Shares or Warrants, without the prior written consent of the Company, and pursuant to the terms of the lock-up agreements. We are selling our Shares through a Tier 2 offering pursuant to Regulation A (Regulation A+) under the Securities Act of 1933, as amended (the “Securities Act”), and we intend to sell the Units either directly to investors or through registered broker-dealers who are paid commissions. The Company has engaged Dalmore Group, LLC, a New York limited liability company and FINRA/SIPC registered broker-dealer (“Dalmore”), to provide broker-dealer services in connection with this Offering. This Offering will terminate on the earlier of (i) __________ __, 2022, (ii) the date on which the Maximum Offering is sold, or (iii) when the Board of Directors of the Company elects to terminate the Offering (in each such case, the “Termination Date”). There is no escrow established for this Offering. We will hold closings upon the receipt of investors’ subscriptions and acceptance of such subscriptions by the Company. If, on the initial Closing Date , we have sold less than the Maximum Offering, then we may hold one or more additional closings for additional sales, until the earlier of: (i) the sale of the Maximum Offering, or (ii) the Termination Date. There is no aggregate minimum requirement for the Offering to become effective; therefore, we reserve the right, subject to applicable securities laws, to begin applying “dollar one” of the proceeds from the Offering towards our business strategy, including, without limitation, research and development expenses, offering expenses, working capital and general corporate purposes and other uses as more specifically set forth in the “Use of Proceeds to Issuer” section of this offering circular (the “Offering Circular”). We expect to commence the sale of the Units as of the date on which the Offering Statement of which this Offering Circular is a part (the “Offering Statement”) is qualified by the United States Securities and Exchange Commission (the “SEC”).

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We expect to commence the sale of the Units as of the date on which this offering circular is declared qualified by the SEC.

Investing in our Securities involves a high degree of risk. These are speculative securities. You should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” starting on page 11 for a discussion of certain risks that you should consider in connection with an investment in our Units.

THE SEC DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

	Price to Public	Underwriting Discount and Commissions		Proceeds to the Company (2)
Units, each consisting of	$●		(1)	$●
One Common Share
One Warrant
Common Shares underlying Warrants	$●		(1)	$●
Total Maximum Offering (3)	$●		(1)	$●

(1)	The minimum investment amount for each subscription is $1,000 . The Offering is being made directly to investors by the management of the Company on a “best efforts” basis. We reserve the right to offer the Units through broker-dealers who are registered with the Financial Industry Regulatory Authority (“FINRA”). The Company has engaged Dalmore to provide broker-dealer services and has agreed to pay a 1% commission on the aggregate amount raised by the Company from investors. This will only start after FINRA Corporate Finance issues a No Objection Letter for the Offering. The Company will also pay a one- time set up fee of $5,000 and a consulting fee of $20,000 payable once FINRA issues a No Objection Letter and the Company receives SEC Qualification.
(2)	The amounts shown in the “Proceeds to the Company” are before deducting organization and offering costs to us, which include legal, accounting, printing, due diligence, marketing, selling and other costs incurred in the Offering of the Units. (See “Use of Proceeds” and “Plan of Distribution and Selling Securityholders.”). The estimated offering expenses will be approximately $1,000,000.
(3)	The Units are being offered pursuant to Regulation A of Section 3(b) of the Securities Act for Tier 2 offerings. The Units are only issued to purchasers who satisfy the requirements set forth in Regulation A. We have the option in our sole discretion to accept less than the minimum investment.

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GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN TEN PERCENT (10%) OF THE GREATER OF YOUR ANNUAL INCOME OR YOUR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A+. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO WWW.INVESTOR.GOV.

This Offering Circular contains all of the representations by us concerning this Offering, and no person shall make different or broader statements than those contained herein. Investors are cautioned not to rely upon any information not expressly set forth in this Offering Circular.

Sale of our Units will commence on approximately __________ __, 2020.

The Company is following the “Offering Circular” format of disclosure under Regulation A+.

The date of this Preliminary Offering Circular is August 7, 2020, subject to completion.

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TABLE OF CONTENTS

	Page
IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR	5
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS	5
SUMMARY	7
RISK FACTORS	11
DILUTION	24
PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS	25
USE OF PROCEEDS TO ISSUER	26
DESCRIPTION OF BUSINESS	27
DESCRIPTION OF PROPERTY	33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES	40
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS	46
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS	49
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS	50
SECURITIES BEING OFFERED	51
WHERE YOU CAN FIND MORE INFORMATION	59
Part F/S	60
INDEX TO FINANCIAL STATEMENTS	60
Part III - Exhibits	III-1
INDEX TO EXHIBITS	III-1
SIGNATURES	61

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IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR

We are offering to sell, and seeking offers to buy, our securities only in jurisdictions where such offers and sales are permitted. Please carefully read the information in this offering circular and any accompanying offering circular supplements, which we refer to collectively as the “Offering Circular.” You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with any information other than the information contained in this Offering Circular. The information contained in this Offering Circular is accurate only as of its date or as of the respective dates of any documents or other information incorporated herein by reference, regardless of the time of its delivery or of any sale or delivery of our securities. Neither the delivery of this Offering Circular nor any sale or delivery of our securities shall, under any circumstances, imply that there has been no change in our affairs since the date of this Offering Circular. This Offering Circular will be updated and made available for delivery to the extent required by the federal securities laws.

This Offering Circular is part of an offering statement (the “Offering Statement”) that we filed with the Securities and Exchange Commission (the “SEC”) using a continuous offering process. Periodically, we may provide an offering circular supplement that would add, update or change information contained in this Offering Circular. Any statement that we make in this Offering Circular will be modified or superseded by any inconsistent statement made by us in a subsequent offering circular supplement. The Offering Statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular. You should read this Offering Circular and the related exhibits filed with the SEC and any offering circular supplement, together with additional information contained in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the SEC. The Offering Statement and all supplements and reports that we have filed or will file in the future can be read at the SEC website, www.sec.gov.

Unless otherwise indicated, data contained in this Offering Circular concerning the business of the Company are based on information from various public sources. Although we believe that these data are generally reliable, such information is inherently imprecise, and our estimates and expectations based on these data involve a number of assumptions and limitations. As a result, you are cautioned not to give undue weight to such data, estimates or expectations.

In this Offering Circular, unless the context indicates otherwise, references to the “Company,” “we,” “our,” and “us” refer to the activities of and the assets and liabilities of the business and operations of Draganfly Inc., a company organized under the laws of British Columbia, Canada, and its subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Business” and elsewhere in this Offering Circular constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar matters that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or the negatives of these terms, or other comparable terminology.

You should not place undue reliance on forward-looking statements. The cautionary statements set forth in this Offering Circular, including in “Risk Factors” and elsewhere, identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:

· Economic conditions in Canada, the United States of America and globally;

· Unpredictable events, such as the COVID-19 outbreak, and associated business disruptions;

· Operational risks;

· The market price of Common Shares may not be high enough to create a positive return for current investors;

· High level of price and volume volatility in the capital markets;

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· No dividends for the foreseeable future;

· Our reliance on management and key employees;

· Risks associated with foreign operations in other countries;

· Risks associated with acquisitions;

· Exposure to information systems security threats;

· Lack of sufficient insurance;

· Changes in laws, regulations, and guidelines relating to our business, including tax and accounting requirements;

· Conflicts of interests of our directors and officers;

· Competition in our industry;

· Uncertainty and adverse changes in the economy;

· Expenses as a public company and having public company disclosure obligations;

· Dilution as a result of future sale of Common Shares;

· Evolving market and difficulty of evaluating future prospects;

· Rapid technological change in our industry;

· Having defective products;

· Failure to obtain or maintain required regulatory approvals;

· The regulatory regime the Company operates in;

· Possibility of data breaches and inadequacy of consumer protection and data privacy policies;

· Increased research and development costs and reduced profitability as a result;

· Lack of outside funding available for research and development;

· Shipping products outside of Canada and approvals required for exporting;

· Potential litigation;

· Reliance on business partners;

· Failure to protect and maintain and the consequential loss of intellectual property rights;

· Adverse impacts on our reported results of operations as a result of adopting new accounting standards or interpretations;

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· Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters;

· The explanatory paragraph from our auditors regarding the Company’s ability to continue as a going concern; and 

· Risks related to our history of losses and the possibility we will not become profitable.

Although the forward-looking statements in this Offering Circular are based on our beliefs, assumptions and expectations, taking into account all information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes. No assurance can be made to any investor by anyone that the expectations reflected in our forward-looking statements will be attained, or that deviations from them will not be material and adverse. We undertake no obligation, other than as may be required by law, to re-issue this Offering Circular or otherwise make public statements updating our forward-looking statements.

SUMMARY

The following highlights information contained elsewhere in this Offering Circular, and it may not contain all of the information that is important to you. You should read this entire Offering Circular carefully, including the section entitled “Risk Factors,” before making an investment decision. References to “we,” “us,” “our,” “our company,” “the Company”, and “Draganfly” refers to Draganfly Inc., and its subsidiaries, a company incorporated under the Business Corporations Act (British Columbia).

Company Information

Draganfly Inc. (the “Company,” “we,” “our,” and “us”) was incorporated on June 1, 2018 under the Business Corporations Act (British Columbia) (the “BCBCA”). On August 15, 2019, the Company completed a going public transaction and on November 5, 2019 listed its common shares on the Canadian Securities Exchange (see “Description of Business – Overview”, starting on page 27). On April 30, 2020, the Company completed the acquisition of Dronelogics Systems Inc. (“Dronelogics”) by acquiring all of the shares of Dronelogics, resulting in Dronelogics becoming a wholly-owned subsidiary of the Company. Certain assets were excluded from the share purchase transaction.  Accordingly, the financial statements for Dronelogics are adjusted to carve out for those certain assets, and the name “Candrone” on the financial statements pertains to the Unmanned Aerial Vehicle (UAV) division of Dronelogics.”

Our head office is located at 2108 St. George Avenue, Saskatoon, Saskatchewan, S7M 0K7. Our telephone number is 1-(306)-955-9907 and our website address is www.draganfly.com. The information contained therein or accessible thereby shall not be deemed to be incorporated into this Offering Circular.

Intercorporate Relationships

The Company has three wholly-owned subsidiaries:

1.	Draganfly Innovations Inc. (“Draganfly Innovations”), a corporation continued under the BCBCA on August 19, 2019. Draganfly’s head office is located at 2108 St. George Avenue, Saskatoon, Saskatchewan S7M 0K7;
2.	Draganfly Innovations USA Inc. (“Draganfly Innovations USA”), a corporation incorporated in the state of Delaware on January 27, 2020. Draganfly Innovations USA’s head office is located at 1017 Maine Campus Drive, Raleigh, NC, 27606; and
3.	Dronelogics, a corporation incorporated under the BCBCA on January 13, 2009. Dronelogics’ head office is located at 319-2999 Underhill Avenue, Burnaby, British Columbia V5A 3C2.

Our Business

The Company has three wholly-owned subsidiaries, Draganfly Innovations, Draganfly Innovations USA, and Dronelogics.

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The business of Draganfly Innovations and Draganfly Innovations USA is the provision of engineering services and manufacture of commercial unmanned aerial vehicles (“UAV”), remotely piloted aircraft systems (“RPAS”), and unmanned vehicle systems (“UVS”) and software, serving the public safety, agriculture, industrial inspections, and mapping and surveying markets.

Dronelogics is a solutions integrator for custom robotics, hardware and software that provides a wide scope of services including sales, training, rentals, maintenance, flying and data processing services.

Description of Property

Draganfly Innovations’ products are manufactured at its machine shop within its leased head office based in Saskatoon, Saskatchewan, Canada. Raw materials for the Company’s products consist of a combination of its original equipment manufacturer parts and third-party components. Draganfly Innovations USA has leased two suites within the North Carolina State University Campus that serves as a management office and place to store some inventory. Dronelogic’s services are provided through its leased space in Burnaby, British Columbia, Canada.

Intellectual Property

With 18 fundamental UAV patents in its portfolio and with six (6) more pending in the application stage, the Company will continue to expand and grow its intellectual property docket. By virtue of being the first commercial UAV company in the industry, our subsidiary, Draganfly Innovations, holds valuable commercial patents. In addition, Draganfly Innovations, Inc. is the owner of 18 registered trademarks with five (5) more trademark applications pending in both the US and Canada.

Product/Services Pipeline

We can provide our customers with an entire suite of products and services, including the following: quad-copters, fixed wing aircrafts, ground based robots, hand held controllers, flight training, and software used for tracking, live streaming and data collection.

Although we have a number of distribution partners, the majority of our product sales are sold directly to the customer. We conduct little outbound sales and marketing promotional activities as customers around the world reach out to us through our website, which is still our primary method of sales.

Draganfly Innovations is recognized as the first commercial multi-rotator manufacturer and has a legacy for its innovation and superior customer service. Draganfly Innovations USA Inc was created in January, 2020 to offer the same services as Draganfly Innovations but to expand its reach directly to the US market. Dronelogics is a solutions integrator for custom robotics, hardware and software that provides a wide scope of services including sales, training, rentals, maintenance, flying and data processing services. Dronelogics provides insights into inventory metrics, asset management, volume-metric calculation and digitizing assets, among many other applications.

Competition

Our industry is subject to rapid and intense technological and regulatory changes. We face, and will continue to face, competition in the development and marketing of our products and services from drone companies, retail and distribution companies, research institutions and academic institutions engaged in manufacturing, research and development, distribution and retail. Competition may arise from, among other things:

· New competitors emerging throughout the world as the drone market matures;

· The incumbent drone player increasing its market share further than its reputed 75% market share due to their aggressive price points;

· Drone as a service typically is not proprietary with relatively low barriers to entry;

· Well capitalized companies will have an advantage in the industry; and

· Technological developments elsewhere may render our existing products non-competitive.

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Risks Related to Our Business

Our business and our ability to execute our business strategy are subject to a number of risks, which are more fully described in the section titled “Risk Factors” beginning on page 11. These risks include, among others:

· Our ability to raise sufficient capital and the availability of future financing;

· Unpredictable events, such as the COVID-19 outbreak, and associated business disruptions;

· The explanatory paragraph from our auditors regarding the Company’s ability to continue as a going concern; and 

· Our ability to develop and protect our intellectual property and to develop, maintain and enhance a strong brand;

· Our ability to compete and succeed in a highly competitive industry; and

· Our ability to manage our research, development, expansion, growth and operating expenses.

Our financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Since inception, we have funded operations exclusively with proceeds from bridge and equity financings. Our future viability is largely dependent upon our ability to raise additional capital to finance our operations. Our management expects that future sources of funding may include sales of equity, obtaining loans, or other strategic transactions. Although our management continues to pursue these plans, there is no assurance that we will be successful with this Offering or in obtaining sufficient financing on terms acceptable to us to continue to finance our operations, if at all. These circumstances raise substantial doubt on our ability to continue as a going concern, and our financial statements do not include any adjustments that might result from the outcome of these uncertainties.

REGULATION A+

We are offering our Units pursuant to rules of the SEC mandated under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). These offering rules are often referred to as “Regulation A+.” We are relying upon “Tier 2” of Regulation A+, which allows us to offer of up to $50 million in a 12-month period.

In accordance with the requirements of Tier 2 of Regulation A+, we are required to publicly file annual, semiannual, and current event reports with the SEC.

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THE OFFERING

Issuer:	Draganfly Inc., a company incorporated under the BCBCA.
Shares Offered:	A maximum of 3 5,000,000 units (the “Units”), each Unit being comprised of one common share in the capital of the Company (each, a “Common Share”) and one common share purchase warrant (each, a “Warrant”), with each Warrant entitling the holder thereof to purchase one additional Common Share (each, a “Warrant Share”) .   The Company’s Common Shares began trading on the Canadian Securities Exchange (“CSE”) in Canada under the symbol “DFLY” on November 5, 2019 and the OTCQB Venture Market of the OTC Markets (“OTCQB”) under the symbol “DFLYF” on January 9, 2020.  The closing price of the Common Shares on ●, being the last trading day before the date of this Offering Circular was US$● on the CSE (the “Closing Price”).  The initial public offering price for each Unit is US$● (the “Unit Price”), which is comprised of the Closing Price plus a 5% discount. ·     one common share in the capital of the Company, with no par value per share (a “Common Share”); and ·    one Common Share purchase warrant (each whole, a “Warrant”) to purchase one additional Common Share (a “Warrant Share). One Warrant is required to purchase one additional Common Share at an exercise price of $● per Warrant, which includes a 50% increase in premium to the Unit Price,subject to certain adjustments. The minimum investment amount for each subscription is $1,000, which minimum may be waived in our discretion.
Warrant Shares Offered:	A maximum of 3 5,000,000 Warrant Shares at an exercise price of $● per Warrant Share, which includes a 50% increase in premium to the Unit Price, subject to customary adjustments. The Warrants are exercisable immediately and terminating on the date that is the twenty-four (24) month anniversary of issuance of a respective purchaser’s Units in the offering (the “Closing Date”).
Common Shares Outstanding before the Offering (1):	79,250,998 shares of Common Shares.
Common Shares to be Outstanding after the Offering(1):	147,506,051 Common Shares, if all our Units are sold and all our Warrants are exercised in full and the maximum Warrant Shares are sold and issued.
Price per Unit:	$●
Price per Warrant Share:	$●
Maximum Offering:	3 5,000,000 Units, at an offering price of $● per Unit, for total gross proceeds of $● (including the exercise of the Warrants in full of the Warrants to purchase 3 5,000,000 Warrant Shares with an exercise price of $● per Warrant Share).
Use of Proceeds:	If we sell all of the 35,000,000 Units being offered, and including exercise of all of the Warrants, all of the 35,000,000 Warrant Shares underlying the Units are issued , our net proceeds (after estimated Offering expenses of $1,000,000 ) will be approximately $●. We will use these net proceeds for research and development expenses, sales and marketing, capex/facility expansion, inventory purchasing, general and administration costs and offering costs and such other purposes described in the “Use of Proceeds to Issuer” section of this Offering Circular.
Hold period:	The Common Shares and Warrants will be separately transferable following the termination of (i) any transfer hold periods under applicable law and (ii) the following contractual lock-up period: Our investors are subject to a 9-month “lock-up” from the Closing Date of the Offering relating to our Units, Common Shares, and Warrants purchased in the Offering. This means that, for a period of 9 months following the Closing Date of this Offering, such persons may not, with limited exceptions, sell or agree to sell any of the Units or components thereof - the Common Shares or Warrants - or enter into any agreement or arrangement to transfer to another, in whole or in part, any of the economic consequences of ownership of the Units, Common Shares or Warrants, without the prior written consent of the Company, and pursuant to the terms of the lock-up agreements.
Risk Factors:	Investing in our Units involves a high degree of risk. See “Risk Factors” starting on page 11.

(1) In addition, there are 6,613,533 of our common shares reserved for issuance under our Share Compensation Plan, of which 3,500,000 of our common shares will be issuable upon vesting of restricted share unit grants , 4,736,666 will be issuable upon exercise of outstanding stock option grants at $0.50 per share , and 1,000,000 of our commons shares will be issuable upon exercise of outstanding stock option grants at $0.64 per share. Additionally, 13,413,499 of our common shares are reserved for issuance to warrant holders whose warrants can be exercised to purchase our common shares at $0.50 per share.

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RISK FACTORS

An investment in our Units involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Offering Circular, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the price of our Common Shares could decline and you may lose all or part of your investment. See “Cautionary Statement Regarding Forward-Looking Statements” above for a discussion of forward-looking statements and the significance of such statements in the context of this Offering Circular.

Risks Related to our Business and Industry

The Company will be affected by operational risks and may not be adequately insured for certain risks.

The Company will be affected by a number of operational risks and the Company may not be adequately insured for certain risks, including: labour disputes; catastrophic accidents; fires; blockades or other acts of social activism; changes in the regulatory environment; impact of non-compliance with laws and regulations; natural phenomena, such as inclement weather conditions, floods, earthquakes and ground movements. There is no assurance that the foregoing risks and hazards will not result in damage to, or destruction of, the Company’s technologies, personal injury or death, environmental damage, adverse impacts on the Company’s operation, costs, monetary losses, potential legal liability and adverse governmental action, any of which could have an adverse impact on the Company’s future cash flows, earnings and financial condition. Also, the Company may be subject to or affected by liability or sustain loss for certain risks and hazards against which the Company cannot insure or which the Company may elect not to insure because of the cost. This lack of insurance coverage could have an adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition.

There is no assurance that resale of the Company’s Common Shares will result in a positive return for existing investors.

The Company’s common shares are currently publicly traded on the Canadian Securities Exchange and the OTCQB Venture Market of the OTC markets. There can be no assurance that the publicly-traded market price of the Common Shares will be high enough to create a positive return for the existing investors. Further, there can be no assurance that the Common Shares will be sufficiently liquid so as to permit investors to sell their position in the Company without adversely affecting the stock price. In such event, the probability of resale of the Common Shares would be diminished. As well, the continued operation of the Company will be dependent upon its ability to procure additional financing in the short term and to generate operating revenues in the longer term. There can be no assurance that any such financing can be obtained or that revenues can be generated. If the Company is unable to obtain such additional financing or generate such revenues, investors may be unable to sell their Common Shares and any investment in the Company may be lost.

The market for securities has experienced a high level of price and volume volatility and market prices are subject to wide fluctuations.

In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continuing fluctuations in price will not occur. It may be anticipated that any quoted market for the Common Shares will be subject to market trends generally, notwithstanding any potential success of the Company in creating revenues, cash flows or earnings. The value of the Common Shares will be affected by such volatility.

The Company has not paid any dividends to date.

To date, the Company has not paid any dividends on its outstanding shares. Any decision to pay dividends on the shares of the Company will be made by its board of directors on the basis of its earnings, financial requirements and other conditions.

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The Company has a history of losses.

The Company has incurred net losses from the inception of its business until the date of this Offering Circular. The Company cannot assure that it can become profitable or avoid net losses in the future or that there will not be any earnings or revenue declines for any future quarterly or other periods. The Company expects that its operating expenses will increase as it grows its business, including expending substantial resources for research and development and marketing. As a result, any decrease or delay in generating revenues could result in material operating losses.

Our inability to retain management and key employees could impair the future success of the Company.

The Company’s future success depends substantially on the continued services of its executive officers and its key development personnel. If one or more of its executive officers or key development personnel were unable or unwilling to continue in their present positions, the Company might not be able to replace them easily or at all. In addition, if any of its executive officers or key employees joins a competitor or forms a competing company, the Company may lose know-how, key professionals and staff members as well as partners. These executive officers and key employees could develop drone technologies that could compete with and take customers and market share away from the Company.

A significant growth in the number of personnel would place a strain upon the Company’s management and resources.

The Company may experience a period of significant growth in the number of personnel that will place a strain upon its management systems and resources. Its future will depend in part on the ability of its officers and other key employees to implement and improve financial and management controls, reporting systems and procedures on a timely basis and to expand, train, motivate and manage the workforce. The Company’s current and planned personnel, systems, procedures and controls may be inadequate to support its future operations.

The Company may be subject to the risks associated with foreign operations in other countries.

The Company’s primary revenues are expected to be achieved in Canada and the US. However, the Company may expand to markets outside of North America and become subject to risks normally associated with conducting business in other countries. The Company cannot predict government positions on such things as foreign investment, intellectual property rights or taxation. A change in government positions on these issues could adversely affect the Company’s business.

The Company may be subject to the risks associated with future acquisitions.

As part of the Company’s overall business strategy, the Company may pursue select strategic acquisitions that would provide additional product or service offerings, additional industry expertise, and a stronger industry presence in both existing and new jurisdictions. Future acquisitions may expose it to potential risks, including risks associated with: (a) the integration of new operations, services and personnel; (b) unforeseen or hidden liabilities; (c) the diversion of resources from the Company’s existing business and technology; (d) potential inability to generate sufficient revenue to offset new costs; (e) the expenses of acquisitions; or (f) the potential loss of or harm to relationships with both employees and existing users resulting from its integration of new businesses. In addition, any proposed acquisitions may be subject to regulatory approval.

The Company may be subject to electronic communication security risks.

A significant potential vulnerability of electronic communications is the security of transmission of confidential information over public networks. Anyone who is able to circumvent the Company’s security measures could misappropriate proprietary information or cause interruptions in its operations. The Company may be required to expend capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches.

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There is no assurance that the Company’s insurance coverage will be sufficient to cover all claims to which the Company may become subject.

Although the Company believes that the events and amounts of liability covered by its insurance policies will be reasonable, taking into account the risks relevant to its business, there can be no assurance that such coverage will be available or sufficient to cover claims to which the Company may become subject. If insurance coverage is unavailable or insufficient to cover any such claims, the Company’s financial resources, results of operations and prospects could be adversely affected.

There are tax risks the Company may be subject to in carrying on business in Canada.

The Company will be considered to have been carrying on business in Canada for purposes of the Income Tax Act (Canada). There is risk that foreign governments may look to increase their tax revenues or levy additional taxes to level the playing field for perceived disadvantages to the traditional brick and mortar business. While the Company does not foresee any adverse tax affects, there is no guarantee that governments will not impose such additional adverse taxes in the future.

The Company’s directors and officers may have a conflicts of interest in conducting their duties.

Because directors and officers of the Company are or may become directors or officers of other reporting companies or have significant shareholdings in other technology companies, the directors and officers of the Company may have a conflict of interest in conducting their duties. The Company and its directors and officers will attempt to minimize such conflicts. In the event that such a conflict of interest arises at a meeting of the directors of the Company, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In appropriate cases the Company will establish a special committee of independent directors to review a matter in which several directors, or officers, may have a conflict. In determining whether or not the Company will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to the Company, the degree of risk to which the Company may be exposed and its financial position at that time. Other than as indicated, the Company has no other procedures or mechanisms to deal with conflicts of interest.

Executive officers and directors may have rights to indemnification including directors’ and officers’ liability insurance that will survive consummation of their agreements.

The Company operates in a competitive market.

The Company faces competition and new competitors will continue to emerge throughout the world. Services offered by the Company’s competitors may take a larger share of consumer spending than anticipated, which could cause revenue generated from the Company’s products and services to fall below expectations. It is expected that competition in these markets will intensify.

If competitors of the Company develop and market more successful products or services, offer competitive products or services at lower price points, or if the Company does not produce consistently high-quality and well-received products and services, revenues, margins, and profitability of the Company will decline.

The Company’s ability to compete effectively will depend on, among other things, the Company’s pricing of services and equipment, quality of customer service, development of new and enhanced products and services in response to customer demands and changing technology, reach and quality of sales and distribution channels and capital resources. Competition could lead to a reduction in the rate at which the Company adds new customers, a decrease in the size of the Company’s market share and a decline in its customers. Examples include but are not limited to competition from other companies in the UAV industry.

In addition, the Company could face increased competition should there be an award of additional licenses in jurisdictions in which the Company operates in.

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The Company faces uncertainty and adverse changes in the economy.

Adverse changes in the economy could negatively impact the Company’s business. Future economic distress may result in a decrease in demand for the Company’s products, which could have a material adverse impact on the Company’s operating results and financial condition. Uncertainty and adverse changes in the economy could also increase costs associated with developing and publishing products, increase the cost and decrease the availability of sources of financing, and increase the Company’s exposure to material losses from bad debts, any of which could have a material adverse impact on the financial condition and operating results of the Company.

The recent COVID-19 outbreak or similar global health crises could affect our ability to access sources of capital.

The extent to which COVID-19 could impact our operations, financial condition, liquidity, results of operations, and cash flows is highly uncertain and cannot be predicted. Negative financial results, uncertainties in the market, and a tightening of credit markets, caused by COVID-19, or a recession, could have a material adverse effect on our liquidity.

COVID-19 or similar pandemics could adversely impact our business and/or our ability to complete reporting obligations.

If a pandemic, epidemic, or outbreak of an infectious disease including the recent outbreak off respiratory illness caused by a novel coronavirus (COVID-19) or other public health crisis were to affect our facilities, staff, accountants or advisors, our business could be adversely affected. Such a pandemic can result in mandatory social distancing, travel bans, and quarantine, and this may limit access to our employees and professional advisors. These factors may hamper our efforts to comply with our filing obligations with the SEC and the Canadian Securities Exchange.

We will incur increased expenses as a result of being a recently listed public company in Canada on the Canadian Securities Exchange and also trading in the United States on the OTCQB Venture Market of the OTC markets and our current resources may not be sufficient to fulfill our public company obligations.

We expect to incur significant legal, accounting, insurance and other expenses as a result of being a recently listed Canadian public company on the Canadian Securities Exchange (CSE) in Canada and our quotation on the OTCQB in the United States, which may negatively impact our performance and could cause our results of operations and financial condition to suffer. Compliance with applicable securities laws in Canada and the rules of the Canadian Securities Exchange substantially increases our expenses, including our legal and accounting costs, and makes some activities more time consuming and costly. Reporting obligations as a public company and our anticipated growth may place a strain on our financial and management systems, processes and controls, as well as on our personnel. We also expect these laws, rules and regulations to make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as officers. As a result of the foregoing, we expect a substantial increase in legal, accounting, insurance and certain other expenses in the future, which will negatively impact our financial performance and could cause our results of operations and financial condition to suffer. We are responsible for establishing and maintaining adequate internal control over financial reporting, which is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Because of our inherent limitations and the fact that we are a new public company and are implementing new financial control and management systems, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A failure to prevent or detect errors or misstatements may result in a decline in the market price of our Common Shares and harm our ability to raise capital in the future.

If our management is unable to certify the effectiveness of our internal controls or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could harm our business and cause a decline in the price of our Common Shares. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to accurately report our financial performance on a timely basis, which could cause a decline in the market price of our Common Shares and harm our ability to raise capital. Failure to accurately report our financial performance on a timely basis could also jeopardize our listing on the Canadian Securities Exchange or any other stock exchange on which our Common Shares may be listed. Delisting of our Common Shares on any exchange would reduce the liquidity of the market for our Common Shares, which would reduce the price of and increase the volatility of the market price of our Common Shares.

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We do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially adversely effected, which could also cause investors to lose confidence in our reported financial information, which in turn could result in a reduction in the trading price of the Common Shares.

Our senior management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day to day management of our business.

The individuals who now constitute our senior management team have relatively limited experience managing a publicly traded company and limited experience complying with the increasingly complex laws pertaining to public companies compared to senior management of other publicly traded companies. Our senior management team may not successfully or efficiently manage our transition as a recently listed public company subject to significant regulatory oversight and reporting obligations under Canadian securities laws. In particular, these new obligations will require substantial attention from our senior management and could divert their attention away from the day‑to‑day management of our business.

A shareholder’s holding in the Company may be diluted if we issue additional Common Shares in the future.

We may issue additional Common Shares in the future, which may dilute a shareholder’s holding in the Company. Our articles will permit the issuance of an unlimited number of Common Shares, and shareholders will have no pre-emptive rights in connection with such further issuances. The directors of the Company have the discretion to determine if an issuance of Common Shares is warranted, the price at which such issuance is effected and the other terms of issue of Common Shares. Also, we may issue additional Common Shares upon the exercise of options to acquire Common Shares under our option plan, which will result in further dilution to the shareholder. Potential future acquisitions may also divert Management’s attention and result in further dilution to the shareholder.

Risks Related to Our Company

The Company operates in evolving markets, which makes it difficult to evaluate the Company’s business and future prospects.

The Company’s UAVs are sold in rapidly evolving markets. The commercial UAV market is in early stages of customer adoption. Accordingly, the Company’s business and future prospects may be difficult to evaluate. The Company cannot accurately predict the extent to which demand for its products and services will increase, if at all. The challenges, risks and uncertainties frequently encountered by companies in rapidly evolving markets could impact the Company’s ability to do the following:

· generate sufficient revenue to maintain profitability;

· acquire and maintain market share;

· achieve or manage growth in operations;

· develop and renew contracts;

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· attract and retain additional engineers and other highly-qualified personnel;

· successfully develop and commercially market new products;

· adapt to new or changing policies and spending priorities of governments and government agencies; and

· access additional capital when required and on reasonable terms.

If the Company fails to address these and other challenges, risks and uncertainties successfully, its business, results of operations and financial condition would be materially harmed.

The Company’s adoption of new business models could fail to produce desired financial returns.

Forecasting the Company’s revenues and profitability for these new business models is inherently uncertain and volatile. The Company’s actual revenues and profits for these business models may be significantly greater or less than the Company’s forecasts. Additionally, these new business models could fail for one or more of the Company’s products and/or services, resulting in the loss of Company’s investment in the development and infrastructure needed to support these new business models, and the opportunity cost of diverting management and financial resources away from more successful businesses.

If critical components or raw materials used to manufacture the Company’s products become scarce or unavailable, then the Company may incur delays in manufacturing and delivery of its products, which could damage its business.

The Company obtains hardware components, various subsystems and systems from a limited group of suppliers. The Company does not have long-term agreements with any of these suppliers that obligate it to continue to sell components, subsystems, systems or products to the Company. The Company’s reliance on these suppliers involves significant risks and uncertainties, including whether its suppliers will provide an adequate supply of required components, subsystems, or systems of sufficient quality, will increase prices for the components, subsystems or systems and will perform their obligations on a timely basis.

In addition, certain raw materials and components used in the manufacture of the Company’s products are periodically subject to supply shortages, and its business is subject to the risk of price increases and periodic delays in delivery. Similarly, the market for electronic components is subject to cyclical reductions in supply. If the Company is unable to obtain components from third-party suppliers in the quantities and of the quality that it requires, on a timely basis and at acceptable prices, then it may not be able to deliver its products on a timely or cost-effective basis to its customers, which could cause customers to terminate their contracts with the Company, increase the Company’s costs and seriously harm its business, results of operations and financial condition. Moreover, if any of the Company’s suppliers become financially unstable, then it may have to find new suppliers. It may take several months to locate alternative suppliers, if required, or to redesign the Company’s products to accommodate components from different suppliers. The Company may experience significant delays in manufacturing and shipping its products to customers and incur additional development, manufacturing and other costs to establish alternative sources of supply if the Company loses any of these sources or is required to redesign its products. The Company cannot predict if it will be able to obtain replacement components within the time frames that it requires at an affordable cost, if at all.

The markets in which the Company competes are characterized by rapid technological change, which requires the Company to develop new products and product enhancements, and could render the Company’s existing products obsolete.

Continuing technological changes in the market for the Company’s products could make its products less competitive or obsolete, either generally or for particular applications. The Company’s future success will depend upon its ability to develop and introduce a variety of new capabilities and enhancements to its existing product and service offerings, as well as introduce a variety of new product offerings, to address the changing needs of the markets in which it offers products. Delays in introducing new products and enhancements, the failure to choose correctly among technical alternatives or the failure to offer innovative products or enhancements at competitive prices may cause existing and potential customers to purchase the Company’s competitors’ products.

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If the Company is unable to devote adequate resources to develop new products or cannot otherwise successfully develop new products or enhancements that meet customer requirements on a timely basis, its products could lose market share, its revenue and profits could decline, and the Company could experience operating losses.

If the Company releases defective products or services, its operating results could suffer.

Products and services designed and published by the Company involve extremely complex software programs, and are difficult to develop and distribute. While the Company has quality controls in place to detect defects in its products and services before they are released. Nonetheless, these quality controls are subject to human error, overriding, and reasonable resource constraints. Therefore, these quality controls and preventative measures may not be effective in detecting defects in the Company’s products and services before they have been released into the marketplace. In such an event, the Company could be required to or may find it necessary to voluntarily suspend the availability of the product or service, which could significantly harm its business and operating results.

The Company’s business could be adversely affected if its consumer protection and data privacy practices are not seen as adequate or there are breaches of its security measures or unintended disclosures of its consumer data.

The rate of privacy law-making is accelerating globally and interpretation and application of consumer protection and data privacy laws in Canada, the United States, Europe and elsewhere are often uncertain, contradictory and in flux. As business practices are being challenged by regulators, private litigants, and consumer protection agencies around the world, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with the Company’s data and/or consumer protection practices. If so, this could result in increased litigation government or court imposed fines, judgments or orders requiring that the Company change its practices, which could have an adverse effect on its business and reputation. Complying with these various laws could cause the Company to incur substantial costs or require it to change its business practices in a manner adverse to its business.

Failure to obtain necessary regulatory approvals from Transport Canada or other governmental agencies, or limitations put on the use of small UAV in response to public privacy concerns, may prevent the Company from expanding sales of its small UAV to non-military customers in Canada.

The regulation of small UAV for commercial use in Canada is undergoing substantial change and the ultimate treatment is uncertain. Currently, the operation of UAVs with a maximum takeoff weight not exceeding 2kg., operated within visual line-of-sight are exempt from the regulations promulgated under the Aeronautics Act (Canada). Transport Canada is responsible for establishing, managing, and developing safety and security standards and regulations for civil aviation in Canada, and includes unmanned civil aviation. Civil operations include law enforcement, scientific research, or use by private sector companies for commercial purposes.

UAV operations for civil or commercial purposes are only authorized to fly with a Special Flight Operations Certificate (“SFOC”) issued by Transport Canada. The Canadian Aviation Regulations (“CARs”) govern civil aviation safety and security in Canada, and by extension govern operation of UAVs in Canada to an equivalent level of safety as manned aircraft. According to section 602.41 of the CARs, “no person shall operate an unmanned air vehicle in flight except in accordance with a SFOC, or an air operator certificate.”

As the name implies, SFOCs are intended to be an authorization for flight under special cases that are specific to a geographical area and for a specific mission. An SFOC may be issued to authorize a UAV to operate for any civil purpose, including for surveillance. The information that must be contained in an application for an SFOC includes details such as: type and purpose of the operation; description of the aircraft; dates and times of the proposed flight; security plans and emergency contingency plans; and a detailed plan describing how the operation will be carried out including: altitude and routes where the operation will be carried out, the location of any obstacles, and the exact boundaries of the area for the operation.

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While Transport Canada has been a world leader in the development of regulations for the commercial use of UAVs, it has acknowledged that the current regulatory regime in Canada has not kept pace with the rapid development in technology and the growing demand for commercial UAV use. In 2010, the Canadian Aviation Regulation Advisory Council (“CARAC”) established the Unmanned Aircraft System Program Design Working Group to develop new regulations to increase the safety, scope and regulatory efficiency of commercial UAV applications in Canada. In 2012, the working group released its phase 1 report which outlines the overall proposed revisions to the Canadian regulatory regime. The working group is currently in the process of drafting the revised regulations contemplated in the phase 1 report with the objective of introducing the new regulations before 2017. The new regulations are intended to be consistent with the international UAV regulatory model established by the International Commercial Aviation Organization (“ICAO”). There will likely be significant advance notice and consultation with the public before the new regulations are implemented.

There are risks associated with the regulatory regime and permitting requirements of our Business.

A significant portion of the Company’s business is based on the operation of remotely piloted aircraft systems (“RPAS”). The operation of RPAS’ poses a risk or hazard to airspace users as well as personnel on the ground. As the RPAS industry is rapidly developing, the regulatory environment for RPAS is constantly evolving to keep pace. As such, whenever a policy change with respect to operating regulations occurs, there is a risk that the Company could find itself to be in non-compliance with these new regulations. While the Company endeavours to take all necessary action to reduce the risks associated with the operations of RPAS’ and to remain well-informed and up-to-date on any addendums and changes to the applicable regulations, there is no assurance that an incident involving an RPAS or the Company’s non-compliance would not create a significant current or future liability for the company.

The regulation of RPAS operations within the Canadian Domestic Airspace (CDA) is still evolving and is expected to continue to change with the proliferation of RPAS’, advancements in technology, and standardization within the industry. Changes to the regulatory regime may be disruptive and result in the Company needing to adopt significant changes in its operations and policies, which may be costly and time-consuming, and may materially adversely affect our ability to manufacture and make delivery of our Company’s products and services in a timely fashion.

Our business and research and development activities are subject to oversight by Transport Canada, the federal institution responsible for transportation policies and programs, including the rules in the Canadian Aviation Regulations (CARs). Currently, Transport Canada requires that any non-recreational operators of RPAS’ have a Special Flight Operations Certificate (SFOC). Our ability to develop, test, demonstrate, and sell products and services depends on the Company’s ability to acquire and maintain a valid SFOC.

In addition, there exists public concern regarding the privacy implications of Canadian commercial and law enforcement use of small UAV. This concern has included calls to develop explicit written policies and procedures establishing usage limitations. There is no assurance that the response from regulatory agencies, customers and privacy advocates to these concerns will not delay or restrict the adoption of small UAV by non-military customers.

This discussion of the risks associated with the regulatory regime and permitting requirements affecting our Company does not take into account the new rules publicly announced by the Minister of Transport (Canada) on January 9, 2019, which will come into force on June 1, 2019 (the “New Rules”). The New Rules are intended to simplify the regulatory regime, including in respect of the requirement to obtain an SFOC under common operation conditions. With the new regulations, there appears to be intention to place more emphasis on Compliant Design Type aircraft as well as individual pilot certification, recurrent testing, and a monetized regulatory regime, which will require operators to pay for aircraft registration and pilot certifications. The Company does expect the new regulations to affect its need to employ and retain personnel with valid pilot certificates. The Company takes all necessary action to remain within compliance of the current and upcoming regulations.

The Company expects to incur substantial research and development costs and devote significant resources to identifying and commercializing new products and services, which could significantly reduce its profitability and may never result in revenue to the Company.

The Company’s future growth depends on penetrating new markets, adapting existing products to new applications, and introducing new products and services that achieve market acceptance. The Company plans to incur substantial research and development costs as part of its efforts to design, develop and commercialize new products and services and enhance existing products. The Company believes that there are significant investment opportunities in a number of business areas. Because the Company accounts for research and development as an operating expense, these expenditures will adversely affect its earnings in the future. Further, the Company’s research and development programs may not produce successful results, and its new products and services may not achieve market acceptance, create additional revenue or become profitable, which could materially harm the Company’s business, prospects, financial results and liquidity.

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The Company’s products and services are complex and could have unknown defects or errors, which may give rise to claims against the Company, diminish its brand or divert its resources from other purposes.

The Company’s UAV rely on complex avionics, sensors, user-friendly interfaces and tightly integrated, electromechanical designs to accomplish their missions. Despite testing, the Company’s products have contained defects and errors and may in the future contain defects, errors or performance problems when first introduced, when new versions or enhancements are released, or even after these products have been used by the Company’s customers for a period of time. These problems could result in expensive and time-consuming design modifications or warranty charges, delays in the introduction of new products or enhancements, significant increases in the Company’s service and maintenance costs, exposure to liability for damages, damaged customer relationships and harm to the Company’s reputation, any of which could materially harm the Company’s results of operations and ability to achieve market acceptance. In addition, increased development and warranty costs could be substantial and could reduce the Company’s operating margins.

The existence of any defects, errors, or failures in the Company’s products or the misuse of the Company’s products could also lead to product liability claims or lawsuits against it. A defect, error or failure in one of the Company’s UAV could result in injury, death or property damage and significantly damage the Company’s reputation and support for its UAV in general. The Company anticipates this risk will grow as its UAV begins to be used in Canadian domestic airspace and urban areas. The Company’s UAV test systems also have the potential to cause injury, death or property damage in the event that they are misused, malfunction or fail to operate properly due to unknown defects or errors.

Although the Company maintains insurance policies, it cannot provide assurance that this insurance will be adequate to protect the Company from all material judgments and expenses related to potential future claims or that these levels of insurance will be available in the future at economical prices or at all. A successful product liability claim could result in substantial cost to us. Even if the Company is fully insured as it relates to a claim, the claim could nevertheless diminish the Company’s brand and divert management's attention and resources, which could have a negative impact on the Company’s business, financial condition and results of operations.

Shortfalls in available external research and development funding could adversely affect the Company.

The Company depends on its research and development activities to develop the core technologies used in its UAV products and for the development of the Company’s future products. A portion of the Company’s research and development activities depend on funding by commercial companies and the Canadian government. Canadian government and commercial spending levels can be impacted by a number of variables, including general economic conditions, specific companies' financial performance and competition for Canadian government funding with other Canadian government-sponsored programs in the budget formulation and appropriation processes. Moreover, the Canadian, federal and provincial governments provide energy rebates and incentives to commercial companies, which directly impact the amount of research and development that companies appropriate for energy systems. To the extent that these energy rebates and incentives are reduced or eliminated, company funding for research and development could be reduced. Any reductions in available research and development funding could harm the Company’s business, financial condition and operating results.

The Company could be prohibited from shipping its products to certain countries if it is unable to obtain Canadian government authorization regarding the export of its products, or if current or future export laws limit or otherwise restrict the Company’s business.

The Company must comply with Canadian federal and provincial laws regulating the export of its products. In some cases, explicit authorization from the Canadian government is needed to export its products. The export regulations and the governing policies applicable to the Company’s business are subject to change. The Company cannot provide assurance that such export authorizations will be available for its products in the future. Compliance with these laws has not significantly limited the Company’s operations or sales in the recent past, but could significantly limit them in the future. Non-compliance with applicable export regulations could potentially expose the Company to fines, penalties and sanctions. If the Company cannot obtain required government approvals under applicable regulations, the Company may not be able to sell its products in certain international jurisdictions, which could adversely affect the Company’s financial condition and results of operations.

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From time to time, the Company may become involved in legal proceedings, which could adversely affect the Company.

The Company may, from time to time in the future, become subject to legal proceedings, claims, litigation and government investigations or inquiries, which could be expensive, lengthy, and disruptive to normal business operations. In addition, the outcome of any legal proceedings, claims, litigation, investigations or inquiries may be difficult to predict and could have a material adverse effect on the Company’s business, operating results, or financial condition.

The Company relies on its business partners, and they may be given access to sensitive and proprietary information in order to provide services and support to the Company’s teams.

The Company relies on various business partners, including third-party service providers, vendors, licensing partners, development partners, and licensees, among others, in some areas of the Company’s business. In some cases, these third parties are given access to sensitive and proprietary information in order to provide services and support to the Company’s teams. These third parties may misappropriate the Company’s information and engage in unauthorized use of it. The failure of these third parties to provide adequate services and technologies, or the failure of the third parties to adequately maintain or update their services and technologies, could result in a disruption to the Company’s business operations. Further, disruptions in the financial markets and economic downturns may adversely affect the Company’s business partners and they may not be able to continue honoring their obligations to the Company. Alternative arrangements and services may not be available to the Company on commercially reasonable terms or the Company may experience business interruptions upon a transition to an alternative partner or vendor. If the Company loses one or more significant business partners, the Company’s business could be harmed.

Risks Related to Intellectual Property

If the Company fails to protect, or incur significant costs in defending, its intellectual property and other proprietary rights, the Company’s business, financial condition, and results of operations could be materially harmed.

The Company’s success depends, in large part, on its ability to protect its intellectual property and other proprietary rights. The Company relies primarily on patents, trademarks, copyrights, trade secrets and unfair competition laws, as well as license agreements and other contractual provisions, to protect the Company’s intellectual property and other proprietary rights. However, a portion of the Company’s technology is not patented, and the Company may be unable or may not seek to obtain patent protection for this technology. Moreover, existing Canadian legal standards relating to the validity, enforceability and scope of protection of intellectual property rights offer only limited protection, may not provide the Company with any competitive advantages, and may be challenged by third parties. The laws of countries other than Canada may be even less protective of intellectual property rights. Accordingly, despite its efforts, the Company may be unable to prevent third parties from infringing upon or misappropriating its intellectual property or otherwise gaining access to the Company’s technology. Unauthorized third parties may try to copy or reverse engineer the Company’s products or portions of its products or otherwise obtain and use the Company’s intellectual property. Moreover, many of the Company’s employees have access to the Company’s trade secrets and other intellectual property. If one or more of these employees leave to work for one of the Company’s competitors, then they may disseminate this proprietary information, which may as a result damage the Company’s competitive position. If the Company fails to protect its intellectual property and other proprietary rights, then the Company’s business, results of operations or financial condition could be materially harmed. From time to time, the Company may have to initiate lawsuits to protect its intellectual property and other proprietary rights. Pursuing these claims is time consuming and expensive and could adversely impact the Company’s results of operations.

In addition, affirmatively defending the Company’s intellectual property rights and investigating whether the Company is pursuing a product or service development that may violate the rights of others may entail significant expense. Any of the Company’s intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. If the Company resorts to legal proceedings to enforce its intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, then the proceedings could result in significant expense to the Company and divert the attention and efforts of the Company’s management and technical employees, even if the Company prevails.

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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The Canadian Intellectual Property Office (“CIPO”) and various foreign national or international patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. Periodic maintenance fees on any issued patent are due to be paid to CIPO and various foreign national or international patent agencies in several stages over the lifetime of the patent. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non‑compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of patent rights include, but are not limited to, failure to timely file national and regional stage patent applications based on our international patent application, failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the market, which would have a material adverse effect on our business.

While a patent may be granted by a national patent office, there is no guarantee that the granted patent is valid. Options exist to challenge the validity of the patent which, depending upon the jurisdiction, may include re-examination, opposition proceedings before the patent office, and/or invalidation proceedings before the relevant court. Patent validity may also be the subject of a counterclaim to an allegation of patent infringement.

Pending patent applications may be challenged by third parties in protest or similar proceedings. Third parties can typically submit prior art material to patentability for review by the patent examiner. Regarding Patent Cooperation Treaty applications, a positive opinion regarding patentability issued by the International Searching Authority does not guarantee allowance of a national application derived from the Patent Cooperation Treaty application. The coverage claimed in a patent application can be significantly reduced before the patent is issued, and the patent’s scope can be modified after issuance. It is also possible that the scope of claims granted may vary from jurisdiction to jurisdiction.

The grant of a patent does not have any bearing on whether the invention described in the patent application would infringe the rights of earlier filed patents. It is possible to both obtain patent protection for an invention and yet still infringe the rights of an earlier granted patent.

The Company may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit the Company’s ability to use certain technologies in the future.

The Company may become subject to claims that its technologies infringe upon the intellectual property or other proprietary rights of third parties. Any claims, with or without merit, could be time-consuming and expensive, and could divert the Company’s management's attention away from the execution of its business plan. Moreover, any settlement or adverse judgment resulting from these claims could require the Company to pay substantial amounts or obtain a license to continue to use the disputed technology, or otherwise restrict or prohibit the Company’s use of the technology. The Company cannot assure that it would be able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that the Company would be able to develop alternative technology on a timely basis, if at all, or that the Company would be able to obtain a license to use a suitable alternative technology to permit the Company to continue offering, and the Company’s customers to continue using, the Company’s affected product. An adverse determination also could prevent the Company from offering its products to others. Infringement claims asserted against the Company may have a material adverse effect on its business, results of operations or financial condition.

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We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, and defending patents on all of our product candidates throughout the world would be prohibitively expensive. Therefore, we have filed applications and/or obtained patents only in key markets including the United States and Canada. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and their products may compete with ours.

Risks Related to Financial Reporting

We may experience adverse effects on our reported results of operations as a result of adopting new accounting standards or interpretations.

Our implementation of and compliance with changes in accounting rules, including new accounting rules and interpretations, could adversely affect our reported financial position or operating results or cause unanticipated fluctuations in our reported operating results in future periods.

Failure to adhere to our financial reporting obligations and other public company requirements could adversely affect the market price of our Common Shares.

Upon receiving a final receipt for the non-offering final prospectus dated October 23, 2019, we became subject to reporting and other obligations under applicable Canadian securities laws and rules of any stock exchange on which the Common Shares are then‑listed, including National Instrument 52‑109—Certification of Disclosure in Issuers’ Annual and Interim Filings. These reporting and other obligations will place significant demands on our Management, administrative, operational and accounting resources. If we are unable to accomplish any such necessary objectives in a timely and effective manner, our ability to comply with our financial reporting obligations and other rules applicable to reporting issuers could be impaired. Moreover, any failure to maintain effective internal controls could cause us to fail to satisfy our reporting obligations or result in material misstatements in our financial statements. If we cannot provide reliable financial reports or prevent fraud, its reputation and operating results could be materially adversely affected which could also cause investors to lose confidence in our reported financial information, which could result in a reduction in the trading price of the Common Shares.

We do not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all error or fraud. A control system, no matter how well‑designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within an organization are detected. The inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a control system, misstatements due to error or fraud may occur and may not be detected in a timely manner or at all.

Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our reported financial results or financial condition.

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, including but not limited to revenue recognition, impairment of goodwill and intangible assets, inventory, income taxes and litigation, are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change our reported financial performance or financial condition in accordance with generally accepted accounting principles.

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Risks Related to the Offering

Additional funding will be required for the Company to meet its requirements and carry out its operations.

The Company will require additional financing from external sources, such as joint ventures, debt financing or equity financing, in order to meet its requirements and carry out operations. The success and the pricing of any such capital raising and/or debt financing will be dependent upon the prevailing market conditions at that time and upon the ability of a company with projects that are non‑producing to attract significant amounts of debt and/or equity. There can be no assurance that such financing will be available to the Company or, if it is, that it will be offered on acceptable terms. If additional financing is raised through the issuance of equity or convertible debt securities of the Company, this may have a depressive effect on the price of the Company’s securities and the interests of shareholders in the net assets of the Company may be diluted. Any failure by the Company to obtain required financing on acceptable terms could cause the Company to delay development of its material projects and could have a material adverse effect on the Company’s financial condition, results of operations and liquidity.

The market price of the Common Shares is subject to fluctuations.

In recent years, the securities markets in the United States and Canada have experienced a high level of price and volume volatility, and the market prices of securities of many technology companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. The price of the Common Shares underlying the Units is also significantly affected by short term changes in the Company’s financial condition or results of operations as reflected in its quarterly financial reports. Other factors unrelated to the Company’s performance that may have an effect on the price of its Common Shares include the following: the extent of analytical coverage available to investors concerning the Company’s business may be limited if investment banks with research capabilities do not follow the Company’s securities; lessening in trading volume and general market interest in the Company’s securities may affect an investor’s ability to trade significant numbers of the Common Shares; and the market price of the Common Shares and size of the Company’s public float may limit the ability of some institutions to invest in the Company’s securities. If an active market for the Common Shares does not continue, the liquidity of an investor’s investment may be limited and the price of the Common Shares may decline. If an active market does not continue, investors may lose their entire investment in the Common Shares. As a result of any of these factors, the market price of the Common Shares at any given point in time may not accurately reflect the long‑term value of the Company.

The Company cannot provide absolute assurance on the reliability of its financial statements.

In the preparation of financial statements, management may need to rely upon assumptions, make estimates or use their best judgment in determining the financial condition of the Company. Significant accounting details are described in more detail in the notes to the Company’s annual consolidated financial statements for the year ended December 31, 2019. In order to have a reasonable level of assurance that financial transactions are properly authorized, assets are safeguarded against unauthorized or improper use and transactions are properly recorded and reported, the Company has implemented and continues to analyze its internal control systems for financial reporting. Although the Company believes its financial reporting and financial statements are prepared with reasonable safeguards to ensure reliability, it cannot provide absolute assurance in that regard.

There may be potential dilution of present and prospective shareholdings.

In order to finance future operations and development efforts, the Company may raise funds through the issue of Common Shares or the issue of securities convertible into or exercisable for Common Shares. The Company cannot predict the size of future issues of Common Shares or the issue of securities convertible into or exercisable for Common Shares or the effect, if any, that future issues and sales of the Common Shares will have on the market price of the Common Shares. Any transaction involving the issue of previously unissued shares, or securities convertible into or exercisable for shares, would result in dilution, which may be substantial, to existing holders of shares.

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There have been no dividends payments on the Company’s Common Shares to date.

No dividends on the Common Shares have been paid to date. The Company currently plans to retain earnings and other cash resources, if any, for the future operation and development of its business. Payment of any future dividends, if any, will be at the discretion of the Board of Directors after taking into account many factors, including the Company’s operating results, financial condition, and current and anticipated cash needs.

The Company has discretion in the use of the net proceeds from an Offering.

The Company intends to allocate the net proceeds it will receive from the Offering as described under “Use of Proceeds” in this Offering Circular, however, the Company will have discretion in the actual application of the net proceeds. The Company may elect to allocate the net proceeds differently from that described in “Use of Proceeds” in this Offer Circular if the Company believes it would be in the Company’s best interests to do so. The Company’s investors may not agree with the manner in which the Company chooses to allocate and spend the net proceeds from the offering. The failure by the Company to apply these funds effectively could have a material adverse effect on the business of the Company.

DILUTION

The following table summarizes the differences between the total consideration and the weighted-average price per share of our Common Shares paid by, on the one hand, officers, directors, and affiliates of the Company who have acquired the Common Shares prior to the date of this Offering Statement and on, the other hand, investors participating in this Offering, before deducting estimated offering expenses, assuming that the maximum gross cash proceeds from the offering of $● are raised and that the number of Common Shares presented on the cover of the Offering Statement are sold. As at date of this Offering Circular, an aggregate of 79,250,998 of our common shares are issued and outstanding, and an aggregate of 13,413,499 Common Share Purchase Warrants issued and outstanding. In addition, there are 3,500,000 restricted share units (“RSUs”) awarded under the Company’s share compensation plan to directors, officers, employees, and consultants of the Company. Each RSU represents a right to receive one common share of the Company, following the vesting of such restricted share units over a three‑year period. As of the date of this Offering Circular, there are 5,736,666 stock options (“Options”) outstanding under the Company’s Share Compensation Plan of which 4,736,666 of our common shares will be issuable upon exercise of outstanding awards at $0.50 per share and 1,000,000 of our common shares will be issuable upon exercise of outstanding awards at $0.64 per share .

The Share Compensation Plan is a 20% “rolling” plan pursuant to which the number of our common shares may be issued pursuant to RSUs and Options. The total number of our common shares that may be issued on exercise of RSUs and Options, together with any other share compensation of the Company, shall not exceed 20% of the number of issued and outstanding common shares from time to time. Future awards could be granted at per share prices above or below the offering price.

Future awards could be issued at per share prices above or below the Offering Price.

Shares Purchased

Total Consideration

Weighted-Average Price

Number

Percentage

Amount

Percentage

per Share

Existing stockholders before this offering

●

●

%

$

●

●

%

$

●

New Investors in this offering

●

●

%

$

●

(1)

●

%

$

●

Total

●

●

%

$

●

●

%

$

●

__________

(1) Assumes the sale of ● shares of Common Shares at $● per share for gross proceeds of $● plus ● warrants of common shares exercised at $● per common share for gross proceeds of $●.

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PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS

The Units are being offered pursuant to Regulation A of Section 3(b) of the Securities Act of 1933, as amended (the “Securities Act”), for Tier 2 offerings, by the management of the Company on a “best-efforts” basis directly to purchasers who satisfy the requirements set forth in Regulation A. We have the option in our sole discretion to accept less than the minimum investment. There is no aggregate minimum to be raised in order for the Offering to become effective and therefore the Offering will be conducted on a “rolling basis.” There is no arrangement for the return of funds to investors if all of the Units offered are not sold in the Offering. This means we are entitled to begin applying “dollar one” of the proceeds from the Offering towards our business strategy, research and development expenses, offering expenses (which include legal, accounting, printing, due diligence, marketing, selling and other costs incurred in the Offering of the Units), commissions, working capital, reimbursements, and other uses as more specifically set forth in the “Use of Proceeds to Issuer” starting on page 26.

Our Offering will expire on the first to occur of (a) the sale of all 3 5,000,000 shares of Units offered hereby, (b) ●, 2022 or (c) when our Board of Directors (the “Board”) elects to terminate the Offering.

There is no arrangement to address the possible effect of the Offering on the price of our Units.

The Common Shares and Warrants will be separately transferable following the termination of (i) any transfer hold periods under applicable law and (ii) the following contractual lock-up period: Our investors are required to enter into a 9-month “lock-up” from the Closing Date of the Offering relating to our Units, Common Shares, and Warrants purchased in the Offering. This means that, for a period of 9 months following the Closing Date of this Offering, such persons may not, with limited exceptions, sell or agree to sell any of the Units or components thereof - the Common Shares or Warrants - or enter into any agreement or arrangement to transfer to another, in whole or in part, any of the economic consequences of ownership of the Units, Common Shares or Warrants, without the prior written consent of the Company, and pursuant to the terms of the lock-up agreements.

We reserve the right to offer the shares through broker-dealers who are registered with FINRA. The Company has engaged Dalmore Group, LLC (“Dalmore”), a New York limited liability company and broker-dealer registered with the SEC and a member of FINRA, to provide broker-dealer services in connection with this Offering. Dalmore’s services include the review of investor information, including Know Your Customer data, Anti-Money Laundering and other compliance checks, and the review of subscription agreements and investor information. As compensation for these services, the Company has agreed to pay Dalmore a one-time payment for out of pocket expenses of $5,000, plus a 1% commission on the aggregate amount raised by the Company in this Offering, as described in the Broker-Dealer Agreement between the Company and Dalmore. This will only start after FINRA Corporate Finance issues a No Objection Letter for the Offering. The Company has authorized Dalmore to deduct the fee directly from Dalmore’s third party escrow or payment account. The Company has also engaged Dalmore as a consultant to provide ongoing general consulting services relating to the Offering such as coordination with third party vendors and general guidance with respect to the Offering. The Client has agreed to pay a one time consulting fee of $20,000 which will be due and payable immediately after FINRA issues a No Objection Letter and the Client receives SEC Qualification.

Generally speaking, Rule 3a4-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an offering of the issuer’s securities. None of our officers or directors are subject to any statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act. None of our officers or directors will be compensated in connection with his participation in the Offering by the payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. None of our officers or directors are, or have been within the past 12 months, a broker or dealer, and none of them are, or have been within the past 12 months, an associated person of a broker or dealer. At the end of the Offering, our officers and directors will continue to primarily perform substantial duties for the Company or on its behalf otherwise than in connection with transactions in securities. Our officers and directors will not participate in selling an offering of securities for any issuer more than once every 12 months other than in reliance on Exchange Act Rule 3a4-1(a)(4)(i) or (iii), except that for securities issued pursuant to Rule 415 under the Securities Act, the 12 months shall begin with the last sale of any security included within one Rule 415 registration.

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Selling Security Holders

No securities are being sold for the account of security holders; all net proceeds of this offering will go to the Company.

USE OF PROCEEDS TO ISSUER

The maximum gross proceeds from the sale of all of the 35,000,000 Units and including the exercise of all of the 35,000,000 Warrants is $●. The net proceeds from the total maximum offering are expected to be approximately $●, after the payment of offering costs (including legal, accounting, printing, due diligence, marketing, selling and other costs incurred in the Offering). Our estimated offering costs of $1,000,000 include a deduction of 1% of the total gross proceeds for commissions payable to Dalmore Group, LLC on all the Units being offered, which will only start after FINRA Corporate Finance issues a No Objection Letter for the Offering. The Company will also pay a one-time set up fee of $5,000 and a consulting fee of $20,000 payable once FINRA issues a No Objection Letter and the Company receives SEC Qualification. The estimate of the budget for offering costs is an estimate only and the actual offering costs may differ. We expect from time to time to evaluate the acquisition of businesses, intellectual property, products and technologies for which a portion of the net proceeds may be used, although we currently are not planning or negotiating any such transactions. The following table represents management’s best estimate of the uses of the net proceeds received from the sale of Units.

Percentage of Offering Sold

		100%		75%		50%		25%
Business Objectives	$		$		$		$
Research and Development	$		$		$		$
Sales and Marketing	$		$		$		$
Capex/Facility Expansion	$		$		$		$
Inventory/Purchasing	$		$		$		$
General and administrative costs	$		$		$		$
Cost to complete the offering	$		$		$		$
TOTAL	$		$		$		$

We began operations in June 1, 2018 and have a very limited operating history. Our plan of operations for the next few years includes the following: (i) hiring engineers to perform more engineering service work, to complete contracts on a timelier basis, and to perform R&D for the company’s next generation of products; (ii) hiring sales/marketing employees for our product lines and engineering services work; (iii) hiring sales/marketing employees for further expansion into services (e.g. drone as a service); (iv) diversifying and expanding business lines organically and by potential acquisitions; (v) updating machinery used for manufacturing and production; (vi) continuing to patent innovative ideas for new products; (vii) developing and increasing current product offering to various niche industries that are not currently being served; and (viii) considering potential acquisition opportunities.

The amounts set forth above are our current estimates for such development activities, and we cannot be certain that actual costs will not vary from these estimates. Our management has significant flexibility and broad discretion in applying the net proceeds received in this Offering. We cannot assure you that our assumptions, expected costs and expenses and estimates will prove to be accurate or that unforeseen events, problems or delays will not occur that would require us to seek additional debt and/or equity funding, which may not be available on favorable terms, or at all. See “Risk Factors” starting on page 11 for more information regarding the risks associated with an investment in our Units.

The Company intends to use a portion of the proceeds raised in this Offering to fund the compensation payable to its Chief Executive Officer and Chief Financial Officer, as described under “Executive Compensation” below. Proceeds from the Offering will be used to fund 100 % of the amount of the Chief Executive Officer’s direct compensation, which is $120,000.00.  The Company does not currently pay its directors cash compensation and does not expect to compensate them with the proceeds of the Offering.

This expected use of the net proceeds from this Offering represents our intentions based upon our current financial condition, results of operations, business plans and conditions. As of the date of this Offering Circular, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the closing of this Offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this Offering, and reserves the right to change the estimated allocation of net proceeds set forth above. Additionally, we reserve the right to use proceeds for repayment of Company indebtedness.   The Company does not at this time have indebtedness for which a material part of the proceeds is to be used for repayment (other than trade and vendor payables in the ordinary course of business for which amounts are not material).

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Although our business does not presently generate positive cash flow, we believe that if we raise the maximum amount in this Offering, that we will have sufficient capital to finance our operations for at least the next 12 months. However, if we do not sell the maximum number of Shares offered in this Offering, or if our operating and development costs are higher than expected, we will need to obtain additional financing prior to that time. Further, we expect that during or after such 12-month period, we will be required to raise additional funds to finance our operations until such time that we can conduct profitable revenue-generating activities.

Pending our use of the net proceeds from this Offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment grade, and interest-bearing instruments. We may also use a portion of the net proceeds for the repayment of outstanding loans, investment in strategic partnerships and possibly the acquisition of complementary businesses, products or technologies, although we have no present commitments or agreements for any specific acquisitions or investments.

DESCRIPTION OF BUSINESS

Overview

The Company was incorporated on June 1, 2018 under the BCBCA. Effective July 17, 2019, the Company amended its articles (“Articles”) to remove various classes of authorized but unissued preferred shares and replace them with only one class of preferred shares. On August 15, 2019, the Company completed a going public transaction pursuant to an amalgamation agreement entered into among the Company, Drone Acquisition Corp. and 1187607 B.C. Ltd., 2300 (the “Amalgamation Agreement”), and changed its name to Draganfly Inc. On August 22, 2019, the Company amended the Articles to re-designate its Class A Common Shares as Common Shares. On April 30, 2020, the Company completed the acquisition of Dronelogics by acquiring all of the shares of Dronelogics, making it a wholly-owned subsidiary of the Company.

Pursuant to our Articles of Incorporation, we are authorized to issue (i) an unlimited number of shares of Common Shares and (ii) an unlimited number of shares of Preferred Shares. As of August 7, 2020, we have (i) 79,250,998 shares of Common Shares outstanding and (ii) no shares of Preferred Shares outstanding.

The Company has three wholly-owned subsidiaries, as follows:

1.	Draganfly Innovations Inc. (“Draganfly Innovations”), a corporation continued under the BCBCA on August 19, 2019. Draganfly’s head office is located at 2108 St. George Avenue, Saskatoon, Saskatchewan S7M 0K7;
2.	Draganfly Innovations USA Inc. (“Draganfly Innovations USA”), a corporation incorporated in the state of Delaware on January 27, 2020. Draganfly Innovations USA’s head office is located at 1017 Maine Campus Drive, Raleigh, NC, 27606; and
3.	Dronelogics, a corporation incorporated under the BCBCA on January 13, 2009. Dronelogics’ head office is located at 319-2999 Underhill Avenue, Burnaby, British Columbia V5A 3C2.

The business of Draganfly Innovations and Draganfly Innovations USA is the provision of engineering services and manufacture of commercial UAVs, RPASs, and UVSs and software, serving the public safety, agriculture, industrial inspections, and mapping and surveying markets.

Dronelogics is a solutions integrator for custom robotics, hardware and software that provides a wide scope of services including sales, training, rentals, maintenance, flying and data processing services.

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Inter-corporate Relationships

The following chart identifies the Company’s material wholly-owned subsidiaries, their applicable governing jurisdictions and the percentage of their voting securities which are beneficially owned, or controlled or directed, directly or indirectly, by the Company:

Draganfly Inc. (British Columbia)
↓100%	↓100%	↓100%
Draganfly Innovations Inc. (British Columbia)	Draganfly Innovations USA Inc. (Delaware)	Dronelogics Systems Inc. (British Columbia)

Company Overview and History

The Company was incorporated under the BCBCA on June 1, 2018. On August 15, 2019, the Company completed a going public transaction pursuant to the Amalgamation Agreement and changed its name to “Draganfly Inc.”

In connection with the going public transaction, the Company completed certain private placement offerings on May 22, 2019 and August 6, 2019 (pursuant to prospectus and registration exemptions in Canada, the United States, and in other jurisdictions) raising aggregate gross proceeds of CAD$7,025,749.50 through the issuance of 14,051,499 subscription receipts (the “Subscription Receipts”) at a price of CAD$0.50 per Subscription Receipt. The said private placement offering was required in order to satisfy closing conditions of the going public transaction. At closing of the going public transaction, each Subscription Receipt automatically converted, without payment of additional consideration and without any further action on the part of the holder, into one unit of the Company, subject to adjustment in certain circumstances, consisting of one (1) Common Share and one common share purchase warrant (the “2019 Warrant”). Each 2019 Warrant entitling the holder to purchase one (1) Common Share at a price of CAD$0.50 for a period of twelve (12) months following the issuance of the 2019 Warrants.

The Company completed the listing of its Common Shares for trading on the Canadian Securities Exchange under the symbol “DFLY” on November 5, 2019. The Company completed the listing of its Common Shares for trading on the OTCQB Venture Market of the OTC Markets under the symbol “DFLYF” on January 9, 2020.

Certain of our common shares held by the new directors and officers of the Company are subject to escrow (the “Escrow”) that prohibits transfer for up to a three‑year period following the Listing pursuant to the policies of the Canadian Securities Exchange. In addition, as part of the going public transaction, shareholders of Draganfly Innovations Inc. and former shareholders of the Company have agreed that certificates representing their respective Common Shares held by former shareholder of Former Draganfly will be subject to trading restrictions (the “Voluntary Restriction”) for up to a three‑year period following the Listing. Notwithstanding the Escrow and the Voluntary Restriction, the shareholders holding these Common Shares will otherwise have all of the normal rights associated with Common Shares, such as entitlement to dividends, voting powers and participation in assets upon dissolution or winding up, until they are released from escrow.

On April 30, 2020, the Company completed a share purchase transaction with the shareholders of Dronelogics (the “Dronelogics Sellers”), acquiring all of the shares of Dronelogics for cash and Common Shares, pursuant to a share purchase agreement dated January 15, 2020 between the Company and the Dronelogics Sellers (the “Share Purchase Agreement”). On closing of the Dronelogics acquisition, the Company: (i) paid the Dronelogics Sellers CAD$2.0 million, consisting of a cash payment of CAD$500,000, subject to a post-closing working capital adjustment; (ii) issued the Dronelogics Sellers 3,225,438 Common Shares in satisfaction of the balance of the purchase price and payment of certain management bonuses at a deemed price of CAD$0.50 per Common Share; (iii) appointed Mr. Justin Hannewyk, President of Dronelogics, to the Board of Directors of the Company; and (iv) issued 200,000 Common Shares to a finder in connection with the Dronelogics acquisition. The Common Shares issued under the Dronelogics acquisition are subject to resale restrictions in the form of pooling terms providing for release of such shares over a period of 24 months and a right to place in favor of the Company during the same 24-month period.   Pursuant to the Share Purchase Agreement, certain assets were excluded from the share purchase transaction.  Accordingly, the financial statements for Dronelogics are adjusted to carve out for those certain assets, and the name “Candrone” on the financial statements pertains to the Unmanned Aerial Vehicle (UAV) division of Dronelogics.”

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Three Year History

Historically, the main business of Draganfly Innovations Inc. was to operate as a manufacturing company offering commercial UAVs directly to its customer base across various industry verticals such as public safety, agriculture, industrial, etc. The main product offering of the Company now consists of quadcopters such as The Commander, X4, and Guardian. The Commander is the most recent and most advanced of the quadcopter line up. The Commander quadcopter is a professional quality, powerful, easy to fly aerial platform delivering high quality aerial photography and video with one of the World’s longest flight time capabilities (with a 400g payload) of 55 minutes on a single battery charge. The Commander can fly 100+ acres on a single charge – this is the coverage of some of the Company’s fixed wing competitors. The Company has also developed a fixed wing drone, called The Tango2 which has recently been available to customers. The ideal use of the Tango2 fixed wing is for search and rescue, inspection and any application that requires loitering in the air for extended time periods, covering large surface area. The Company has also designed and produced a ground based robot, The DraganScout ground based robot, which has not been commercialized as of yet but has received expressions of interest for applications within public safety and agricultural inspection. With continued R&D funding, the intention is to fully complete development of the DraganScout and make it available for sale.

Over the last 3 years, the Company has started to do engineering procurement for certain customers in an industry vertical that it does not currently serve, such as military applications (e.g., high value product delivery on the battlefield, surveillance and capture drones). The rationale is three-fold: engage in long term contracts that tend to be recurring in nature, gain exposure to an industry that the Company otherwise did not have access to, and leverage our innovation learnings into other products that can be sold in other industries.

This progression occurred due to shifts in the commercial UAV space, the area the company is known for being an industry pioneer. As businesses and other commercial users became more comfortable using UAVs, most tend to test their use case by buying lower cost consumer drones. Over time, one large company has become the dominant leader in both consumer and commercial drone sales. The phenomenon has moved the Company’s focus to niche markets which organically created engineering service work, With the Company’s strength in innovation, this shift lends very well to developing custom products for specific clients’ needs as well as integration and customization work.

The Company works with its customers to customize a product or platform from idea (R&D) to completion and testing. A work plan is created with timelines and budget which includes materials, travel, testing, and engineering time. This plan is signed off on by the customer before work begins. To date, the majority of this work is considered proprietary and secret in nature. In some cases, Draganfly effectively acts as a subcontractor to a larger military focused drone company, for example, creating new products and applications to their specifications.

We are driven by passion, ingenuity and the need to provide efficient solutions and first-class services to our customers around the world with the goal of saving time, money, and lives.

With the acquisition of Dronelogics, a drone integrator and service provider that has been in business for over 10 years, we have expanded our offerings in a complementary business and have expanded our product offering in the integration and engineering segments, expanding our total addressable market and enhancing our position as a leader in the UAV and UVS industry.

Our Business

The business of the Company is conducted through three wholly-owned subsidiaries: (i) Draganfly Innovations; (ii) Draganfly Innovations USA; and (ii) Dronelogics.

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Draganfly Innovations is an award-winning, industry-leading manufacturer within the UAV and UVS space, recognized as being at the forefront of technology for over two decades. Draganfly Innovation’s business is creating quality, cutting-edge UVS and software. Draganfly Innovations provides engineering services and manufactures commercial UAVs, RPASs, and UVSs and software, serving the public safety, agriculture, industrial inspections, and mapping and surveying markets.

Dronelogics is a solutions integrator for custom robotics, hardware and software that provides a wide scope of services including sales, training, rentals, maintenance, flying and data processing services. The wide variety of services, products and innovations that Dronelogics provides results in a unique one-stop-shop solution for its clients which aids in higher customer retention, diversified revenue streams, repeat business and protection against market volatility.

Dronelogics’ customer base comprises well over 10,000 independent names and the company enjoys high repeat business due to its expertise, unique focus on service and broad scope of offerings.

Our Products and Services

Founded in 1998, Draganfly Innovations is recognized as the first commercial multi-rotor manufacturer and has a legacy for its innovation and superior customer service. Draganfly Innovations has sold products and services to over 50 countries. To date, Draganfly Innovations, has sold over 9,000 of its drones primarily to police forces around the world. Zenon Dragan is one of the founders of the Company and is a recognized leading expert on UAVs. Draganfly Innovations is positioning itself as an integrated solutions provider to the UAV industry.

The Company can provide its customers with an entire suite of products and services that include: quad-copters, fixed wing aircrafts, ground based robots, hand held controllers, flight training, and software used for tracking, live streaming, and data collection. The Company’s products are manufactured at its machine shop within its head office based in Saskatoon, Saskatchewan. Raw materials for the Company’s products consist of a combination of its original equipment manufacturer parts and third-party components.

Dronelogics, a complementary business to Draganfly, expands the Company’s product offering in the integration and engineering segments, thereby broadening the Company’s total addressable market and enhancing its position as a leader in the UAV and UVS industry. As a trusted drone service provider, Dronelogics provides insights into asset management, volume-metric calculation and digitizing assets, among many other applications. It is a solutions integrator for custom robotics, hardware and software that provides a wide scope of services including sales, training, rentals, maintenance, flying and data processing services.

Our integrated UAV system is equipped for automated take-offs and landings with altitude and return to home functions as well as in-house created survey software. The Company’s standard features combined with custom fit camera payloads ranging from third-party multi-spectral, hyper-spectral, LIDAR, thermal, and infrared allows the Company to offer a truly unique solution to clients. The Company has also partnered with companies such as Waterloo based, Dejero, who provide a live streaming solution that the Company can offer to its customers and share in monthly usage fees.

The Company’s patented high quality folding frame on its quadcopters means customers have a strong aerial platform that can easily pack into the back seat or trunk of an automobile. The easier the aircraft is to transport, the faster users can get from one job to another. When packed in its rugged transport case, the complete quadcopter system meets airline baggage size requirements. Constructed from high quality carbon fiber, the strength-to weight ratio of the aircraft is very high, coupled with a strong folding frame helps reduce damage in the event of a hard landing or hitting an obstruction.

Because the Company’s system is designed and manufactured in-house, the Company controls the quality, design, software and systems integration, delivering a helicopter system that is inherently stable. The onboard computer and 11 sensors keep the helicopter level in real-time and pointed in the right direction, so when a user “parks” the helicopter in the air using the GPS position hold function, the user can shift their attention to getting the photos they need. Even in a GPS position hold, one can reposition the aircraft, continue shooting photos and meanwhile, in real-time, the telemetry data system is monitoring aircraft battery health, heading, bearing, altitude, and both audibly and visually alerting the user to any aircraft warnings.

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Although the Company has a number of distribution partners, the majority of its product sales are sold directly to the customer. The Company does very little outbound sales and marketing promotional activities with customers around the world reaching out to the Company through its website which is still its primary method of selling.

Consumer and prosumer drones are ideal for certain aerial filming applications, but enterprises looking to use drones for advanced applications will generally turn to high‑end UAV manufactures with longer flight times, better sensor capabilities and analytic functionalities. The high‑end commercial UAV market, which is defined as drones >$5,000, is one of the fastest-growing markets within the broader UAV space.

Although the higher end commercial UAV market is growing quickly, the commercial industry is shifting towards using lower cost consumer type drones for their business. As a result, the Company has started offering engineering service and customization work. All engineering, customization, and integration work takes place at its facility within its head office. In some cases, travel to customers’ locations is required to understand the scope of a project. In some cases, Draganfly uses lower cost third party off the shelf UAVs and integrates higher end sensors or customizes the UAV to handle niche applications not offered by standard UAVs. The Company takes a small margin on the third party equipment and charges for the engineering service work involved in the integration. In more complex situations, the Company will create an entirely new product for a very specific application. Given Draganfly’s core competence is its ability to innovate, engineering services is a natural evolution for the Company.

Product sales accounted for 31% of revenues in the financial year ended December 31, 2018 with the balance made up of engineering services. In the financial year ended December 31, 2019, engineering services revenues represented 82% with the balance being made up of product sales. The bulk of engineering service work is for one large US‑based customer that subcontracts to Draganfly. The customer’s clients tend to be the U.S. government and military. Although the Company does not anticipate a slowdown in government and military spending, the recent U.S. government shutdown and COVID-19 outbreak has impacted the timing of certain projects for Draganfly.

The Company has a list of ideas that could become products but given its current resources, are not actively working on anything. Following Listing, with access to research and development (“R&D”) funding and more engineering personnel, the Company continues to work on enlarging its product offering.

Draganfly Innovations introduced its first systems in 1999 and has evolved and has since shaped the UAV industry. The aircraft are widely used by public safety agencies worldwide and one of the first small Unmanned Aerial Systems (“sUAS”) to receive a Federal Aviation Administration (“FAA”) Certificate of Authorization (“COA”) in the fall of 2009 with the Mesa County Colorado Sheriff’s Office. In 2012, the Royal Canadian Mounted Police (“RCMP”) flew the X4-ES system to locate and save the life of an accident victim. The RCMP system is on permanent display at the Smithsonian National Air and Space Museum. Their aircrafts have achieved many industry firsts, including:

· The first public safety sUAS to shoot aerial photos documenting a manned aircraft accident in an urban area;

· The first sUAS operated by a public safety organization flown at night to locate and save a life;

· The first sUAS helicopter to be granted a county wide U.S. FAA COA,

· Was recently named as a test platform at one of the U.S. FAA certified test sites.

· Draganfly has the largest Canadian SFOC and USA FAA COA “approved” installed sUAS customer base in North America.

On April 10, 2015, the FAA issued to the Company an FAA Section 333 Exemption and Certificate of Authorization (COA) to operate commercially and conduct research in the U.S.

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The exemption covers the Commander, Draganflyer X4-P, Draganflyer X4-ES, Draganflyer X6, and Draganflyer Guardian aircraft for use in aerial data collection such as mapping, agriculture, surveying, aerial photography, and inspections.

The Company had 4 of the first 6 Compliance certifications for their products issued by Transport Canada (TC). At the time, to be deemed a Compliant Drone, a company had to self-declare that their product’s capabilities meet Transport Canada’s specific safety measures. TC had to review and accept each self-declaration. All four of our then-current systems (Guardian, X4P, X4ES, and Commander) were approved so when TC announced the first 6 compliant certificates, Draganfly products made up four of them.

Competition

Although Draganfly is acknowledged as the pioneer that first developed the commercial multi rotor helicopter, there are now many drone hardware companies in the World. Draganfly has sold products and services to over 50 countries but predominantly focuses on the North American market given its geographical location. As technology has improved and costs for hardware and software have come down, the line between consumer and commercial drones has blurred. Historically, Draganfly has serviced early adopters in the public safety industry. At this stage of the commercial drone adoption curve, the average public safety organization (local, regional, and even federal law enforcement, for example), are quite budget conscious. Hence, these organizations tend to use lower cost drones that have become quite sophisticated that can accomplish most of their use cases. The obvious dominant player is DJI, the Chinese drone company that is reputed to own over 70% of the consumer and now commercial drone market. The majority of DJI’s drones are geared towards broad applications involving the masses. Draganfly has moved away from competing directly with DJI and has chosen to serve niche markets outside of where DJI tends to be. There are also some organizations that tend to be US based that either prefer or are mandated to not use foreign drones such as those produced by DJI. Some of these organizations are sensitive to their work being exposed to that of overseas governments which has at least for the time being, created a niche market for players such as Draganfly. As Draganfly has evolved to move with the industry trends, the Company now uses DJI drones as part of some of its customization and engineering services work. Draganfly has also moved into innovative engineering procurement which is very specialized and is currently not aware of any Canadian and US companies focusing on this industry or its existing customers. As the drone industry matures, this may bring more players to this space or the Company’s customers may choose to develop the in-house expertise to do the work that they currently outsource to Draganfly. However, it is the Company’s view that there will be a growing customer base that will require very specialized work that only a handful of companies can do.

It became evident to Management that funds needed to be raised to execute a sales and marketing strategy to capitalize on industry demand for its product and services.

Management determined in mid-2018 the best course of action to secure additional capital, grow its brand and expand its reach was to secure a public listing on a reputable exchange. To that end, the Company completed a go public transaction and listed on the Canadian Securities Exchange.

Compliance with Government Regulation

The operation of Remotely Piloted Aircraft Systems (“RPAS”) or UAVs within Canada for any intended application is governed by regulations developed and managed by Transport Canada. The Canadian Aviation Regulations (“CARs”) developed by Transport Canada clearly detail the rules and regulations that are directly applicable to all civil aviation operations, both manned and unmanned, within the Canadian Domestic Airspace (“CDA”). Civil aviation encompasses all applications and purposes other than those operated by military organizations. Transport Canada currently has provisions that allow exemptions and relief from specific sections of CARs for recreational operators with an additional set of restrictions and limitations. However, no business or corporation is permitted to operate an RPAS under these recreational exemptions and must adhere to the full CARs. Commercial / non-recreational operations of RPAS within CDA can only be safely and legally accomplished through the issuance of a Special Flight Operations Certificate (“SFOC”) granted by Transport Canada. An SFOC is intended to be a temporary authorization for flight operations that have clear, defined, and specific geographical areas, dates and times, intended applications, and flight profile limitations. SFOC’s are granted by Transport Canada inspectors on a case-by-case basis and must be applied for in advance of the intended flight operations. The SFOC application must include details such as the type and purpose of operations, description of the aircraft, dates and times of intended flights, security and emergency plans, and detailed standard operating procedures to explain how the flight operations will be conducted. Currently any flight operations conducted for non-recreational purposes can only be performed under the authority of an SFOC. An SFOC can be granted for operation of any RPAS make and model and can be granted to the business or organization rather than a specific individual or pilot. This allows for a company to self-certify a number of approved pilots rather than requiring individual licensing for each pilot. Transport Canada offers an advanced authorization called a Compliant SFOC, which is available only to operators of RPAS that have been recognized by Transport Canada as meeting the safety standards of a Compliant Design Type. The Compliant SFOC provides the operator with additional allowances including, but not limited to, operations in a wider geographical operating area. Failure to obtain the necessary regulatory approvals such as the granting of an SFOC or limitations put on the use of RPAS’ may prevent the company from developing, testing, and demonstrating its products and services and/or expanding its sales and services.

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New RPAS came into force on June 1, 2019. The Company expected the regulations to affect its need to employ and retain personnel with valid pilot certificates. The Company takes all necessary action to ensure that it remains compliant with current and upcoming regulations.

Employees

The Company currently has 22 full-time employees and engages two (2) to three (3) contractors on a regular basis. Ideally, the Company would like to add to its engineering bench and marketing team to help build the Company’s engineering services offering. We do not currently have any pension, annuity, insurance, and profit-sharing plans, although we may choose to adopt such plans in the future.

Corporate Information

Our head office is located at 2108 St. George Avenue, Saskatoon, Saskatchewan, S7M 0K7, and our telephone number is 1-(306)-955-9907. Our website address is www.draganfly.com. The information contained therein or accessible thereby shall not be deemed to be incorporated into this Offering Circular.

DESCRIPTION OF PROPERTY

The Company’s products are manufactured at its machine shop within its leased head office based in Saskatoon, Saskatchewan. Raw materials for the Company’s products consist of a combination of its original equipment manufacturer parts and third-party components.

United States Operations

The Company, through its wholly-owned subsidiary, Draganfly Innovations USA Inc., has a management office in Raleigh, North Carolina that currently conducts business in the state of North Carolina in the United States.

Raleigh Management Office – Draganfly Innovations USA Inc. operates a management office in Raleigh, North Carolina pursuant to a Member License Agreement with HQ Raleigh, LLC (“Licensor”). Pursuant to a Lease Agreement, dated January 25, 2019, between C21, LLC (“C21”) and the State of North Carolina, C21 leases from the State of North Carolina a building located at 1017 Main Campus Drive, Raleigh, NC 27606, together with non-exclusive rights to use common areas of the building (the “Master Leased Premises”). Licensor and C21 have entered into separate agreement whereby Licensor has been granted rights to manage and operate a portion of the Master Leased Premises, including the right to grant licenses permitting use of the Master Leased Premises by third parties. Pursuant to the Member License Agreement, Licensor grants Draganfly Innovations USA a license permitting use of a portion of the Master Leased Premises, which includes Suite 2306 and Suite 2310 of the building (the “Raleigh Management Office”). Draganfly Innovations USA Inc. operates the Raleigh Management Office under a one (1) year lease, commencing on February 1, 2020. After one year, the lease will continue on a month-to-month basis until terminated by either the State of North Carolina or Draganfly Innovations USA Inc. Draganfly Innovations USA currently pays $500 for Suite 2306 and $1200 for Suite 2310 per month in rent, subject to 3% yearly increases.

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Canada Operations

Draganfly Innovations’ products are manufactured at its machine shop within its leased head office based in Saskatoon, Saskatchewan, Canada. Dronelogic’s services are provided through its leased space in Burnaby, British Columbia, Canada.

Saskatoon Facility – Draganfly Innovations Inc. operates a fully operational facility located at 2108 St. George Avenue, Saskatoon, SK S7M 0K7 (The “Saskatoon Facility”). The Saskatoon Facility is to be used only for the purposes of Draganfly Innovations Inc. operating its business of design, development, production, distribution, sale and/or licensing of drones or robots, or such other use as permitted by the landlord from time to time. Draganfly Innovations Inc. operates the Saskatoon Facility under a two (2) year lease, commencing on December 1, 2019 and ending on December 1, 2021. Draganfly Innovations Inc. currently pays $43,000.00 per annum plus GST to be paid in monthly installments of $3,583.33 plus GST. The Company has the option to renew the lease for six (6) successive one (1) year periods.

Burnaby Facility – Dronelogics leases Unit 319 in a building on that certain parcel of land located at 2999 Underhill Avenue situated in Burnaby, British Columbia (the “Burnaby Facility”). Dronelogics operates the Burnaby Facility under a five (5) year lease commencing on, November 1, 2016, and expiring on October 31, 2021. Dronelogics currently pays $2,981.33 per month in rent. Subject to the terms of the lease, Dronelogics may be granted a renewal lease for a further term of five (5) years.

Intellectual Property

With 18 fundamental UAV patents in its portfolio and with six (6) more pending in the application stage, the Company will continue to expand and grow its intellectual property docket. By virtue of being the first commercial UAV company in the industry, our subsidiary, Draganfly Innovations, holds valuable commercial patents.

Below is a chart summarizing the Company’s patents:

US Issued Patents
Law Firm	Docket / File #	Patent #	Date Issued	Patent Name
MLT	040065-0007	8,052,081	November 8, 2011	Dual Rotor Helicopter with Tilted Rotational Axes
MLT	040065-0011	8,292,215	October 23, 2012	Helicopter with Folding Rotor Arms
MLT	040065-0027	8,753,155	June 17, 2014	Wheel with Folding Segments
MLT	040065-0028	8,991,740	March 31, 2015	Vehicle with Aerial and Ground Mobility
Suiter Swantz	TLN 14-7-2	9,442,485	September 13, 2016	Pixel Based Image Tracking System for Unmanned Aerial Vehicle (UAV) Action Camera System
Suiter Swantz	TLN 14-2-2	9,489,937	November 8, 2016	Real-Time Noise Reduction System for Dynamic Motor Frequencies Aboard an Unmanned Aerial Vehicle (UAV)
Suiter Swantz	TLN 14-6-2	9,511,878	December 6, 2016	System and Method for Adaptive Y-Axis Power Usage and Non-Linear Battery Usage for UAV Equipped with Action Camera System
MLT	040065-0033	9,598,171	March 21, 2017	Vehicle with Aerial and Ground Mobility (Divisional Patent)
Suiter Swantz	TLN 14-1-2	9,710,709	July 18, 2017	Cascade Recognition for Personal Tracking via Unmanned Aerial Vehicle (UAV)
Suiter Swantz	TLN 13-1-2	9,769,387	September 19, 2017	Action Camera System for Unmanned Aerial Vehicle
Suiter Swantz	TLN 14-7-3	9,785,147	October 10, 2017	Pixel Based Image Tracking System for Unmanned Aerial Vehicle (UAV) Action Camera System (Continuation Patent)
Suiter Swantz	TLN 14-1-3	9,892,322	February 13, 2018	Cascade Recognition for Personal Tracking via Unmanned Aerial Vehicle (UAV) (Continuation Patent)
Furman IP	145-037	10,035,581	July 31, 2018	Multi-Rotor UAV with Compact Folding Rotor Arms
Suiter Swantz	DRAG 15-1-2	10,059,442	August 28, 2018	Vertical Takeoff and Landing Unmanned Aircraft System
Suiter Swantz	TLN 13-1-3	10,187,580	January 22, 2019	Action Camera System for Unmanned Aerial Vehicle (Continuation Patent)
CDN Issued Patents
Law Firm	Docket / File #	Patent #	Date Issued	Patent Name
MLT	040065-0014	2,787,279	October 22, 2013	Vehicle with Aerial and Ground Mobility
MLT	040065-0015	2,787,075	October 29, 2013	Wheel with Folding Segments
Furman IP	145-036	2,917,434	April 23, 2019	Multi-Rotor UAV with Compact Folding Rotor Arms
Suiter Swantz	TLN 14-9-2	14/939,369	November 12, 2015	Visually Intelligent Camera Device with Peripheral Control Outputs
Suiter Swantz	DRAG 16-1-2	15/584,815	May 2, 2017	Tandem-Wing Aircraft System with Shrouded Propeller
Suiter Swantz	TLN 14-1-4	15/894,292	February 12, 2018	Cascade Recognition for Personal Tracking via Unmanned Aerial Vehicle (UAV) (Continuation Patent)
Suiter Swantz	DRAG 16-2-2	15/706,158	September 15, 2017	Vertical Take-Off and Landing (VTOL) Aircraft Having Variable Center of Gravity
Furman IP	145-020	2,876,630	January 2, 2015	Unmanned Rotary Wing Aircraft with Compact Folding Rotor Arms
Suiter Swantz	DRAG 15-1-1CA	2,935,793	July 11, 2016	Vertical Takeoff and Landing Unmanned Aircraft System

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Below is a chart summarizing Draganfly Innovation Inc.’s registered trademarks and pending applications:

Description	Name / Title	Official No.	Governmental Entity
Trademark Application (Status: Filed)	DRAGANFLY	1,972,336	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFLYER EXPLORE	TMA1,025,742	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFLYER APEX	TMA1,025,624	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFLYER COMMANDER	TMA1,008,809	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFUEL	TMA997,118	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFLY INNOVATIONS	TMA908,564	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFLYER	TMA906,939	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFLY & DESIGN	TMA905,935	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFLY	TMA1,071,582	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFLY	TMA1,069,670	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANFLYER GUARDIAN	TMA904,883	Canadian Intellectual Property Office (CIPO)
Registered Trademark	DRAGANVIEW	TMA886,217	Canadian Intellectual Property Office (CIPO)
Trademark Application (Status: Application Accepted, Published for Opposition)	DRAGANFLYER APEX	86750092	United States Patent and Trademark Office (USPTO)
Trademark Application (Status: Application Accepted, Published for Opposition)	DRAGANFLYER EXPLORE	86750101	United States Patent and Trademark Office (USPTO)
Trademark Application (Status: Application Accepted, Under Examination)	DRAGANFLY	86648412	United States Patent and Trademark Office (USPTO)
Registered Trademark	DRAGANFLYER COMMANDER	5760146	United States Patent and Trademark Office (USPTO)
Registered Trademark	DRAGANFUEL	5563360	United States Patent and Trademark Office (USPTO)
Registered Trademark	DRAGANFLY INNOVATIONS	5130969	United States Patent and Trademark Office (USPTO)
Registered Trademark	DRAGANFLYER	4920316	United States Patent and Trademark Office (USPTO)
Registered Trademark	DRAGANFLY & Design	5130970	United States Patent and Trademark Office (USPTO)
Registered Trademark	DRAGANFLYER GUARDIAN	4995725	United States Patent and Trademark Office (USPTO)
Registered Trademark	DRAGANVIEW	4920317	United States Patent and Trademark Office (USPTO)
Trademark Application (Status: Application Accepted, Under Examination)	DRAGANFLY	88488410	United States Patent and Trademark Office (USPTO)

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We believe it is important to our success that we:

· obtain and maintain patent and other legal protections for the proprietary technology, inventions and improvements we consider important to our business;

· prosecute our patent applications and defend our issued patents;

· preserve the confidentiality of our trade secrets; and

· operate without infringing the patents and proprietary rights of third parties.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s Management’s Discussion and Analysis provides an analysis of the Company’s financial results for the financial periods December 31, 2019 and December 31, 2018 and the notes thereto.

The following Management’s Discussion and Analysis (“MD&A”) is prepared as at December 31, 2019 in accordance with National Instrument 51-102F1 and should be read together with the audited consolidated financial statements for the years ended December 31, 2019 and December 31, 2018 and the notes related thereto, which are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards. The financial statements are compliant and up to date with all new financial accounting standards, as noted per IFRS. The Company has elected to not delay compliance with any new or revised financial accounting standard. The Company’s fiscal year end is December 31. Additional information regarding the Company will be available through the SEDAR website at www.sedar.com. Certain information included in this MD&A may constitute forward-looking statements. Statements in this report that are not historical facts are forward-looking statements involving known and unknown risks and uncertainties, which could cause actual results to vary considerably from these statements.

All dollar amounts are expressed in United States currency, unless otherwise indicated, that Canadian currency is used.

Cautionary Note Regarding Forward-Looking Statements

Certain information included in this MD&A may constitute forward-looking statements. Statements in this report that are not historical facts are forward-looking statements involving known and unknown risks and uncertainties, which could cause actual results to vary considerably from these statements.

Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company may differ materially from those reflected in forward-looking statements due to a variety of risks, uncertainties and other factors. The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

The Company’s forward-looking statements are based on the Company’s beliefs and assumptions which are based on information available at the time these assumptions are made. The forward-looking statements contained herein are as of the date of this listing document, and are subject to change after this date, and the Company assumes no obligation to publicly update or revise the statements to reflect new events or circumstances, except as may be required pursuant to applicable laws. Although management believes that the expectations represented by such forward-looking information or statements are reasonable, there is significant risk that the forward-looking information or statements may not be achieved, and the assumptions underlying such information or statements will not prove to be accurate.

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Actual results or events could differ materially from the plans, intentions and expectations expressed or implied in any forward-looking information or statements, as a result of numerous risks, uncertainties and other factors such as those described above and in “Risks and Uncertainties” below.

Key Business Activities

2019 was another milestone year for Draganfly. The company solidified its engineering services business to not only offset a reduction in manufactured goods due to industry pricing shifts created by Chinese competition but to make this its primary business. Although, the Company’s products are still well regarded in the industry, the commercial UAV space as a whole has been impacted by lower priced consumer drones that can now offer similar functionality. The Company recognized their opportunity of engineering procurement for those customers that either choose not to buy Chinese UAVs or are restricted from doing so due to information sensitivity concerns.

Given the Company’s impressive history and deep engineering talent, a natural evolution was to outsource in-house capabilities to customers. Doing this leverages the Company’s core skill set of innovation that tends to lead to future projects, bringing in more consistent revenue.

Results of Operations for the Years Ended December 31, 2019 and December 31, 2018

Revenues

Our revenue was C$1,380,427 for the year ended December 31, 2019, compared to C$1,387,013 for the year ended December 31, 2018.

C$1,131,488 represents engineering services work while the balance of revenue is from hardware sales. Securing clients in this business line was key to its consistent revenue achieved by the Company in 2019. These clients were important for revenue and continued validation of the technology, but more importantly they demonstrate that the Company’s customized product designs have global applicability. Total revenue for the year ended December 31, 2019 decreased by $6,586 or 0.5% as compared to 2018. The decrease in revenue is due to the Company’s shrinking product sales business partially offset by the continued increase in engineering services.

Gross profit is the difference between the revenue received and the direct cost of that revenue. Gross margin is gross profit divided by revenue and is often presented as a percent. As a result of reduced product sales, the Company’s Gross Profit increased by $227,013 or 24.3%. As a percentage of sales, gross margin increased from 67.4% in 2018 to 84.1% in 2019. Again, the higher gross margins realized in 2019 was the result of a major shift to engineering service work which has a higher gross margin than the legacy manufacturing gross margin.

Research and Development Expenses

Our research and development expenses were C$16,883 for the year ended December 31, 2019, compared to C$16,158 for the year ended December 31, 2018. Research and development expenses to date consist primarily of contract research fees, manufacturing, consultant fees, preclinical studies, and study related costs.

General and Administrative Expenses

Our general and administrative expenses were C$4,450,154 for the year ended December 31, 2019, compared to C$1,477,474 for the year ended December 31, 2018. General and administrative expenses consist primarily of personnel, legal fees, and travel and office expenses. The largest contributor to the increase is marketing and investor relations expenses.

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Net Loss

Our net loss was C$11,095,057 for the year ended December 31, 2019, compared to C$601,729 for the year ended December 31, 2018. The increased loss was largely the result of a listing expense resulting from the amalgamation as well as increased marketing and investor relations expenses to create awareness of the Company

Liquidity and Capital Resources

To date, we have generated negative cash flows from operating activities. All costs in connection with our formation, development, legal services and support have been funded by revenues, equity and debt placements.

The Company’s liquidity risk is on its loans, accounts payable and accrued liabilities, as it may encounter difficulty discharging its obligations. The Company attempts to mitigate this risk by managing its debt holders as well as ensuring there is capital coming into the company for its operations. As at December 31, 2019, the Company has a working capital of $2,037,906 (December 31, 2018 had a deficit of $4,353,261).

The Company considers the items included in capital to include shareholders’ equity. The Company manages its capital structure and makes adjustments to it in light of changes in economic and business conditions, financing environment and the risk characteristics of the underlying assets. The Company does not have any contracted or committed capital expenditures as of the date of these financial statements. The Company utilizes its credit card facilities from time to time to make various purchases for their operations. In order to maintain or adjust its capital structure, the Company may issue new shares, new debt, or scale back the size and nature of its operations. The Company is not subject to externally imposed capital requirements. As at December 31, 2019, shareholders’ equity was $2,191,353 and at December 31, 2018, shareholder’s deficit was $4,132,609.

Our future expenditures and capital requirements will depend on numerous factors, including the success of this Offering and the progress of our research and development efforts.

Our business does not presently generate positive cash flow. We believe that if we raise $● (the Maximum Amount) in this Offering, we will have sufficient capital to finance our operations for at least the next 12 months; however, if we do not sell the Maximum Amount or if our operating and development costs are higher than expected, we will need to obtain additional financing prior to that time. We do not have any track record for self-underwritten Regulation A+ offerings, and there can be no assurance we will raise the Maximum Amount or any other amount. Further, we expect that after such 12-month period, we will be required to raise additional funds to finance our operations until such time that we can conduct profitable revenue-generating activities. However, no assurances can be made that we will be successful obtaining additional equity or debt financing, or that ultimately, we will achieve profitable operations and positive cash flow.

Going Concern

Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is contingent upon its ability to raise additional capital as required. During the period from January 1, 2019 through December 31, 2019, the Company incurred net losses of C$11,095,057. Initially, we intend to finance our operations through equity and debt financings.

Capital Expenditures

We do not have any contractual obligations for ongoing capital expenditures at this time.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements.

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Contractual Obligations, Commitments and Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. We are not aware of any matters which result in a loss contingency.

Relaxed Ongoing Reporting Requirements

Regulation A+ provides that a filer can take advantage of an extended transition period for complying with new or revised accounting standards.

Plan of Operations

As noted above, the continuation of our current plan of operations requires us to raise significant additional capital. If we are successful in raising capital through the sale of shares offered for sale in this Offering Circular, we believe that the Company will have sufficient cash resources to fund its plan of operations for the next 12 months. If we are unable to do so, we may have to curtail and possibly cease some operations.

We are a UAV manufacturer, custom engineering, and UAV services company and began operations in 1998. Our plan of operations for the next few years includes: hire engineers to perform more engineering service work, to complete contracts on a timelier basis, and to perform R&D for the company’s next generation of products; hire sales/marketing people for our product lines and engineering services work; hire sales/marketing people for further expansion into services (e.g. drone as a service); diversify and expand business lines organically and by potential acquisitions; update/capex machinery used for manufacturing and production; continue to patent innovative ideas for new products; develop and increase its current product offering to various niche industries that aren’t being served now; consider potential acquisition opportunities. Provided the full offering is completed, the company should not have to raise capital within six months.

We continually evaluate our plan of operations to determine the manner in which we can most effectively utilize our limited cash resources. The timing of completion of any aspect of our plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond our control. There is no assurance that we will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund our ongoing operations.

These circumstances raise substantial doubt on our ability to continue as a going concern. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

Trend Information

Although Draganfly is acknowledged as the pioneer that first developed the commercial multi rotor helicopter, there are now many drone hardware companies in the world. As technology has improved and costs for hardware and software have come down, the line between consumer and commercial drones has blurred. Historically, Draganfly has serviced early adopters in the public safety industry. At this stage of the commercial drone adoption curve, the average public safety organization (local, regional, and even federal law enforcement, for example), are quite budget conscious. Hence, these organizations tend to use lower cost drones that have become quite sophisticated that can accomplish most of their use cases. Draganfly has moved away from competing directly with lower priced, foreign manufactured drones and has chosen to serve niche markets outside of where they tend to service. Our facility is ideal for custom engineering and niche type production where we keep limited inventory. There are also some organizations that tend to be US based that either prefer or are mandated to not use foreign drones. Some of these organizations are sensitive to their work being exposed to that of overseas governments which has at least for the time being, created a niche market for players such as Draganfly.

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In light of the recent COVID-19 pandemic, there could possibly be an impact on sourcing materials that are used to manufacture our products. Additionally, COVID-19 has caused significant disruptions to the global financial markets, which could impact our ability to raise additional capital. The ultimate impact on us and our significant suppliers and manufacturers is unknown, but our operations and financial condition could suffer in the event of any of these types of unpredictable events. Further, any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, results of operations, financial condition and cash flows. Currently, our operations remain materially unaffected by the sudden outbreak of COVID-19. Our facilities in Saskatchewan and British Columbia are large enough where employees can maintain safe distances from each other while working. Employees can also work remotely should an employee fall ill. Further, the Company adheres to rules and regulations by their governing jurisdictions to ensure the health of its employees and customers are prioritized.

As Draganfly has evolved to move with the industry trends, the Company now uses DJI drones as part of some of its customization and engineering services work. Draganfly has also moved into innovative engineering procurement which is very specialized and is currently not aware of any Canadian and US companies focusing on this industry or its existing customers. As the drone industry matures, this may bring more players to this space or the Company’s customers may choose to develop the in-house expertise to do the work that they currently outsource to Draganfly. However, it is the Company’s view that there will be a growing customer base that will require very specialized work that only a handful of companies can do.

Consumer and prosumer drones are ideal for certain aerial filming applications, but enterprises looking to use drones for advanced applications will generally turn to high‑end UAV manufactures with longer flight times, better sensor capabilities and analytic functionalities. The high‑end commercial UAV market, which is defined as drones >$5,000, is one of the fastest-growing markets within the broader UAV space, a space where Draganfly is positioned.

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

As of August 7, 2020, our directors, executive officers and significant employees were as follows:

Name	Position	Age		Term of Office	Approximate hours per week for part-time employees
Executive Officers:
Cameron Chell	Chairman, CEO, and Director		52	Aug 14, 2019 – Present	15 hours
Paul Sun	CFO and Corporate Secretary		48	August 14, 2019 – Present
Patrick Imbasciani	Chief Operating Officer , Draganfly Innovations Inc.		47	October 22, 2019 – Present
John Bagocius	SVP Sales		48	July 14, 2020 - Present
Scott Larson	Interim President		48	July 3, 2020 - Present
Directors:
Scott Larson	Director		48	August 14, 2019 – Present
Olen Aasen	Director		37	August 14, 2019 – Present
Denis Silva	Director		40	August 14, 2019 – Present
Andrew Hill Card, Jr.	Director		73	November 7, 2019 – Present
Justin Hannewyk	Director		35	April 30, 2020 – Present
John M. Mitnick	Director		58	June 18, 2020 – Present

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Business Experience

Cameron Chell, CEO and Director – Mr. Chell is the CEO of the Company and CEO and Co-Founder of Business Instincts Group, Inc. Mr. Chell became an entrepreneur at age 14, and has since spent his career growing a diverse collection of high-potential ideas into revolutionary companies that have changed the way we experience the world. At 14, Mr. Cameron launched his first company by building irrigation valves, but as a junior high student, he was consistently turned down by manufacturers and distributors. Undeterred, he bid on irrigation contracts instead, landing deals and building his first business. By 17, Mr. Cameron had launched several other companies including a computer assembly and reseller operation. Later in life, while working as a stockbroker tasked with seeding high-tech companies, building Boards and raising capital, Mr. Cameron realized he could turn his passion for creating companies into a career. He quickly left to quench his thirst for building businesses himself. From October 2007 to present, Mr. Cameron served as the Chief Executive Officer of Business Instincts Group (“BIG”). As the CEO of BIG, Mr. Cameron takes a very hands-on leadership position in client projects, infusing his principles of clarity, alignment and measurement into the culture of every BIG partner. That leadership was critical to the success of UrtheCast, which he co-founded, Cold Bore Technologies (Mr. Cameron served as Co-Founder from February 2013 to Present), Slyce (Mr. Cameron Served as Director from January 2012 to January 2017), Raptor Rig (Mr. Cameron served as Director from February 2015 to Present), Draganfly (Mr. Cameron Served as Director and Chief Executive Officer from May 2013 to Present) and TraxOne Inc (Mr. Cameron served as Director from September 2016 to Present). Most recently, Mr. Cameron has served as an advisor to KodakCoin (Mr. Cameron served as a Director from May 2017 to Present), believed to be one of the first compliant cryptocurrencies developed in partnership between Business Instincts Group, WENN Digital and CurrencyWorks Inc (Mr. Cameron served as Chairman from November 2017 to Present). Mr. Cameron is an Olympic decathlete, a cancer survivor, and the author of Sustainable Startup, a guide for scaling small businesses and their teams. In addition to his work with BIG, Mr. Cameron speaks publicly on topics including technology, culture and overcoming adversity.

Paul Sun, Chief Financial Officer and Corporate Secretary – Mr. Sun has over 20 years of business experience and has held numerous senior roles at investment banks including Scotia Capital, Desjardins, and Beacon Securities. Mr. Sun has provided financial solutions to small start-ups to billion dollar market-cap companies and has been involved in many transactions across the entire capital structure. He has also held project and operations management positions at a number of private and publicly traded companies. He officially joined Draganfly in June, 2015. He was awarded his Bachelor of Applied Science and Engineering from The University of Toronto and his Master of Business Administration from the Schulich School of Business. He holds the Professional Engineer and Certified Financial Analyst designations. Mr. Sun’s business knowledge, experience, and education has provided him with an understanding of financial reporting sufficient to enable him to act as a member of the Audit Committee.

Patrick Imbasciani, Chief Operating Officer , Draganfly Innovations Inc. – Mr. Imbasciani is a seasoned business professional with over 20 years of experience infusing technology and building enduring relationships in domestic and international markets. In the 1990's and early 2000's, he served his country as Sergeant in the United States Marine Corps. Later, Mr. Imbasciani went on to serve the international community as Director of Health and Education Programs for the United Nations Pan American Health Organization Foundation in Washington DC. From 2014-2018, Mr. Imbasciani served as Senior Director of international Business Development for world renown drone company PrecisionHawk. Prior to joining Draganfly in 2019, Mr. Imbasciani served as the interim COO of an interstate construction company located in the southeastern US. Mr. Imbasciani brings a disciplined leadership and industry experience to Draganfly, and a wealth of proven drone experience, which he cultivated while at PrecisionHawk. While there, Mr. Imbasciani created new distribution channels to deliver UAS to enterprise and end customers in agriculture, insurance, and energy among other industries. Mr. Imbasciani expanded the company into 10 countries outside of the United States, championed and oversaw numerous new proof-of-concepts with enterprise partners including solar inspections and post catastrophe insurance reporting, and personally led emergency response efforts to collect data with drones in Ecuador, the US, and The Bahamas, following a deadly earthquake, mass floods, and Hurricanes. Today, Mr. Imbasciani has developed a sound go to market business, marketing, and operations strategy for Draganfly, and Mr. Imbasciani works tirelessly to deliver the company to profitability and scale.

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Olen Aasen, Director – Mr. Aasen is a corporate and securities lawyer with more than 14 years of experience in corporate, securities and regulatory matters. Mr. Aasen has been Executive Vice President & General Counsel at King & Bay West Management Corp. from February 2011 to the present. King & Bay is a merchant bank that provides services to companies in the mineral resource, aviation and technology sectors. Prior to King & Bay, Mr. Aasen was an associate with Blake, Cassels & Graydon LLP from May 2007 to February 2011. Mr. Aasen obtained a J.D. from the University of British Columbia in 2006 and was called to the British Columbia Bar in 2007. Mr. Aasen was also appointed to the 2016 Legal 500 GC Powerlist for Canada.

Scott Larson, Interim President and Director – Mr. Larson brings over 20 years of combined corporate finance, technology development and entrepreneurial experience to the Board. From January 2019 to March 2020, Mr. Larson was the CEO of Kater Technologies, a Vancouver-based mobility as a service (MaaS) company building out an integrated intermodal transportation platform incorporating public transportation, buses, taxis and ride hailing vehicles into a single service. Prior to that, from 2016 to 2019, Mr. Larson was CEO and co-founder of Helios Wire, a satellite company building out a space-enabled IoT/M2M network. In 2019, Helios Wire was sold to a strategic acquirer. From 2010 to 2015, Mr. Larson was also the CEO/Co-Founder of UrtheCast. Mr. Larson helped scale the company from its inception, taking it public on the Toronto Stock Exchange, raising $200 million, and leading the company to 250 employees over five years with seven offices around the world.

John Bagocius – SVP Sales – Prior to joining the Company, Mr. Bagocius was the VP of Sales for the Public Safety & Commercial UAS groups for FLIR Systems from January 2019 to March 2020. Mr. Bagocius came to FLIR via the Aeryon Labs acquisition, where he ran the Public Safety and Commercial Drone business lines from June 2017 until December 2018. Before joining Aeryon, Mr. Bagocius served the biometrics technology field, most recently, as the Director of Sales for Crossmatch Technologies, providing biometric solutions and identity management tools to military and law enforcement agencies worldwide. Mr. Bagocius spent nearly 17 years at Crossmatch, from June 2000 to June 2017 where he held various leadership positions in Sales, Product Management, and Business Development. Mr. Bagocius has over 20 years of experience in both direct and channel sales to all levels of the government (Federal, DOD, intel, state & local) as well as the critical infrastructure industry (power generation, nuclear, DOT) and various commercial entities in the education, finance, and transportation industries. Mr. Bagocius’ experience has been based in security and technology - hardware, software, and complete solution offerings. Mr. Bagocius is a veteran of the U.S. Marine Corps, serving as a member of the prestigious White House Honor Guard performing duties at the White House, Pentagon, and Arlington National Cemetery. Mr. Bagocius also served as a member of the 13th Marine Expeditionary Unit, as part of a joint United Nations Task Force conducting operations in Africa. Mr. Bagocius is a graduate of The Florida State University and holds a Bachelors of Science degree in Information Systems Management.

Denis Silva, Director – Mr. Silva is a corporate and securities partner with 12 years of experience in corporate, securities, mining and regulatory legal experience (since 2009) and has acted for a wide variety of companies listed on Canadian and US exchanges, with a focus on technology and mining. Mr. Silva holds a BA from the University of British Columbia, MPA from Queen’s University and LLB from University of Windsor.

Andrew Hill Card, Jr., Director – Andrew H. Card, Jr. was named Interim CEO of the George & Barbara Bush Foundation in June 2020. He continues to serve as Chairman of the National Endowment for Democracy (NED), a non-profit organization dedicated to the growth and strengthening of democratic institutions around the world, a position he assumed in January 2018. Mr. Card has also held numerous positions at senior levels of government under three Presidents throughout the years, including Chief of Staff to President George W. Bush, where Mr. Card became the second longest tenured White House Chief of Staff. Mr. Card served as Deputy Chief of Staff to President George H.W. Bush, as well as U.S. Secretary of Transportation, and served President Ronald Reagan as a Deputy Assistant to the President for Intergovernmental Affairs.

Mr. Card served as President of Franklin Pierce University in New Hampshire from January 2015 through July 2016. Prior to this, Mr. Card served as Executive Director of the Office of the Provost and Vice President for Academic Affairs at Texas A&M University from August 2013 until December 2014. He served as Acting Dean of The Bush School of Government and Public Service at Texas A&M from July 2011, until Dean Ryan Crocker's return from service as the U.S. Ambassador to Afghanistan on August 1, 2013.

Mr. Card serves on the Board of Directors of public corporation Union Pacific, on the Board of Directors of the Edward M. Kennedy Institute for the United States Senate, on the Board of Directors of Draganfly, on the Business Advisory Board of BrainStorm Cell Therapeutics, and on the non-publicly traded Board for Energy Security Partners, and on a number of non-profit boards. Mr. Card previously served on the Advisory Board of the U.S. Chamber of Commerce. He is also a professional speaker represented by the Washington Speakers Bureau.

While Chief of Staff to President George W. Bush, Mr. Card coordinated the priorities of the Administration’s agenda, the development of policies, and appointments of Cabinet Secretaries and senior officials throughout the government. On September 11, 2001, Mr. Card is the one who whispered in President Bush’s ear while the President was sitting in a classroom in Florida, that terrorists had attacked the United States. Mr. Card then led a government-wide reorganization to best allocate resources to deal with the aftermath of 9-11 and the new terrorist environment.

Prior to his tenure as White House Chief of Staff, Mr. Card managed and ran the Republican National Convention in Philadelphia at the request of nominee Texas Governor George W. Bush. Before that, Mr. Card was Vice President-Government Relations for General Motors Corporation, one of the world’s largest automobile manufacturers. In this role Mr. Card directed the company’s international, national, state and local government affairs activities and represented GM on matters of public policy before the U.S. Congress and the Administration. From 1993 to 1998, Mr. Card was President and Chief Executive Officer of the American Automobile Manufacturers Association, the trade association whose members were Chrysler Corporation, Ford Motor Company, and General Motors Corporation. When Chrysler became part of Daimler Corporation, Mr. Card oversaw the dissolution of the nearly 100 year old trade association.

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In August 1992, at the request of President Bush, Secretary Mr. Card coordinated the Administration’s disaster relief efforts in the wake of the massive Hurricane Andrew. He also directed President Bush’s transition office during the transition from the Bush Administration to the Clinton Administration. Prior to that he served as Special Assistant (1983 to 1987) and later as Deputy Assistant to the President and Director of Intergovernmental Affairs for President Ronald Reagan (1988) where he was liaison to governors, statewide elected officials, state legislators, mayors and other elected officials. From March 1987 until March 1988, Mr. Card ran the successful New Hampshire Presidential Primary Campaign for George H. W. Bush.

He is a graduate of the University of South Carolina with a B.S. in Engineering. He also attended the U.S. Merchant Marine Academy and the John F. Kennedy School of Government at Harvard University. Mr. Card served in the U.S. Navy from 1965 to 1967. Mr. Card has been the recipient of many honorary degrees and awards.

Mr. Card is a native of Holbrook, Massachusetts and got his start in politics as an elected official in Holbrook and then as Member of the Massachusetts House of Representatives from 1975-1983. He served as a Minority Whip from 1977-1983. In 1982 he was named Legislator of the Year by the National Republican Legislators Association and received the Distinguished Legislator Award from the Massachusetts Municipal Association. He was a candidate for the Republican Nomination for Governor of Massachusetts in 1982. He and his wife, The Reverend Kathleene (Bryan) Card, also from Holbrook, Massachusetts, have three children and six grandchildren.

Justin Hannewyk, Director –

Mr. Hannewyk, President of Dronelogics, is the co-founder of Dronelogics Systems and has been consulting with enterprise clients on the integration of drones for over a decade. Working closely with international companies in industries such as mining, forestry, energy and entertainment as well as advising governmental bodies, Mr. Hannewyk oversees the design and delivery of systems to meet client's needs. A progressive and forward-thinker, Mr. Hannewyk draws from industry insight to recognize customer requirements and pinpoint areas where technology can be leveraged to make better business decisions.

John M. Mitnick, Director – Mr. Mitnick is an American attorney with 32 years of experience serving at the highest levels of government and the private sector. From February 2018 until September 2019, he served as the General Counsel of the U.S. Department of Homeland Security (DHS), having been confirmed for that position unanimously by the U.S. Senate. In that capacity, Mr. Mitnick served as the chief legal officer of a federal security and law enforcement agency with over 240,000 employees, was responsible for providing legal advice and counsel to DHS and all of its components, and supervised over 2,500 attorneys. From March 2014 to February 2018, he served as Senior Vice President, General Counsel, and Secretary of The Heritage Foundation, an influential think tank, and from November 2007 to April 2013 he served as Vice President, General Counsel, and Secretary of a Raytheon division with over $3 billion in annual sales, over 9,000 employees, and business operations in over 40 countries and on all continents.

Mr. Mitnick’s recent tenure at DHS was a continuation of his homeland security public service. Beginning in November 2002, he assisted in establishing DHS and then served as Associate General Counsel for Science and Technology until August 2004, when he moved to the White House. He served in the White House Counsel’s Office as Deputy Counsel of the Homeland Security Council from August 2004 until April 2005, and then as Associate Counsel to the President, with responsibility for the entire homeland security portfolio, until October 2007. He began his legal career in 1988 at the law firm now known as Kilpatrick Townsend & Stockton LLP, where he was a partner specializing in mergers and acquisitions, strategic alliances, commercial contracts, and business start-ups.

Mr. Mitnick has also served on the Board of Directors of Valaurum, Inc., a private mint, from March 2016 to February 2018 and since October 2019. He received his Juris Doctor degree from the University of Virginia School of Law and a Bachelor of Arts degree in Jurisprudence from the University of Oxford. He also holds a Bachelor of Arts degree in History and Political Science (summa cum laude) from Emory University.

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Corporate Cease Trade Orders or Bankruptcies

Other than as disclosed herein, none of the proposed directors (or any of their personal holding companies) of the Company:

(a)	is, as at the date of this Offering Circular, or has been, within 10 years before the date of this Offering Circular, a director, chief executive officer or chief financial officer of any company, including the Company, that: (i) was subject to a cease trade order or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days while that person was acting in the capacity as director, chief executive officer or chief financial officer; or (ii) was the subject of a cease trade or similar order or an order that denied the issuer access to any exemption under securities legislation in each case for a period of 30 consecutive days, that was issued after the person ceased to be a director, chief executive officer or chief financial officer in the company and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; or
(b)	is as at the date of this Offering Circular or has been within the 10 years before the date of this Offering Circular, a director or executive officer of any company, including the Company, that while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
(c)	has, within the 10 years before the date of this Offering Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangements or compromise with creditors, or had a receiver, receiver manager as trustee appointed to hold the assets of the proposed director.

Other than as provided below, none of the proposed directors (or any of their personal holding companies) has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director.

By Order of the Supreme Court of Newfoundland and Labrador dated June 17, 2020, Deloitte Restructuring Inc. was appointed as the receiver and manager of all current and future assets, undertakings, and properties of the Kami Mine Limited Partnership, Kami General Partner Limited, and Alderon Iron Ore Corp. The receivership was initiated by a secured creditor of the Kami Mine Limited Partnership after its failure to refinance the secured debt due to the COVID-19 pandemic. Mr. Aasen was Corporate Secretary of Alderon Iron Ore Corp. and Secretary and Director of Kami General Partner Limited until April 28, 2020.

Penalties or Sanctions

Other than as provided herein, no Director or executive officer of the Company or shareholder holding sufficient securities of the Company to affect materially the control of the Company has been:

· been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or

· been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor making an investment decision.

Pursuant to a settlement agreement (the “Settlement Agreement”) dated November 6, 1998 that Cameron Chell signed with the Alberta Stock Exchange (the “ASE”), Mr. Chell agreed to the following sanctions:

· prohibition against ASE Approval (as defined in the General By-law of the ASE) in any capacity for a period of five years commencing November 6, 1998;

· a fine in the sum of $25,000;

· strict supervision for a period of two years following re-registration in any capacity; and

· close supervision for a period of one year following the period of strict supervision described above.

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The matters respecting the Settlement Agreement are as set forth in an ASE Notice to Members dated November 12, 1998, which provides that:

· representations were made by the promoter of a company to one of Mr. Chell’s clients that he would only be permitted to purchase securities in the initial public offering of that company if he would agree to purchase additional securities in the secondary market following the listing on the Alberta Stock Exchange and, in or around March or April, 1996, Mr. Chell disclosed confidential information to the promoter of that company concerning a client’s account with respect to a cheque returned NSF to Mr. Chell’s employer;

· the investment objectives for two of Mr. Chell’s clients were amended without prior knowledge or consent of such clients and purchases and sales of securities were subsequently executed in the accounts of such clients which were unsuitable for the clients given the stated investment objectives for the accounts prior to the amendment of such investment objectives;

· Mr. Chell executed a total of 21 transactions in the accounts of two of Mr. Chell’s clients without prior knowledge or authorization of such clients;

· the signature on the new client account form for one of Mr. Chell’s clients, which purported to be that of the client was not in fact the signature of the client nor did such client have any knowledge of any changes made to the investment objectives for his account(s);

· on or about June 10, 1996, the address for the account of one of Mr. Chell’s clients was changed to Mr. Chell’s local post office box address without such client’s knowledge and while the client was resident in Ontario. As a result, during the period of June 10 to and including September, 1996, the client did not receive any trade confirmations or accounts statements with respect to her accounts with Mr. Chell;

· on or about March 19, 1996, Mr. Chell permitted one of his clients to acquire approximately 4% of the total initial public offering by a company, contrary to the rules of the Alberta Stock Exchange;

· on or about October 19, 1996, Mr. Chell purchased securities of a company in the account of one of his clients without disclosing the involvement of his brother as president of that company;

· on or about June 23, 1996, the private placement questionnaire & undertaking completed in connection with the purchase by one of Mr. Chell’s clients and filed with the Alberta Stock Exchange disclosed that Mr. Chell’s client was a resident of Alberta when in fact such client was a resident of Ontario. Mr. Chell knew or ought to have known that it contained a misstatement of fact in that regard;

· during the period of the summer, 1996 to and including May 1997, Mr. Chell’s day to day involvement as the president and chairman of Coffee.Com Interactive Café Corp. (“Coffee.Com”) as well as being a shareholder was not disclosed to Mr. Chell’s employer.

· Further, Mr. Chell purchased securities offerings via private placement by Coffee.Com for certain of his clients without fully disclosing his involvement with that company to such clients;

· on or about March 18 and June 19, 1996, Mr. Chell executed purchase of securities for Ontario residents. At the time of such purchases, Mr. Chell knew or ought to have known that he was not registered in the province of Ontario;

· During the summer of 1996, Mr. Chell represented to the Alberta Stock Exchange that certain purchasers of securities offered via private placement were close friends and business associates when he knew or ought to have known that such representations were untrue; and

· During the period of June 19, 1996 and to and including May 1, 1997, Mr. Chell failed to obtain the prior approval of his employer for advertisements and sales literature distributed by Mr. Chell regarding Coffee.Com.

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Conflicts of Interest

The directors of the Company are required by law to act honestly and in good faith with a view to the best interests of the Company and to disclose any interests, which they may have in any project or opportunity of the Company. If a conflict of interest arises at a meeting of the Board, any director in a conflict will disclose his interest and abstain from voting on such matter.

To the best of the Company’s knowledge, and other than as disclosed herein, there are no known existing or potential conflicts of interest among the Company, its promoters, directors and officers or other members of management of the Company or of any proposed promoter, director, officer or other member of management as a result of their outside business interests except that certain of the directors and officers serve as directors and officers of other companies, and therefore it is possible that a conflict may arise between their duties to the Company and their duties as a director or officer of such other companies.

Advance Notice Provisions

We have included certain advance notice provisions with respect to the election of our directors in our Articles (the “Advance Notice Provisions”). The Advance Notice Provisions are intended to: (i) facilitate orderly and efficient annual general meetings or, where the need arises, special meetings; (ii) ensure that all Shareholders receive adequate notice of Board nominations and sufficient information with respect to all nominees; and (iii) allow Shareholders to register an informed vote. Only persons who are nominated by Shareholders in accordance with the Advance Notice Provisions will be eligible for election as directors at any annual meeting of Shareholders, or at any special meeting of Shareholders if one of the purposes for which the special meeting was called was the election of directors.

Under the Advance Notice Provisions, a Shareholder wishing to nominate a director would be required to provide us notice, in the prescribed form, within the prescribed time periods. These time periods include, (i) in the case of an annual meeting of Shareholders (including annual and special meetings), not less than 30 nor more than 65 days prior to the date of the annual meeting of Shareholders; provided, that if the first public announcement of the date of the annual meeting of Shareholders (the “Notice Date”) is less than 50 days before the meeting date, notice must be given not later than the close of business on the 10^th day following the Notice Date; and (ii) in the case of a special meeting (which is not also an annual meeting) of Shareholders called for the purpose of electing directors (whether or not called for other purposes), not later than the close of business on the 15^th day following the Notice Date, provided that, in either instance, if notice and access (as defined in National Instrument 54-101— Communication with Beneficial Owners of Securities of a Reporting Issuer) is used for delivery of proxy related materials in respect of a meeting described above, and the Notice Date in respect of the meeting is not less than 50 days prior to the date of the applicable meeting, the notice must be received not later than the close of business on the 40th day before the applicable meeting.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

Statement of Executive Compensation

For the purposes of this Offering Circular, a “Named Executive Officer”, or “NEO”, means each of the following individuals:

(a)	each individual who, during any part of the Company’s financial year ended December 31, 2019, served as chief executive officer (“CEO”) of the Company, including an individual performing functions similar to a CEO;
(b)	each individual who, during any part of the Company’s financial year ended December 31, 2019, served as chief financial officer (“CFO”) of the Company, including an individual performing functions similar to a CFO;
(c)	the most highly compensated executive officers of the Company and its subsidiaries, other than the individuals identified in paragraphs (a) and (b), as at December 31, 2019 whose total compensation was more than $150,000, as determined in accordance with subsection 1.3(5) of Form 51‑102F6, for the financial year ended December 31, 2019; and
(d)	each individual who would be a NEO under paragraph (c) above but for the fact that the individual was not an executive officer of the Company, and was not acting in a similar capacity, as at December 31, 2019.

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Based on the foregoing definitions, the Company has 3 Named Executive Officers: Cameron Chell, the Company’s CEO, Paul Sun, the Company’s CFO, and Patrick Imbasciani – Chief Operating Officer (the (“COO”). The summary compensation table below provides information for the two most recently completed financial years ended December 31, 2019 regarding compensation paid to or earned by each of the Named Executive Officers.

Director and Named Executive Officer Compensation

The following table represents information regarding the total compensation for the directors and the executive officers of the Company as of December 31, 2019 in Canadian dollars:

Name and Capacity in which	Cash Compensation		Other Compensation		Total Compensation
Compensation was Received	($)		($)(1)		($)
Cameron Chell(2) Chairman, CEO, and Director	$	9,000.00	$	236,750	$	245,750
Paul Sun CFO and Corporate Secretary	$	133,813.74	$	443,076.92	$	576,890.66
Patrick Imbasciani, Chief Operating Officer, Draganfly Innovations Inc.	$	37,365.63	$	218,250	$	255,615.63
John Bagocius, SVP of Sales(4)	$	0	$	0	$	0
Scott Larson Director and Interim President	$	0	$	236,750	$	236,750
Olen Aasen Director	$	0	$	236,750	$	236,750
Denis Silva Director	$	0	$	236,750	$	236,750
Andrew Hill Card, Jr. Director	$	0	$	236,750	$	236,750
Justin Hannewyk Director(5)	$	0	$	0	$	0
John Mitnick Director(6)	$	0	$	0	$	0

(1)	Any values reported in the “Other Compensation” column, if applicable, represents the aggregate grant date fair value, computed in accordance with Accounting Standards Codification (ASC) 718 Share Based Payments, of grants of equity compensation to each of our named executive officers and directors.   The equity compensation granted in the prior fiscal year ended December 31, 2019 includes stock options and RSUs and such grants are subject to vesting over time with further details in the below table entitled “Stock Options and Other Compensation Securities.”
(2)	Mr. Chell provides his services through the Chell Consulting Agreement. See below “Employment, Consulting, and Management Agreements”.
(3)	Comprised of vacation accrual and the fair value of equity compensation pursuant to footnote (1).
(4)	On July 14, 2020, Mr. Bagocius was hired as the Senior Vice President of Sales. Mr. Bagocius provides his services through the Bagocius Employment Agreement. See below “Employment, Consulting and Management Agreements”.
(5)	Mr. Hannewyk was appointed to the Board on April 30, 2020.
(6)	Mr. Mitnick was appointed to the Board on June 18, 2020.

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Stock Options and Other Compensation Securities

The following table sets out all compensation securities granted or issued to all Named Executive Officers and directors by the Company or any of its subsidiaries during the fiscal year ended December 31, 2019 for services provided or to be provided, directly or indirectly, to the Company or any of its subsidiaries:

Name and position	Type of compensation security	Number of compensation securities, number of underlying securities, and percentage of class	Date of issue or grant	Issue, conversion or exercise price CAD($)	Closing price of security on date of grant CAD($)	Closing Price of Security on date at year end CAD($)	Expiry Date
Cameron Chell Chairman, CEO and Director	Stock options RSUs	250,000(1) 250,000(2)	Oct 30, 2019 Oct 30, 2019	$0.50 $0.50	N/A N/A	$0.62 $0.62	Oct 30, 2029 Oct 30, 2022
Paul Sun CFO	Stock options RSUs	500,000(1) 500,000(2)	Oct 30, 2019 Oct 30, 2019	$0.50 $0.50	N/A N/A	$0.62 $0.62	Oct 30, 2029 Oct 30, 2022
Patrick Imbasciani COO	Stock options RSUs	250,000(1) 250,000(2)	Oct 30, 2019 Oct 30, 2019	$0.50 $0.50	N/A N/A	$0.62 $0.62	Oct 30, 2029 Oct 30, 2022
Scott Larson Director and Lead Independent Director	Stock options RSUs	250,000(1) 250,000(2)	Oct 30, 2019 Oct 30, 2019	$0.50 $0.50	N/A N/A	$0.62 $0.62	Oct 30, 2029 Oct 30, 2022
Olen Aasen Director	Stock options RSUs	250,000(1) 250,000(2)	Oct 30, 2019 Oct 30, 2019	$0.50 $0.50	N/A N/A	$0.62 $0.62	Oct 30, 2029 Oct 30, 2022
Denis Silva Director	Stock options RSUs	250,000(1) 250,000(2)	Oct 30, 2019 Oct 30, 2019	$0.50 $0.50	N/A N/A	$0.62 $0.62	Oct 30, 2029 Oct 30, 2022
Andrew Hill Card, Jr Director	Stock options RSUs	250,000(1) 250,000(2)	Oct 30, 2019 Oct 30, 2019	$0.50 $0.50	N/A N/A	$0.62 $0.62	Oct 30, 2029 Oct 30, 2022
Justin Hannewyk(3) Director	Stock options RSUs	$0 $0	N/A N/A	N/A N/A	N/A N/A	N/A N/A	N/A N/A
John Mitnick Director(4)	Stock options RSUs	250,000(1) 250,000 (5)	Nov 19, 2019 Nov 19, 2019	$0.50 $0.50	N/A N/A	$0.62 $0.62	Nov 19, 2029 Nov 19, 2022

Notes: 

(1)	These stock options vest 1/3 on the grant date, 1/3 on the first anniversary of the grant date and 1/3 on the second anniversary of the grant date.
(2)	These RSUs are deliverable as to 1/3 on October 30, 2020, 1/3 on October 30, 2021 and 1/3 on October 30, 2022.
(3)	Mr. Hannewyk was appointed to the Board effective April 30, 2020 and was granted 250,000 stock options at an exercise price of CAD$0.50 expiring on April 30, 2030 and 250,000 RSUs at a deemed price of CAD$0.50 expiring on April 30, 2023.
(4)	Mr. Mitnick was appointed to the Board effective June 18, 2020 and his RSUs and Options were previously granted to him in anticipation of him officially joining the board and as part of his advisory role with the Company.
(5)	These RSUs are deliverable as to 1/3 on November 19, 2020, 1/3 on November 19, 2021 and 1/3 on November 19, 202 2 .

Exercise of Compensation Securities by Directors and Named Executive Officers

No compensation securities were exercised by the Company’s Named Executive Officers and directors during the fiscal year ended December 31, 2019.

Director Compensation

As of August 7, 2020, we have seven (7) directors. We currently do not pay our directors any cash compensation for their services as board members.

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During the financial year ended December 31, 2019, none of the directors of the Company were paid, awarded or granted any compensation with respect to activities performed in their capacity as directors except as noted above, see “Statement of Executive Compensation – Director and Named Executive Officer Compensation”. Directors are eligible to participate in the Share Compensation Plan. Directors are also entitled to be reimbursed for expenses incurred by them in their capacity as directors.

Employment, Consulting, and Management Agreements

Except as disclosed herein, there were no agreements or arrangements under which compensation was provided during the most recently completed financial year or is payable in respect of services provided to the Company or any of its subsidiaries that were: (a) performed by a director or named executive officer; or (b) performed by any other party but are services typically provided by a director or a named executive officer.

The Company’s consulting agreement (the “Chell Consulting Agreement”) with 1502372 Alberta Ltd. (the “Consultant”) whereby the Company pays monthly fees of $10,000 ($3,000 from October 1, 2019-December 31, 2019) for the provision by of executive services by the Consultant to the Company, and in this regard, has Cameron Chell hold the position of Chairman and Chief Executive Officer contains the following provisions: (a) where termination notice is given by the Company, other than for certain specified reasons as set out in the Chell Consulting Agreement, the Company shall give the Consultant at least 60 days’ advance notice in writing; and (b) where termination is given by the Consultant, the Consultant shall give the Company 60 days’ advance notice in writing. If the Chell Consulting Agreement is terminated pursuant to either (a) or (b) above, then the Consultant will be entitled to the fees earned to the effective date of termination and any expenses incurred on behalf of the Company prior to the effective date of termination which are otherwise reimbursable by the Company pursuant to the terms of the Chell Consulting Agreement. The Consultant is a private company controlled by Cameron Chell, Chairman, Chief Executive Officer and Director of the Company.

Mr. Imbasciani has entered into an executive employment agreement (the “Imbasciani Employment Agreement”) with the Company, dated October 21, 2019. Pursuant to the Imbasciani Employment Agreement, Mr. Imbasciani has agreed to perform certain services as Chief Operating Officer of the Company. As of June 18, 2020, Mr. Imbasciani became the Chief Operating Officer of Draganfly Inn ovations Inc. and is no longer the Chief Operation Officer of the Company. The Imbasciani Employment Agreement provides that Mr. Imbasciani shall receive an annual base salary of USD $118,800. Mr. Imbasciani is eligible for annual commissions and cash bonuses based on the achievement by the Company of certain objectives in its business plan and on sales revenue generated by Mr. Imbasciani. The executive employment agreement also grants Mr. Imbasciani an issuance of 500,000 options in the Company option pool, with vesting criteria in line with Company policy. It further provides Mr. Imbasciani with certain standard employment benefits, such as health insurance, paid vacation and business expense reimbursement. The executive employment agreement is at will and may be terminated by Mr. Imbasciani or the Company at any time for any reason with or without cause.

Mr. Bagocius has entered into an employment agreement (the “Bagocius Employment Agreement”) with the Company, dated June 14, 2020. Pursuant to the Bagocius Employment Agreement, Mr. Bagocius has agreed to perform certain services as Chief Revenue Officer of the Company.   Pursuant to resolutions of the Company’s board, Mr. Bagocius’ became the Senior Vice President, Sales of the Company and is no longer the Chief Revenue Officer . The Bagocius Employment Agreement provides that Mr. Bagocius shall receive an annual base salary of USD $140,000 , which will be reviewed within 3 months based on milestones being met and contingent upon the financial strength of the Company . The Bagocius Employment Agreement grants Mr. Bagocius an issuance of 5,000 options issued and vesting within the Company’s standard share compensation plan. These options will be granted and set within 30 days per board approval. Additionally, Mr. Bagocius will receive 15 paid holiday days annually.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table shows the beneficial ownership of our Common Shares as of the date of this Offering Circular held by (i) each person known to us to be the beneficial owner of more than 10% of any class of our shares; and (ii) all directors and executive officers as a group. As of the date of this Offering Circular, there were 79,250,998 shares of our common shares issued and outstanding.

Beneficial ownership is determined in accordance with the rules of the SEC, and generally includes voting power and/or investment power with respect to the securities held. Shares of Common Shares subject to options and warrants currently exercisable or which may become exercisable within 60 days of the date of this Offering Circular, are deemed outstanding and beneficially owned by the person holding such options or warrants for purposes of computing the number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. Except as indicated in the footnotes to this table, the persons or entities named have sole voting and investment power with respect to all shares of Common Shares shown as beneficially owned by them.

The percentages below are based on fully diluted shares of our common shares as of the date of this Offering Circular. Unless otherwise indicated, the business address of each person listed is c/o Draganfly Inc., 2108 St. George Avenue, Saskatoon, SK, S7M 0K7.

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Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership		Amount and Nature of Beneficial Ownership Acquirable (2)		Percent of Class (1)
Directors and Officers:
All executive officers and directors as a group		8,307,591		833,331		11.53	%
Greater than 10% Securityholders:
None.

________  

(1)	This Offering Statement does not contemplate that any of our current listed stockholders will acquire any additional Common Shares as part of this Offering.
(2)	Includes 833,331 of our common shares which could be issued within the next 60 days to our executive officers and directors upon exercise of vested options.

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

Transactions with Related Persons

Except as described below and except for employment arrangements which are described under “executive compensation,” since the last complete fiscal year, there has not been, nor is there currently proposed, any transaction in which we are or were a participant, the amount involved exceeds the lesser of $120,000 or 1% of the total assets at year end for the last completed fiscal year, and any of our directors, executive officers, holders of more than 5% of our common shares or any immediate family member of any of the foregoing had or will have a direct or indirect material interest.

We have also entered into indemnification agreements with each of our directors and executive officers. In general, these indemnification agreements require the Company to indemnify a director to the fullest extent permitted by law against liabilities that may arise by reason of his or her service for the Company.

Review, Approval and Ratification of Related Party Transactions

Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officer(s), Director(s) and significant stockholders. We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional Directors, so that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof. On a moving forward basis, our Directors will continue to approve any related party transaction.

On July 17, 2015, the Company issued a note payable for $600,000 CDN with the former owner of the Company in connection with the sale of all of Draganfly Innovation Inc.’s issued and outstanding shares. The note payable bears interest at 5% per annum, was due on December 1, 2015 and is secured against the intellectual property as at the effective date. During the year ended December 31, 2019, the Company repaid the balance owing of $378,770 CDN (2018 - $nil). As at December 31, 2019, $nil (2018 - $364,655 CDN) in notes payable plus accrued interest is outstanding. For the year ended December 31, 2019, the Company recognized interest expense of $15,153 CDN (2018 - $17,748).

On December 17, 2015, Business Instincts Group, Inc. ("BIG"), a company controlled by Mr. Chell, loaned $160,000 CDN evidenced by a promissory note executed by Trace Live Networks Inc. (“Trace”), a company founded, in part, by Cameron Chell in 2014. In July 2015, Trace acquired Draganfly Innovations Inc. At the beginning of 2017, Trace and Draganfly Innovations Inc. vertically amalgamated with the resulting company being named Draganfly Innovations Inc. During the year ended December 31, 2017, the balance outstanding of $160,000 CDN in favor of BIG was applied against a subscription receivable from BIG. This subscription receivable was settled in the year ended December 31, 2019.

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During the year ended December 31, 2018, the Company entered into a series of ten (10) promissory notes totaling $273,500 CDN with Business Instincts Group, Inc., a company controlled by Mr. Chell. The promissory notes are interest bearing at 12% per annum, unsecured and due within 60 days from the date of advance and have been repaid in full.

Indebtedness of Directors and Executive Officers

At any time during the Company’s last completed financial year, no director, executive officer, employee, proposed management nominee for election as a director of the Company nor any associate of any such director, executive officer, or proposed management nominee of the Company or any former director, executive officer or employee of the Company or any of its subsidiaries is or has been indebted to the Company or any of its subsidiaries or is or has been indebted to another entity where such indebtedness is or has been the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company or any of its subsidiaries, other than routine indebtedness.

Interest of Informed Persons In Material Transactions

Other than as set forth herein and other than transactions carried out in the ordinary course of business of the Company or any of its subsidiaries, none of the directors or executive officers of the Company, a director or executive officer of a person or company that is itself an informed person or subsidiary of the Company, nor any shareholder beneficially owning, directly or indirectly, common shares of the Company, or exercising control or direction over common shares of the Company, or a combination of both, carrying more than 10% of the voting rights attached to the outstanding shares of the Company nor an associate or affiliate of any of the foregoing persons has since the commencement of the Company’s most recently completed financial year any material interest, direct or indirect, in any transactions which materially affected or would materially affect the Company or any of its subsidiaries.

The Company has entered into a Business Services Agreement with Business Instincts Group, Inc., a company controlled by Mr. Chell, providing the Company with corporate development, human resources, administrative and business services on a fee for services basis as set out in the agreement. This agreement may be terminated by either party upon provision of a 90 days’ written notice.

SECURITIES BEING OFFERED

The following is a summary of the rights of our capital shares as provided in our Articles and Notice of Articles. For more detailed information, please see our Articles and Notice of Articles which have been filed as exhibits to the Offering Statement of which this Offering Circular is a part.

General

The Company’s Notice of Articles provide that our authorized capital consists of an unlimited number of Common Shares, without par value, which do not have any special rights or restrictions.

As of the date of this Offering Circular, the Company has 79,250,998 Common Shares issued and outstanding.

Rights, Preferences and Restrictions Attaching to Our Common Shares

The BCBCA provides shareholders the following rights, privileges, restrictions and conditions attaching to our Common Shares:

· to vote at meetings of shareholders, except meetings at which only holders of a specified class of shares are entitled to vote;

· subject to the rights, privileges, restrictions and conditions attaching to any other class of shares of our company, to share equally in the remaining property of our company on liquidation, dissolution or winding-up of our company; and

· the Common Shares are entitled to receive dividends if, as, and when declared by the Board of Directors.

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The provisions in our Articles attaching to our Common Shares may be altered, amended, repealed, suspended or changed by affirmative vote of the holders of not less than two-thirds of the outstanding Common Shares.

With the exception of special resolutions (i.e. resolutions in respect of fundamental changes to our company, including: the sale of all or substantially all of our assets, a merger or other arrangement or an alteration to our authorized capital that is not allowed by resolution of the directors) that require the approval of holders of two-thirds of the outstanding Common Shares entitled to vote at a meeting, either in person or by proxy, resolutions to approve matters brought before a meeting of our shareholders require approval by a simple majority of the votes cast by shareholders entitled to vote at a meeting, either in person or by proxy.

Share Purchase Warrants and Rights

Pursuant to our Articles, and subject to the BCBCA, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the Company’s directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.

Shareholder Meetings

The BCBCA provides that: (i) a general meetings of shareholders must be held in British Columbia, or may be held at a location outside British Columbia since our Articles do not restrict our company from approving a location outside of British Columbia for the holding of the general meeting and the location for the meeting is approved by ordinary resolution, or the location for the meeting is approved in writing by the British Columbia Registrar of Companies before the meeting is held; (ii) directors must call an annual meeting of shareholders not later than 18 months after the date of incorporation and no later than 15 months after the last preceding annual meeting; (iii) for the purpose of determining shareholders entitled to receive notice of or vote at meetings of shareholders, the directors may fix in advance a date as the record date for that determination, provided that such date shall not precede by more than two months or by less than 21 days, if we are a public company, otherwise 10 days, the date on which the meeting is to be held; (iv) the holders of not less than 5% of the issued shares entitled to vote at a meeting may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition; (v) only shareholders entitled to vote at the meeting, our directors and our auditor are entitled to be present at a meeting of shareholders; and (vi) upon the application of a director or shareholder entitled to vote at the meeting, the British Columbia Supreme Court may order a meeting to be called, held and conducted in a manner that the Court directs.

Pursuant to our Articles, the quorum for the transaction of business at a meeting of our shareholders is at least two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least five percent of the issued shares entitled to be voted at the meeting. On a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that s hareholder and may exercise that vote either in person or by proxy.

Fully Paid and Non-assessable

All outstanding shares of Common Shares are, and the Common Shares to be outstanding upon completion of this Offering will be, duly authorized, validly issued, fully paid and non-assessable.

Share Compensation Plan

Compensation of Directors and Executive Officers

Each of the executive officers and directors listed above is eligible to receive equity compensation at the discretion of our Board. In October 2019, the Company granted options to purchase 2,000,000 shares of Common Shares at $0.50 per share with one third (1/3) of the options vesting on the first, one third (1/3) of the options vesting on the second, and one third (1/3) of the options vesting on the third anniversary of the date of grant. In October 2019, the Company granted 2,000,000 RSUs, deliverable as to one third (1/3) on October 30, 2020, one third (1/3) deliverable on October 30, 2021, and one third (1/3) deliverable on October 30, 2022. Mr. Hannewyk was appointed to the Board effective April 30, 2020 and was granted 250,000 stock options at an exercise price of $0.50 expiring on April 30, 2030 and 250,000 RSUs at a deemed price of $0.50 expiring on April 30, 2023. On July 3, 2020, Scott Larson was appointed interim president and was granted options to purchase 500,000 Common Shares at $0.64 per share. O n July 14, 2020, John Bagocius was hired as the Senior Vice President of Sales and was granted options to purchase 500,000 Common Shares at $0.64 per share with one third (1/3) of the options vesting on the first, one third (1/3) of the options vesting on the second, and one third (1/3) of the options vesting on the third anniversary of the date of grant.  

Upon completion of this Offering, our executive officers and directors will be eligible to receive equity awards under our equity incentive plans at any time at the discretion of our Board of Directors.

Share Compensation Plan and Other Incentive Plans

The Board has previously adopted the Company’s share compensation plan (the “Share Compensation Plan”), prepared in accordance with the policies of the Canadian Securities Exchange, that provides for the granting of RSUs and Options on such terms and conditions as prescribed by the Share Compensation Plan. The Share Compensation Plan is a “rolling” plan, pursuant to which the maximum number of common shares issuable under the Share Compensation Plan and any other share compensation arrangement of the Company including the RSUs that may be awarded under the Share Compensation Plan, is 20% of the common shares of the Company then issued and outstanding. The Share Compensation Plan was adopted effective August 19, 2019.

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The Share Compensation Plan provides participants (each, a “Participant”), who may include participants who are citizens or residents of the United States (each, a “US Participant”), with the opportunity, through RSUs and Options, to acquire an ownership interest in the Company. The RSUs will rise and fall in value based on the value of the Company’s common shares. Unlike the Options, the RSUs will not require the payment of any monetary consideration to the Company. Instead, each RSU represents a right to receive one common share following the attainment of vesting criteria determined at the time of the award. See “Restricted Share Units – Vesting Provisions” below. The Options, on the other hand, are rights to acquire common shares upon payment of monetary consideration (i.e., the exercise price), subject also to vesting criteria determined at the time of the grant. See “Options – Vesting Provisions” below.

Purpose of the Share Compensation Plan

The stated purpose of the Share Compensation Plan is to advance the interests of the Company and its subsidiaries, and its shareholders by: (a) ensuring that the interests of Participants are aligned with the success of the Company and its subsidiaries; (b) encouraging stock ownership by such persons; and (c) providing compensation opportunities to attract, retain and motivate such persons.

Eligible Persons

The following people are eligible to participate in the Share Compensation Plan: any officer or employee of the Company or any officer or employee of any subsidiary of the Company and, solely for purposes of the grant of Options, any director of the Company or any director of any subsidiary of the Company, and any Consultant (defined under the Share Compensation Plan as an individual (other than an employee or a director of the Company) or a corporation that is not a U.S. Person that: (A) is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Company or to an affiliate of the Company, other than services provided in relation to an offer or sale of securities of the Company in a capital raising transaction, or services that promote or maintain a market for the Company’s securities; (B) provides the services under a written contract between the Company or the affiliate and the individual or the Company, as the case may be; (C) in the reasonable opinion of the Company, spends or will spend a significant amount of time and attention on the affairs and business of the Company or an affiliate of the Company; and (D) has a relationship with the Company or an affiliate of the Company that enables the individual to be knowledgeable about the business and affairs of the Company.

Administration of the Share Compensation Plan

The Share Compensation Plan is administered by the Board or such other persons as may be designated by the Board (the “Administrators”) based on the recommendation of the Board or the compensation committee of the Board, if applicable. The Administrators determine the eligibility of persons to participate in the Share Compensation Plan, when RSUs and Options will be awarded or granted, the number of RSUs and Options to be awarded or granted, the vesting criteria for each award of RSUs and grant of Options and all other terms and conditions of each award and grant, in each case in accordance with applicable securities laws and the requirements of the Canadian Securities Exchange.

Restrictions on the Award of RSUs and Grant of Options

The awards of RSUs and grants of Options under the Share Compensation Plan is subject to a number of restrictions:

(a)

the total number of common shares issuable to insiders under the Share Compensation Plan and any other share compensation arrangements of the Company cannot exceed 20% of the common shares then outstanding; and

(b)

the aggregate sales price (meaning the sum of all cash, property, notes, cancellation of debt, or other consideration received or to be received by the Company for the sale of the securities) or amount of common shares issued during any consecutive 12 month period will not exceed the greatest of the following: (i) U.S.$1,000,000; (ii) 15% of the total assets of the Company, measured at the Company’s most recent balance sheet date; or (iii) 15% of the outstanding amount of the common shares, measured at the Company’s most recent balance sheet date.

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In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of the Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may in their sole discretion make such changes or adjustments, if any, as the Administrators consider fair or equitable to reflect such change or event including, without limitation, adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto.

Restricted Share Units

The total number of Common Shares that may be issued on exercise of Options and RSUs, together with any other share compensation arrangements of the Company, shall not exceed 20% of the number of issued and outstanding Common Shares from time to time.

Mechanics for RSUs

RSUs awarded to Participants under the Share Compensation Plan are credited to an account that is established on their behalf and maintained in accordance with the Share Compensation Plan. After the relevant date of vesting of any RSUs awarded under the Share Compensation Plan, a Participant shall be entitled to receive and the Company shall issue or pay (at its discretion): (i) a lump sum payment in cash equal to the number of vested RSUs recorded in the Participant’s account multiplied by the volume weighted average price of the Common Shares traded on the Canadian Securities Exchange for the five (5) consecutive trading days prior to the payout date; (ii) the number of Common Shares required to be issued to a Participant upon the vesting of such Participant’s RSUs in the Participant’s account will be, duly issued as fully paid and non‑assessable shares and such Participant shall be registered on the books of the Company as the holder of the appropriate number of Common Shares; or (iii) any combination of thereof.

Vesting Provisions

The provides that: (i) at the time of the award of RSUs, the Administrators will determine the vesting criteria applicable to the awarded RSUs; (ii) vesting of RSUs may include criteria such as performance vesting; (iii) each RSU shall be subject to vesting in accordance with the terms set out in an agreement evidencing the award of the RSU attached as Exhibit A to the Share Compensation Plan (or in such form as the Administrators may approve from time to time) (each an “RSU Agreement”); and (iv) all vesting and issuances or payments in respect of an RSU shall be completed no later than December 15 of the third calendar year commencing after the award date for such RSU.

It is the current intention that RSUs may be awarded with both time based vesting provisions as a component of the Company’s annual incentive compensation program, and performance based vesting provisions as a component of the Company’s long term incentive compensation program.

Under the Share Compensation Plan, should the date of vesting of an RSU fall within a blackout period or within nine business days following the expiration of a blackout period, the date of vesting will be automatically extended to the tenth business day after the end of the blackout period.

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Termination, Retirement and Other Cessation of Employment in connection with RSUs

A person participating in the Share Compensation Plan will cease to be eligible to participate in the following circumstances: (i) receipt of any notice of termination of employment or service (whether voluntary or involuntary and whether with or without cause); (ii) retirement; and (iii) any cessation of employment or service for any reason whatsoever, including disability and death (an “Event of Termination”). In such circumstances, any vested RSUs will be issued (and with respect to each RSU of a US Participant, such RSU will be settled and shares issued as soon as practicable following the date of vesting of such RSU as set forth in the applicable RSU Agreement, but in all cases within 60 days following such date of vesting; and unless otherwise determined by the Administrators in their discretion, any unvested RSUs will be automatically forfeited and cancelled (and with respect to any RSU of a US Participant, if the Administrators determine, in their discretion, to waive vesting conditions applicable to an RSU that is unvested at the time of an Event of Termination, such RSU shall not be forfeited or cancelled, but instead will be deemed to be vested and settled and shares delivered following the date of vesting date of such RSU as set forth in the applicable RSU Agreement). Notwithstanding the above, if a person retires in accordance with the Company’s retirement policy at such time, the pro rata portion of any unvested performance based RSUs will not be forfeited or cancelled and instead shall be eligible to become vested in accordance with the vesting conditions set forth in the applicable RSU Agreement after such retirement (as if retirement had not occurred), but only if the performance vesting criteria, if any, have been met on the applicable date. For greater certainty, if a person is terminated for just cause, all unvested RSUs will be forfeited and cancelled.

Options

The total number of Common Shares that may be issued on exercise of Options and RSUs, together with any other share compensation arrangements of the Company, shall not exceed 20% of the number of issued and outstanding Common Shares from time to time.

Mechanics for Options

Each Option granted pursuant to the Share Compensation Plan will entitle the holder thereof to the issuance of one Common Share upon achievement of the vesting criteria and payment of the applicable exercise price. Options granted under the Share Compensation Plan will be exercisable for Common Shares issued from treasury once the vesting criteria established by the Administrators at the time of the grant have been satisfied. However, the Company will continue to retain the flexibility through the amendment provisions in the Share Compensation Plan to satisfy its obligation to issue Common Shares by making a lump sum cash payment of equivalent value (i.e., pursuant to a cashless exercise), provided there is a full deduction of the number of underlying Common Shares from the Share Compensation Plan’s reserve.

Vesting Provisions

The Share Compensation Plan provides that the Administrators may determine when any Option will become exercisable and may determine that Options shall be exercisable in instalments or pursuant to a vesting schedule. The Option agreement will disclose any vesting conditions prescribed by the Administrators.

Termination, Retirement and Other Cessation of Employment in connection with Options

A person participating in the Share Compensation Plan will cease to be eligible to participate where there is an Event of Termination. In such circumstances, unless otherwise determined by the Administrators in their discretion, any unvested Options will be automatically cancelled, terminated and not available for exercise and any vested Options may be exercised only before the earlier of: (i) the termination of the Option; and (ii) six months after the date of the Event of Termination. If a person is terminated for just cause, all Options will be (whether or not then exercisable) automatically cancelled.

Other Terms

The Administrators will determine the exercise price and term/expiration date of each Option, provided that the exercise price in respect of that Option shall not be less than the Market Price on the date of grant. “Market Price” is defined in the Share Compensation Plan, as of any date, the closing price of the Common Shares on the Canadian Securities Exchange for the last market trading day prior to the date of grant of the Option or if the Common Shares are not listed on a stock exchange, the Market Price shall be determined in good faith by the Administrators.

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No Option shall be exercisable after ten years from the date the Option is granted. Under the Share Compensation Plan, should the term of an Option expire on a date that falls within a blackout period or within nine business days following the expiration of a blackout period, such expiration date will be automatically extended to the tenth business day after the end of the blackout period.

Unless otherwise determined by the Board, in the event of a change of control, any surviving or acquiring corporation shall assume any Option outstanding under the Share Compensation Plan on substantially the same economic terms and conditions or substitute or replace similar options for those Options outstanding under the Share Compensation Plan on substantially the same economic terms and conditions.

Transferability

RSUs awarded and Options granted under the Share Compensation Plan or any rights of a Participant cannot be transferred, assigned, charged, pledged or hypothecated, or otherwise alienated, whether by operation of law or otherwise.

Reorganization and Change of Control Adjustments

In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may make such changes or adjustments, if any, as they consider fair or equitable, to reflect such change or event including adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto.

Amendment Provisions in the Share Compensation Plan

The Board may amend the Share Compensation Plan or any RSU or Option at any time without the consent of any Participant provided that such amendment shall:

(a)	not adversely alter or impair any RSU previously awarded or any Option previously granted, except as permitted by the adjustment provisions of the Share Compensation Plan and with respect to RSUs and Options of US Participants;
(b)	be subject to any regulatory approvals including, where required, the approval of the Canadian Securities Exchange; and
(c)	be subject to shareholder approval, where required, by the requirements of the Canadian Securities Exchange, provided that shareholder approval shall not be required for the following amendments:

(i) amendments of a “housekeeping nature”, including any amendment to the Share Compensation Plan or an RSU or Option that is necessary to comply with applicable laws, tax or accounting provisions or the requirements of any regulatory authority, stock exchange or quotation system and any amendment to the Share Compensation Plan or an RSU or Option to correct or rectify any ambiguity, defective provision, error or omission therein, including any amendment to any definitions therein;

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(ii)	amendments that are necessary or desirable for RSUs or Options to qualify for favourable treatment under any applicable tax law;
(iii)	amendments to the vesting provisions of any RSU or any Option (including any alteration, extension or acceleration thereof), providing such amendments do not adversely alter or impair such RSU or Option;
(iv)	amendments to the termination provisions of any Option (e.g., relating to termination of employment, resignation, retirement or death) that does not entail an extension beyond the original expiration date (as such date may be extended by virtue of a blackout period) providing such amendments do not adversely alter or impair such Option;
(v)	amendments to the Share Compensation Plan that would permit the Company to retain a broker and make payments for the benefit of Participants to such broker who would purchase Common Shares for such persons, instead of issuing Common Shares from treasury upon the vesting of the RSUs;
(vi)	amendments to the Share Compensation Plan that would permit the Company to make lump sum cash payments to Participants, instead of issuing Common Shares from treasury upon the vesting of the RSUs;
(vii)	the amendment of the cashless exercise feature set out in the Share Compensation Plan; and
(viii)	change the application of the Change of Control provisions in section 6.2 or the Reorganization Adjustments provisions in section 6.3).

For greater certainty, shareholder approval will be required in circumstances where an amendment to the Share Compensation Plan would:

(a)	increase the fixed maximum percentage of issued and outstanding Common Shares issuable under the Share Compensation Plan, other than by virtue of the adjustment provisions in the Share Compensation Plan, or change from a fixed maximum percentage of issued and outstanding Common Shares to a fixed maximum number of Common Shares;
(b)	increase the limits referred to above under “Restrictions on the Award of RSUs and Grant of Options”;
(c)	reduce the exercise price of any Option (including any cancellation of an Option for the purpose of reissuance of a new Option at a lower exercise price to the same person);
(d)	extend the term of any Option beyond the original term (except if such period is being extend by virtue of a blackout period); or
(e)	amend the amendment provisions in Section 6.4 of the Share Compensation Plan.

Oversight and Description of Named Executive Officer and Director Compensation

The Board is responsible for the oversight of the Company’s strategy, policies and programs on the compensation and development of senior management and directors.

The Company’s executive compensation program is intended to provide an appropriate overall compensation package that permits the Company to attract and retain highly qualified and experienced senior executives and to encourage superior performance by the Company. The Company’s compensation policies are intended to motivate individuals to achieve and to award compensation based on corporate and individual results. The compensation of the Company’s executive officers is established based on a relatively equal weighing of each of these considerations.

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Compensation for the Company’s executive officers is intended to reflect a fair evaluation of overall performance and is intended to be competitive in aggregate with levels of compensation of comparable companies. The Company’s compensation structure is primarily composed of two components: base salary and options and RSUs to purchase common shares. The Company generally strives to use long term incentives, such as the grant of stock options, as performance incentives for executive management and to provide the opportunity for overall compensation of employees, including executives, to be above industry average levels as well as to increase the alignment of interests between employees, executive management and shareholders. Executive officers and directors are eligible to be granted stock options and RSUs under the Share Compensation Plan, and previous grants of options and / or RSUs are taken into consideration when considering new grants. The Share Compensation Plan is intended to provide long term rewards linked directly to the market value of the common shares. The Company is of the view that the Share Compensation Plan is in the best interests of the Company and will assist the Company to attract, motivate and retain talented and capable board members and executive management.

The Share Compensation Plan also allows the Company to grant from time to time RSUs to non-employee directors, employees and/or consultants of the Company or its designated affiliates on such terms and conditions as prescribed by the Share Compensation Plan. As of the date of this Offering Circular, there are 3,550,000 RSUs awarded under the Company’s share compensation plan to directors, officers, employees and consultants of the Company. Each RSU represents a right to receive one common share of the Company, following the vesting of such restricted share units over a three year period. The RSUs are exercisable for three (3) years. As of the date of this Offering Circular, there are 4,770,000 stock options outstanding under the Company’s Share Compensation Plan.

The following table provides information regarding compensation plans under which equity securities of the Company are authorized for issuance in effect as of the end of the Company’s most recently completed financial year:

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)			Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity Compensation Plans Approved By Shareholders		N/A			N/A		N/A
Equity Compensation Plans Not Approved By Shareholders		6,900,000	(1)	$	0.50		7,034,122
Total:		6,900,000			N/A		7,034,122

Note:

(1) Includes RSUs and Options granted pursuant to the Plan. See above “Share Compensation Plan and Other Incentive Plans”.

The Company does not have a pension plan benefit program nor a non-equity incentive plan in place. Therefore, there were no payments or benefits in connection with a defined benefit or a defined contribution plan and no annual incentive plan or long term incentive plan awards offered to the Named Executive Officers (as defined below) during the Company’s most recently completed financial year.

Given the current stage of development and the limited elements of executive compensation, the Board believes it has effective risk management and regulatory compliance relating to its compensation policies used in determining executive compensation. Risks related to compensation are taken into consideration as part of the general review and determination of executive compensation by the Board. Inappropriate and excessive risks by executives are mitigated by regular Board meetings during which financial and other information of the Company is reviewed, and which information includes executive compensation. Interested directors declare their interest and abstain from voting on compensation matters. No risks have been identified arising from the Company’s compensation policies and practices that are reasonably likely to have a material adverse effect on the Company.

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The Company does not permit its Named Executive Officers or directors to purchase financial instruments, including, for greater certainty, prepaid variable forward contracts, equity swaps, collars or units of exchange funds, that are designed to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the Named Executive or director.

Penny Stock Regulation

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share. Such securities are subject to rules that impose additional sales practice requirements on broker-dealers who sell them. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchaser of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prepared by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, among other requirements, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. As our Common Shares immediately following this Offering may be subject to such penny stock rules, purchasers in this Offering will in all likelihood find it more difficult to sell their Common Shares in the secondary market.

Public Market

The Company is an alternative reporting company under Regulation A+, Tier 2 of the Securities Act. The Company’s Common Shares are listed on the Canadian Securities Exchange under the symbol “DFLY” and the OTCQB Venture Market of the OTC Markets under the symbol “DFLYF”.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a Regulation A+ Offering Statement on Form 1-A under the Securities Act with respect to the Units offered hereby. This Offering Circular, which constitutes a part of the Offering Statement, does not contain all of the information set forth in the Offering Statement or the exhibits and schedules filed therewith. For further information about us and the Units offered hereby, we refer you to the Offering Statement and the exhibits and schedules filed therewith. Statements contained in this Offering Circular regarding the contents of any contract or other document that is filed as an exhibit to the Offering Statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the Offering Statement. We are required to file periodic reports and other information with the SEC pursuant to the Regulation A, Tier 2 rules and regulation under the Securities Act. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, including us, that file electronically with the SEC. The address of this site is www.sec.gov.

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PART F/S

	Page
Cover Page to the Consolidated Financial Statements for Years Ended December 31, 2019 and 2018.	F-1
Independent Auditor’s Report to the Consolidated Financial Statements for Years Ended December 31, 2019 and 2018.	F-2
Consolidated Statements of Financial Position for Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars).	F-3
Consolidated Statements of Comprehensive Loss for Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars).	F-4
Consolidated Statements of Changes in Shareholders’ Equity for Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars).	F-5
Consolidated Statements of Changes in Cash Flows for Years Ended December 31, 2019 and 2018 (Expressed in Canadian Dollars).	F-6
Notes to the Consolidated Financial Statements For Years Ended December 31, 2019 and 2018.	F-7
Dronelogics Systems Inc.
Cover Page to the Candrone C arve-out Condensed Interim Financial Statements Period ended September 30, 2019 (unaudited) ( Expressed in Canadian Dollars ) .	F-33
Candrone Carve-out Condensed Interim Statements of Finance Position for the Period ended September 30, 2019  (unaudited) ( Expressed in Canadian Dollars ) .	F-34
Candrone Carve-out Condensed Interim Statement of Net income for the Period ended September 30, 2019 (unaudited) (Expressed in Canadian Dollars).	F-35
Candrone Carve-out Condensed Interim Statement of Changes in Owners’ Equity for the Period ended September 30, 2019 (unaudited) (Expressed in Canadian Dollars).	F-36
Candrone Carve-out Condensed Interim Statement of Changes in Cash Flows (unaudited) For the Ni ne M onths En ded September 30, 2019  ( Expressed in Canadian Dollars ) .	F-37
Candrone Notes to the C arve-out F inancial S tatement s (unaudited) For the Nine Months ended September 30, 2019 ( Expressed in Canadian Dollars ) .	F-38
Cover Page to the Candrone Carve-out Condensed Interim Financial Statements Period ended December 31, 201 8 (audited) ( Expressed in Canadian Dollars ) .	F-49
Independent Auditor’s Report to the Candrone Carve-out Condensed Interim Financial Statements Period ended December 31, 201 8 (audited) ( Expressed in Canadian Dollars ) .	F-50
Candrone Carve-out Statements of Financial Position (audited) ( Expressed in Canadian Dollars ) .	F-51
Candrone Carve-out Statements of Comprehensive Income (audited) ( Expressed in Canadian Dollars ) .	F-52
Candrone Carve-out Statements of Changes in Owners’ Deficiency (audited) (Expressed in Canadian Dollars).	F-53
Candrone Carve-out Statements of Changes in Cash Flows (audited) (Expressed i n Canadian Dollars).	F-54
Candrone Notes to the Carve-out Financial Statements For the year ended December 31, 2018 (audited) .	F-55

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Draganfly Inc. (formerly Drone Acquisition Corp.)

Consolidated Financial Statements

Years Ended December 31, 2019 and 2018

(Expressed in Canadian Dollars)

F-1

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Draganfly Inc. (formerly Drone Acquisition Corp.)

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Draganfly Inc. (formerly Drone Acquisition Corp.) (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2019 and 2018, and the consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 

 Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and 2018, and the consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Emphasis of Matter Regarding Going Concern 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company incurred losses and negative cash flows from operations from inception that has primarily been funded through financing activities and has stated that substantial doubt exists about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. 

/s/ DMCL

DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
 Vancouver, BC

June 10, 2020

F-2

Draganfly Inc. (formerly Drone Acquisition Corp.)              

Consolidated Statements of Financial Position

Expressed in Canadian Dollars

		December 31,			December 31,
As at	Notes	2019			2018
ASSETS
Current Assets
Cash		$	2,429,375		$	101,787
Accounts receivable	4		224,695			97,896
Inventory	5		48,563			61,185
Prepaid expenses and deposits	6		272,630			23,305
			2,975,263			284,173
Non-current Assets
Subscription receivable	4		-			153,566
Equipment	8		115,141			55,178
Intellectual property	9		1,385			11,908
Right of use asset	10		129,994			-
TOTAL ASSETS		$	3,221,783		$	504,825
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Trade payables and accrued liabilities	12	$	894,357		$	2,586,087
Notes payable	13		-			844,304
Convertible debentures	14		-			1,207,043
Lease liability	11		43,000			-
			937,357			4,637,434
Non-current Liabilities
Lease liability	11		93,073			-
TOTAL LIABILITIES			1,030,430			4,637,434
SHAREHOLDERS’ EQUITY
Share capital	15		27,786,517			12,561,342
Equity reserve	15		2,508,233			882,180
Accumulated deficit			(28,103,397	)		(17,576,131	)
TOTAL SHAREHOLDERS’ EQUITY			2,191,353			(4,132,609	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	3,221,783		$	504,825

Nature of continuance and operations (Note 1)

Contingency (Note 18)

Subsequent events (Notes 13 and 24)

Approved and authorized for issuance by the Board of Directors on June 10, 2020.

“Scott Larson”	“Cameron Chell”
Director	Director

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

F-3

Draganfly Inc. (formerly Drone Acquisition Corp.)

Consolidated Statements of Comprehensive Loss

Expressed in Canadian Dollars

		For the years ended December 31,
	Note	2019			2018
Revenue from sales of goods	16	$	248,939		$	423,705
Revenue from provision of services	16		1,131,488			963,308
TOTAL REVENUE			1,380,427			1,387,013
COST OF SALES	5		(218,800	)		(452,399	)
GROSS PROFIT			1,161,627			934,614
OPERATING EXPENSES
Amortization	9	$	8,386		$	15,534
Depreciation	8,10		41,250			22,521
Office and miscellaneous			2,127,632			328,292
Professional fees			524,101			131,028
Research and development			16,883			16,158
Share-based compensation	15		761,559			-
Travel			30,896			17,817
Wages and salaries			989,083			984,179
			(4,499,790	)		(1,515,529	)
OTHER INCOME (EXPENSE)
Finance and other costs	22		(171,905	)		(145,271	)
Foreign exchange gain			5,803			2,971
Gain on disposal of assets	8		28,651			-
Gain on settlement of debt	12,15		198,976			-
Listing expense	3		(7,804,859	)		-
Loss on write-off loan receivable	7		(13,560	)		-
Other income			-			8,130
Scientific research and development credit			-			113,356
NET AND COMPREHENSIVE LOSS		$	(11,095,057	)	$	(601,729	)
Loss per share
Basic/Diluted		$	(0.23	)	$	(0.02	)
Weighted average number of common shares outstanding			47,647,977			39,344,881

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

F-4

Draganfly Inc. (formerly Drone Acquisition Corp.)

Consolidated Statements of Changes in Shareholders’ Equity

Expressed in Canadian Dollars

	Number of Shares		Share Capital		Equity Reserve			Deficit			Total Shareholders’ Equity
Balance at December 31, 2017		39,332,455	$	12,550,942	$	1,215,206		$	(17,297,428	)	$	(3,531,280	)
Shares issued for exercise of warrants		14,352		10,400		(10,000	)		-			400
Expired options		-		-		(323,026	)		323,026			-
Net loss		-		-		-			(601,729	)		(601,729	)
Balance at December 31, 2018		39,346,807		12,561,342		882,180			(17,576,131	)		(4,132,609	)
Shares issued for settlement of notes payable		1,291,549		645,775		-			-			645,775
Shares issued as transactions fees		2,000,000		1,000,000		-			-			1,000,000
Recapitalization of Draganfly Inc.		10,500,001		5,250,001		1,645,193			-			6,895,194
Shares issued of settlement of trades payable		45,325		22,662		-			-			22,662
Shares issued for settlement of convertible debentures and accrued interest		2,118,492		1,059,246		-			-			1,059,246
Shares issued for exercise of warrants		316,940		221,741		(212,908	)		-			8,833
Reclassification of unexercised conversion feature		-		-		(567,791	)		567,791			-
Shares and warrants issued on private placement		14,051,499		7,025,750		-			-			7,025,750
Stock-based compensation		-		-		761,559			-			761,559
Net loss		-		-		-			(11,095,057	)		(11,095,057	)
Balance at December 31, 2019		69,670,613	$	27,786,517	$	2,508,233		$	(28,103,397	)	$	2,191,353

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

F-5

Draganfly Inc. (formerly Drone Acquisition Corp.)

Consolidated Statements of Changes in Cash Flows

Expressed in Canadian Dollars 

	For the years ended December 31,
	2019			2018
OPERATING ACTIVITIES
Net loss	$	(11,095,057	)	$	(601,729	)
Adjustments for:
Amortization		8,386			15,534
Depreciation		41,250			22,521
Finance and other costs		171,905			145,271
Gain on settlement of debt		(198,976	)		-
Gain on disposal of assets		(28,651	)		-
Expense of non-financial asset		15,389			-
Listing expense		7,804,859			-
Share-based compensation		761,559			-
		(2,519,336	)		(418,404	)
Net changes in non-cash working capital items:
Accounts receivable		(126,799	)		(35,150	)
Inventory		12,622			94,761
Prepaid expenses		(249,325	)		(2,833	)
Trade payables and accrued liabilities		(1,005,121	)		100,069
Funds used in operations activities		(3,887,959	)		(261,556	)
INVESTING ACTIVITIES
Cash assumed from the Amalgamation		28,538			-
Purchase of equipment		(87,785	)		(12,535	)
Disposal of equipment		31,500			10,755
Funds used in investing activities		(27,747	)		(1,780	)
FINANCING ACTIVITIES
Proceeds from issuance of notes payable		1,137,978			373,243
Repayment of notes payable		(882,770	)		(137,854	)
Repayment of convertible debentures		(486,131	)		-
Repayment of lease liability		(38,000	)		-
Proceeds from issuance of common shares		6,534,583			400
Funds provided by financing activities		6,265,660			235,789
Effects of exchange rate changes on cash		(22,366	)		(882	)
Change in cash		2,349,954			(27,547	)
Cash, beginning		101,787			130,216
Cash, ending	$	2,429,375		$	101,787
Supplemental cash flow disclosure (Note 23)

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

F-6

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

1. NATURE AND CONTINUANCE OF OPERATIONS

Draganfly Inc. (formerly Drone Acquisition Corp.) (the “Company”) was incorporated by articles of incorporation dated June 1, 2018 under the Business Corporations Act (British Columbia). Effective November 5, 2019, 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 Company has incurred losses and negative cash flows from operations from inception that has primarily been funded through financing activities. The Company will need to raise additional capital during the next twelve months and beyond to support current operations and planned development. These factors indicate the existence of a material uncertainty that may cast significant doubt as to the Company’s ability to continue as a going concern. Management intends to finance operating costs over the next twelve months with cash on hand, convertible debentures and through private placement of common shares. These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. These consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities, the reporting revenues and expenses, and the statements of financial position classifications used, that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION

Statement of Compliance

These consolidated 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 consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

These consolidated financial statements were authorized for issue by the Board of Directors on June 10, 2020.

Basis of preparation

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

F-7

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

Significant estimates and assumptions

The preparation of financial statements in accordance with IFRS requires the Company to use judgment in applying its accounting policies and make estimates and assumptions about reported amounts at the date of the consolidated financial statements and in the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.

Share-based payments

The cost of share-based payment transactions with directors, officers and employees are measured by reference to the fair value of the equity instruments. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining and making assumptions about the most appropriate inputs to the valuation model including the expected life, volatility, risk-free interest rate, expected forfeiture rate and dividend yield of the stock option.

Income taxes

Provisions for income taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these income tax provisions at the end of each reporting period. However, it is possible that at some future date an additional liability could result from audits by tax authorities. Where the final outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. Deferred tax assets are recognized when it is determined that the company is likely to recognize their recovery from the generation of taxable income.

Inventory

Inventory is valued at the lower of cost and net realizable value. Net realizable value is determined with reference to the estimated selling price. The Company estimates selling price based upon assumptions about future demand and current and anticipated retail market conditions.

Contingencies

The assessment of contingencies involves the exercise of significant judgment and estimates of the outcome of future events. In assessing loss contingencies related to legal proceedings that are pending against the Company and that may result in regulatory or government actions that may negatively impact the Company’s business or operations, the Company and its legal counsel evaluate the perceived merits of the legal proceeding or unasserted claim or action as well as the perceived merits of the nature and amount of relief sought or expected to be sought, when determining the amount, if any, to recognize as a contingent liability or when assessing the impact on the carrying value of the Company’s assets. Contingent assets are not recognized in the consolidated financial statements.

F-8

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

Useful lives of equipment and intangible assets

Estimates of the useful lives of equipment and intangible assets are based on the period over which the assets are expected to be available for use. The estimated useful lives are reviewed annually and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence, and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of the relevant assets may be based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the equipment would increase the recorded expenses and decrease the non-current assets.

Other Significant judgments

The preparation of consolidated financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s consolidated financial statements include:

−	The assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty;
−	the classification of financial instruments;
−	the assessment of revenue recognition using the five-step approach under IFRS 15 and the collectability of amounts receivable;
−	the determination of whether a set of assets acquired and liabilities assumed constitute a business; and
−	the determination of the functional currency of the company.

Foreign currency translation

The functional currency of each entity is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Canadian dollars which is the functional and presentation currency of the Company and its subsidiary.

Transactions and balances:

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in the statement of comprehensive loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income. Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.

F-9

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

Share-based payments

The Company operates a stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using a Black–Scholes Option Pricing Model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Amounts recorded for forfeited or expired unexercised options are transferred to deficit in the year of forfeiture or expiry. Amounts recorded for forfeited unvested options are reversed in the period the forfeiture occurs.

Share-based payment expense relating to cash-settled awards, including restricted share units is accrued over the vesting period of the units based on the quoted market value of Company’s common shares. As these awards will be settled in cash, the expense and liability are adjusted each reporting period for changes in the underlying share price.

Restricted Share Units

The restricted share units (“RSUs”) entitle employees, directors, or officers to cash payments payable upon vesting based on vesting terms determined by the Company’s Board of Directors at the time of the grant. A liability for outstanding RSUs is measured at fair value on the grant date and is subsequently adjusted for changes in fair value at each reporting date until settlement. The liability is recognized on a graded vesting basis over the vesting period, with a corresponding charge to profit or loss.

Loss per share

Basic loss per share is calculated by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented, the loss attributable to common shareholders equals the reported loss attributable to owners of the Company. Diluted loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted loss per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period.

Financial Instruments

All financial assets are initially recorded at fair value and classified into one of four categories: fair value through profit or loss (“FVTPL”), fair value through other comprehensive income (“FVTOCI”) and at amortized costs. All financial liabilities are initially recorded at fair value and classified as either FVTPL or other financial liabilities. Financial instruments comprise cash and accounts payable and accrued liabilities.

a) Financial assets

Classification and measurement

The Company classifies its financial assets in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

F-10

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

The classification of debt instruments is driven by the business model for managing the financial assets and their contractual cash flow characteristics. Debt instruments are measured at amortized cost if the business model is to hold the instrument for collection of contractual cash flows and those cash flows are solely principal and interest. If the business model is not to hold the debt instrument, it is classified as FVTPL. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payments of principal and interest.

Equity instruments that are held for trading (including all equity derivative instruments) are classified as FVTPL, for other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument by-instrument basis) to designate them as at FVTOCI.

Financial assets at FVTPL

Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the income statement. Realized and unrealized gains and losses arising from changes in the fair value of the financial asset held at FVTPL are included in the income statement in the period in which they arise. Derivatives are also categorized as FVTPL unless they are designated as hedges.

Financial assets at FVTOCI

Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income. There is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment.

Financial assets at amortized cost

Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date.

Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the loss allowance for the financial asset is measured at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the loss allowance is measured for the financial asset at an amount equal to twelve month expected credit losses. For trade receivables the Company applies the simplified approach to providing for expected credit losses, which allows the use of a lifetime expected loss provision.

Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized.

Derecognition of financial assets

Financial assets are derecognized when they mature or are sold, and substantially all the risks and rewards of ownership have been transferred. Gains and losses on derecognition of financial assets classified as FVTPL or amortized cost are recognized in the income statement. Gains or losses on financial assets classified as FVTOCI remain within accumulated other comprehensive income.

F-11

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

b) Financial liabilities

The Company classifies its financial liabilities into one of two categories as follows:

Fair value through profit or loss (FVTPL) - This category comprises derivatives and financial liabilities incurred principally for the purpose of selling or repurchasing in the near term. They are carried at fair value with changes in fair value recognized in profit or loss.

Other financial liabilities - This category consists of liabilities carried at amortized cost using the effective interest method. Accounts payable and accrued liabilities, and convertible debentures, are included in this category. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

Derecognition of financial liabilities

Financial liabilities are derecognized when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and/or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. Gains and losses on derecognition are generally recognized in profit or loss.

Impairment of assets

The carrying amount of the Company’s non-financial assets (which include equipment and intangible assets) is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of comprehensive loss.

The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. Any reversal of impairment cannot increase the carrying value of the asset to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years. Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.

Income taxes

Current income tax:

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.

F-12

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax:

Deferred income tax is recognized, using the asset and liability method, on temporary differences at the reporting date arising between the tax bases of assets and li abilities and their carrying amounts for financial reporting. The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset

is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

Inventory

Inventory consists of raw materials for manufacturing of multi-rotor helicopters, industrial areal video systems, civilian small unmanned aerial systems or vehicles, and wireless video systems. Inventory is initially valued at cost and subsequently at the lower of cost and net realizable value. Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost is determined using the weighted average cost basis. The Company reviews inventory for obsolete and slow-moving goods and any such inventory is written-down to net realizable value.

Convertible debentures

The components of the compound financial instrument (convertible debenture) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument. The conversion option that will be settled by the exchange of a fixed amount in cash for a fixed number of equity instruments of the Company is classified as an equity instrument. At the issue date, the liability component is recognized at fair value, which is estimated using the effective interest rate on the market for similar nonconvertible instruments. Subsequently, the liability component is measured at amortized cost using the effective interest rate until it is extinguished on conversion or maturity. Upon maturity, the equity portion of the expired unexercised conversion option is reclassified to deficit.

The value of the conversion option classified as equity is determined at the issue date, by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This amount is recognized in equity, net of tax effects, and is not revised subsequently. When the conversion option is exercised, the equity component of the convertible debentures will be transferred to share capital. No profit or gain is recognized to the conversion or expiration of the conversion option.

Transaction costs related to the issuance of the convertible debentures are allocated to the liability and equity components in proportion to the initial carrying amounts. Transaction costs related to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying value of the liability component and amortized over the estimated useful life of the debentures using the effective interest rate method.

F-13

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

Revenue recognition

Revenue comprises the fair value of consideration received or receivable for the sale of goods and consulting services in the ordinary course of the Company’s business. Revenue is shown net of return allowances and discounts.

Sales of goods

The Company manufactures and sells a range of multi-rotor helicopters, industrial aerial video systems, and civilian small unmanned aerial systems or vehicles. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location or picked up by the customer, the risks of obsolescence and loss have been transferred to the customer.

Revenue from these sales is recognized based on the price specified in the contract, net of the estimated discounts and returns. Accumulated experience is used to estimate and provide for the discounts and returns, using the expected value method, and revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. To date, returns have not been significant. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with market practice.

Some contracts include multiple deliverables, such as the manufacturing of hardware and support. Support is performed by another party and does not include an integration service. It is therefore accounted for as a separate performance obligation. In this case, the transaction price will be allocated to each performance obligation based on the stand-alone selling prices. Where these are not directly observable, they are estimated based on expect cost plus margin.

A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

Consulting services

The Company provides consulting, custom engineering and investigating and solving on a project by project basis under fixed-price and variable price contracts. Revenue from providing services is recognized in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognized based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined based on the actual labour hours spend relative to the total expected labour hours. If contracts include the manufacturing of hardware, revenue for the hardware is recognized at a point in time when the hardware is delivered, the legal title has passed and the customer has accepted the hardware.

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

In case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the Company exceed the payment, a contract asset is recognized. If the payments exceed the services rendered, a contract liability is recognized. If the contract includes an hourly fee, revenue is recognized in the amount to which the Company has a right to invoice. Customers are invoiced on a monthly basis and consideration is payable when invoiced.

F-14

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

Cost of Goods Sold

Cost of sales includes the expenses incurred to acquire and produce inventory for sale, including product costs, freight costs, as well as provisions for reserves related to product shrinkage, excess or obsolete inventory, or lower of cost and net realizable value adjustments as required.

Intangible Assets

An intangible asset is an identifiable asset without physical substance. An asset is identifiable if it is separable, or arises from contractual or legal rights, regardless of whether those rights are transferrable or separable from the Company or from other rights and obligations. Intangible assets includes intellectual property, which consists of patent and trademark applications.

Intangible assets acquired externally are measured at cost less accumulated amortization and impairment losses. The cost of a group of intangible assets acquired is allocated to the individual intangible assets based on their relative fair values. The cost of intangible assets acquired externally comprises its purchase price and any directly attributable cost of preparing the asset for its intended use. Research and development costs incurred subsequent to the acquisition of externally acquired intangible assets and on internally generated intangible assets are accounted for as research and development costs.

Intangible assets with finite useful lives are amortized straight-line over their estimated useful lives from the date they are available for use. The amortization period of the Company’s intellectual property is 5 years.

Equipment

Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of comprehensive loss during the financial period in which they are incurred.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statement of comprehensive loss.

Depreciation is calculated on a straight-line method to write off the cost of the assets to their residual values over their estimated useful lives. The depreciation rates applicable to each category of equipment are as follows:

Class of equipment	Depreciation rate
Computer equipment		30	%
Furniture and equipment		20	%
Software		30	%

Research and development expenditures

Expenditures on research are expensed as incurred. Research activities include formulation, design, evaluation and final selection of possible alternatives, products, processes, systems or services. Development expenditures are expensed as incurred unless the Company can demonstrate all of the following: (i) the technical feasibility of completing the intangible asset so that it will be available for use or sale; (ii) its intention to complete the intangible asset and use or sell it; (iii) its ability to use or sell the intangible asset; (iv) how the intangible asset will generate probable future economic benefits. Among other things, the Company can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; (v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and (vi) its ability to measure reliably the expenditure attributable to the intangible asset during its development.

F-15

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

Government Assistance

Government grants are recognized when there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the period that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, the cost of the asset is reduced by the amount of the grant and the grant is recognized as income in equal amounts over the expected useful life of the asset.

SR&ED Investment tax credits

The Company claims federal investment tax credits as a result of incurring scientific research and experimental development (“SR&ED”) expenditures. Federal investment tax credits are recognized when the related expenditures are incurred and there is reasonable assurance of their realization. Federal investment tax credits are accounted for as a reduction of research and development expense for items of a period expense nature or as a reduction of property and equipment for items of a capital nature. Management has made a number of estimates and assumptions in determining the expenditures eligible for the federal investment tax credit claim. It is possible that the allowed amount of the federal investment tax credit claim could be materially different from the recorded amount upon assessment by Canada Revenue Agency.

The Company claims provincial (Alberta) investment tax credits as a result of incurring SR&ED expenditures. Provincial investment tax credits are recognized when the related expenditures are incurred and there is reasonable assurance of their realization. Management has made a number of estimates and assumptions in determining the expenditures eligible for the provincial investment tax credit claim. The provincial investment tax credits are refundable and have been recorded as Alberta SR&ED tax credit receivable, and as a reduction in research and development expenses on the statement of comprehensive loss. It is possible that the allowed amount of the provincial investment tax credit claim could be materially different from the recorded amount upon assessment by Canada Revenue Agency and the Alberta Tax and Revenue Administration.

Leases

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the commencement date, the lease liability is recognized at the present value of the future lease payments and discounted using the interest rate implicit in the lease or the Company’s incremental borrowing rate. A corresponding right-of-use (“ROU”) asset will be recognized at the amount of the lease liability, adjusted for any lease incentives received and initial direct costs incurred. Over the term of the lease, financing expense is recognized on the lease liability using the effective interest rate method and charged to net income, lease payments are applied against the lease liability and depreciation on the ROU asset is recorded by class of underlying asset.

The lease term is the non-cancellable period of a lease and includes periods covered by an optional lease extension option if reasonably certain the Company will exercise the option to extend. Conversely, periods covered by an option to terminate are included if the Company does not expect to end the lease during that time frame. Leases with a term of less than twelve months or leases for underlying low value assets are recognized as an expense in net income on a straight-line basis over the lease term.

F-16

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars

 

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONT’D)

A lease modification will be accounted for as a separate lease if it materially changes the scope of the lease. For a modification that is not a separate lease, on the effective date of the lease modification, the Company will remeasure the lease liability and corresponding ROU asset using the interest rate implicit in the lease or the Company’s incremental borrowing rate. Any variance between the remeasured ROU asset and lease liability will be recognized as a gain or loss in net income to reflect the change in scope.

Adoption of new accounting standard

The Company adopted the requirements of IFRS 16 effective January 1, 2019. This new standard replaces IAS 17 Leases and the related interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased.

For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to the current accounting for finance leases, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting is substantially unchanged.

On adoption, the Company’s lease consisted of an office lease. The Company transitioned to the new standard using the modified retrospective approach and:

o Measured the lease liability based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate at January 1, 2019;

o Measured the right-of-use asset based on the present value of the liability at the commencement date of the lease less any incentives received from the lessor; and

o Recording the cumulative difference to deficit.

The following is a reconciliation of total operating lease commitments at December 31, 2018 to the lease liabilities recognized at January 1, 2019:

Lease liability before discounting	$	38,000
Renewal options		133,000
Discounted using incremental borrowing rate		(39,366	)
Lease liability	$	131,634

For any new contracts entered into on or after January 1, 2019, the Company considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the Company assesses whether the contract meets three key evaluations which are whether:

i.	the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company
ii.	the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract
iii.	the Company has the right to direct the use of the identified asset throughout the period of use. The Company assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.

included under non-current assets and lease liabilities have been included under current and non-current liabilities.

F-17

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

3. AMALGAMATION

On January 31, 2019, the Company and Draganfly Innovations entered into the BCA providing for a three-cornered amalgamation among the Company, Draganfly Innovations, and Merger Co. As of August 15, 2019, the Amalgamation closed and the Company acquired, on a one for 1.794 basis, all of the issued and outstanding Draganfly Innovations shares (the “Draganfly Innovations Shares”) in exchange for 42,638,356 common shares of the Company.

This resulted in a reverse take-over, of the Company, by the shareholders of Draganfly Innovations. At the time of the Amalgamation, the Company did not constitute a business as defined under IFRS 3; therefore, the Amalgamation is accounted under IFRS 2, where the difference between the consideration given to acquire the Company and the net asset value of the Company is recorded as a listing expense to net loss. As Draganfly Innovations is deemed to be the accounting acquirer for accounting purposes, these consolidated financial statements present the historical financial information of Draganfly Innovations up to the date of the Amalgamation.

Number of shares of Draganfly Inc.		10,500,001
Fair value of common shares in concurrent financing	$	0.50
Fair value of shares of Draganfly Inc.	$	5,250,001
Fair value of warrants		1,645,193
Fair value of shares issued for transaction fees		1,000,000
Net assets acquired	$	(90,335	)
Listing expense	$	7,804,859

Fair value of the Company acquired, net of liabilities
Cash	$	28,538
Accounts receivable		4,991
Loans receivable		963,269
Accounts payable and accrued liabilities		(406,463	)
Subscription receipts		(500,000	)
	$	90,335

The fair value of 10,500,001 issued common shares of the Company was estimated to be $0.50 per share using the price of a subscription receipts financing that was completed concurrently (Note 15).

Prior to the closing of the Amalgamation, Draganfly Innovations issued 2,000,000 common shares with a value of $1,000,000 as transaction fees for the Amalgamation to related parties.

The Company assumed 4,000,000 share purchase warrants exercisable at a price of $0.10 per share expiring on February 4, 2021. The fair value of share-purchase warrants was $1,645,193, estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

Risk-free interest rate		0.86	%
Estimate life	1.48 years
Expected volatility		100	%
Expected dividend yield		0	%

F-18

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

3. AMALGAMATION (CONT’D)

As at August 15, 2019, the Company received $7,025,750 in proceeds to issue subscription receipts (the “Subscription Receipts”) at a price of $0.50 per Subscription Receipt. Each Subscription Receipt was automatically converted, without payment of additional consideration and without any further action on the part of the holder, into one unit of the Company (a “Unit”) on completion of the Amalgamation and the Company becoming reporting issuer in the Province of Saskatchewan and obtaining conditional approval of a listing of the common shares on the CSE (the “Transaction”). Each Unit consists of one common share and one warrant. Each warrant will entitle the holder to purchase one common share at a price of $0.50 for a period of 12 months following the issuance of warrants. The proceeds of the private placement were released to the Company on November 5, 2019 (Note 15).

4. ACCOUNTS RECEIVABLE

	December 31, 2019		December 31, 2018
Trade accounts receivable	$	146,194	$	66,295
GST input tax credits		54,885		7,985
SR&ED receivable		23,616		23,616
	$	224,695	$	97,896

Subscriptions receivable

During the year ended December 31, 2017, the Company agreed to settle subscriptions receivable of $160,000 by way of offsetting the amounts against amounts owing on certain notes payable. As at December 31, 2018, the outstanding balance is $153,566 in subscription receivables relating to shares issued in a prior year. During the year ended December 31, 2019, this receivable was settled against certain notes payable (Note 13).

5. INVENTORY

	December 31, 2019		December 31, 2018
Parts	$	48,563	$	61,185

During the year ended December 31, 2019, the Company recorded a provision to value its inventory for obsolete and slow-moving inventory, recognizing an expense in cost of sales of $nil (2018: $80,135).

During the year ended December 31, 2019, $96,463 (2018: $271,511) of inventory was sold and recognized in cost of sales.

6. PREPAID EXPENSES AND DEPOSITS

	December 31, 2019		December 31, 2018
Insurance	$	35,703	$	11,352
Prepaid marketing services		227,459		-
Prepaid subscriptions		1,583		1,526
WCB Premiums		916		853
Deposits		6,969		9,574
	$	272,630	$	23,305

F-19

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

7. NOTE RECEIVABLE

On September 30, 2019, the Company issued a note receivable to a vendor of the Company for USD $10,000. The note began to accrue interest on December 22, 2019. As at December 31, 2019, the balance of the note receivable was $13,232, including $328 of interest. The loan is unsecured, bears interest of 10% per annum and was due on December 22, 2019. As at December 31, 2019, the note receivable was deemed uncollectable and the Company recognized a loss of write off of loan receivable of $13,560.

8. EQUIPMENT

	Computer Equipment			Furniture and Equipment			Software			Total
Cost
Balance at January 1, 2018	$	163,255		$	202,556		$	72,499		$	438,310
Additions		440			140			11,955			12,535
Disposals		(420	)		(21,334	)		(114	)		(21,868	)
Balance at December 31, 2018		163,275			181,362			84,340			428,977
Additions		-			87,785			-			87,785
Disposals		(1,056	)		(31,647	)		-			(32,703	)
Impairment		(155,219	)		(95,327	)		(54,373	)		(304,919	)
Balance at December 31, 2019	$	7,000		$	142,173		$	29,967		$	179,140
Accumulated depreciation
Balance at January 1, 2018	$	147,074		$	149,840		$	65,477		$	362,391
Charge for the year		3,341			14,854			4,326			22,521
Eliminated on disposal		(389	)		(10,695	)		(29	)		(11,113	)
Balance at December 31, 2018		150,026			153,999			69,774			373,799
Charge for the year		103			7,028			4,574			11,705
Eliminated on disposal		(1,654	)		(26,770	)		-			(28,424	)
Impairment		(141,714	)		(96,313	)		(55,054	)		(293,081	)
Balance at December 31, 2019	$	6,761		$	37,944		$	19,294		$	63,999
Net book value:
December 31, 2018	$	13,249		$	27,363		$	14,566		$	55,178
December 31, 2019	$	239		$	104,229		$	10,673		$	115,141

  

During the year ended December 31, 2019, the Company sold computer equipment for a gain on disposal of assets of $28,651 (December 31, 2018 - $nil).

F-20

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

9. INTELLECTUAL PROPERTY

	Total
Cost
Balance at January 1, 2018	$	71,805
Balance at December 31, 2018		71,805
Impairment		(29,874	)
Balance at December 31, 2019	$	41,931
Accumulated depreciation
Balance at January 1, 2018	$	44,362
Charge for the year		15,534
Balance at December 31, 2018		59,896
Charge for the year		8,386
Impairment		(27,736	)
Balance at December 31, 2019	$	40,546
Net book value:
December 31, 2018	$	11,908
December 31, 2019	$	1,385

10. RIGHT OF USE ASSETS

The Company’s right-of-use asset relates to the lease of office space.

On adoption of IFRS 16, the group recognized lease liability which had previously been classified as ‘operating leases’ under IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments and discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on January 1, 2019 was 12%.

On December 1, 2019, the Company entered into an amendment for the lease agreement, where the lease was amended with a change in annual payments. As there was no change to the underlying asset, the modification was not accounted for as a separate lease.

	Total
Cost
Balance at January 1, 2019, on adoption of IFRS 16	$	131,634
Lease modification		27,905
Balance at December 31, 2019	$	159,539
Accumulated depreciation
Balance at January 1, 2019, on adoption of IFRS 16	$	-
Charge for the period		29,545
Balance at December 31, 2019	$	29,545
Net book value:
January 1, 2019, on adoption of IFRS 16	$	131,634
December 31, 2019	$	129,994

F-21

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

11. LEASE LIABILITY

	Total
Balance at January 1, 2019, on adoption of IFRS 16	$	131,634
Interest expense		14,534
Lease payments		(38,000	)
Lease modification		27,905
Balance at December 31, 2019	$	136,073
Which consists of:
Current lease liability	$	43,000
Non-current lease liability		93,073
Balance at December 31, 2019	$	136,073

12. TRADES PAYABLE AND ACCRUED LIABILITIES

	December 31, 2019		December 31, 2018
Trades payable	$	688,309	$	1,593,377
Accrued liabilities		162,658		106,220
Contingent liabilities (Note 18)		-		15,000
Due to related parties (Note 20)		9,681		837,781
Government grant payable (Note 17)		33,709		33,709
	$	894,357	$	2,586,087

During the year ended December 31, 2019, the Company settled $1,030,714 in trades payable through repayment of $512,492 and recognized a gain on settlement of debt of $518,222 (2018 - $nil).

13. NOTES PAYABLE

	December 31, 2019			December 31, 2018
Opening balance	$	844,304		$	571,675
Issuance of notes payable		1,137,978			373,243
Repayment of notes payable (1)		(1,036,336	)		(137,854	)
Settlement of notes payable		(62,000	)		-
Foreign exchange		(22,366	)		(882	)
Interest accrued		101,689			38,122
Eliminated on consolidation		(963,269	)		-
Ending balance	$	-		$	844,304

(1) Includes the application of $153,566 of subscription receivable (Note 4).

The Company had no notes payable outstanding as at December 31, 2019.

During the year ended December 31, 2019, the following new notes were executed:

- Note 13 was entered into with a company controlled by a director of the Company, bear interest at 12% per annum and are unsecured. Note 13 was settled during the year ended December 31, 2019.

F-22

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

13. NOTES PAYABLE (CONT’D)

- Notes 14 through 17, were entered into between the Company and Draganfly Innovations for $930,000, interest bearing at 10% per annum, calculated annually, and due at the earlier of 30 days from the date the Amalgamation is completed and one year from the date of the advance. Upon closing of the Amalgamation (Note 3), Notes 14 through 17 were eliminated upon consolidation.

- Note 18 was entered into with an individual for USD$125,000, interest bearing at 18% per annum, and is unsecured. The notes had a maturity date of October 29, 2019 and was repaid during the year ended December 31, 2019. This note also bore a USD$6,250 due diligence fee and a USD$6,250 closing fee that are being recognized over the life of the note as additional interest.

The Company’s notes payable outstanding as at December 31, 2018 were as follows:

	Start Date	Maturity Date	Rate			Principal		Interest		Total
Note 1	2015-03-26	2015-07-17		0	%	$	124,000	$	-	$	124,000
Note 2	2015-07-17	2015-12-01		5	%		278,570		87,249		365,819
Note 3	2018-02-05	2018-04-30		12	%		25,000		2,704		27,704
Note 4	2018-05-28	2018-07-31		12	%		60,000		4,281		64,281
Note 5	2018-06-25	2018-07-31		12	%		40,000		2,486		42,486
Note 6	2018-07-09	2018-08-06		12	%		12,000		690		12,690
Note 7	2018-07-23	2018-08-23		12	%		23,000		1,217		24,217
Note 8	2018-09-17	2018-10-31		12	%		40,000		1,381		41,381
Note 9	2018-10-15	2018-11-30		12	%		32,000		810		32,810
Note 10	2018-11-26	2018-12-31		12	%		2,000		23		2,023
Note 11	2018-12-04	2018-12-31		12	%		2,500		21		2,521
Note 12	2018-12-07	2019-03-05		18	%		99,743		4,629		104,372
Total						$	738,813	$	105,491	$	844,304

14. CONVERTIBLE DEBENTURES

	September 2015 (1)			August 2016 (2 and 3)			December 2016 (4)			January 2017  (5 and 6)			March 2017 (7)			Total
Cost
Balance at January 1, 2018	$	550,000		$	200,000		$	160,784		$	51,202		$	154,236		$	1,116,222
Accretion		-			-			39,216			13,047			38,558			90,821
Balance at December 31, 2018	$	550,000		$	200,000		$	200,000		$	64,249		$	192,794		$	1,207,043
Repayments		(275,000	)		(208,131	)		-			-			-			(486,131	)
Settled for shares		(275,000	)		-			(200,000	)		(65,000	)		(200,000	)		(740,000	)
Accretion and interest		-			8,131			-			751			7,206			16,088
Balance at December 31, 2019	$	-		$	-		$	-		$	-		$	-		$	-

The Company had no convertible debentures outstanding as at December 31, 2019.

During the year ended December 31, 2019, half of Debenture 1 and the entire portion of Debentures 2 and 3 were repaid.

During the year ended December 31, 2019, the Company settled the remaining portion of Debenture 1 and Debentures 4 through 7 by issuing 2,118,492 common shares of the Company (Note 15 and 23).

F-23

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

15. SHARE CAPITAL

Authorized share capital

Unlimited number of common shares without par value.

Issued share capital

For the year ended December 31, 2019,

- Prior to the closing of the Amalgamation (Note 3), Draganfly Innovations issued 719,927 (pre-consolidation) common shares to a company controlled by a director of the Company for settlement of $799,341 in accounts payable and application of $153,566 in subscription receivable (Note 4).

- Prior to the closing of the Amalgamation (Note 3), Draganfly Innovations issued 1,114,827 (pre-consolidation) common shares with a value of $1,000,000 as transaction fees for the Amalgamation to related parties.

- On August 15, 2019, the Amalgamation (Note 3) was completed and the Company acquired, on a 1.794 for 1 basis, all issued and outstanding shares of Draganfly Innovations in exchange for 42,638,356 common shares of the Company.

- On August 15, 2019, the Company issued 45,325 common shares for settlement of $22,662 in trades payables at a value of $0.50 per share.

- On August 15, 2019, the Company issued 2,118,492 common shares for settlement of $740,000 in convertible debentures and interest. As a result of the settlement, the Company recognized loss on settlement of debt of $319,246 in the statement of loss and comprehensive loss.

- On August 23, 2019, the Company issued 316,940 common shares for exercise of share purchase warrants of the Company for proceeds of $8,833. As a result of the exercise, $212,909 from reserve was reclassification to share capital.

- On October 25, 2019, the Company issued 14,051,499 units per the private placement (Note 3). Each unit consists of one common share and one warrant. These warrants have an exercise price of $0.50 per warrant, each convert to one common share, and have a life of one year, expiring on October 25, 2020.

For the year ended December 31, 2018,

- The Company issued 8,000 shares for proceeds of $400 for exercise of warrants. In relation, $10,000 in equity reserve was reclassified to share capital.

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. Such options will be exercisable for a period of up to 10 years from the date of grant. The aggregate sales price (meaning the sum of all cash, property, notes, cancellation of debt, or other consideration received or to be received by the Company for the sale of the securities) or amount of common shares issued during any consecutive 12-month period will not exceed the greatest of the following: (i) U.S.$1,000,000; (ii) 15% of the total assets of the Company, measured at the Company’s most recent balance sheet date; or (iii) 15% of the outstanding amount of the common shares of the Company, measured at the Company’s most recent balance sheet date; and The number of common shares issuable pursuant to the exercise of options under the plan within a 12 month period to all eligible persons retained to provide investor relations activities (together with those common shares that are issued pursuant to any other share compensation arrangement) shall not, at any time, exceed 1% of the issued and outstanding common shares.

F-24

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

15. SHARE CAPITAL (CONT’D)

As at December 31, 2019, 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		9.84		3,075,000		1,024,992
November 19, 2019	November 19, 2029	$	0.50		9.89		650,000		83,333
							3,725,000		1,108,325

The following is a summary of the Company’s stock option activity:

	Number of Options			Weighted Average Exercise Price
Outstanding, December 31, 2017		300,000		$	1.25
Expired		(300,000	)		1.25
Outstanding, December 31, 2018		-		$	-
Granted		3,725,000			0.50
Outstanding, December 31, 2019		3,725,000		$	0.50

During the year ended December 31, 2019,

- The Company granted 2,925,000 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 800,000 options to consultants. Each option is exercisable at $0.50 per share for a period of 10 years from the grant date.

During the year ended December 31, 2018, the fair value of 300,000 expired options of $323,026 was reclassified from reserves to deficit.

During the year ended December 31, 2019, the Company recorded $599,701 in stock-based compensation for stock options, based on the fair values of stock options granted which were estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

	Year ended December 31, 2019
Risk free interest rate	1.45%-1.46		%
Expected volatility		100	%
Expected life	7.5 years
Expected dividend yield		0	%
Exercise price	$	0.50

The weighted average grant date fair value of options granted during the year ended December 31, 2019 was $0.46 per option.

F-25

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

15. SHARE CAPITAL (CONT’D)

Restricted share units (RSUs)

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.

The aggregate sales price (meaning the sum of all cash, property, notes, cancellation of debt, or other consideration received or to be received by the Company for the sale of the securities) or amount of common shares issued during any consecutive 12-month period will not exceed the greatest of the following: (i) USD $1,000,000; (ii) 15% of the total assets of the Company, measured at the Company’s most recent balance sheet date; or (iii) 15% of the outstanding amount of the common shares of the Company, measured at the Company’s most recent balance sheet date. At the election of the Board of Directors, upon each vesting date, participants receive (a) the issuance of common shares from treasury equal to the number of RSUs vesting, or (b) a cash payment equal to the number of vested RSUs multiplied by the fair market value of a common share, calculated as the closing price of the common shares on the CSE for the trading day immediately preceding such payment date; or (c) a combination of (a) and (b).

On the grant date of RSUs, the Company determines whether it has a present obligation to settle in cash. If the Company has a present obligation to settle in cash, the RSUs are accounted for as liabilities, with the fair value remeasured at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period. The Company has a present obligation to settle in cash if the choice of settlement in shares has no commercial substance, or the Company has a past practice or a stated policy of setting in cash, or generally settles in cash whenever the counterparty asks for cash settlement. If no such obligation exists, RSUs are accounted for as equity settled share-based payments and are valued using the share price on grant date. Upon settlement:

a)	If the Company elects to settle in cash, the cash payment is accounted for as the repurchase of an equity interest (i.e. as a deduction from equity), except as noted in (c) below.
b)	If the Company elects to settle by issuing shares, the value of RSUs initially recognized in reserves is reclassified to share capital, except as noted in (c) below.
c)	If the Company elects the settlement alternative with the higher fair value, as at the date of settlement, the Company recognizes an additional expense for the excess value given (i.e. the difference between the cash paid and the fair value of shares that would otherwise have been issued, or the difference between the fair value of the shares and the amount of cash that would otherwise have been paid, whichever is applicable).

During the year ended December 31, 2019, the Company committed to grant 3,175,000 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. The Company at its discretion elected to grant the employees and consulting common shares rather than paying cash. As a result, the Company recorded share-based payment expense of $161,858 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.

F-26

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

15. SHARE CAPITAL (CONT’D)

As at December 31, 2019 the Company had the following RSUs outstanding:

Grant Date	Number of RSUs Outstanding
October 30, 2019		2,925,000
November 19, 2019		250,000
		3,175,000

Warrants

The following is the summary of the Company’s warrant activity:

	Number of Warrants			Weighted Average Exercise Price
Outstanding, December 31, 2017		784,232		$	0.30
Exercised		(14,352	)		0.03
Outstanding, December 31, 2018		770,030		$	0.27
Warrants of the Company at time of Amalgamation (Note 3)		4,000,000			0.10
Expired		(453,090	)		0.03
Exercised		(316,940	)		0.03
Issued		14,051,499			0.50
Outstanding, December 31, 2019		18,051,499		$	0.41

As at December 31, 2019, the Company had the following warrants outstanding:

Date Issued	Expiry Date	Exercise Price		Number of Warrants Outstanding
February 4, 2019	February 4, 2021	$	0.10		4,000,000
November 5, 2019	November 5, 2020	$	0.50		14,051,499
					18,051,499

The weighted average remaining contractual life of warrants outstanding as of December 31, 2019 was 0.90 years (December 31, 2018 - 0.84 years).

F-27

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

16. 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.

	December 31, 2019		December 31, 2018
Product sales	$	248,939	$	423,705
Consulting		1,131,488		963,308
	$	1,380,427	$	1,387,013

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.

The Company operates in an international market within one reportable industry segment. Geographic revenue segmentation is as follows:

	December 31, 2019		December 31, 2018
Canada	$	127,118	$	249,595
United States		1,251,199		1,131,940
International		2,110		5,478
	$	1,380,427	$	1,387,013

The Company derives significant revenues from one customer, which exceeds 10% of total revenues for either the year ended December 31, 2019 at 81%. During the year ended December 31, 2018, there were three customers that provided significant revenues that exceeded 10% (2018 – 63%).

17. GOVERNMENT ASSISTANCE

During the year ended December 31, 2019, the Company received $nil (December 31, 2018 – $89,740) in government assistance for the purchase of research related to scientific research and experimental development tax credit, the entire amount is included in other income. In addition, the Company recorded $nil (December 31, 2018 - $23,816) in SR&ED receivable for current year SR&ED claim.

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. During the year ended December 31, 2018, the Company made its final repayment of $13,764.

In addition, the Company will pay the Organization $33,709 if the Company ever sells a product that the Organization’s funding contributed to, recorded in accounts payable and accrued liabilities.

F-28

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

18. CONTINGENCY

  
On January 15, 2018, the Company entered into a settlement agreement with a vendor pursuant to an action filed under the Ontario Court. Per the agreement, the Company is to pay the settlement amount of $75,000 in 15 equal installments on a monthly basis. During the year ended December 31, 2019, the Company repaid $15,000 (2018 - $60,000) of the settlement amount.

19. 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 one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash held in bank accounts and trade receivables. The majority of cash is deposited in bank accounts held with major bank in Canada. 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. The Company does not have any past due outstanding receivables and the expected loss rate for undue balance is estimated to be nominal.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents. Historically, the Company’s sole source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.

Foreign exchange risk

Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company does not hedge its exposure to fluctuations in foreign exchange rates.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its cash equivalents as these instruments have original maturities of three months or less and are therefore exposed to interest rate fluctuations on renewal.

Fair value

The fair value of the Company’s financial assets and liabilities approximates the carrying amount.

Capital Management

The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of cash and equity comprised of issued share capital, and share-based payment reserve.

F-29

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

19. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONT’D)

The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its board of directors, will balance its overall capital structure through new equity issuances or by undertaking other activities as deemed appropriate under the specific circumstances. The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2018.

20. 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.

Loans:

	On July 17, 2015, the Company issued a note payable for $600,000 with the former owner of the Company. The note payable bears interest at 5% per annum, was due on December 1, 2015 and is secured against the intellectual property as at the effective date. During the year ended December 31, 2019, the Company repaid the balance owing of $378,770 (2018 - $nil). As at December 31, 2019, $nil (2018 - $364,655) in notes payable plus accrued interest is outstanding. For the year ended December 31, 2019, the Company recognized interest expense of $15,153 (2018 - $17,748).
i.	On December 17, 2015, the Company issued a $160,000 note payable to a company controlled by a director of the Company. During the year ended December 31, 2017, the balance outstanding of $160,000 was applied against a subscription receivable (note 3). This subscription receivable was settled in the year ended December 31, 2019.
ii.	During the year ended December 31, 2018, the Company issued into various promissory notes of $273,500 with a company controlled by a director of the Company. The promissory notes are interest bearing at 12% per annum, unsecured and due within 60 days from the date of advance.

During the year ended December 31, 2019, the company repaid the balance owing of $290,973 (2018 - $37,086). As at December 31, 2019, $nil in promissory notes plus accrued interest is outstanding (2018 - $253,995). For the year ended December 31, 2019, the Company recorded interest expense of $13,860 (2018 - $17,581).

Trade payables and accrued liabilities:

During the year ended December 31, 2019, the Company had $9,681 (2018 - $837,781) payable to related parties outstanding that were included in accounts payable. The balances outstanding are unsecured, non-interest bearing and due on demand.

Key management compensation

Key management includes the Company’s directors and members of the executive management team. Compensation awarded to key management for the year ended December 31, 2019 and 2018 included:

	December 31, 2019		December 31, 2018
Contract work, in office and miscellaneous	$	420,039	$	-
Salaries		289,450		280,000
Share-based payments		480,158		-
Total	$	1,189,647	$	280,000

F-30

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

21. INCOME TAXES

The following table reconciles the expected income taxes at the Canadian statutory income tax rates to the amounts recognized in the statements of comprehensive loss for the years ended December 31, 2019 and 2018:

	December 31, 2019			December 31, 2018
Loss before income taxes	$	11,095,507		$	601,729
Canadian statutory rates		27	%		27	%
Expected income tax		2,996,000			162,000
Non-deductible items		(2,043,000	)		-
Adjustments to prior years provision versus statutory tax returns		(388,000	)		-

Differences between prior year provision and final tax return		(18,000	)		(20,000	)
Change in deferred tax asset not recognized		(547,000	)		(142,000	)
Income tax	$	-		$	-

The Company’s unrecognized deductible temporary differences and unused tax losses for which no deferred tax asset is recognized consist of the following amounts:

	December 31, 2019			December 31, 2018
Deferred income tax assets (liabilities):
Share issuance costs	$	-		$	1,000
Non-capital losses		2,439,000			1,849,000
Property and equipment		581,000			650,000
Intangible assets		-			(27,000	)
Scientific Research and Experimental Development		49,000			49,000
Total deferred income tax assets	$	3,069,000		$	2,522,000
Deferred income tax not recognized		(3,069,000	)		(2,522,000	)
Net deferred tax assets	$	-		$	-

The Company has non-capital loss carry forward of approximately $7,743,000 which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the years 2033 to 2039.

22. FINANCE AND OTHER COSTS

	December 31, 2019		December 31, 2018
Accretion and interest expense (note 14)	$	16,088	$	90,821
Interest expense for notes payable (note 13)		101,689		38,122
Interest expense on lease liabilities (note 11)		14,534		-
Interest on outstanding trade payables and bank charges		39,594		16,328
	$	171,905	$	145,271

23. SUPPLEMENTAL CASH FLOW DISCLOSURES

During the year ended December 31, 2019:

· Settlement of $822,003 in accounts payable and application of $153,566 in subscription receivable through issuance of shares (Note 15); and

· Settlement of $740,000 of convertible debentures (Note 15).

F-31

Draganfly Inc. (formerly Drone Acquisition Corp.)

Notes to the Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

Expressed in Canadian Dollars 

 

24. SUBSEQUENT EVENTS

The following reportable events occurred subsequent to the year ended December 31, 2019:

· On April 30, 2020, the Company completed the acquisition of Dronelogics Systems Inc. (“Dronelogics”) by acquiring all of the shares of Dronelogics, resulting in Dronelogics becoming a wholly-owned subsidiary of the Company. Dronelogics is a solutions integrator for custom robotics, hardware and software that provides a wide scope of services including sales, training, rentals, maintenance, flying and data processing services.

o On closing of the Dronelogics acquisition, the Company: (i) paid the Dronelogics shareholders $2,000,000, consisting of a cash payment of $500,000, subject to a post-closing working capital adjustment; (ii) issued the Dronelogics shareholders 3,225,438 common shares in satisfaction of the balance of the purchase price and payment of certain management bonuses at a deemed price of 0.50 per common share; (iii) appointed Mr. Justin Hannewyk, President of Dronelogics, to the Board of Directors of the Company; and (iv) issued 200,000 Common Shares to a finder in connection with the Dronelogics acquisition. The common shares issued under the Dronelogics acquisition are subject to resale restrictions in the form of pooling terms providing for release of such shares over a period of 24 months and a right to place in favor of the Company during the same 24-month period.

· 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 the Company’s business operations cannot be reasonably estimated at this time. As at the financial statement approval date, 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. These 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 2020.

F-32

Candrone

Carve-out Condensed Interim Financial Statements

Period ended September 30, 2019

(unaudited)

(Expressed in Canadian Dollars)

F-33

Candrone

Carve-out Condensed Interim Statements of Finance Position

Expressed in Canadian dollars

			September 30,		December 31,
	Notes		2019		2018
			(unaudited)
ASSETS
Current assets
Cash			$	104,794	$	-
Accounts receivable				330,564		100,290
Inventory		4		604,958		270,580
Prepaids and deposits		6		151,286		40,228
				1,191,602		411,098
Non-current assets
Property and equipment		5		44,364		15,461
Right of use assets		8		115,372		-
Total Assets			$	1,351,338	$	426,559
LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Bank indebtedness			$	-	$	25,064
Accounts payable and accrued liabilities		7		548,831		157,000
Due to shareholders		13		121,062		105,872
Notes payable		11		245,595		152,340
Lease liability – current portion		9		49,159		-
Vehicle loan – current portion		10		4,890		-
				959,537		440,276
Long-term liabilities
Lease liability		9		68,945		-
Vehicle loan		10		23,321		-
Total Liabilities				1,061,803		4470,276
OWNERS’ EQUITY
Net owners’ equity				289,535		(13,717	)
Total Owners’ Equity				289,535		(13,717	)
Total Liabilities and Owners’ Equity			$	1,351,338	$	426,559

Nature and continuance of operations (Note 1)

Commitments (Notes 9 and 10)

Subsequent event (Note 14)

Approved and authorized for issuance by the Board of Directors of Dronelogics on January 31, 2020.

“Richard Cochrane”	“Justin Hannewyk”
Director	Director

The accompanying notes are an integral part of these carve-out condensed interim financial statements.

F-34

Candrone

Carve-out Condensed Interim Statement of Net income

(Unaudited)

Expressed in Canadian dollars

			Nine months ended
	Notes		September 30, 2019
Revenues
Product Sales			$	1,723,562
Services				891,684
				2,615,246
Cost of Sales				1,706,476
Gross Margin				908,770
Operating expenses
Amortization		5,8		53,637
Auto				1,772
Business development				69,800
Facilities				5,899
Financial fees and bad debts				23,116
Insurance				15,663
Management		13		94,500
Office and Administration				30,013
Professional fees				15,670
Salaries and Wages				213,751
				523,821
Income before Other Items				384,949
Other Items
Rent income				20,465
Foreign exchange loss				(307	)
Net and comprehensive income			$	405,107

The accompanying notes are an integral part of these carve-out condensed interim financial statements.

F-35

Candrone

Carve-out Condensed Interim Statement of Changes in Owners’ Equity

(Unaudited)

Expressed in Canadian dollars

	Owners’ Equity
Balance, January 1, 2018	$	42,789
Net change in cinematography		(322,393	)
Net income for the year		265,887
Balance, December 31, 2018	$	(13,717	)
Adjustment on adoption of IFRS 16 (Note 3)		510
Net change in cinematography		(102,365	)
Net income for the period		405,107
Balance, September 30, 2019	$	289,535

The accompanying notes are an integral part of these carve-out condensed interim financial statements.

F-36

Candrone

Carve-out Condensed Interim Statement of Changes in Cash Flows

(Unaudited)

For the nine months ended

Expressed in Canadian dollars

	Nine months ended
	September 30, 2019
Operating activities
Net income for the period	$	405,107
Adjustments for items not affecting cash
Amortization		53,637
Changes in non-cash working capital items
Accounts receivable		(230,274	)
Inventory		(334,378	)
Prepaid and deposits		(111,058	)
Accounts payable and accrued liabilities		391,831
Net cash provided by operating activities		174,865
Investing activities
Purchase of property and equipment		(7,739	)
Net change in cinematography		(102,365	)
Net cash used in investing activities		(110,104	)
Financing activities
Issuance of notes payable		1,100,541
Repayment of notes payable		(1,007,286	)
Advances from shareholders		15,190
Payment of lease obligation		(43,348	)
Net cash provided by financing activities		65,097
Increase in cash		129,858
Cash (bank indebtedness), beginning		(25,604	)
Cash (bank indebtedness), ending	$	104,794

The accompanying notes are an integral part of these carve-out condensed interim financial statements.

F-37

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

1.	Nature and continuance of operations
	Candrone (the “Company” or “Candrone”) is a division of DroneLogics Systems Inc. (“Dronelogics”), incorporated on January 13, 2009, under the laws of the province of British Columbia, Canada. The Company’s principal activity is the provision of services with unmanned aerial vehicle (“UAV”) and remotely piloted aircraft (“RPA”), together known as drones, sales of drones, repairs and training related to drones in North America.
	The head office, principal address and the registered and records office of the Company are located at 22-2720 Cheakamus Way, Whistler, BC V0N 1B2, with principal operations at #319-2999 Underhill Ave, Burnaby, British Columbia, Canada, V5A 3C2.
2.	Basis of presentation
	Statement of compliance
	These Carve-out Condensed Interim Financial Statements have been prepared in accordance with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting.” They do not include all of the information required for full annual financial statements and should be read in conjunction with the Company’s audited Carve-out Condensed Interim Financial Statements for the fiscal year ended December 31, 2018.
	These financial statements were approved and authorized by the Board of Directors of Dronelogics on January 31, 2020.
	Basis of preparation
	The Carve-out Condensed Interim Financial Statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The Carve-out Condensed Interim Financial Statements are presented in Canadian dollars unless otherwise noted.
	The carve-out financial information has been prepared from Dronelogics’ historical results of operations, assets and liabilities attributable to Candrone.
	Management evaluated each of the accounts of Dronelogics and carved-out, on a reasonable basis, the balances and activity of the Candrone operations. The historical costs and expenses reflected in Dronelogics’ financial statements include 1an allocation for certain corporate and shared service functions historically provided by Dronelogics, including, but not limited to, executive oversight, accounting, tax, legal, human resources, and other shared services. These expenses have been allocated to Candrone on the basis of direct usage when identifiable, with the remainder allocated on a pro-rata basis of total expenses of Dronelogics and other measures considered to be a reasonable reflection of the historical utilization levels of these services.
	Management believes the assumptions underlying these Carve-out Condensed Interim Financial Statements, including the assumptions regarding the allocation of general corporate expenses from Dronelogics, are reasonable. Nevertheless, these Carve-out Condensed Interim Financial Statements may not include all of the actual expenses that would have been incurred had Candrone operated as a standalone entity during the periods presented and may not reflect the results of operations, financial position and cash flows had Candrone operated as a standalone entity during the periods presented. Actual costs that would have been incurred if Candrone had operated as a standalone entity would depend on multiple factors and would result in additional costs that are not reflected in Candrone’s historical results of operations, financial position and cash flows.

F-38

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

2.	Basis of preparation (continued)
	Salaries, benefits and incentive compensation have been reflected in the carve-out period based on employee services that were specifically identifiable with Candrone, as well as management’s best estimate to allocate shared employee costs.
	Significant estimates and assumptions
	The preparation of financial statements in accordance with IFRS requires the Company to use judgment in applying its accounting policies and make estimates and assumptions about reported amounts at the date of the financial statements and in the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.
	Income taxes
	Provisions for income taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these income tax provisions at the end of each reporting period. However, it is possible that at some future date an additional liability could result from audits by tax authorities. Where the final outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. Deferred tax assets are recognized when it is determined that the company is likely to recognize their recovery from the generation of taxable income.
	Inventories
	Inventory is valued at the lower of cost and net realizable value. Net realizable value is determined with reference to the estimated selling price. The Company estimates selling price based upon assumptions about future demand and current and anticipated retail market conditions.
	Useful lives of property and equipment
	Estimates of the useful lives of property and equipment are based on the period over which the assets are expected to be available for use. The estimated useful lives are reviewed annually and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence, and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of the relevant assets may be based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the equipment would increase the recorded expenses and decrease the non-current assets.

F-39

   

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

2.	Basis of preparation (continued)
	Significant judgments
	The preparation of financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s financial statements include:

· The assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty;

· The classification of financial instruments;

· The classification of leases as either operating or finance type leases; and

· The determination of the functional currency of the company.

3.	Significant Accounting Policies
	These carve-out interim financial statements have been prepared on the basis of accounting policies and methods of computation consistent with those applied in the Company’s audited annual financial statement for the fiscal year ended December 31, 2018, with the exception of the following:
	Adoption of new standards - Leases
	The Company adopted the requirements of IFRS 16 effective January 1, 2019. This new standard replaces IAS 17 Leases and the related interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to the current accounting for finance leases, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting is substantially changed.
	On adoption, the Company’s lease consisted of a warehouse lease and two vehicle leases. The Company transitioned to the new standard using the modified retrospective approach and:

· Measured the lease liability based on the present value of the remaining lease payments discounted using the Company’s incremental borrowing rate at January 1, 2019;

· Measured the right-of-use asset as if IFRS 16 had been applied since the commencement date, but discounted using the Company’s incremental borrowing rate at January 1, 2019; and

· Recording the cumulative difference to deficit.

The net impact on retained earnings on January 1, 2019 was an increase of $540.

The following is a reconciliation of total operating lease commitments at December 31, 2018 to the lease liabilities recognized at January 1, 2019:

Lease liabilities before discounting	$	177,438
Discounted using incremental borrowing rate		(15,985	)
Operating lease liability	$	161,453

F-40

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

3.	Significant Accounting Policies (continued)
	The following is a reconciliation of lease liabilities to right of use lease asset at January 1, 2019:

Operating lease liability at January 1, 2019	$	161,453
Prepaid lease payment		3,919
Lease payments prior to January 1, 2019		5,763
Depreciation prior to January 1, 2019		(3,919	)
Right of use lease asset at January 1, 2019	$	167,216

For any new contracts entered into on or after January 1, 2019, the Company considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the Company assesses whether the contract meets three key evaluations which are whether:

i.	the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company
ii.	the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract
iii.	the Company has the right to direct the use of the identified asset throughout the period of use. The Company assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.

Measurement and recognition of leases as a lessee

At lease commencement date, the Company recognizes a right-of-use asset and a lease liability on the balance sheet.

The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for impairment when such indicators exist.

At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available. If the interest rate implicit in the lease is not readily available, the Company discounts using the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

F-41

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

3.	Significant Accounting Policies (continued)
	The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognizing a right-of-use asset and lease liability, the payments in relation to these are recognized as an expense in profit or loss on a straight-line basis over the lease term. On the statement of financial position, right-of-use assets have been included under non-current assets and lease liabilities have been included under current and non-current liabilities.
4.	Inventory

	September 30, 2019		December 31, 2018
Resale products and related parts	$	604,958	$	270,580

During the nine month period ended September 30, 2019, the Company recorded a provision to value its inventory for obsolete and slow-moving inventory, recognizing a reduction in cost of sales of $6,453 (2018: $2,340).

5. Property and equipment

	Vehicle		Leasehold Improvements		Equipment		Total
Cost:
At January 1, 2018	$	-	$	12,366	$	31,612	$	43,978
Additions		-		-		1,027		1,027
At December 31, 2018		-		12,366		32,639		45,005
Additions		28,211		-		7,738		35,949
At September 30, 2019	$	28,211	$	12,366	$	40,377	$	80,954
Amortization:
At January 1, 2018	$	-	$	3,309	$	18,187	$	21,496
Charge for the year		-		2,473		5,575		8,048
At December 31, 2018		-		5,782		23,762		29,544
Charge for the period		-		2,473		4,573		7,046
At September 30, 2019	$	-	$	8,255	$	28,335	$	36,590
Net Book Value:
At December 31, 2018	$	-	$	6,584	$	8,877	$	15,461
At September 30, 2019	$	28,211	$	4,111	$	12,042	$	44,364

F-42

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

6. Prepaids and deposits

	September 30, 2019		December 31, 2018
Prepaids	$	76,744	$	9,672
Deposits		74,542		30,556
	$	151,286	$	40,228

7. Accounts payable and accrued liabilities

	September 30, 2019		December 31, 2018
Trade payables	$	459,433	$	65,991
Accrued liabilities		15,390		36,162
Sales tax payable		74,008		54,847
	$	548,831	$	157,000

8.	Right of use assets
	The Company’s right-of-use assets relates to the lease of warehouse space and two vehicles.
	On adoption of IFRS 16, the group recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019. The weighted average lessee’s incremental borrowing rate applied to the warehouse lease liabilities on January 1, 2019 was 7.25%, and the vehicle lease liabilities was 7.75%.

	Warehouse		Vehicles		Total
Cost:
At January 1, 2019, on adoption of IFRS 16	$	137,150	$	30,066	$	167,216
Amortization:
At January 1, 2019, on adoption of IFRS 16	$	3,919	$	1,335	$	5,254
Charge for the period		35,267		11,324		46,591
At September 30, 2019	$	39,186	$	12,659	$	51,845
Net Book Value:
At January 1, 2019, on adoption of IFRS 16	$	133,231	$	28,731	$	161,962
At September 30, 2019	$	97,964	$	17,407	$	115,372

F-43

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

9. Lease liability

	Warehouse			Vehicles			Total
At January 1, 2019, on adoption of IFRS 16	$	132,817		$	28,636		$	161,453
Interest expense		6,443			1,371			7,814
Lease payments		(38,998	)		(12,165	)		(51,162	)
At September 30, 2019	$	100,262		$	17,842		$	118,104
Which consist of:
Current lease liability	$	42,262		$	6,897		$	49,159
Non-current lease liability	$	58,000		$	10,945		$	68,945

10.	Vehicle loan
	In August 2019, the Company obtained financing for motor vehicle acquired. The loan is secured by the vehicle financed. The loan has a term of 60 months and interest bearing at 6.99%.

	September 30, 2019		December 31, 2018
Balance, beginning	$	-	$	-
Issued		28,211		-
		28,211		-
Current		4,890		-
Long-term	$	23,321	$	-

F-44

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

11. Notes Payable

	September 30, 2019			December 31, 2018
Opening balance	$	152,340		$	179,817
Additions		1,100,541			23,250
Repayments		(1,007,286	)		(50,727	)
	$	245,595		$	152,340

The Company’s notes payable outstanding as at September 30, 2019 are as follows:

	Opening		Addition		Repayment			Total
Note 2	$	34,710	$	–	$	(12,015	)	$	22,695
Note 3		71,500		–		(12,870	)		58,630
Note 5		22,880		–		(9,360	)		13,520
Note 6		23,250		1,100,541		(973,041	)		150,750
Total	$	179,817	$	1,100,541	$	(1,007,286	)	$	245,595

The Company’s notes payable outstanding as at December 31, 2018 are as follows:

	Opening		Addition		Repayment			Total
Note 1	$	4,167	$	–	$	(4,167	)	$	–
Note 2		50,730		–		(16,020	)		34,710
Note 3		88,660		–		(17,160	)		71,500
Note 4		900		–		(900	)		–
Note 5		35,360		–		(12,480	)		22,880
Note 6		–		23,250		–			23,250
Total	$	179,817	$	23,250	$	(50,727	)	$	152,340

Note 1 through 5 are issued to Business Development Bank of Canada (“BDC”), and are guaranteed by the directors of Dronelogics.

Note 1 was interest bearing at BDC’s floating base rate (5%) plus a variance of 1% per year, unsecured and due on April 11, 2018.

Note 2 was interest bearing at BDC’s floating base rate (4.85%) plus a variance of 2.35% per year, secured and due on February 10, 2021. The principal repayments were due in installments of $1,235 on October 3, 2016 and $1,335 for the next 59 months.

Note 3 were interest bearing at BDC’s floating base rate (4.85%) plus a variance of 2.00% per year, secured and due on February 10, 2023. The principal repayments were due in installments of $1,310 on October 3, 2016 and $1,430 for the next 83 months.

Note 4 were interest bearing at BDC’s floating base rate (4.85%) plus a variance of 1% per year, secured and due on April 23, 2018. The principal repayments were due in monthly installments of $225 commencing April 5, 2016.

F-45

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

11.	Notes Payable (continued)
	Note 5 were interest bearing at BDC’s floating base rate (4.70%) plus a variance of 1% per year, secured and due on October 23, 2020. The principal repayments were due in installments of $1,120 on November 23, 2016 and $1,040 for the next 47 months.
	Note 6 is a revolving line of credit of up to $200,000 to Royal Bank of Canada (“RBC”). The line of credit was interest bearing at RBC’s Prime Rate plus 2.56% per annum, payable on the 25th of each month.
12.	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 one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash held in bank accounts and trade receivables. The Company does not have any past due outstanding receivables and the expected loss rate for undue balance is estimated to be nominal.
	Liquidity risk
	Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents. Historically, the Company’s sole source of funding has been loans from shareholders and notes payable from Business Development Bank of Canada. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.
	Foreign exchange risk
	Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. Accordingly, the Company is moderately exposed to foreign currency risk.
	Interest rate risk
	Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its notes payable and has determined there is no material exposure related to interest rate risk.
	Fair value
	The fair value of the Company’s financial assets and liabilities approximates the carrying amount.

F-46

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

12.	Financial Instruments and Financial Risk Management (continued)
	Capital Management
	The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of shareholders’ equity.
	The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its board of directors, will balance its overall capital structure through new equity issuances or by undertaking other activities as deemed appropriate under the specific circumstances. The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2018.
13.	Related party transactions and balances
	The following amounts due to related parties are included in non-current liabilities:

	September 30, 2019		December 31, 2018
Shareholders of the Company	$	121,062	$	105,872
	$	121,062	$	105,872

These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.

Key management personnel compensation

	Nine months ended September 30, 2019		Year ended December 31, 2018
Management salaries	$	94,500	$	90,000
	$	94,500	$	90,000

14.

Subsequent events

On January 15, 2020, the shareholders of Dronelogics executed a share purchase agreement with Draganfly Inc. (“Draganfly”), whereby Draganfly has agreed to acquire all of the issued and outstanding shares in the capital of Dronelogics, excluding the cinematography division, for a consideration of $2,000,000, plus the amount, if any, by which the estimated closing date working capital exceeds the target closing working capital (the “Transaction”). Draganfly is an operational business of developing and manufacturing multi-rotor helicopters, industrial aerial video systems and civilian small unmanned aerial systems or vehicles. Effective November 5, 2019, Draganfly’s shares began trading on the Canadian Securities Exchange (the “CSE”) under the symbol “DFLY”. The consideration will be paid as follows:

- $500,000 in cash, subject to working capital adjustment;

- 3,000,000 common shares in the capital of Draganfly at a deemed price of $0.50 per share.

F-47

Candrone

Notes to the carve-out financial statements

(Unaudited)

For the nine months ended September 30, 2019

Expressed in Canadian dollars

14.	Subsequent events (continued)
	The shareholders of Dronelogics will enter into executive employment agreements with Draganfly. In addition, they will receive a nomination right to appoint one person to the board of directors of Draganfly for a period of two years from the Closing.
	The Transaction has been approved by the board of directors of Draganfly and Dronelogics. In connection with the Transaction, Draganfly will pay fees of $160,000 to certain advisors; consisting of $100,000 by way of 200,000 in Draganfly shares at a deemed price of $0.50 per share and as to $60,000 in cash or Draganfly shares at a deemed price of $0.50 per share. At Closing, Draganfly will issue: (i) additional Draganfly shares to the shareholders, at a deemed price of $0.50 per Draganfly share, in satisfaction of accrued management bonuses in connection with their services to Dronelogics; (ii) grant 445,000 incentive stock options to certain employees of Dronelogics pursuant to Draganfly’s share compensation plan, exercisable at a price equal to closing price of the Draganfly shares on the CSE on January 15, 2020. The options shall have a term of 10 years and vest in three equal tranches, on the first, second and third anniversaries of the date of grant, and (iii) award 375,000 restricted share units (the “RSUs”) to certain directors and officers of Dronelogics. RSUs were awarded to certain directors and officers of Dronelogics pursuant to Draganfly’s share compensation plan. The RSUs shall vest in three equal tranches, on the first, second and third anniversaries of the date of award.
	Completion of the Transaction is subject to a number of closing conditions customary for a transaction of this nature, including the filing of required forms with the CSE.

F-48

  

Candrone

Carve-out financial statements

Year Ended December 31, 2018

(Expressed in Canadian Dollars)

F-49

INDEPENDENT AUDITOR’S REPORT

To the Directors and Shareholders of Draganfly Inc.

Report on the Financial Statements

We have audited the carve-out financial statements of Candrone (the “Company”), a division of DroneLogics Systems Inc., which comprise the carve-out statement of financial position as at December 31, 2018, and the carve-out statements of comprehensive income, changes in owner’s deficiency and cash flows for the year then ended, and notes to the carve-out financial statements, including a summary of significant accounting policies (collectively referred to as the “carve-out financial statements”).

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these carve-out financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We were not able to observe the counting of physical inventories at December 31, 2017, or satisfy ourselves concerning those inventory quantities by alternative means.

Since opening inventories affect the determination of the financial performance and cash flows, we were unable to determine whether adjustments to the financial performance and cash flows might have been necessary for the year ended December 31, 2018.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (“US GAAS”). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the carve-out financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2018, and the carve-out statements of comprehensive loss, changes in shareholders’ equity and cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Comparative Information

The carve-out financial statements of the Company for the year ended December 31, 2017 are unaudited.

/s/ DMCL

DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
 Vancouver, BC

August 4, 2020

F-50

Candrone

Carve-out Statements of Financial Position

Expressed in Canadian dollars

			December 31,			December 31,
	Notes		2018			2017
						(unaudited)
ASSETS
Current assets
Cash			$	-		$	90,809
Accounts receivable				100,290			98,262
Inventory		3		270,580			204,060
Prepaids and deposits		4		40,228			46,421
				411,098			439,552
Non-current assets
Property and equipment		5		15,461			22,482
Intangible assets				-			228
Total Assets			$	426,559		$	462,262
LIABILITIES AND OWNERS’ DEFICIENCY
Current Liabilities
Bank indebtedness			$	25,064		$	-
Accounts payable and accrued liabilities		6		157,000			130,065
Due to shareholders		10		105,872			109,591
Notes payable		8		152,340			179,817
Total Liabilities				440,276			419,473
ONWERS’ DEFICIENCY
Net owners’ deficiency				(13,717	)		42,789
Total Owners’ Deficiency				(13,717	)		42,789
Total Liabilities and Owners’ Deficiency			$	426,559		$	462,262

Nature and continuance of operations (Note 1)

Commitments (Note 7)

Subsequent events (Notes 1 and 12)

Approved and authorized for issuance by the Board of Directors of Dronelogics on August 4, 2020.

“Richard Cochrane”	“Justin Hannewyk”
Director	Director

The accompanying notes are an integral part of these carve-out financial statements.

F-51

Candrone

Carve-out Statements of Comprehensive Income

Expressed in Canadian dollars

			December 31,		December 31,
	Notes		2018		2017
					(unaudited)
Revenues
Product Sales			$	2,345,134	$	2,870,357
Services				637,698		309,920
				2,982,832		3,180,277
Cost of Sales				2,244,174		2,456,473
Gross Margin				738,658		723,804
Operating expenses
Amortization		5		8,048		11,312
Automotive				11,999		16,559
Business development				68,308		108,126
Facilities				34,264		33,439
Financial fees and bad debts				19,087		28,496
Insurance				20,032		32,538
Management expense		10		90,000		90,000
Office and Administration				23,295		16,024
Professional fees				26,097		34,807
Salaries and Wages				172,094		229,600
				473,224		596,141
Income before Other Item				265,434		127,663
Other Item
Foreign exchange gain				453		33
Net income			$	265,887	$	127,696

F-52

Candrone

Carve-out Statements of Changes in Owners’ Deficiency

Expressed in Canadian dollars

	Owner’s Deficiency
Balance, January 1, 2017 (unaudited)	$	91,954
Net change in cinematography		(176,861	)
Net income for the year		127,696
Balance, December 31, 2017 (unaudited)		42,789
Net change in cinematography		(322,393	)
Net income for the year		265,887
Balance, December 31, 2018	$	(13,717	)

The accompanying notes are an integral part of these carve-out financial statements.

F-53

Candrone

Carve-out Statements of Changes in Cash Flows

Expressed in Canadian dollars

	December 31,			December 31,
	2018			2017
				(unaudited)
Operating activities
Net income for the year	$	265,887		$	127,696
Adjustments for items not affecting cash
Amortization		8,048			11,312
Changes in non-cash working capital items
Accounts receivable		(2,028	)		74,152
Inventory		(66,520	)		(39,195	)
Prepaid and deposits		6,193			237,798
Accounts payable and accrued liabilities		27,163			(118,931	)
Net cash provided by operating activities		238,743			292,832
Investing activities
Purchase of property and equipment		(1,027	)		(27,761	)
Net change in cinematography		(322,393	)		(176,861	)
Net cash used in investing activities		(323,420	)		(204,622	)
Financing activities
Issuance of notes payable		23,250			34,250
Repayment of notes payable		(50,727	)		(58,360	)
Advances from (repayments to) shareholders		(3,719	)		63,885
Net cash provided by (used in) financing activities		(31,196	)		39,775
Increase (decrease) in cash		(115,873	)		127,985
Cash (bank indebtedness), beginning		90,809			(37,176	)
Cash (bank indebtedness), end	$	(25,604	)	$	90,809
Represented As:
Cash	$	-		$	90,809
Bank Overdraft		(25,604	)		-
	$	(25,604	)	$	90,809

The accompanying notes are an integral part of these carve-out financial statements.

F-54

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

1.	Nature and continuance of operations
	Candrone (the “Company” or “Candrone”) is a division of DroneLogics Systems Inc. (“Dronelogics”), incorporated on January 13, 2009, under the laws of the province of British Columbia, Canada. The Company’s principal activity is the provision of services with unmanned aerial vehicle (“UAV”) and remotely piloted aircraft (“RPA”), together known as drones, sales of drones, repairs and training related to drones in North America.
	The head office, principal address and the registered and records office of the Company are located at 22-2720 Cheakamus Way, Whistler, BC V0N 1B2, with principal operations at #319-2999 Underhill Ave, Burnaby, British Columbia, Canada, V5A 3C2.
2.	Significant accounting policies
	Statement of compliance
	The carve-out financial statements of the Company comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
	These financial statements were approved and authorized by the Board of Directors of Dronelogics on January 31, 2020.
	Basis of preparation
	The carve-out financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The carve-out financial statements are presented in Canadian dollars unless otherwise noted.
	The carve-out financial information has been prepared from Dronelogics’ historical results of operations, assets and liabilities attributable to Candrone.
	Management evaluated each of the accounts of Dronelogics and carved-out, on a reasonable basis, the balances and activity of the Candrone operations. The historical costs and expenses reflected in Dronelogics’ financial statements include an allocation for certain corporate and shared service functions historically provided by Dronelogics, including, but not limited to, executive oversight, accounting, tax, legal, and other shared services. These expenses have been allocated to Candrone on the basis of direct usage when identifiable, with the remainder allocated on a pro-rata basis of total expenses of Dronelogics and other measures considered to be a reasonable reflection of the historical utilization levels of these services.
	Management believes the assumptions underlying these carve-out financial statements, including the assumptions regarding the allocation of general corporate expenses from Dronelogics, are reasonable. Nevertheless, these carve-out financial statements may not include all of the actual expenses that would have been incurred had Candrone operated as a standalone entity during the periods presented and may not reflect the results of operations, financial position and cash flows had Candrone operated as a standalone entity during the periods presented. Actual costs that would have been incurred if Candrone had operated as a standalone entity would depend on multiple factors and would result in additional costs that are not reflected in Candrone’s historical results of operations, financial position and cash flows.

F-55

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

2.	Significant accounting policies and basis of preparation (continued)
	Salaries, benefits and incentive compensation have been reflected in the carve-out period based on employee services that were specifically identifiable with Candrone, as well as management’s best estimate to allocate shared employee costs.
	Significant estimates and assumptions
	The preparation of carve-out financial statements in accordance with IFRS requires the Company to use judgment in applying its accounting policies and make estimates and assumptions about reported amounts at the date of the carve-out financial statements and in the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.
	Income taxes
	Provisions for income taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these income tax provisions at the end of each reporting period. However, it is possible that at some future date an additional liability could result from audits by tax authorities. Where the final outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. Deferred tax assets are recognized when it is determined that the company is likely to recognize their recovery from the generation of taxable income.
	Inventories
	Inventory is valued at the lower of cost and net realizable value. Net realizable value is determined with reference to the estimated selling price. The Company estimates selling price based upon assumptions about future demand and current and anticipated retail market conditions.
	Useful lives of property and equipment
	Estimates of the useful lives of property and equipment are based on the period over which the assets are expected to be available for use. The estimated useful lives are reviewed annually and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence, and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of the relevant assets may be based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the equipment would increase the recorded expenses and decrease the non-current assets.
	Significant judgments
	The preparation of carve-out financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s carve-out financial statements include:

F-56

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

2. Significant accounting policies and basis of preparation (continued)

· The assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty;

· The classification of financial instruments;

· The classification of leases as either operating or finance type leases; and

· The determination of the functional currency of the company.

Foreign currency translation

The functional currency of the company is Canadian dollars with certain transactions made in US dollars. The carve-out financial statements are presented in Canadian dollars which is the company’s functional and presentation currency.

Transactions and balances:

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in the statement of comprehensive loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge.

Cash/bank indebtedness

Cash/bank indebtedness includes cash on hand, bank overdrafts and bankers acceptances. Bank overdrafts are repayable on demand. Bank overdrafts and bankers acceptances form an integral part of the Company’s cash management and are included as a component of cash/bank indebtedness for the purpose of the statement of cash flows.

Financial instruments

The Company adopted all of the requirements of IFRS 9 Financial Instruments on January 1, 2018. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 utilizes a revised model for recognition and measurement of financial instruments in a single, forward-looking “expected loss” impairment model.

The following is the Company’s new accounting policy for financial instruments under IFRS 9:

(i) Classification

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

F-57

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

2.	Significant accounting policies and basis of preparation (continued)
	The Company completed a detailed assessment of its financial assets and liabilities as at January 1, 2018. The following table shows the original classification under IAS 39 and the new classification under IFRS 9:

Financial assets/liabilities	Original Classification IAS 39	New Classification IFRS 9
Cash	Loans and receivables	Amortized cost
Accounts receivable	Loans and receivables	Amortized cost
Accounts payable	Other financial liabilities	Amortized cost
Due to shareholders	Other financial liabilities	Amortized cost
Notes payable	Other financial liabilities	Amortized cost

The adoption of IFRS 9 resulted in no impact to the opening accumulated deficit nor to the opening balance of accumulated comprehensive income on January 1, 2018.

(ii) Measurement

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statements of loss and comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the statements of loss and comprehensive loss in the period in which they arise.

Debt investments at FVTOCI

These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss

Equity investments at FVTOCI

These assets are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

(iii) Impairment of financial assets at amortized cost

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the statements of loss and comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

F-58

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

2.	Significant accounting policies and basis of preparation (continued)
	(iv) Derecognition
	Financial assets
	The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity.
	Financial liabilities
	The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and / or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
	Gains and losses on derecognition are generally recognized in profit or loss.
	Impairment of assets
	The carrying amount of the Company’s non-financial assets (which include property and equipment) is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of comprehensive loss.
	The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
	An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. Any reversal of impairment cannot increase the carrying value of the asset to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.
	Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.

F-59

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

2.	Significant accounting policies and basis of preparation (continued)
	Income taxes
	Current income tax:
	Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.
	Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
	Deferred income tax:
	Deferred income tax is recognized, using the asset and liability method, on temporary differences at the reporting date arising between the tax bases of assets and li abilities and their carrying amounts for financial reporting. The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
	Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
	Leases
	Leases of property and equipment where substantially all the risks and benefits incidental to the ownership of the asset are transferred the Company are classified as finance leases.
	Finance leases are capitalized by recording an asset and a liability at the lower of the fair value of the leased property and equipment or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
	Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.
	Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.
	Lease incentives under operating leases are recognized as a liability and amortized on a straight-line basis over the life of the lease term.
	Inventory
	Inventory consists of resale products and parts of multi-rotor UAVs, LiDAR sensors and camera arms. Inventory is initially valued at cost and subsequently at the lower of cost and net realizable value.

F-60

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

2.	Significant accounting policies and basis of preparation (continued)
	Net realizable value is determined as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Cost is determined using the weighted average cost basis. The Company reviews inventory for obsolete and slow-moving goods and any such inventory is written-down to net realizable value.
	Revenue Recognition
	The Company adopted IFRS 15 – Revenue from Contracts with Customers on January 1, 2018 using the modified retrospective approach where the cumulative impact of adoption is recognized in retained earnings as of January 1, 2018. The new standard provides for a single model that applies to all contracts with customers with two types of recognition: at a point in time or over time. Under IFRS 15 the Company’s accounting policy for revenue recognition is as follows: i) identify the contract with the customer; ii) identify the performance obligation(s) in the contract; iii) determine the transaction price; iv) allocate the transaction price to the performance obligation(s); and (v) recognize revenue when (or as) performance obligation(s) are satisfied.
	Revenue comprises the fair value of consideration received or receivable for the sale of goods and consulting services in the ordinary course of the Company’s business. Revenue is shown net of return allowances and discounts.
	Sales of goods
	The Company manufactures and sells a range of multi-rotor UAVs, industrial aerial video systems, and civilian small unmanned aerial systems or vehicles. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location or picked up by the customer.
	Revenue from these sales is recognized based on the price specified in the contract, net of the estimated discounts and returns. Accumulated experience is used to estimate and provide for the discounts and returns, using the expected value method, and revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. To date, returns have not been significant. No element of financing is deemed present as the sales are made with a credit term of 30 days, which is consistent with market practice.
	A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
	Services rendered
	The Company provides consulting, training and repair services on a project by project basis under fixed-price and variable price contracts. Revenue from providing services is recognized in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognized based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined based on the actual labour hours spend relative to the total expected labour hours. If contracts include the manufacturing of hardware, revenue for the hardware is recognized at a point in time when the hardware is delivered, the legal title has passed and the customer has accepted the hardware.

F-61

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

2.	Significant accounting policies and basis of preparation (continued)
	Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.
	Cost of Goods Sold
	Cost of sales includes the expenses incurred to acquire and produce inventory for sale, including product costs, freight costs, as well as provisions for reserves related to product shrinkage, excess or obsolete inventory, or lower of cost and net realizable value adjustments as required.
	Property and equipment
	Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.
	Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of comprehensive loss during the financial period in which they are incurred.
	Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statement of comprehensive loss.
	Amortization is calculated on a straight-line method to write off the cost of the assets to their residual values over their estimated useful lives. The amortization rates applicable to each category of property, plant and equipment are as follows:

Class of property and equipment	Amortization rate
Leasehold improvements	Term of lease
Equipment		20	%

Accounting standards issued but not yet effective

New standard IFRS 16 “Leases”

This new standard replaces IAS 17 Leases and the related interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to the current accounting for finance leases, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting will be substantially changed. The standard is effective for the annual period beginning on January 1, 2019. The Company intends to transition to the new standard using the modified retrospective approach and measure the lease liability based on the present value of the remaining lease payments and the cumulative difference to deficit. The Company has evaluated the impact of this new guidance on its consolidated carve-out financial statements and has estimated that the adoption of the new standard will result in the recognition of additional right of use assets related to its leased premises of approximately $161,000 and lease liabilities of approximately $161,000.

F-62

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

3. Inventory

	December 31, 2018		December 31, 2017
Resale products and related parts	$	270,580	$	204,060

During the year ended December 31, 2018, the Company recorded a provision to value its inventory for obsolete and slow-moving inventory, recognizing a reduction in cost of sales of $2,340 (2017: $6,487).

4. Prepaids and deposits

	December 31, 2018		December 31, 2017
Prepaids	$	9,672	$	7,781
Deposits		30,556		38,640
	$	40,228	$	46,421

5. Property and equipment

	Leasehold Improvements		Equipment		Total
Cost:
At January 1, 2017	$	4,976	$	11,241	$	16,217
Additions		7,390		20,371		27,761
At December 31, 2017		12,366		31,612		43,978
Additions		-		1,027		1,027
At December 31, 2018	$	12,366	$	32,639	$	45,005
Amortization:
At January 1, 2017	$	1,575	$	8,609	$	10,184
Charge for the period		1,734		9,578		11,312
At December 31, 2017		3,309		18,187		21,496
Charge for the period		2,473		5,575		8,048
At December 31, 2018	$	5,782	$	23,762	$	29,544
Net Book Value:
At December 31, 2017	$	9,057	$	13,425	$	22,482
At December 31, 2018	$	6,584	$	8,877	$	15,461

F-63

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

6. Accounts payable and accrued liabilities

	December 31, 2018		December 31, 2017
Trade payables	$	65,991	$	42,952
Accrued liabilities		36,162		17,340
Sales tax payable		54,847		69,773
	$	157,000	$	130,065

7.	Lease obligations and commitments
	Operating lease commitments
	As at December 31, 2018, future payments required under non-cancellable operating leases contracted for but not capitalized in the carve-out financial statements are as follows:

	December 31, 2018		December 31, 2017
Payable not later than one year	$	69,604	$	63,619
Payable later than one year and not later than five years		118,237		160,962
Payable later than five years		-		-
	$	187,841	$	224,581

8. Notes Payable

	December 31, 2018			December 31, 2017
Opening balance		179,817			203,927
Additions		23,250			34,250
Repayments		(50,727	)		(58,360	)
		152,340			179,817

The Company’s notes payable outstanding as at December 31, 2018 are as follows:

	Opening		Addition		Repayment			Total
Note 1	$	4,167	$	–	$	(4,167	)	$	–
Note 2		50,730		–		(16,020	)		34,710
Note 3		88,660		–		(17,160	)		71,500
Note 4		900		–		(900	)		–
Note 5		35,360		–		(12,480	)		22,880
Note 6		–		23,250		–			23,250
Total	$	179,817	$	23,250	$	(50,727	)	$	152,340

F-64

    

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

8.	Notes Payable (continued)
	The Company’s notes payable outstanding as at December 31, 2017 are as follows:

	Opening		Addition		Repayment			Total
Note 1	$	14,167	$	–	$	(10,000	)	$	4,167
Note 2		66,750		–		(16,020	)		50,730
Note 3		105,820		–		(17,160	)		88,660
Note 4		3,600		–		(2,700	)		900
Note 5		13,590		34,250		(12,480	)		35,360
Total	$	203,927	$	34,250	$	(58,360	)	$	179,817

	Note 1 through 6 are issued to Business Development Bank of Canada (“BDC”), and are guaranteed by the directors of Dronelogics.
	Note 1 was interest bearing at BDC’s floating base rate (5%) plus a variance of 1% per year, unsecured and due on April 11, 2018.
	Note 2 was interest bearing at BDC’s floating base rate (4.85%) plus a variance of 2.35% per year, secured and due on February 10, 2021. The principal repayments were due in installments of $1,235 on October 3, 2016 and $1,335 for the next 59 months.
	Note 3 was interest bearing at BDC’s floating base rate (4.85%) plus a variance of 2.00% per year, secured and due on February 10, 2023. The principal repayments were due in installments of $1,310 on October 3, 2016 and $1,430 for the next 83 months.
	Note 4 was interest bearing at BDC’s floating base rate (4.85%) plus a variance of 1% per year, secured and due on April 23, 2018. The principal repayments were due in monthly installments of $225 commencing April 5, 2016.
	Note 5 was interest bearing at BDC’s floating base rate (4.70%) plus a variance of 1% per year, secured and due on October 23, 2020. The principal repayments were due in installments of $1,120 on November 23, 2016 and $1,040 for the next 47 months.
	Note 6 was a revolving line of credit of up to $200,000 to Royal Bank of Canada (“RBC”). The line of credit was interest bearing at RBC’s Prime Rate plus 2.56% per annum, payable on the 25th of each month.
9.	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 one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash held in bank accounts and trade receivables.

F-65

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

9.	Financial Instruments and Financial Risk Management (continued)
	The Company does not have any past due outstanding receivables and the expected loss rate for undue balance is estimated to be nominal.
	Liquidity risk
	Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents. Historically, the Company’s sole source of funding has been loans from shareholders and notes payable from Business Development Bank of Canada. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.
	Foreign exchange risk
	Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. As at December 31, 2018, the Company held financial liabilities denominated in foreign currencies totaling $6,056, as well as financial assets denominated in foreign currencies totaling $53,543. A 5% shift in exchange rates would result in a foreign exchange gain or loss of approximately $2,200. Accordingly, the Company is moderately exposed to foreign currency risk.
	Interest rate risk
	Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its notes payable.
	Fair value
	The fair value of the Company’s financial assets and liabilities approximates the carrying amount.
	Capital Management
	The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to its owners and benefits to other stakeholders. The capital structure of the Company consists of owners’ equity.
	The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its board of directors, will balance its overall capital structure through new equity issuances or by undertaking other activities as deemed appropriate under the specific circumstances. The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2017.

F-66

   

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

10.	Related party transactions and balances
	The following amounts due to related parties are included in non-current liabilities:

	December 31, 2018		December 31, 2017
Shareholders of Dronelogics	$	105,872	$	109,591
	$	105,872	$	109,591

These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.

Key management personnel compensation

	Years ended
	December 31, 2018		December 31, 2017
Management expense	$	90,000	$	90,000
	$	90,000	$	90,000

11	Income tax expense and deferred tax assets and liabilities
	A reconciliation of the expected income tax recovery to actual is as follows:

         

	December 31, 2018			December 31, 2017
Net income for the year	$	265,887		$	127,696
Statutory tax rate		27	%		26	%
Expected income tax recovery at the statutory tax rate	$	71,789		$	33,201
Adjustments to prior years provision		(14,036	)		(4,657	)
Net change in cinematography		(90,556	)		(67,824	)
Change in recognized deferred assets		32,802			39,280
Income tax recovery	$	–		$	–

The significant components of deferred income tax assets and liabilities as at December 31, 2018 and 2017 are as follows:

	December 31, 2018			December 31, 2017
Non-capital loss carry-forwards	$	55,922		$	34,540
Property and equipment		16,161			4,740
	$	72,802		$	39,280
Unrecognized deferred tax asset		(72,802	)		(39,280	)
Net deferred income tax assets	$	–		$	–

As at December 31, 2018, Dronelogics has non-capital loss carry forward of approximately $200,000 in Canada that are available to reduce income otherwise taxable in future years. The non-capital losses will expire in 2038.

F-67

Candrone

Notes to the Carve-out Financial Statements

For the year ended December 31, 2018

12.	Subsequent events
	The following reportable events occurred subsequent to the year ended December 31, 2018:

·	In August 2019, the Company obtained financing for the acquisition of a motor vehicle. The loan is secured by the vehicle financed. The loan has a term of 60 months and bearing interest at 6.99%.
·	On April 30, 2020, Draganfly Inc. (“Draganfly”) completed the acquisition of Dronelogics by acquiring all of the shares of Dronelogics, resulting in Dronelogics becoming a wholly-owned subsidiary of Draganfly.
	On closing of the Dronelogics acquisition, Draganfly: (i) paid the Dronelogics shareholders 2,000,000, consisting of a cash payment of $500,000, subject to a post-closing working capital adjustment; (ii) issued the Dronelogics shareholders 3,225,438 common shares in satisfaction of the balance of the purchase price and payment of certain management bonuses at a deemed price of 0.50 per common share; (iii) appointed Mr. Justin Hannewyk, President of Dronelogics, to the Board of Directors of Draganfly; and (iv) issued 200,000 common shares to a finder in connection with the Dronelogics acquisition. The common shares issued under the Dronelogics acquisition are subject to resale restrictions in the form of pooling terms providing for release of such shares over a period of 24 months and a right to place in favor of Dronelogics during the same 24-month period.
·	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 the Company’s business operations cannot be reasonably estimated at this time. As at the financial statement approval date, 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. These 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 2020.

F-68

PART III – EXHIBITS

Exhibit No.	Description
EX1A-2.1 #	Notice of Articles of Draganfly Inc., dated November 4, 2019
EX1A-2.2 #	Articles of Drone Acquisition Corp., dated June 1, 2018.
EX1A-2.3 #	Certificate of Incorporation of Drone Acquisition Corp., dated June 1, 2018.
EX1A-2.4 #	Certificate of Change of Name from Drone Acquisition Corp. to Draganfly Inc., dated August 15, 2019.
EX1A-4.1†	Form of Subscription Agreement.
EX1A-4.2†	Form of Common Share Purchase Warrant.
EX1A-4.3 #	Form of Indemnity Agreement.
EX1A-6.1 #	Independent Consulting Agreement, dated October 1, 2019, between Draganfly Inc., 1502372 Alberta Ltd., and Cameron Chell.
EX1A-6.2 #	Employment Agreement, dated October 21, 2019, between Draganfly Innovations Inc. and Patrick Imbasciani.
EX1A-6.3 #	Share Purchase Agreement, dated January 15, 2020, between Draganfly Inc., Dronelogics Systems Inc., and each person identified as a “Seller” in Schedule A thereto.
EX1A-6.4 #	Business Combination Agreement, dated January 31, 2019, between Drone Acquisition Corp., Draganfly Innovations Inc., and 1187607 B.C. Ltd.
EX1A-6.5 #	Broker Dealer Agreement, dated June 10, 2020, between Draganfly Inc. and Dalmore Group, LLC.
EX1A-6.6 #	Share Compensation Plan of Draganfly Inc., including Form of Stock Option Agreement and Form of Restricted Share Agreement
EX1A-6.7†	Employment Offer Letter, dated June 14, 2020, addressed to John Bagocius.
EX1A-10.1 #	Power of Attorney (included on signature page).
EX1A-11.1†	Consent of Dale Matheson Carr-Hilton Labonte LLP (Auditors) (Draganfly Inc.) .
EX1A-11.2†	Consent of Dale Matheson Carr-Hilton Labonte LLP (Auditors) (Dronelogics Systems Inc.)
EX1A-12.1†	Opinion of DLA Piper (Canadian Legal Counsel).
EX1A-14.1 #	Appointment of Agent for Service of Process.

† Filed herewith.

# Previously filed.

III-1

SIGNATURES

Pursuant to the requirements of Regulation A+, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A/A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Saskatoon, Province of Saskatchewan, Country of Canada, on August 7, 2020.

Draganfly Inc.
By:	/s/ Cameron Chell
	Name: Cameron Chell
	Title: Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Cameron Chell and Paul Sun, or any of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Form 1-A offering statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.

This offering statement has been signed by the following persons in the capacities and on the dates indicated.

/s/ Cameron Chell	Date: August 7, 2020
Name: Cameron Chell Title: Chief Executive Officer and Chairman of the Board
/s/ Paul Sun	Date: August 7, 2020
Name: Paul Sun Title: Chief Financial Officer
/s/ Scott Larson	Date: August 7, 2020
Name: Scott Larson Title: Director
/s/ Olen Aasen	Date: August 7, 2020
Name: Olen Aasen Title: Director
/s/ Denis Silva	Date: August 7, 2020
Name: Denis Silva Title: Director
/s/ Andrew Hill Card, Jr.	Date: August 7, 2020
Name: Andrew Hill Card, Jr.
Title: Director
/s/ Justin Hannewyk	Date: August 7, 2020
Name: Justin Hannewyk Title: Director
	Date: August 7 , 2020
/s/ John M. Mitnick
Name: John M. Mitnick Title: Director

_____________

- 61 -

EX1A-4 SUBS AGMT.1

EXHIBIT 4.1

DRAGANFLY INC. SUBSCRIBER QUESTIONNAIRE

In connection with subscribing for the securities (the “Securities”) issued by Draganfly Inc., a company incorporated under the laws of the Province of British Columbia, Canada (the “Company”), please complete the following Subscriber Questionnaire. The Company intends to use the proceeds of this offering for a variety of uses including without limitation research and development expenses, offering expenses, working capital and general corporate purposes as further described in the offering circular pursuant to which the Securities are being offered under Regulation A (“Regulation A”) under the Securities Act of 1933 (“Securities Act”) in effect as of the date hereof (the “Offering Circular”). The potential subscriber in the Securities shall be referred to in this Agreement as the “Subscriber.” This Subscriber Questionnaire should be completed either by the Subscriber or, if the Subscriber is an entity, by an authorized representative of the Subscriber.

The Subscriber Questionnaire and the Subscription Agreement are collectively referred to as the “Agreement.” If the Subscriber Questionnaire indicates that any Subscriber’s response to a question requires further information, the Subscriber should contact the Company as soon as possible. Subscribers must complete and return all other additional required documentation, including an IRS Form W-9.

1. U.S., Canadian or Other Foreign Person or Entity Status.

☐	I represent and warrant that the “U.S. Subscriber” is a United States citizen or resident or a corporation, partnership, limited liability company, trust, or equivalent legal entity organized under the laws of any state of the United States.
☐	I represent and warrant that the “Canadian Subscriber” is a Canadian citizen or resident or a corporation, partnership, limited liability company, trust, or equivalent legal entity organized under the laws of any province or territory of Canada.
☐	I represent and warrant that the “International Subscriber” is neither a United States nor Canadian citizen or resident, corporation, partnership, limited liability company, trust, or equivalent legal entity organized under the laws of any state of the United States or province or territory of Canada.

2. Accredited Investor or Qualified Purchaser Status.

To invest in this offering, the Subscriber must either be an “accredited investor,” within the meaning of Rule 501(a) under the Securities Act, or the Subscriber must be a “qualified purchaser,” within the meaning of Regulation A under the Securities Act or the Subscriber must be an “accredited investor,” as defined in National Instrument 45-106 Prospectus Exemptions of the Canadian Securities Administrators (“NI 45-106”) under Canadian securities laws.

☐	U.S. Accredited Investor Status. I represent and warrant that the Subscriber is an “accredited investor,” within the meaning of Rule 501(a) under the Securities Act.
☐	Canadian Accredited Investor Status. I represent and warrant that the Subscriber is an “accredited investor,” as defined in NI 45-106.

If you are a Canadian “accredited investor”:
a.	complete and sign the Accredited Investor Certificate attached as Schedule A to Annex 1 of the Subscription Agreement and,
b.	if you are an individual relying on category (j), (k) or (l) of the Accredited Investor Certificate (and do not meet the higher financial asset threshold set out in paragraph (j.1) of the Accredited Investor Certificate), complete and sign the Form 45 106F9 – Form for Individual Accredited Investors attached as Schedule A-1 to Annex 1 of the Subscription Agreement.

☐ Qualified Purchaser Status. I represent and warrant that the Subscriber is a “qualified purchaser,” as defined in Regulation A of the Securities Act, based on the fact that either:

a.	I am the Subscriber and I am a natural person. I am not investing more than the greater of either 10% of my net worth1 or 10% of my annual income2; or
b.	The Subscriber is not a natural person, and the Subscriber is not investing more than the greater of the following, as calculated for the most recently completed fiscal year end:

(a)	10% of the Subscriber’s revenue; or
(b)	10% of the Subscriber’s net assets.

3. ERISA.

Benefit Plan Investor Status. I represent and warrant that the Subscriber is not, and neither I nor the Subscriber is acting (directly or indirectly) on behalf of, any of the following:

☐ An employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act (“ERISA”)), whether or not the plan is subject to Title I of ERISA; a plan, individual retirement account or other arrangement that is subject to Section 4975 of the Internal Revenue Code (“Code”); a “benefit plan investor” within the meaning of 29 C.F.R. Section 2510.3-101; a “governmental plan” within the meaning of Section 3(32) of ERISA; or a person that is deemed to hold “plan assets” under the ERISA plan assets regulations, and consequently subject to regulation under ERISA.

☐ An entity 25% or more of the value of any class of equity of which is held by entities described in the paragraph above; provided that for purposes of making the determination, the value of any equity interest held by a person (other than an entity described in the beginning of this item) who has discretionary authority or control with respect to the assets of the entity or a person who provides investment advice for a fee (direct or indirect) with respect to those assets, or any affiliate of that person, will be disregarded.

☐ A “benefit plan investor” based on the immediately preceding item, that is subject to Title I of ERISA or Section 4975 of the Code.

4. Additional Information.

  BY PURCHASING THE SECURITIES, THE SUBSCRIBER EXPRESSLY ACKNOWLEDGES AND ASSUMES THESE RISKS.

☐ The Subscriber acknowledges that the Subscription Information has been prepared without taking into account the Subscriber’s objectives, financial situation, or needs, or those of any other person. The Subscriber acknowledges that it is recommended that the Subscriber seek independent legal, financial, accounting, and taxation advice before making a decision to acquire, subscribe for, or purchase the Securities.

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¹ For purposes of this paragraph, “net worth” must be calculated as set forth in Rule 501(a) under the Securities Act of 1933, as amended. In general, “net worth” means the excess of total assets at fair market value over total liabilities. For the purposes of determining “net worth,” the primary residence owned by an individual shall be excluded as an asset. Any liabilities secured by the primary residence should be included in total liabilities only if and to the extent that: (1) such liabilities exceed the fair market value of the residence; or (2) such liabilities were incurred within 60 days before the sale of the Securities (other than as a result of the acquisition of the primary residence).

² For purposes of this paragraph, “annual income” must be calculated as set forth in Rule 501(a) under the Securities Act of 1933, as amended, which requires natural persons to consider their income in the two most recent years and a reasonable expectation of income for the current year.

☐ The Subscriber agrees that at any time in the future at which the Subscriber may acquire the Securities, the Subscriber shall be deemed to have reaffirmed, as of the date of acquisition of the Securities, each and every representation and warranty made by the Subscriber in this Agreement or any other instrument provided by the Subscriber to the Company in connection with that acquisition, except to the extent modified in writing by the Subscriber and consented to by the Company.

☐ The Subscriber agrees on behalf of the Subscriber and the Subscriber’s successors and assigns, without further consideration, to prepare, execute, acknowledge, file, record, publish and deliver any other instruments, documents and statements and to take any other actions as the Company may determine to be necessary or appropriate to comply with applicable law and to effectuate and carry out the purposes of this Agreement. The Subscriber further agrees that the Company may, in its sole discretion, refuse to sell me a Security if, among other things, the Subscriber refuses to comply with this provision.

5. Review of Subscription Information.

☐ The Subscriber acknowledges and agrees that the Subscriber has received, and should read and carefully review, the following documents (collectively, the “Subscription Information”) in connection with submitting this Subscriber Questionnaire:

a.	The Offering Circular;
b.	All exhibits to the offering circular, including all “testing the waters” materials filed therewith in compliance with Rule 255 under the Securities Act; and
c.	This Agreement, which sets forth the terms governing my subscription to the Securities, and sets forth certain representations I am making in connection with my subscription to the Securities.

6. Subscriber Information.

Signatory name:     Signatory title (if applicable):      Entity address: Entity Name:

E-Mail Address:
Aggregate Investment (USD value):
Price per Unit in general sale:	$ [●]
Price per Common Share underlying Warrant in general sale:	$ [●]
Payment Method (USD):

☐	I represent and warrant to the Company that the answers provided in this Subscriber Questionnaire are current, true, correct and complete and may be relied upon by the Company and its respective affiliates in evaluating my eligibility, or the eligibility of the entity that I represent, as a Subscriber and determining whether to accept this Agreement. I will notify the Company of any change to the information provided in this Subscriber Questionnaire promptly, but in any event within fifteen days of such change.
☐	I agree to be bound (or, if I am an authorized representative of the Subscriber, I agree that the Subscriber will be bound) by any affirmation, assent or agreement that I transmit to or through this website by computer or other electronic device, including internet, telephonic and wireless devices, including, but not limited to, any consent I give to receive communications from the Company or any of its affiliates solely through electronic transmission. I agree that when I click on an “I Agree,” “I Consent” or other similarly worded button or entry field with my mouse, keystroke or other device, my agreement or consent will be legally binding and enforceable against me (or, if I am an authorized representative of the Subscriber, against the Subscriber) and will be the legal equivalent of my handwritten signature on an agreement that is printed on paper. I agree that the Company and any of their affiliates will send me electronic copies of any and all communications associated with my subscription to the Securities, as provided in Section 6 of this Subscriber Questionnaire and Section 12 below of the Subscription Agreement.
☐	I represent and warrant to the Company that all questions and responses provided by the Subscriber in the course of completing the “purchase flow” process, including without limitation, the information reflected in this Subscriber Questionnaire, as well as Subscriber’s contact information, address, and account information, Subscriber’s social security number if Subscriber is a natural person, and, if Subscriber is an entity, Subscriber’s tax identification number and whether Subscriber is an S Corporation, C Corporation, Grantor Trust, Limited Partnership, General Partnership, Limited Liability Partnership, Limited Liability Company, Estate, or other type of entity, is current, true, correct and complete and may be relied upon by the Company and its respective affiliates. I will notify the Company of any change to this information promptly, but in any event within fifteen days of such change.

7. Insider or Registrant of the Company.

The Subscriber is either:

☐	an “insider” as such term is defined in the Securities Act (British Columbia)3;
☐	a “registrant” as such term is defined in the Securities Act (British Columbia); or
☐	is not an “insider” nor a “registrant”.

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³ As set out in the Securities Act (British Columbia), “insider” means:

(a) a director or an officer of an issuer,

(b) a director or an officer of a person that is itself an insider or a subsidiary of an issuer,

(c) a person that has

(i) beneficial ownership of, or control or direction over, directly or indirectly, or

(ii) a combination of beneficial ownership of, and control or direction over, directly or indirectly,

securities of an issuer carrying more than 10% of the voting rights attached to all the issuer's outstanding voting securities, excluding, for the purpose of the calculation of the percentage held, any securities held by the person as underwriter in the course of a distribution,

(d) an issuer that has purchased, redeemed or otherwise acquired a security of its own issue, for so long as it continues to hold that security,

(e) a person designated as an insider in an order made under section 3.2, or

(f) a person that is in a prescribed class of persons.

8. Present Ownership of Securities.

The Subscriber either:

☐	owns directly or indirectly, or exercises control or direction over, no Common Shares or securities convertible into Common Shares; or
☐	owns directly or indirectly, or exercises control or direction over, ________________ Common Shares and convertible securities entitling the Subscriber to acquire an additional ________________ Common Shares.

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATUTES OR REGULATIONS OF NON-U.S. JURISDICTIONS OR ANY STATE SECURITIES OR BLUE SKY LAWS, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. ALTHOUGH AN OFFERING CIRCULAR ON FORM 1-A FOR A TIER II OFFERING HAS BEEN FILED AND QUALIFIED WITH THE SECURITIES AND EXCHANGE COMMISSION, THAT OFFERING STATEMENT DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A REGISTRATION STATEMENT UNDER THE ACT.

SUBSCRIPTION AGREEMENT

This Subscription Agreement (the “Agreement”) applies to the initial subscription to the Units (defined hereunder) and the Common Shares underlying the Warrants (each as defined hereunder), issued by Draganfly Inc., a company incorporated under the laws of British Columbia, Canada (the “Company”) and is made and entered into by and between the undersigned (the “Subscriber”) and the Company. Subject to the terms and conditions provided in this Agreement, and to the terms of the other Subscriber Agreements, as defined below, the Subscriber wishes to irrevocably subscribe for and purchase (subject to acceptance of such subscription by the Company) certain Securities (as defined below), as set forth in Section 1, offered pursuant to the offering circular with respect to the offer and sale of the Securities in effect and filed with the Securities and Exchange Commission (“SEC”) under Regulation A (“Regulation A”) under the Securities Act of 1933, as amended (“Securities Act”) as of the date hereof (the “Offering Circular”). Each “Unit” of securities is comprised of one common share in the capital of the Company, with no par value per share (each, a “Common Share”), and one Common Share purchase warrant (each whole warrant, a “Warrant”), attached hereto as Exhibit A, to purchase one additional Common Share (each, a “Warrant Share”).The Units and the Common Shares underlying the Warrants are collectively referenced herein as the “Securities”.

The Company’s Common Shares began trading on the Canadian Securities Exchange (“CSE”) in Canada under the symbol “DFLY” on November 5, 2019 and the OTCQB Venture Market of the OTC Markets (“OTCQB”) under the symbol “DFLYF” on January 9, 2020. The closing price of the Common Shares on ●, being the last trading day before the date of the Offering Circular, was US$● on the CSE (the “Closing Price”). The initial public offering price for each Unit is US$● (the “Unit Price”), which is comprised of the Closing Price plus a 5% discount. One Warrant is required to purchase one additional Warrant Share at an exercise price of US$● per Warrant, which includes a 50% increase in premium to the Unit Price, subject to certain adjustments. The Warrants are exercisable immediately and terminating on the date that is the twenty-four (24) month anniversary of issuance of a respective purchaser’s Units in the Offering (defined below) (the “Closing Date”).

A. The Company is a company incorporated under the laws of the Province of British Columbia, Canada.

B. The offering of the Securities (the “Offering”) is described in the Offering Circular that is available through the online website platform located at www.draganfly.com (the “Site”), which is owned and operated by the Company, as well as on the SEC EDGAR website and the SEDAR website. It is the responsibility of the Subscriber to read the Offering Circular and all other Subscription Information (defined below). While these documents are subject to change, the Company advises the Subscriber to print and retain a copy of these documents for the Subscriber’s records. By signing this Agreement electronically, Subscriber agrees to be bound by the terms of the Subscriber Agreements, as defined below, with respect to Subscriber’s subscription to the Securities, and Subscriber agrees that by signing this Agreement electronically, Subscriber is also deemed to have signed each of the remaining Subscriber Agreements, to consent to the Company’s Privacy Notice, and to agree to transact business with the Company and to receive communications relating to the Securities electronically.

C. The Subscriber hereby represents that he, she or it is (i) either (1) a United States citizen or resident or a corporation, partnership, limited liability company, trust, or equivalent legal entity organized under the laws of any state of the United States, (2) a Canadian citizen or resident or a corporation, partnership, limited liability company, trust, or equivalent legal entity organized under the laws of any province or territory of Canada, or (3) neither a United States nor Canadian citizen or resident or a corporation, partnership, limited liability company, trust, or equivalent legal entity organized under the laws of any state of the United States or any province or territory of Canada; and (ii) is either (1) an “accredited investor,” as that term is defined under Regulation D under the Securities Act, (2) is a “qualified purchaser,” as that term is defined under Regulation A under the Securities Act, or (3) is an “accredited investor,” as defined in NI 45-106.

D. Except as the context otherwise requires, any reference in this Agreement to:

1. “Subscription Information” shall mean collectively:

a. The Subscriber Agreements;

b. The Offering Circular;

c. All exhibits to the offering circular, including all “testing the waters” materials filed therewith in compliance with Rule 255 under the Securities Act; and

2. “Draganfly Parties” shall mean the Company and any of its affiliates, and each of their respective directors, managers, officers, shareholders, members, partners, employees or agents.

3. “Subscriber” shall mean the natural person (whether individually or jointly with another person) or entity subscribing for the Securities and also includes the Canadian Subscriber and the International Subscriber unless otherwise indicated.

4. “Subscriber Agreements” shall mean collectively:

a. The questions and responses provided by the Subscriber in the course of completing the “invest flow” process, including without limitation the account information questionnaire, on the Site (the “Subscriber Questionnaire”);

b. The terms of use for the website operated by the Company located at www.draganfly.com (the “Terms of Use”); and

c. This Agreement, which sets forth the terms governing a subscription to the Securities, and sets forth certain representations made in connection with a subscription to the Securities.

SUBSCRIBER’S REPRESENTATIONS, WARRANTIES AND COVENANTS

1. Subscription for and Purchase of the Securities

1.1 Subject to the express terms and conditions of this Agreement, the Subscriber hereby irrevocably subscribes for and agrees to purchase the Securities (the “Purchase”) in the amount of the purchase price (the “Purchase Price”) set forth in the Subscriber Questionnaire.

1.2 The Subscriber must initially purchase at least the minimum number of Securities established by the Company as specified in the Offering Circular. There is no minimum subscription requirement on additional purchases once the Subscriber has purchased this minimum number of Securities.

1.3 Once the Subscriber’s subscription to purchase the Securities is accepted by the Company (as evidenced by the Company’s counter signature to this Agreement), the commitment is irrevocable (except pursuant to Section 17 herein) until the Securities are issued, the Purchase is rejected by the Company, or the Company otherwise determines not to consummate the transaction.

1.4 The Company has the right to reject this Agreement in whole or in part for any reason. Once the Agreement is accepted by the Company, the Subscriber may not cancel, terminate or revoke this Agreement (except pursuant to Section 17 herein), which, in the case of an individual, shall survive his death or disability and shall be binding upon the Subscriber, his heirs, trustees, beneficiaries, executors, personal or legal administrators or representatives, successors, transferees and assigns.

1.5 The Purchase Price for the Securities shall be paid concurrently with the electronic execution and delivery to the Company of this Subscription Agreement. Subscriber shall deliver the Purchase Price to the Company, in accordance with the instructions set forth in the Subscriber Questionnaire. The Subscriber understands that the Company will not accept this Agreement until the full amount of the Purchase Price has been delivered to the Company.

1.6 If this Agreement is accepted by the Company, the Subscriber agrees to comply fully with the terms of the Subscriber Agreements. The Subscriber further agrees to execute any other necessary documents or instruments in connection with this subscription and the Subscriber’s purchase of the Securities.

1.7 Subscriber understands and acknowledges that the Purchase Price for the Securities will be immediately available to the Company acceptance of the subscription by the Company. If this Agreement is accepted by the Company, the Subscriber hereby authorizes the Company to utilize the cash proceeds in the Company’s sole discretion in accordance with the use of proceeds provided in the Offering Circular (the “Closing”).

1.8 In the event that (i) this Agreement is rejected in full or (ii) this Agreement is terminated in accordance with Section 17 following its acceptance (in full or in part), the Company will direct any payment made by the Subscriber to the Company for the Securities that has not previously been refunded to be refunded to the Subscriber by the Company without interest and without deduction, and all of the obligations of the Subscriber hereunder shall terminate. To the extent that this Agreement is rejected in part, the Company shall refund to the Subscriber any payment made by the Subscriber to the Company with respect to the rejected portion of this subscription without interest and without deduction, and all of the obligations of Subscriber hereunder shall remain in full force and effect except for those obligations with respect to the rejected portion of this subscription, which shall terminate.

1.9 Upon acceptance of this Agreement by the Company and payment of the Purchase Price by the Subscriber and receipt of the Purchase Price by the Company, the Company agrees to deliver the Securities to the Subscriber at the Closing as described in the Offering Circular, subject to the terms of this Agreement, and in all cases understanding that the Company has full discretion to accept or reject this Agreement at any time prior to Closing.

2. Subscriber’s Review of Information and Subscription Decision.

2.1 The Subscriber acknowledges and understands that it is solely the Subscriber’s responsibility to read the Subscription Information and make a determination to subscribe to the Securities. The Subscriber and/or the Subscriber’s advisers, who are not affiliated with and not compensated directly or indirectly by any of the Draganfly Parties, have such knowledge and experience in business and financial matters as will enable them to utilize the information which they have received in connection with the Company and its business to evaluate the merits and risks of a subscription, to make an informed decision and to protect Subscriber’s own interests in connection with the Purchase. The Subscriber understands that Greenberg Traurig, LLP acts as counsel only to the Company and does not represent the Subscriber or any other person by reason of purchasing the Securities.

2.2 The Subscriber is subscribing for and purchasing the Securities without being furnished any offering literature other than the Subscription Information, and is making this subscription decision solely in reliance upon the information contained in the Subscription Information and upon any investigation made by the Subscriber or Subscriber’s advisers, but not on any recommendation to subscribe to the Securities by any Draganfly Party.

2.3 The Subscriber’s subscription to the Securities is consistent with the purposes, objectives and cash flow requirements of the Subscriber.

2.4 The Subscriber understands that the Securities being purchased are a speculative purchase that involves a substantial degree of risk of loss of the Subscriber’s entire purchase price in the Securities, and the Subscriber understands and is fully cognizant of the risk factors related to the purchase of the Securities. The Subscriber has received and has had the opportunity to review the Subscription Information including the risk factors set forth in the Offering Circular. Neither the Company nor anyone on its behalf has made any representations (whether written or oral) to the Subscriber (i) regarding the future value or utility of the Securities or (ii) that the past business performance and experience of the Draganfly Parties will in any way predict the current or future value or utility of the Securities.

2.5 The Subscriber understands that any forecasts or predictions as to the Company’s performance are based on estimates, assumptions and forecasts that the Company believes to be reasonable but that may prove to be materially incorrect, and no assurance is given that actual results will correspond with the results contemplated by the various forecasts.

2.6 At no time has it been expressly or implicitly represented, guaranteed or warranted to the Subscriber by the Company, any other Draganfly Party, or any other person that:

2.6.1 a percentage of profit and/or amount or type of gain or other consideration will be realized as a result of this subscription; or

2.6.2 the past performance or experience of any other purchase sponsored by any Draganfly Party in any way indicates the predictable or probable results of the ownership of the Securities or the overall venture.

2.7 The Subscriber represents and agrees that none of the Draganfly Parties have recommended or suggested the acquisition of Securities to the Subscriber.

3. Subscriber’s Representations Related to a Subscription in the Securities.

3.1 The Subscriber, if an entity, is, and shall at all times while it holds the Securities remain, duly organized, validly existing and in good standing under the laws of the state, province or other jurisdiction of the country of its incorporation or organization, having full power and authority to own its properties and to carry on its business as conducted. The Subscriber, if a natural person, is eighteen years of age or older, competent to enter into a contractual obligation, and, if a U.S. Subscriber or Canadian Subscriber, a citizen or resident of the United States of America or Canada, respectively. The principal place of business or principal residence of the Subscriber is as shown in the Subscriber Questionnaire.

3.2 The Subscriber has the requisite power and authority to deliver this Agreement, perform his, her or its obligations set forth in this Agreement, and consummate the transactions contemplated in this Agreement. The Subscriber has duly executed and delivered this Agreement and has obtained the necessary authorization to execute and deliver this Agreement and to perform his, her or its obligations in this Agreement and to consummate the transactions contemplated in this Agreement. This Agreement, assuming the due execution and delivery hereof by the Company, is a legal, valid and binding obligation of the Subscriber enforceable against the Subscriber in accordance with its terms.

3.3 The Subscriber is subscribing for and purchasing the Securities solely for the Subscriber’s own account, and not with a view toward or in connection with resale, distribution (other than to its shareholders or members, if any), subdivision or fractionalization thereof. The Subscriber has no agreement or other arrangement, formal or informal, with any person or entity to sell, transfer or pledge any part of the Securities, or which would guarantee the Subscriber any profit, or insure against any loss with respect to the Securities, and the Subscriber has no plans to enter into any such agreement or arrangement.

3.4 The Subscriber represents and warrants that the execution and delivery of this Agreement, the consummation of the transactions contemplated in this Agreement and the performance of the obligations outlined in this Agreement will not conflict with or result in any violation of or default under any provision of any other agreement or instrument to which the Subscriber is a party or any license, permit, franchise, judgment, order, writ or decree, or any statute, rule or regulation, applicable to the Subscriber. The Subscriber confirms that the consummation of the transactions envisioned in this Agreement, including, but not limited to, the Subscriber’s Purchase, will not violate any domestic or foreign law and that such transactions are lawful in the Subscriber’s country of citizenship and residence.

3.5 The Subscriber is able to bear the economic risk of this purchase and, without limiting the generality of the foregoing, is able to hold the Securities for an indefinite period of time. The Subscriber has adequate means to provide for the Subscriber’s current needs and personal contingencies and has a sufficient net worth to sustain the loss of the Subscriber’s entire subscription in the Securities.

3.6 Neither (i) the Subscriber, (ii) any of its directors, executive officers, other officers that may serve as director or officer of any company in which it invests, general partners or managing partners, nor (iii) any beneficial owner of the Company’s voting equity securities (in accordance with Rule 262 of the Securities Act) held by the Subscriber is subject to any Disqualifying Event¹ except for Disqualifying Events covered by Rule 262(b)(2) or (3) or Rule 262(c) under the Securities Act and disclosed reasonably in advance of the Purchase in writing in reasonable detail to the Company.

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¹ “Disqualifying Event” means the following: 

3.7 The Subscriber understands that no state, federal or foreign authority has scrutinized this Agreement or the Securities offered pursuant hereto, has made any finding or determination relating to the fairness for purchase of the Securities, or has recommended or endorsed the Securities, and that the Securities have not been registered under the Securities Act or any state or foreign securities laws, in reliance upon exemptions from registration thereunder.

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(1) within the past ten years, conviction of a felony or misdemeanor (i) in connection with the purchase or sale of any security; (ii) involving the making of any false filing with the SEC or (iii) arising out of the conduct of the business of being an underwriter, broker, dealer, municipal securities dealer, investment advisor or paid solicitor of purchasers of securities;

(2) was the subject to an order, judgment or decree of any court of competent jurisdiction, entered within the prior five years, that restrains or enjoins the Subscriber from engaging or continuing to engage in any conduct or practice (i) in connection with the purchase or sale of any security; (ii) involving the making of any false filings with the SEC; or (iii) arising out of the conduct of the business of being an underwriter, broker, dealer, municipal securities dealer, investment advisor or paid solicitor of purchasers of securities;

(3) the subject of a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U.S. Commodity Futures Trading Commission; or the National Credit Union Administration that (i) bars the Subscriber from (a) association with an entity regulated by such commission, authority, agency, or officer, (b) engaging in the business of securities, insurance or banking or (c) engaging in savings association or credit union activities; or (ii) constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within the past ten years;

(4) subject to an order of the SEC entered pursuant to section 15(b) or 15B(c) of the Securities Exchange Act of 1934 or section 203(e) or (f) of the Investment Advisers Act of 1940 that (i) suspends the Subscriber’s registration as a broker, dealer, municipal securities dealer or investment adviser; (ii) places limitations on the Subscriber’s activities, functions or operations of, or imposes civil money penalties on the Subscriber; or (iii) bars the Subscriber from being associated with any entity or from participating in the offering of any penny stock;

(5) subject to any order of SEC entered within the prior five years that orders the Subscriber to cease and desist from committing or causing a violation or future violation of (i) any scienter-based anti-fraud provision of the federal securities laws or (ii) Section 5 of the Securities Act;

(6) suspension or expulsion from membership in, or suspension or bar from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade;

(7) having filed (as a registrant or issuer), or named as an underwriter in any registration statement or Regulation A offering statement filed with the SEC that, within the past five years, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is currently the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; and

(8) was subject to a United States Postal Services (“USPS”) false representation order entered within the previous five years, or currently is subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the USPS to constitute a scheme or device for obtaining money or property through the mail by means of false representations.

3.8 Subscriber represents and warrants that Subscriber: (a) (1) is not located or domiciled; (2) does not have a place of business; or (3) is not a Resident of, or located in, a jurisdiction that is subject to U.S. or other sovereign country sanctions or embargoes, or (2) an individual, or an individual employed by or associated with an entity, identified on the U.S. Department of Commerce’s Denied Persons or Entity List, the U.S. Department of Treasury’s Specially Designated Nationals or Blocked Persons Lists, or the U.S. Department of State’s Debarred Parties List. Subscriber agrees that if Subscriber’s country of residence or other circumstances change such that the above representations are no longer accurate, Subscriber will immediately cease using the Securities. Subscriber further represents and warrants that if Subscriber is purchasing the right to receive the Securities on behalf of a legal entity: (1) such legal entity is duly organized and validly existing under the applicable laws of the jurisdiction of its organization, and (2) Subscriber is duly authorized by such legal entity to act on its behalf.

4. Subscriber’s Lock-Up Period.

4.1 The Common Shares and Warrants will be separately transferable following the termination of (i) any transfer hold periods under applicable law and (ii) the following contractual lock-up period: The Subscriber understands that it is subject to a 9-month “lock-up” from the Closing Date of the Offering relating to the Units, Common Shares, and Warrants purchased in the Offering. This means that, for a period of 9 months following the Closing Date of the Offering, the Subscriber may not, with limited exceptions, sell or agree to sell any of the Units or components thereof - the Common Shares or Warrants - or enter into any agreement or arrangement to transfer to another, in whole or in part, any of the economic consequences of ownership of the Units, Common Shares or Warrants, without the prior written consent of the Company pursuant to the terms of this lock-up agreement.

5. Information Provided by Subscriber.

5.1 The information that the Subscriber has furnished in the Investor Questionnaire, including (without limitation) the information furnished by the Subscriber to the Company regarding whether Subscriber qualifies as (i) an “accredited investor” as that term is defined in Rule 501 under Regulation D under the Securities Act, (ii) a “qualified purchaser” as that term is defined in Rule 256 under Regulation A under the Securities Act and/or (iii) an “accredited investor” as defined under NI 45-106, is correct and complete as of the date of this Agreement and will be correct and complete on the date, if any, that the Company accepts this Agreement. Further, the Subscriber shall immediately notify the Company of any change in any statement made in this Agreement prior to the Subscriber’s receipt of the Company’s acceptance of this Agreement, including, without limitation, Subscriber’s status as an “accredited investor” and/or a “qualified purchaser.” The representations and warranties made by the Subscriber may be fully relied upon by the Company, and any other Draganfly Party, and by any investigating party relying on them. The Subscriber acknowledges and agrees that the Subscriber shall be liable for any loss, liability, claim, damage and expense whatsoever (including all expenses incurred in investigating, preparing or defending against any claim whatsoever) arising out of or based upon any inaccuracy in the representations and warranties in the information provided by the Subscriber.

5.2 The Subscriber confirms that all information and documentation provided to the Company, including but not limited to all information regarding the Subscriber’s identity and source of funds to be used to purchase the Securities, is true, correct and complete. The Subscriber is currently a bona fide resident of the state or jurisdiction set forth in the current address provided to the Company. The Subscriber has no present intention of becoming a resident of any other state or jurisdiction.

5.3 The representations, warranties, agreement, undertakings and acknowledgments made by the Subscriber in this Agreement will be relied upon by the Draganfly Parties and counsel to the Company in determining, among other things, whether to allow the Subscriber to purchase the Securities. The representations, warranties, agreements, undertakings and acknowledgments made by the Subscriber in this Agreement shall survive the Subscriber’s purchase of the Securities. The Subscriber agrees to notify the Company immediately if any of the Subscriber’s representations, warranties and covenants contained in this Agreement become untrue or incomplete in any respect.

5.4 The Draganfly Parties may rely conclusively upon and shall incur no liability in respect of any action taken upon any notice, consent, request, instructions or other instrument believed in good faith to be genuine or to be signed by properly authorized persons of the Subscriber.

6. Rights to Use Subscriber Information.

6.1 The Subscriber agrees and consents that the Draganfly Parties and any administrator appointed from time to time with respect to the Company (the “Administrator”) may obtain, hold, use, disclose, transfer, and otherwise process the Subscriber’s data, including but not limited to the contents of the Subscription Agreements:

6.1.1 as the Draganfly Parties or the Administrator reasonably deem necessary or appropriate to facilitate the acceptance, management and administration of the Subscriber’s subscription for the Securities, on an ongoing basis;

6.1.2 to provide notice of, and/or to seek consent to uses or disclosures of such data for specific purposes;

6.1.3 for any specific purposes where the Subscriber has given specific consent to do so;

6.1.4 to carry out statistical analysis and market research, whereby the products of such statistical analysis or market research are not disclosed outside of the Draganfly Parties or the Administrator on a basis in which Subscriber is identifiable without the Subscriber’s specific consent;

6.1.5 as the Draganfly Parties or the Administrator reasonably deem necessary or appropriate to comply with legal process, court orders, or other legal, regulatory, or self-regulatory requirements, requests, or investigations applicable to the Draganfly Parties, the Administrator or the Subscriber, including, but not limited to, in connection with anti-money laundering and similar laws, or to establish the availability under any applicable law of an exemption from registration of the Securities or to establish compliance with applicable law generally by the Draganfly Parties;

6.1.6 for disclosure or transfer to third parties, including the Subscriber’s financial adviser (where appropriate), regulatory bodies, auditors or technology providers to any of the Draganfly Parties or the Administrator, as reasonably necessary for the purposes described in this Section 6.1; and

6.1.7 for any other purposes described in the Privacy Notice or the Subscriber Agreements.

6.2 The Subscriber agrees and consents to disclosure by the Draganfly Parties or the Administrator to relevant third parties of information pertaining to the Subscriber in respect of disclosure and compliance policies or information requests related thereto.

6.3 The Subscriber authorizes the Draganfly Parties and any of their agents to disclose the Subscriber’s nonpublic personal information to comply with regulatory and contractual requirements applicable to the Draganfly Parties. Any such disclosure shall, to the fullest extent permitted by law, be permitted notwithstanding any privacy policy or similar restrictions regarding the disclosure of the Subscriber’s nonpublic personal information.

7. Relationship Between Subscriber and the Draganfly Parties.

7.1 Subscriber acknowledges and agrees that the purchase and sale of the Securities pursuant to this Agreement is an arms-length transaction between the Subscriber and the Company. In connection with the purchase and sale of the Securities, none of the Company nor any other Draganfly Party is acting as the Subscriber’s agent or fiduciary. The Draganfly Parties assume no advisory or fiduciary responsibility in connection with the Securities. The Draganfly Parties have not provided Subscriber with any legal, accounting, regulatory or tax advice with respect to the Securities, and Subscriber has consulted its own respective legal, accounting, regulatory and tax advisers to the extent Subscriber deems appropriate.

8. Regulatory Limitations and Requirements.

8.1 The Subscriber understands, acknowledges and agrees that the sale of the Securities contemplated in this Agreement is not fully registered with the SEC because it is being made in reliance on Regulation A under the Securities Act, which exempts the Company from certain reporting and other requirements related to the Company, the Securities and their sale, and that the Company is not registered or licensed with any federal or state regulator as an investment adviser, broker-dealer, or under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) or the Investment Company Act of 1940 (“1940 Act”). As a result, the Subscriber will not be afforded the full set of protections provided to the clients and customers of such entities under the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Advisers Act or the 1940 Act.

8.2 The Subscriber understands and agrees that if, at any time, it is determined that the Company is not in compliance with the Securities Act, the Exchange Act, the Advisers Act, or the 1940 Act, or is otherwise not in compliance with applicable law, the Company may take any corrective action it determines is appropriate, in its sole and absolute discretion.

8.3 The Subscriber understands that the Securities are not legal tender, are not backed by the government, and accounts and value balances are not subject to Federal Deposit Insurance Corporation or Securities Purchaser Protection Corporation protections.

8.4 The Subscriber understands that he or she may be barred from purchasing the Securities if the Subscriber is (i) an employee benefit plan that is subject to the fiduciary responsibility standards and prohibited transaction restrictions of part 4 of Title I of U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) any plan to which Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) applies, (iii) a private investment fund or other entity whose assets are treated as “plan assets” for purposes of ERISA and Section 4975 of the Code or (iv) an insurance company, whose general account assets are treated as “plan assets” for purposes of ERISA and Section 4975 of the Code. The Subscriber has notified the Company if it falls into (i) — (iv) of this paragraph.

8.5. THE SUBSCRIBER REPRESENTS AND WARRANTS THAT IT WILL REVIEW AND CONFIRM THE INFORMATION PROVIDED ON AN INTERNAL REVENUE SERVICE (THE “IRS”) FORM W-9, WHICH WILL BE GENERATED AND PROVIDED TO THE COMPANY VIA THE SITE. THE SUBSCRIBER CERTIFIES THAT THE FORM W-9 INFORMATION CONTAINED IN THE EXECUTED COPY (OR COPIES) OF IRS FORM W-9 (AND ANY ACCOMPANYING REQUIRED DOCUMENTATION), AS APPLICABLE, WHEN SUBMITTED TO THE COMPANY WILL BE TRUE, CORRECT AND COMPLETE. THE SUBSCRIBER SHALL (I) PROMPTLY INFORM THE COMPANY OF ANY CHANGE IN SUCH INFORMATION, AND (II) FURNISH TO THE COMPANY A NEW PROPERLY COMPLETED AND EXECUTED FORM, CERTIFICATE OR ATTACHMENT, AS APPLICABLE, AS MAY BE REQUIRED UNDER THE INTERNAL REVENUE SERVICE INSTRUCTIONS TO SUCH FORM W-9, THE CODE OR ANY APPLICABLE TREASURY REGULATIONS OR AS MAY BE REQUESTED FROM TIME TO TIME BY THE COMPANY.

8.5.1 THE CANADIAN SUBSCRIBER AND/OR THE INTERNATIONAL SUBSCRIBER, AS APPLICABLE, REPRESENTS AND WARRANTS THAT HE/SHE/IT HAS REVIEWED THE CANADIAN AND INTERNATIONAL SUPPLEMENT ATTACHED HERETO AS ANNEX I AND THAT HE/SHE/IT IS IN COMPLIANCE WITH ANY REQUIREMENTS OF THE NON-U.S. JURISDICTION (THE “INTERNATIONAL JURISDICTION”) IN WHICH HE/SHE/IT RESIDES OR IS DOMICILED AND WILL NOTIFY THE COMPANY IF NO LONGER IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH INTERNATIONAL JURISDICTION.

8.6 If the Subscriber is not a United States person (as defined by Section 7701(a)(30) of the Code), the Subscriber hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Subscription Agreement, including (i) the legal requirements within its jurisdiction for the Purchase of the Securities, (ii) any foreign exchange restrictions applicable to the Purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. The Subscriber’s subscription and payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Subscriber’s jurisdiction.

8.7 It is the intent of the Draganfly Parties to comply with all applicable federal, state and local laws designed to combat money laundering and similar illegal activities. Subscriber hereby represents, covenants, and agrees that, to the best of Subscriber’s knowledge based on reasonable investigation:

8.7.1 None of the Subscriber’s funds tendered for the Purchase Price (whether payable in cash or otherwise) shall be derived from money laundering or similar activities deemed illegal under federal laws and regulations.

8.7.2 To the extent within the Subscriber’s control, none of the Subscriber’s funds tendered for the Purchase Price (whether payable in cash or otherwise) will cause any Draganfly Party to be in violation of federal anti-money laundering laws or regulations.

8.7.3 When requested by the Company, the Subscriber will provide any and all additional information, and the Subscriber understands and agrees that the Company or any other Draganfly Party may release confidential information about the Subscriber and, if applicable, any underlying beneficial owner or Related Person² to U.S. regulators and law enforcement authorities, deemed reasonably necessary to ensure compliance with all applicable laws and regulations concerning money laundering and similar activities. The Company reserves the right to request any information as is necessary to verify the identity of the Subscriber and the source of any payment to the Company. In the event of delay or failure by the Subscriber to produce any information required for verification purposes, a subscription by the Subscriber may be refused.

8.7.4 Neither the Subscriber, nor any person or entity controlled by, controlling or under common control with the Subscriber, nor any of the Subscriber’s beneficial owners, nor any person for whom the Subscriber is acting as agent or nominee in connection with this subscription, nor, in the case of a Subscriber which is an entity, any Related Person is:

a. a Prohibited Subscriber;³

b. a Senior Foreign Political Figure,⁴ any member of a Senior Foreign Political Figure’s “immediate family,” which includes the figure’s parents, siblings, spouse, children and in-laws, or any Close Associate of a Senior Foreign Political Figure,⁵ or a person or entity resident in, or organized or chartered under, the laws of a Non-Cooperative Jurisdiction;⁶ or

c. a person or entity resident in, or organized or chartered under, the laws of a jurisdiction that has been designated by the U.S. Secretary of the Treasury under Section 311 of the Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 as warranting special measures due to money laundering concerns.

___________________ 

2 “Related Person” shall mean, with respect to any entity, any interest holder, director, senior officer, trustee, beneficiary or grantor of such entity; provided that in the case of an entity that is a publicly traded company or a tax qualified pension or retirement plan in which at least 100 employees participate that is maintained by an employer that is organized in the U.S. or is a U.S. government entity, the term “Related Person” shall exclude any interest holder holding less than 5% of any class of securities of such publicly traded company and beneficiaries of such plan.

3 “Prohibited Subscriber” shall mean a person or entity whose name appears on (i) the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control; (ii) other lists of prohibited persons and entities as may be mandated by applicable law or regulation; or (iii) such other lists of prohibited persons and entities as may be provided to any Draganfly Party in connection therewith.

4 “Senior Foreign Political Figure” shall mean a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a Senior Foreign Political Figure includes any corporation, business or other entity that has been formed by, or for the benefit of, a Senior Foreign Political Figure.

5 “Close Associate of a Senior Foreign Political Figure” shall mean a person who is widely and publicly known internationally to maintain an unusually close relationship with the Senior Foreign Political Figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the Senior Foreign Political Figure.

6 “Non-Cooperative Jurisdiction” shall mean any foreign country that has been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force, of which the U.S. is a member and with which designation the U.S. representative to the group or organization continues to concur.

8.7.5 The Subscriber hereby agrees to immediately notify the Company if the Subscriber knows, or has reason to suspect, that any of the representations in this Section 8.7 have become incorrect or if there is any change in the information affecting these representations and covenants.

8.7.6 The Subscriber agrees that, if at any time it is discovered that any of the foregoing anti-money laundering representations are incorrect, or if otherwise required by applicable laws or regulations, the Company may undertake appropriate actions, and the Subscriber agrees to cooperate with such actions, to ensure compliance with such laws or regulations.

8.7.7 The Subscriber acknowledges and agrees that the Company, in complying with anti-money laundering statutes, regulations and goals, may file any information with governmental and law enforcement agencies to identify transactions and activities that the Company or its agents reasonably determines to be suspicious, or as otherwise required by law.

9. Tax Requirements.

9.1 The Subscriber certifies that the Subscriber has completed and submitted any required waiver of local privacy laws that could otherwise prevent disclosure of information to the Company, the IRS or any other governmental authority for purposes of Chapter 3, Chapter 4 or Chapter 61 of the Internal Revenue Code (the “Code”) (including without limitation in connection with FATCA, as defined below) or any intergovernmental agreement entered into in connection with the implementation of the FATCA (an “IGA”), and any other documentation required to establish an exemption from, or reduction in, withholding tax or to permit the Company to comply with information reporting requirements pursuant to Chapter 3, Chapter 4 or Chapter 61 of the Code (including, without limitation, in connection with FATCA or any IGA).

9.2 The Subscriber further certifies that the Subscriber will provide to the Company prior to the Closing an IRS Form W-9, appropriate IRS Form W-8 or other applicable IRS Forms and any additional documentation required by the Company for purposes of satisfying the Company’s obligations under the Code, and in any event the Company may require such documentation prior to the delivery of the Securities to the Subscriber.

9.3 The Subscriber will (a) provide, upon request, prompt written notice to the Company, and in any event within 30 days of such request, of any change in the Subscriber’s U.S. tax or withholding status, and (b) execute properly and provide to the Company, within 30 days of written request by the Company, any other tax documentation or information that may be reasonably required by the Company in connection with the operation of the Company to comply with applicable laws and regulations (including, but not limited to, the name, address and taxpayer identification number of any “substantial U.S. owner” (as defined in the Code) of the Subscriber or any other document or information requested by the Company in connection with the Company complying with FATCA and/or any IGA or as required to reduce or eliminate any withholding tax directly or indirectly imposed on or collected by or with respect to the Company), and (c) execute and properly provide to the Company, within 30 days of written request by the Company, any tax documentation or information that may be requested by the Company.

9.4 The Subscriber further consents to the reporting of the information provided pursuant to this Section 9, in addition to certain other information, including, but not limited to, the value of the Subscriber’s purchase of the Securities to the IRS or any other governmental authority if the Company is required to do so under FATCA.

9.5 As used in this Agreement, “FATCA” means one or more of the following, as the context requires: (i) Sections 1471 through 1474 of the Code and any associated legislation, regulations or guidance, or similar legislation, regulations or guidance enacted in any other jurisdiction which seeks to implement equivalent tax reporting, financial or tax information sharing, and/or withholding tax regimes, (ii) any intergovernmental agreement, treaty or any other arrangement between the United States and an applicable foreign country, entered into to facilitate, implement, comply with or supplement the legislation, regulations or guidance described in the foregoing clause (i), and (iii) any legislation, regulations or guidance implemented in a jurisdiction to give effect to the foregoing clauses (i) or (ii).

9.6 By executing this Agreement, the Subscriber understands and acknowledges that (i) the Company may be required to provide the identities of the Subscriber’s direct and indirect beneficial owners to a governmental entity, and (ii) the Subscriber hereby waives any provision of law and/or regulation of any jurisdiction that would, absent a waiver, prevent the Company from compliance with the foregoing and otherwise with applicable law as described in this Section 9.

9.7 The Subscriber confirms that the Subscriber has been advised to consult with the Subscriber’s independent attorney regarding legal matters concerning the Company and to consult with independent tax advisers regarding the tax consequences of purchasing the Securities. The Subscriber acknowledges that Subscriber has received a copy of the Offering Circular regarding certain tax consequences of purchasing the Securities, subject to adoption of new laws or regulations or amendments to existing laws or regulations. The Subscriber acknowledges and agrees that none of the Draganfly Parties are providing any warranty or assurance regarding the tax consequences to the Subscriber by reason of the Purchase.

10. Other Risks.

10.1 The Subscriber (i) is able to bear the economic cost of holding the Securities for an indefinite period of time; (ii) has adequate means of providing for his, her, or its current needs and possible personal contingencies even in the event that the Securities lose all of their value; and (iii) has no need for liquidity of the Securities. The Subscriber’s purchase of the Securities is consistent with the objectives and cash flow requirements of the Subscriber and will not adversely affect the Subscriber’s overall need for diversification and liquidity.

10.2 The Subscriber is solely responsible for reviewing, understanding and considering the risks above and any additional risks, including without limitation those described in the Offering Circular. The Company’s operations, financial condition, and results of operations could be materially and adversely affected by any one or more of those risk factors, as could the underlying value of each Subscriber’s Securities, which may lead to the Securities losing all value.

11. Transfer and Storage of Personal Data.

11.1 The Subscriber understands and agrees that in connection with the services provided by the Company, its personal data may be transferred and/or stored in various jurisdictions in which the Draganfly Parties have a presence, including in or to jurisdictions that may not offer a level of personal data protection equivalent to the Subscriber’s country of residence.

11.2 The Subscriber further understands and agrees that, although the Draganfly Parties will use their reasonable efforts to maintain the confidentiality of the information provided in the Subscriber Questionnaire, the Draganfly Parties may disclose or transfer the Subscriber Agreements, and disclose or transfer other data of Subscriber, as described in Section 6.1. Any disclosure, use, storage or transfer of information for these purposes shall not be treated as a breach of any restriction upon the disclosure, use, storage or transfer of information imposed on any person by law or otherwise.

12. Consent to Electronic Delivery of Notices, Disclosures and Forms.

12.1 The Subscriber understands that, to the fullest extent permitted by law, any notices, disclosures, forms, privacy statements, reports or other communications (collectively, “Communications”) regarding the Company, the Subscriber’s purchase of the Securities (including annual and other updates and tax documents) may be delivered by electronic means, such as by e-mail. The Subscriber hereby consents to electronic delivery as described in the preceding sentence. In so consenting, the Subscriber acknowledges that e-mail messages are not secure and may contain computer viruses or other defects, may not be accurately replicated on other systems or may be intercepted, deleted or interfered with, with or without the knowledge of the sender or the intended recipient. The Subscriber also acknowledges that an e-mail from the Draganfly Parties may be accessed by recipients other than the Subscriber and may be interfered with, may contain computer viruses or other defects and may not be successfully replicated on other systems. No Draganfly Party gives any warranties in relation to these matters. The Subscriber further understands and agrees to each of the following:

12.1.1 Other than with respect to tax documents in the case of an election to receive paper versions, none of the Draganfly Parties or the Administrator will be under any obligation to provide the Subscriber with paper versions of any Communications.

12.1.2 Electronic Communications may be provided to the Subscriber via e-mail or a website of a Draganfly Party upon written notice of such website’s internet address to such Subscriber. In order to view and retain the Communications, the Subscriber’s computer hardware and software must, at a minimum, be capable of accessing the Internet, with connectivity to an internet service provider or any other capable communications medium, and with software capable of viewing and printing a portable document format (PDF) file created by Adobe Acrobat. Further, the Subscriber must have a personal e-mail address capable of sending and receiving e-mail messages to and from the Draganfly Parties or the Administrator. To print the documents, the Subscriber will need access to a printer compatible with his or her hardware and the required software.

12.1.3 If these software or hardware requirements change in the future, a Draganfly Party will notify the Subscriber through the Site or other written notification.

12.1.4 To facilitate these services, the Subscriber must provide the Company with his or her current e-mail address and update that information as necessary. Unless otherwise required by law, the Subscriber will be deemed to have received any electronic Communications that are sent to the most current e-mail address that the Subscriber has provided to the Company in writing.

12.1.5 None of the Draganfly Parties or the Administrator will assume liability for non-receipt of notification of the availability of electronic Communications in the event the Subscriber’s e-mail address on file is invalid; the Subscriber’s e-mail or Internet service provider filters the notification as “spam” or “junk mail”; there is a malfunction in the Subscriber’s computer, browser, internet service or software; or for other reasons beyond the control of the Draganfly Parties or the Administrator.

12.2 Solely with respect to the provision of tax documents by a Draganfly Party, the Subscriber agrees to each of the following:

12.2.1 If the Subscriber does not consent to receive tax documents electronically, a paper copy will be provided.

12.2.2 The Subscriber’s consent to receive tax documents electronically continues for every tax year of the Company until the Subscriber withdraws its consent by notifying the Company in writing.

13. Bankruptcy.

In the event that the Subscriber files or enters bankruptcy, insolvency or other similar proceeding, Subscriber agrees to use the best efforts possible to avoid any Draganfly Parties being named as a party or otherwise involved in the bankruptcy proceeding. Furthermore, this Agreement should be interpreted so as to prevent, to the maximum extent permitted by applicable law, any bankruptcy trustee, receiver or debtor-in-possession from asserting, requiring or seeking that (i) Subscriber be allowed to return the Securities to the Company for a refund or (ii) the Company being mandated or ordered to redeem or withdraw the Securities held or owned by Subscriber.

14. Limitations on Damages.

14.1 IN NO EVENT SHALL THE COMPANY OR ANY OTHER DRAGANFLY PARTY BE LIABLE TO THE SUBSCRIBER FOR ANY LOST PROFITS OR SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING SHALL BE INTERPRETED AND HAVE EFFECT TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, RULE OR REGULATION.

14.2 IN NO EVENT WILL THE AGGREGATE LIABILITY OF THE COMPANY AND THE DRAGANFLY PARTIES (JOINTLY), WHETHER IN CONTRACT, WARRANTY, TORT (INCLUDING NEGLIGENCE, WHETHER ACTIVE, PASSIVE OR IMPUTED), OR OTHER THEORY, ARISING OUT OF OR RELATING TO THESE TERMS EXCEED THE AMOUNT SUBSCRIBER PAYS TO THE COMPANY FOR THE SECURITIES.

15. Arbitration. PLEASE READ SECTIONS 15.1 THROUGH 15.9 CAREFULLY BECAUSE THEY CONTAIN ADDITIONAL PROVISIONS APPLICABLE ONLY TO INDIVIDUALS LOCATED, RESIDENT OR DOMICILED IN THE UNITED STATES. IF THE SUBSCRIBER IS LOCATED, RESIDENT OR DOMICILED IN THE UNITED STATES, THIS SECTION REQUIRES THE SUBSCRIBER TO ARBITRATE CERTAIN DISPUTES AND CLAIMS WITH THE COMPANY AND LIMITS THE MANNER IN WHICH A SUBSCRIBER CAN SEEK RELIEF FROM THE COMPANY.

15.1 Either party may, at its sole election, require that the sole and exclusive forum and remedy for resolution of a Claim be final and binding arbitration pursuant to this Section 15 (this “Arbitration Provision”). The arbitration shall be conducted in Los Angeles, California. As used in this Arbitration Provision, “Claim” shall include any past, present, or future claim, dispute, or controversy involving Subscriber (or persons claiming through or connected with Subscriber), on the one hand, and any of the Draganfly Parties (or persons claiming through or connected with the Draganfly Parties), on the other hand, relating to or arising out of this Agreement, any Securities, the Site, and/or the activities or relationships that involve, lead to, or result from any of the foregoing, including (except to the extent provided otherwise in the last sentence of Section 15.5 below) the validity or enforceability of this Arbitration Provision, any part of this Arbitration Provision, or the entire Agreement; provided, however, that “Claims” shall not be deemed to include any claims or disputes arising out of alleged breaches or violations of the federal and state securities laws of the United States. Claims are subject to arbitration regardless of whether they arise from contract; tort (intentional or otherwise); a constitution, statute, common law, or principles of equity; or otherwise. Claims include (without limitation) matters arising as initial claims, counter-claims, cross-claims, third-party claims, or otherwise. The scope of this Arbitration Provision is to be given the broadest possible interpretation that is enforceable.

15.2 The party initiating arbitration shall do so with the American Arbitration Association or the Judicial Arbitration and Mediation Services, in accordance with their rules governing commercial arbitrations. Provided however, that the parties hereby agree that only one arbitrator shall hear and determine their dispute. In the case of a conflict between the rules and policies of the administrator and this Arbitration Provision, this Arbitration Provision shall control, subject to countervailing law, unless all parties to the arbitration consent to have the rules and policies of the administrator apply.

15.3 Each party shall bear the expense of its own attorney’s fees, except as otherwise provided by law. If a statute gives Subscriber the right to recover any of these fees, these statutory rights shall apply in the arbitration notwithstanding anything to the contrary in this Agreement, and the parties hereby consent to a determination by the arbitrator of a party’s entitlement to recover fees and the reasonable amount thereof.

15.4 Within 30 days of a final award by the arbitrator, a party may appeal the award for reconsideration by a three-arbitrator panel selected according to the rules of the arbitrator administrator. In the event of such an appeal, an opposing party may cross-appeal within 30 days after notice of the appeal. The panel will reconsider de novo all aspects of the initial award that are appealed. Costs and conduct of any appeal shall be governed by this Arbitration Provision and the administrator’s rules, in the same way as the initial arbitration proceeding. Any award by the individual arbitrator that is not subject to appeal, and any panel award on appeal, shall be final and binding, except for any appeal right under the Federal Arbitration Act (the “FAA”), and may be entered as a judgment in any court of competent jurisdiction.

15.5 The Draganfly Parties agree not to invoke their right to arbitrate an individual Claim that Subscriber may bring in Small Claims Court or an equivalent court, if any, so long as the Claim is pending only in that court. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NO ARBITRATION SHALL PROCEED ON A CLASS, REPRESENTATIVE, OR COLLECTIVE BASIS (INCLUDING AS PRIVATE ATTORNEY GENERAL ON BEHALF OF OTHERS), EVEN IF THE CLAIM OR CLAIMS THAT ARE THE SUBJECT OF THE ARBITRATION HAD PREVIOUSLY BEEN ASSERTED (OR COULD HAVE BEEN ASSERTED) IN A COURT AS CLASS REPRESENTATIVE, OR COLLECTIVE ACTIONS IN A COURT.

15.6 Unless otherwise provided in this Agreement or consented to in writing by all parties to the arbitration, no party to the arbitration may join, consolidate, or otherwise bring claims for or on behalf of two or more individuals or unrelated corporate entities in the same arbitration unless those persons are parties to a single transaction. Unless consented to in writing by all parties to the arbitration, an award in arbitration shall determine the rights and obligations of the named parties only, and only with respect to the claims in arbitration, and shall not (i) determine the rights, obligations, or interests of anyone other than a named party, or resolve any Claim of anyone other than a named party, or (ii) make an award for the benefit of, or against, anyone other than a named party. No administrator or arbitrator shall have the power or authority to waive, modify, or fail to enforce this Section 15.6 and any attempt to do so, whether by rule, policy, arbitration decision or otherwise, shall be invalid and unenforceable. Any challenge to the validity of this Section 15.6 shall be determined exclusively by a court and not by the administrator or any arbitrator.

15.7 This Arbitration Provision is made pursuant to a transaction involving interstate commerce and shall be governed by and enforceable under the FAA. The arbitrator will apply substantive law consistent with the FAA and applicable statutes of limitations. The arbitrator may award damages or other types of relief permitted by applicable substantive law, subject to the limitations set forth in this Arbitration Provision. The arbitrator will not be bound by judicial rules of procedure and evidence that would apply in a court. The arbitrator shall take steps to reasonably protect confidential information.

15.8 This Arbitration Provision shall survive (i) suspension, termination, revocation, closure, or amendments to this Agreement and the relationship of the parties; (ii) the bankruptcy or insolvency of any party hereto or other party; and (iii) any transfer of any Securities to any other party. If any portion of this Arbitration Provision other than Section 15.6 is deemed invalid or unenforceable, the remaining portions of this Arbitration Provision shall nevertheless remain valid and in force. If arbitration is brought on a class, representative, or collective basis, and the limitations on such proceedings in Section 15.5 are finally adjudicated pursuant to the last sentence of Section 15.6 to be unenforceable, then no arbitration shall be had and any award issued shall be void and enforceable. In no event shall any invalidation be deemed to authorize an arbitrator to determine Claims or make awards beyond those authorized in this Arbitration Provision.

15.9 THE PARTIES ACKNOWLEDGE THAT THEY HAVE A RIGHT TO LITIGATE CLAIMS THROUGH A COURT BEFORE A JUDGE, BUT WILL NOT HAVE THAT RIGHT IF ANY PARTY DEMANDS ARBITRATION PURSUANT TO THIS ARBITRATION PROVISION. THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY WAIVE THEIR RIGHTS TO LITIGATE SUCH CLAIMS IN A COURT UPON DEMAND OF ARBITRATION BY ANY PARTY. THE PARTIES HERETO WAIVE A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT OR ANY OTHER AGREEMENTS RELATED TO IT.

15.10 The Draganfly Parties agree and acknowledge that nothing in this Agreement shall be deemed to constitute a waiver of any Draganfly Party’s compliance with the federal securities laws and the rules and regulations thereunder, nor shall it constitute a waiver by the Subscriber of any of the Subscriber’s legal rights under applicable U.S. federal securities laws or any other laws whose applicability is not permitted to be contractually waived. In addition, this Arbitration Provision shall not apply to claims arising under the U.S. federal securities laws.

16. Additional Information and Subsequent Changes in the Foregoing Representations, Warranties and Covenants.

16.1 The Subscriber agrees to provide any additional documentation the Company may reasonably request, including documentation as may be required by the Company to form a reasonable basis that the Subscriber qualifies as an “accredited investor” as that term is defined in Rule 501 under Regulation D promulgated under the Securities Act, or otherwise as a “qualified purchaser” as that term is defined in Regulation A promulgated under the Securities Act, or as may be required by the securities administrators or regulators of any state, to confirm that the Subscriber meets any applicable minimum financial suitability standards and has satisfied any applicable maximum investment limits.

16.2 Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of each of the parties hereto.

16.3 The parties agree to execute and deliver such further documents and information as may be reasonably required in order to effectuate the purposes of this Agreement.

16.4 The Subscriber acknowledges and agrees that it will provide additional information or take such other actions as may be necessary or advisable for the Draganfly Parties (in the sole and absolute judgment of such party or parties) to comply with any disclosure and compliance policies, related legal process or appropriate requests (whether formal or informal), tax reporting and/or withholding requirements or otherwise.

17. Termination.

17.1 In addition to any other event or development described in this Agreement as permitting or requiring termination, each of the following events will cause this Agreement to terminate and expire:

17.1.1 At the discretion of the Company, any breach of any provision of this Agreement (including, without limitation, through any inaccuracy, omission, or incompleteness of a representation or warranty of the Subscriber in this Agreement); and/or

17.1.2 At the discretion of the Company, any determination by the Company that the Subscription in any way results in a material violation of applicable law.

17.2 In the event of termination, Sections 6 (Rights to Use Subscriber Information), 7 (Relationship between Subscriber and the Draganfly Parties), 11 (Transfer and Storage of Personal Data), 12 (Consent to Electronic Delivery of Notices, Disclosures and Forms), 14 (Limitations on Damages), 15 (Arbitration), 17 (Termination), and 18 (Miscellaneous Provisions) shall survive.

17.2.1 Upon delivery of the Securities to Subscriber pursuant to this Agreement, Subscriber’s obligations, pursuant to the Subscriber Questionnaire and Section 5 of this Agreement, to inform the Company of any changes in any statements made in this Agreement, shall terminate with respect to any such changes that relate solely to the period after the delivery of the Securities.

18. Miscellaneous Provisions.

18.1 Governing Law; Consent to Jurisdiction; Venue and Service of Process. Notwithstanding the place where this Agreement may be executed by any of the parties hereto, the parties expressly agree that all the terms and provisions hereof shall be construed under the laws of the State of Delaware. To the extent permissible under applicable law, the Subscriber hereby irrevocably agrees that any suit, action or proceeding (“Action”) with respect to this Agreement may, but need not, be resolved, whether by arbitration or otherwise, within the State of California. Accordingly, the parties consent and submit to the non-exclusive jurisdiction of the federal and state courts. The Subscriber agrees and consents that service of process as provided by U.S. federal and Delaware state law may be made upon the Subscriber in any such Action brought in any of said courts, and may not claim that any such suit, action or proceeding has been brought in an inconvenient forum. Notwithstanding the foregoing or anything to the contrary, the Subscriber and Company agree that no provisions under federal laws and regulations, including the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, respective to jurisdiction, venue and/or forum, shall be waived.

18.2 E-Mail Communications. All notices and communications to be given or otherwise made to the Subscriber shall be deemed to be sufficient if sent by e-mail to such address provided by the Subscriber via the Site. Unless otherwise specified in this Agreement, Subscriber shall send all notices or other communications required to be given hereunder to the Company via e-mail at [●]. Any such notice or communication shall be deemed to have been delivered and received on the first business day following that on which the e-mail has been sent (assuming that there is no error in delivery). As used in this Section 18.2, “business day” shall mean any day other than a day on which banking institutions in the State of California or the City of Saskatoon, in British Columbia, are legally closed for business.

18.3 Assignability. This Agreement, or the rights, obligations or interests of the Subscriber hereunder, may not be assigned, transferred or delegated without the prior written consent of the Company. Any such assignment, transfer or delegation in violation of this Section 18.3 shall be null and void.

18.4 Severability. If any provision of this Agreement is invalid or unenforceable under any applicable law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such applicable law. Any provision hereof that may be held invalid or unenforceable under any applicable law shall not affect the validity or enforceability of any other provisions hereof, and to this extent the provisions hereof shall be severable.

18.5 Reimbursement of Costs Related to an Action. In the event that either party hereto shall commence any suit, action or other proceeding to interpret this Agreement, or determine to enforce any right or obligation created in this Agreement, then such party, if it prevails in such action, shall recover its reasonable costs and expenses incurred in connection therewith, including, but not limited to, reasonable attorney’s fees and expenses and costs of appeal, if any.

18.6 Entire Agreement. This Agreement (including the exhibits and schedules attached to this Agreement) and the documents referred to in this Agreement constitute the entire agreement among the parties and shall constitute the sole documents setting forth terms and conditions of the Subscriber’s contractual relationship with the Company with regard to the matters set forth in this Agreement. This Agreement supersedes any and all prior or contemporaneous communications, whether oral, written or electronic, between the Company and the Subscriber. Irrespective of the foregoing, the Subscriber and the Company may enter into a separate agreement for each of Subscriber’s purchase in the general offering and the voucher program, as such terms are defined in the Offering Circular, as applicable.

18.7 Third-Party Beneficiaries. The parties acknowledge that there are no third-party beneficiaries of this Agreement, except for any affiliates of the Company that may be involved in the issuance or servicing of the Securities on the Site, which the parties expressly agree shall be third-party beneficiaries hereof.

18.8 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

[Signature Page to Follow]

E-SIGNATURE PAGE

☐ By checking this box and clicking the “I Agree” button, I agree to comply with and be bound by all terms of this Agreement. I acknowledge and accept that all purchases of the Securities under this Agreement are final, and there are no refunds or cancellations except as may be required by this Agreement, applicable law or regulation. I further acknowledge and accept that the Company reserves the right to refuse, cancel or accept or, subject to Section 17, cancel this Agreement at any time in its sole discretion.

Entity Name:	________________________________
By:	/s/
Name:	________________________________
Title:	________________________________
Submission Date:
Total Purchase Amount:	$
Number of Units _______: Number of Common Shares Underlying Warrants _______:
AGREED AND ACCEPTED BY THE COMPANY:
By:
Name:	________________________________
Title:	________________________________
Effective Date:	________________________________

ANNEX I

CANADIAN AND INTERNATIONAL SUPPLEMENT

In connection with the purchase by the above-signed Subscriber of the Subscriber’s Securities as a “Canadian Subscriber” or an “International Subscriber”, the Subscriber hereby represents, warrants, covenants and certifies to the Company (and acknowledges that the Company and its counsel are relying thereon) that:

i.	the Subscriber is knowledgeable of, or has been independently advised as to, the applicable securities laws of the International Jurisdiction which would apply to this Subscription Agreement, if any;
ii.	the Subscriber is purchasing the Subscriber’s Securities pursuant to exemptions from the prospectus and registration requirements under the applicable securities laws of that International Jurisdiction or, if such is not applicable, the Subscriber is permitted to purchase the Subscriber’s Securities under the applicable securities laws of the International Jurisdiction without the need to rely on an exemption;
iii.	the applicable securities laws of the International Jurisdiction do not require the Company to file a prospectus, offering memorandum or similar document or to register or qualify the distribution of the Securities or for the Company to be registered with or to make any filings or seek any approvals of any kind whatsoever from any governmental or regulatory authority of any kind whatsoever in the International Jurisdiction;
iv.	the delivery of this Subscription Agreement, the acceptance of it by the Company and the issuance of the Subscriber’s Securities to the Subscriber complies with all applicable laws of the Subscriber’s jurisdiction of residence or domicile and all other applicable laws and will not cause the Company to become subject to or comply with any continuous disclosure, prospectus or other periodic filing or reporting requirements under any such applicable laws, nor does it require the Company to attorn to the jurisdiction of any governmental authority or regulator in such International Jurisdiction or require any translation of documents by the Company;
v.	the Subscriber will not sell, transfer or dispose of the Subscriber’s Securities except in accordance with all applicable securities laws of the International Jurisdiction, and the Subscriber acknowledges that the Company shall have no obligation to register any such purported sale, transfer or disposition which violates securities laws;
vi.	the Subscriber will provide such evidence of compliance with all such matters as the Company or its respective counsel may reasonably request;
vii.	the Canadian Subscriber acknowledges, represents, warrants, covenants and certifies that the Canadian Subscriber has been advised by the Company that the Company is relying on exemptions from the requirements under the applicable Canadian securities laws to provide the Canadian Subscriber with a prospectus or registration statement, and no prospectus or registration statement has been filed by the Company in connection with the issuance of the Securities, and as a consequence:

1.	the Canadian Subscriber is restricted from using most of the civil remedies available under the Canadian securities laws and certain protections, rights and remedies provided by the securities laws, including statutory rights of rescission or damages, will not be available to the Canadian Subscriber;
2.	the Canadian Subscriber may not receive information that would otherwise be required to be provided to the Canadian Subscriber under the Canadian securities laws; and
3.	the Company is relieved from certain obligations that would otherwise apply under the Canadian securities laws;

viii.

the Canadian Subscriber acknowledges, represents, warrants, covenants and certifies that the Canadian Subscriber is purchasing the Securities as principal for its own and not for the benefit of any other person;

ix.

the Canadian Subscriber acknowledges, represents, warrants, covenants and certifies, if the Canadian Subscriber is not an individual, the Canadian Subscriber pre-existed the offering of the Securities and has a bona fide business purpose other than the investment in the Securities and was not created, formed or established solely or primarily to acquire Securities, or to permit purchases of securities without a prospectus, in reliance on an exemption from the prospectus requirements of applicable Canadian securities laws; and

x.

The Canadian Subscriber acknowledges that the certificates representing the Securities will bear a legend in substantially the following form and with the necessary information inserted:

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE _______, 2020” [the date which is four months and one day after the closing date of the offering will be inserted] provided that subsequent to the date which is four months and one day after the Closing Date of the Offering, the certificates representing the Securities may be exchanged for certificates bearing no such legends. The Canadian Subscriber also acknowledges that it has been advised to consult its own independent legal advisor with respect to the applicable resale restrictions; that it is solely responsible for complying with such restrictions; and that the Company is not responsible for ensuring compliance by the Canadian Subscriber of the applicable resale restrictions.

Schedule A to Annex 1

Schedule A ACCREDITED INVESTOR CERTIFICATE
(for Canadian residents only)

TO:            Draganfly Inc. (the “Company”)

Capitalized terms used in this Schedule A and defined in the Agreement to which this Schedule A is attached have the meaning defined in the Agreement unless otherwise defined herein.

The Subscriber is an “accredited investor” as defined in subsection 1.1 of NI 45‑106. The undersigned has indicated below the categories which the undersigned, satisfies in order to qualify as an “accredited investor”.

The undersigned understands that the Company and its counsel are relying upon this information in determining to sell securities to the undersigned in a manner exempt from the prospectus and registration requirements of applicable securities laws.

The undersigned or through the undersigned acting as its agent, represents, warrants and certifies that it, he or she is: [initial or place a checkmark above the line to the left of each applicable item]

_____	(a)	a Canadian financial institution, or a Schedule I, II or III bank under the Bank Act (Canada);
_____	(b)	the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);
_____	(c)	a subsidiary of any person referred to in paragraphs (a) to (b), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;
_____	(d)	a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer;
_____	(e)	an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (d);
_____	(e.1)	an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador)
_____	(f)	the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;
_____	(g)	a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec;
_____	(h)	any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;
_____	(i)	a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a jurisdiction of Canada;

_____	(j)	an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that, before taxes, but net of any related liabilities, exceeds $1,000,000; Note: Financial assets include cash and securities, but do not include a personal residence – see the definition of “financial assets” later in this certificate. Financial assets are generally liquid or relatively easy to liquidate. You must subtract any liabilities related to your financial assets to calculate your net financial assets—see the definition of “related liabilities”. Financial assets held in a group RRSP under which you do not have the ability to acquire the financial assets and deal with them directly are not considered to be beneficially owned by you. If you meet the higher financial asset threshold set out in paragraph (j.1), then initial paragraph (j.1) instead of this paragraph (j). Note: If you are an accredited investor described in this paragraph (j), do not meet the higher financial asset threshold set out in paragraph (j.1), you must deliver a completed Form 45‑106F9 – Form for Individual Accredited Investors (Schedule A‑1 to Annex 1).
_____	(j.1)	an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds $5,000,000; Note: The financial assets of your spouse (including financial assets in a spousal RRSP) cannot be included in the calculation of net financial assets under this paragraph (j.1).
_____	(k)	an individual whose net income before taxes exceeded $200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year; Note: If you are an accredited investor described in this paragraph (k), you must deliver a completed Form 45‑106F9 – Form for Individual Accredited Investors (Schedule A‑1 to Annex 1).
_____	(l)	an individual who, either alone or with a spouse, has net assets of at least $5,000,000; Note: To calculate net assets, take the value of your total assets (which may include a personal residence) and subtract your total liabilities (which may include a mortgage). The value attributed to assets should reasonably reflect their estimated fair value. Income tax should be considered a liability if the obligation to pay it is outstanding at the time of the subscription. Note: If you are an accredited investor described in this paragraph (l, you must deliver a completed Form 45‑106F9 – Form for Individual Accredited Investors (Schedule A‑1 to Annex 1).
_____	(m)	a person, other than an individual or investment fund, that has net assets of at least $5,000,000 as shown on its most recently prepared financial statements;
_____	(n)	an investment fund that distributes or has distributed its securities only to:
		(i)	a person that is or was an accredited investor at the time of the distribution,
		(ii)	a person that acquires or acquired securities in the circumstances referred to in sections 2.10 Minimum amount investment, or 2.19 Additional investment in investment funds of NI 45‑106; or
		(iii)	a person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 Investment fund reinvestment of NI 45‑106;
_____	(o)	an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;

_____	(p)	a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully‑managed account managed by the trust company or trust corporation, as the case may be;
_____	(q)	a person acting on behalf of a fully‑managed account managed by that person, if that person:
		(i) is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction; and (ii) in Ontario, is purchasing a security that is not a security of an investment fund;
_____	(r)	a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;
_____	(s)	an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) through (d) or paragraph (i) in form and function;
_____	(t)	a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors; {Note: If you have initialed this paragraph (t), name each owner of an interest, and indicate the category of accredited investor into which that person fits (by reference to the paragraph numbers in this Schedule A. If a person named below is a director required by law to own a voting security, and that person is not an accredited investor, indicate “director” under Category.} Name                                                                                   Category _______________________________                     _______________ _______________________________                     _______________ _______________________________                     _______________ _______________________________                     _______________
_____	(u)	an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser;
_____	(v)	a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as an accredited investor; or
_____	(w)	on or after May 5, 2015, a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse.
		{Note: If you have initialled this paragraph (w), name the person who established the trust and each trustee, and indicate the category of accredited investor into which that person fits (by reference to the paragraph numbers in this Schedule A). If a person named below is not an accredited investor, indicate “N/A” under Category.}

Name	Category
Person who established trust:
Trustee:
Trustee:
Trustee:

  

The Subscriber has executed this certificate as of the ______ day of ____________, 2020.

If a trust, partnership or other entity:	If an individual:
Name of Entity	Signature
Type of Entity	Name of Individual
Signature of person Signing
Title of person Signing

As used in this Certificate, the following terms have the following meanings:

An issuer is an “affiliate” of another issuer if:

(a)	one of them is the subsidiary of the other, or
(b)	each of them is controlled by the same person;

“Canadian financial institution” means:

(a)	an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act; or
(b)	a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

“control person” has the meaning ascribed to that term in securities legislation except in Ontario, Québec and Nova Scotia where “control person” means any person that holds or is one of a combination of persons that holds:

(a)	a sufficient number of any of the securities of an issuer so as to affect materially the control of the issuer, or
(b)	more than 20% of the outstanding voting securities of an issuer except where there is evidence showing that the holding of those securities does not affect materially the control of the issuer;

“eligibility adviser” means:

(a)

a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed; and

(b)

in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not:

(i)	have a professional business or personal relationship with the issuer, or any of its directors, executive officers, founders or control persons, and
(ii)	have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months;

“financial assets” means cash, securities, or a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

“foreign jurisdiction” means a country other than Canada or a political subdivision of a country other than Canada;

“fully managed account” means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction;

“investment fund” has the same meaning as in National Instrument 81‑106 Investment Fund Continuous Disclosure and means a mutual fund or a non‑redeemable investment fund;

“jurisdiction” means a province or territory of Canada except when used in the term foreign jurisdiction;

“local jurisdiction” means the jurisdiction in which the Canadian securities regulatory authority is situated;

“non‑redeemable investment fund” has the same meaning as in National Instrument 81‑106 Investment Fund Continuous Disclosure and means an issuer:

(a)	whose primary purpose is to invest money provided by its securityholders;
(b)	that does not invest:

(i)	for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non‑redeemable investment fund; or
(ii)	for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non‑redeemable investment fund; and

(c) that is not a mutual fund;

“regulator” means, for the local jurisdiction, the Executive Director as defined under securities legislation of the local jurisdiction;

“related liabilities” means:

(a)	liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets; or
(b)	liabilities that are secured by financial assets;

“securities legislation” means securities legislation as such term is defined in National Instrument 14‑101 Definitions;

“spouse” means, an individual who:

(a)	is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual;
(b)	is living with another individual in a marriage‑like relationship, including a marriage‑like relationship between individuals of the same gender; or
(c)	in Alberta, is an individual referred to in paragraph (a) or (b), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta); and

“subsidiary” means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary.

Calculation of purchaser’s net assets: To calculate a purchaser’s net assets under paragraph (a) of the “accredited investor” definition, subtract the purchaser’s total liabilities from the purchaser’s total assets. The value attributed to assets should reasonably reflect their estimated fair value. Income tax should be considered a liability if the obligation to pay it is outstanding at the time of the trade.

Schedule A-1 to Annex 1

{This Schedule A‑1 to Annex 1 is in the form required under applicable Canadian securities laws and must be completed if the Subscriber:

· is subscribing under the “accredited investor” exemption set out in Section 6(d)(i) of the Agreement;

· is an individual relying on category (j), (k) or (l) of the Accredited Investor Certificate (Schedule A to Annex 1); and

· does not meet the higher financial asset threshold set out in paragraph (j.1) of the Accredited Investor Certificate.}

Form 45‑106F9
Form for Individual Accredited Investors

WARNING!

This investment is risky. Don’t invest unless you can afford to lose
all the money you pay for this investment.

SECTION 1 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER
1. About your investment
Type of securities: Common Shares	Issuer: Draganfly Inc.
Purchased from: Draganfly Inc.
SECTIONS 2 TO 4 TO BE COMPLETED BY THE PURCHASER
2. Risk acknowledgement
This investment is risky. Initial that you understand that:		Your initials
Risk of loss – You could lose your entire investment of $__________________. {Instruction: Insert the total dollar amount of the investment.}
Liquidity risk – You may not be able to sell your investment quickly – or at all.
Lack of Information – You may receive little or no information about your investment.
Lack of advice – You will not receive advice from the salesperson about whether this investment is suitable for you unless the salesperson is registered. The salesperson is the person who meets with, or provides information to, you about making this investment. To check whether the salesperson is registered, go to www.aretheyregistered.ca.
3. Accredited investor status
You must meet at least one of the following criteria to be able to make this investment. Initial the statement that applies to you. (You may initial more than one statement.) The person identified in section 6 is responsible for ensuring that you meet the definition of accredited investor. That person, or the salesperson identified in section 5, can help you if you have questions about whether you meet these criteria.		Your initials
· Your net income before taxes was more than $200,000 in each of the 2 most recent calendar years, and you expect it to be more than $200,000 in the current calendar year. (You can find your net income before taxes on your personal income tax return.)
· Your net income before taxes combined with your spouse’s was more than $300,000 in each of the 2 most recent calendar years, and you expect your combined net income before taxes to be more than $300,000 in the current calendar year
· Either alone or with your spouse, you own more than $1 million in cash and securities, after subtracting any debt related to the cash and securities.

· Either alone or with your spouse, you have net assets worth more than $5 million. (Your net assets are your total assets (including real estate) minus your total debt.)
4. Your name and signature
By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form.
First and last name (please print):
Signature:		Date:
SECTION 5 TO BE COMPLETED BY THE SALESPERSON
5. Salesperson information
{Instruction: the salesperson is the person who meets with, or provides information to, the purchaser with respect to making this investment. That could include a representative of the issuer or selling security holder, a registrant or a person who is exempt from the registration requirement.}
First and last name of salesperson (please print):
Telephone:	Email:
Name of firm (if registered):
SECTION 6 TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER
6. For more information about this investment
Draganfly Inc. 2108 St. George Avenue, Saskatoon, SK, S7M 0K7 Canada Attention:              Paul Sun Phone:                   1-306-955-9906 Email:                    paul.sun@draganfly.com Website:                www.draganfly.com For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities‑administrators.ca.

 

{The Subscriber should keep one copy of this form (signed by the Subscriber) for the Subscriber’s records.}

EX1A-4 SUBS AGMT.2

EXHIBIT 4.2

THE WARRANTS REPRESENTED HEREBY AND THE UNDERLYING SECURITIES ISSUABLE UPON EXERCISE HEREUNDER HAVE BEEN QUALIFIED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REGULATION A.  TIER 2, OFFERING STATEMENT IN AN EXEMPT OFFERING UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  RESALES OF THE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LEGISLATION AND THEREFORE RESALES OF THE WARRANTS MAY, IN SOME STATES BE LIMITED BY STATE SECURITIES LEGISLATION UNLESS AN EXEMPTION FROM REGISTRATION OR QUALIFICATION IS AVAILABLE UNDER THAT STATES' SECURITIES LAWS.

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE _______________, 202_ [INSERT DATE THAT IS 4 MONTHS AND A DAY AFTER THE DISTRIBUTION DATE].

THE WARRANTS REPRESENTED HEREBY WILL BE VOID AND OF NO VALUE AFTER 5:00 PM (VANCOUVER TIME) ON _______________, 202_.

WARRANT CERTIFICATE

DRAGANFLY INC.
(a British Columbia Company)

Certificate Number: __     **______** Warrants to Purchase
**_ ** Shares

COMMON SHARE PURCHASE WARRANTS

THIS IS TO CERTIFY THAT, for value received, ____________ of _________________________________or his lawful assignee (the “Holder”) is the registered holder of ____________ (______) warrants (the “Warrants”) of Draganfly Inc. (the “Company”). Each Warrant shall entitle the Holder to subscribe for and purchase one fully paid and non-assessable common shares without par value (collectively the “Shares” and individually, a “Share”) in the authorized capital of the Company at any time on or before 5:00 p.m. Vancouver time on ______________, 20___, (the “Expiry Date”), at a price of US$● per Share, subject, however, to the provisions and upon the Terms and Conditions attached hereto as Schedule “A.”  The Warrants are exercisable immediately and terminating on the date that is the twenty-four (24) month anniversary of issuance of a respective purchaser’s Units (defined below) in the offering of the securities described in the Offering Circular that is available through the online website platform located at www.draganfly.com, which is owned and operated by the Company, as well as on the SEC EDGAR website and the SEDAR website.  Each “Unit” of securities is comprised of one Share, and one Warrant to purchase one additional Share.

The rights represented by this Warrant Certificate may be exercised by the Holder, in whole or in part (but not as to a fraction of a Share) by surrender of this Warrant Certificate (properly endorsed as required), together with a Warrant Exercise Form in the form attached hereto as Appendix “B”, duly completed and executed, to the Company at 2108 St. George Avenue, Saskatoon, SK, S7M 0K7 (Attention: Chief Financial Officer), or such other address as the Company may from time to time in writing direct, together with a certified cheque or bank draft payable to or to the order of the Company in payment of the purchase price of the number of Shares subscribed for.  The Holder is advised to read “Instruction to Holders” attached hereto as Appendix “A” for details on how to complete the Warrant Exercise Form (as such term is defined in Schedule “A”).

IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be executed by its duly authorized officer, this ___ day of ________, 20__.

DRAGANFLY INC.

Per:                                                                 
            Authorized Signatory

SCHEDULE “A”

TERMS AND CONDITIONS
ATTACHED TO COMMON SHARE PURCHASE WARRANTS
ISSUED BY DRAGANFLY INC.
(the “Company”)

Each Warrant of the Company, whether single or part of a series, is subject to these Terms and Conditions as they were at the date of issue of the Warrant.

PART 1

DEFINITIONS AND INTERPRETATION

Definitions

1.1 In these Terms and Conditions, except as otherwise expressly provided herein, the following words and phrases will have the following meanings:

(a) “Company” means Draganfly Inc. and includes any successor corporations;

(b) “Company’s auditor” means the accountant duly appointed as auditor of the Company;

(c) “Exchange” has the meaning ascribed thereto in §3.3;

(d) “Exercise Price” means US$● per Share or as may be adjusted as per Part 5;

(e) “Expiry Date” means the date defined as such on the face page of the Warrant Certificate;

(f) “Expiry Time” means 5:00 p.m. Vancouver time on the Expiry Date;

(g) “Holder” means the registered holder of a Warrant;

(h) “Joint Actors” has the meaning ascribed thereto in §7.1;

(i) “person” means an individual, corporation, partnership, trustee or any unincorporated organization, and words importing persons have a similar meaning;

(j) “Shares” or “shares” means the common shares in the capital of the Company as constituted at the date of issue of a Warrant and any shares resulting from any event referred to in §4.7;

(k) “U.S. Securities Act” has the meaning ascribed thereto in §2.6;

(l) “Warrant” means a warrant as evidenced by the certificate, one Warrant entitles the holder to purchase one (1) Share of the Company (subject to adjustment) on or before the Expiry Date at the Exercise Price set forth on the Warrant Certificate;

(m) “Warrant Certificate” means the certificate evidencing the Warrant;

(n) “Warrant Exercise Form” means Appendix “B” hereof; and

(o) “Warrant Transfer Form” means Appendix “C” hereof.

General

1.2 In these Terms and Conditions, except as otherwise expressly provided herein:

(a) the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Part, clause, subclause or other subdivision;

(b) a reference to a Part means a Part of these Terms and Conditions and the symbol § followed by a number or some combination of numbers and letters refers to the section, paragraph or subparagraph of these Terms and Conditions so designated;

(c) the headings are for convenience only, do not form a part of these Terms and Conditions and are not intended to interpret, define or limit the scope, extent or intent of these Terms and Conditions or any of its provisions;

(d) all dollar amounts referred to herein are expressed in United States funds;

(e) time will be of the essence hereof; and

(f) words importing the singular number include the plural and vice versa, and words importing the masculine gender include feminine and neuter genders.

(g) this Warrant Certificate shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.

Applicable Law

1.3 This Warrant shall be governed by and construed in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein, without reference to its principles governing the choice or conflict of laws.

PART 2

ISSUE OF WARRANTS

Additional Warrants

2.1 The Company may at any time and from time to time issue Warrants or grant options or similar rights to purchase shares of in its capital.

Issue in Substitution for Lost Warrants

2.2 In case a Warrant Certificate will become mutilated, lost, destroyed or stolen, the Company in its discretion may issue and deliver a new Warrant Certificate of like date and tenor as the one mutilated, lost, destroyed or stolen in exchange for, and in place of, and upon cancellation of such mutilated Warrant Certificate, or in lieu of and in substitution for such lost, destroyed or stolen Warrant Certificate, and the Warrants represented by such substituted Warrant Certificate will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Warrants of the same issue. The Company may charge a reasonable fee for the issuance and delivery of a new Warrant Certificate.

2.3 The applicant for the issue of a new Warrant Certificate pursuant hereto will bear the cost of the issue thereof and in the case of loss, destruction or theft furnish to the Company such evidence of ownership, and of loss, destruction or theft of the Warrant Certificate so lost, destroyed or stolen as will be satisfactory to the Company in its discretion; and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion and will pay the reasonable charges of the Company in connection therewith.

Holder not a Shareholder

2.4 The holding of a Warrant will not constitute the Holder a shareholder of the Company, nor entitle the Holder to any right or interest in respect thereof, except as expressly provided in the Warrant Certificate.

Canadian Securities Law Exemption

2.5 The Holder acknowledges and agrees that the Warrants and any Shares issued pursuant to the exercise of any Warrants have been or will be issued pursuant to an exemption from the registration and prospectus requirements of applicable Canadian securities law and that the Company has no obligation to, and does not intend to, file any prospectus or registration statement in any jurisdiction in order to qualify any of such Warrants and/or Shares for resale.

U.S. Securities Law Matters

2.6 Neither the Warrants nor the Shares issuable upon exercise hereof have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or U.S. state securities laws. The Warrants and the Shares issuable upon exercise hereof have been qualified in an exempt Regulation A. Tier 2 offering pursuant to Section 3(b) of the U.S. Securities Act. The Warrants and Shares issuable hereunder are not "restricted securities" as defined in Rule 144 of the U.S. Securities Act. Notwithstanding the foregoing the Warrants and the Shares issuable thereunder may not be transferred or resold in the United States without an exemption under applicable state securities legislation and regulations thereunder.

PART 3

OWNERSHIP AND TRANSFER OF WARRANT

Exchange of Warrants

3.1 A Warrant Certificate in any authorized denomination, upon compliance with the reasonable requirements of the Company, may be exchanged for a Warrant Certificate(s) in any other authorized denomination of the same issue entitling the Holder to purchase an equal aggregate number of Shares at the same Exercise Price and on the same terms as the Warrant Certificate so exchanged.

3.2 Warrants may be exchanged only with the Company. Any Warrants tendered for exchange will be surrendered to the Company and cancelled.

3.3 Subject to applicable securities legislation and the rules, policies, notices and orders issued by applicable securities regulatory authorities, including the Canadian Securities Exchange, or such other stock exchange as the Shares may then be listed and posted for trading on (the “Exchange”), the Warrants are transferable on the terms and conditions contained herein and by the Holder completing and submitting to the Company a completed and duly executed Warrant Transfer Form and provision of such additional documents as may be reasonably requested by the Company. Subject to the foregoing, the Company shall issue and mail as soon as practicable, and in any event within 5 business days of receipt of this Warrant certificate, together with a duly completed and executed Warrant Transfer Form attached hereto, a new Warrant certificate (with or without legends as may be appropriate) registered in the name of the transferee or as the transferee may direct and shall take all other necessary actions to effect the transfer as directed.

Charges for Exchange

3.4 On exchange of Warrants, the Company, except as otherwise herein provided, may charge a reasonable fee for each new Warrant Certificate issued, and payment of any transfer taxes or governmental or other charges required to be paid will be made by the party requesting such exchange.

Ownership of Warrants

3.5 The Company may deem and treat the Holder of a Warrant as the absolute owner of such Warrant for all purposes and will not be affected by any notice or knowledge to the contrary.

Notice to Holder

3.6 Unless herein otherwise expressly provided, any notice to be given hereunder to a Holder will be deemed to be validly given, if mailed to the address of the Holder as set out on the Warrant Certificate. Any notice so given will be deemed to have been received 5 days from the date of mailing to the Holder or any market intermediary then holding the Warrants of the Holder in any trust account.

PART 4

EXERCISE OF WARRANTS

Method of Exercise of Warrants

4.1 The right to purchase Shares conferred by a Warrant may be exercised by the Holder surrendering the Warrant Certificate, together with a duly completed and executed Warrant Exercise Form and a certified cheque or bank draft payable to, or to the order of Company at the address as set out on the Warrant Certificate, for the purchase price applicable at the time of surrender in respect of the shares subscribed for in lawful money of the United States to the Company at the address as set out on the Warrant Exercise Form.

Effect of Exercise of Warrants

4.2 Upon surrender and payment as aforesaid, the shares so subscribed for will be deemed to have been issued, and the Holder will be deemed to have become the holder of such shares on the date of such surrender and payment, and such shares will be issued at the Exercise Price as may be adjusted in the events and in the manner described herein.

4.3 Within 10 business days after surrender and payment as aforesaid, the Company will forthwith cause to be delivered to the person in whose name the shares are directed to be registered as specified in such Warrant Exercise Form, or if no such direction is given, the Holder, a certificate for the appropriate number of shares not exceeding those which the Holder is entitled to purchase pursuant to the Warrant Certificate surrendered.

Subscription for Less than Entitlement

4.4 A Holder may purchase a number of Shares less than the number which the Holder is entitled to purchase pursuant to the surrendered Warrant Certificate. In the event of any purchase of a number of Shares less than the number which can be purchased pursuant to a Warrant Certificate, the Holder, upon exercise thereof, will, in addition to certificates representing Shares issued on such exercise, and be entitled to receive a new Warrant Certificate in respect of the balance of the Shares which the Holder was entitled to purchase pursuant to the surrendered Warrant Certificate but which were not then purchased.

4.5 The Company shall not be required to issue fractional Shares upon the exercise of the Warrants evidenced hereby and the Holder shall not be entitled to any cash payment or compensation in lieu of a fractional Share.

Expiration of Warrants

4.6 After the Expiry Date, all rights under the Warrants will wholly cease and terminate, and the Warrants will thereupon be void and of no effect.

Exercise Price

4.7 The price per share which must be paid to exercise a Warrant is the Exercise Price, as may be adjusted in the events and in the manner described herein.

Legends on Shares

4.8 In addition to the other legends that may be required by applicable law, the certificates representing Shares issued upon exercise of Warrants will bear the following legend:

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE ____________, 202__ [INSERT DATE THAT IS 4 MONTHS AND A DAY AFTER THE DISTRIBUTION DATE];

provided that at any time subsequent to [INSERT DATE THAT IS FOUR MONTHS AND A DAY AFTER THE DISTRIBUTION DATE], any certificate representing such Shares may be exchanged for a certificate bearing no such legends.

4.8 U.S. Legends: The certificates representing Shares underlying the Warrants shall bear such legend, if any, as may be required under applicable U.S. state securities laws until such time as is no longer required under the applicable requirements of such state securities laws, with such determination based upon the opinion of United States counsel acceptable to the Company.

PART 5

ADJUSTMENTS

Adjustments

5.1 If and whenever the Shares will be subdivided into a greater or consolidated into a lesser number of shares, or in the event of any payment by the Company of a stock dividend (other than a dividend paid in the ordinary course), or in the event that the Company conducts a rights offering to its shareholders, the exercise price will be decreased or increased proportionately as the case may be. Upon any such subdivision, consolidation, payment of a stock dividend or rights offering, subject to the consent of the Exchange (if required), the number of shares deliverable upon the exercise of a Warrant and the exercise price of the Warrant will be increased or decreased proportionately as the case may be.

5.2 In case of any reclassification of the capital of the Company, or in the case of the merger, reorganization or amalgamation of the Company with, or into any other company or of the sale of substantially all of the property and assets of the Company to any other company, each Warrant will, after such reclassification of capital, merger, amalgamation or sale, confer the right to purchase that number of shares or other securities or property of the Company or of the company resulting from such reclassification, merger, amalgamation, or to which such sale will be made, as the case may be, which the Holder would then hold if the Holder had exercised the Holder’s rights under the Warrant before reclassification of capital, merger, amalgamation or sale; and in any such case, if necessary, appropriate adjustments will be made in the application of the provisions set forth in this Part 5 with respect to the rights and interest thereafter of the Holders to the end that the provisions set forth in this Part 5 will thereafter correspondingly be made applicable as nearly as may reasonably be in relation to any Shares or other securities or property thereafter deliverable on the exercise of a Warrant, subject to any approvals required by the Exchange.

5.3 The adjustments provided for in this Part 5 are cumulative.

Determination of Adjustments

5.4 If any question will at any time arise with respect to any adjustments to be made under §5.1 and §5.2, such question will be conclusively determined by the Company’s auditor, or, if the Company’s auditor declines to so act, any other chartered accountant in the Province of British Columbia that the Company may designate (acting reasonably) and who will have access to all appropriate records, and such determination will be binding upon the Company and the Holder.

Hold Period

5.5 The Shares received by the Holder upon the exercise of the Warrants is subject to a hold period as determined by the Securities Act (British Columbia). There may be further restrictions on resale in accordance with the requirements of any exchange, including the Canadian Securities Exchange, and/or other applicable securities laws.

PART 6

COVENANTS BY THE COMPANY

Reservation of Shares

6.1 The Company will reserve, and there will remain unissued out of its authorized capital, a sufficient number of shares to satisfy the rights of purchase provided for in all Warrants from time to time outstanding.

Securities Qualification Requirements

6.2 If, in the opinion of counsel for the Company, any filing is required to be filed with or any permission is required to be obtained from any securities regulatory body or any other step is required under any Federal or Provincial law before any shares which the Holder is entitled to purchase pursuant to the Holder’s Warrant may properly and legally be issued upon exercise thereof, the Company covenants that it will take such action.

PART 7

RESTRICTION ON EXERCISE

Blocking Language

7.1 Notwithstanding anything contained herein to the contrary, the rights represented by this Warrant Certificate will not be exercisable by the Holder, in whole or in part, and the Company will not give effect to any such exercise, if, after giving effect to such exercise, the Holder, together with any person or company acting jointly or in concert with the Holder (the “Joint Actors”) would in the aggregate beneficially own, or exercise control or direction over that number of voting securities of the Company which is twenty percent (20%) or greater of the total issued and outstanding voting securities of the Company, immediately after giving effect to such exercise. For greater certainty, the rights represented by this Warrant Certificate will not be exercisable by the Holder, in whole or in part, and the Company will not give effect to any such exercise, if, after giving effect to such exercise, the Holder, together with its Joint Actors, would be deemed to hold a number of voting securities sufficient to materially affect the control of the Company.

7.2 Notwithstanding any provision to the contrary contained herein, no Shares will be issued pursuant to the exercise of any Warrant if the issuance of such securities would constitute a violation of the securities laws of any applicable jurisdiction, and the certificates evidencing the Shares thereby issued may bear such legend as may, in the opinion of legal counsel to the Company, be necessary in order to avoid a violation of any securities laws of any applicable jurisdiction or to comply with the requirements of any stock exchange on which the Shares of the Company are listed, provided that, at any time, in the opinion of legal counsel to the Company, such legends are no longer necessary in order to avoid a violation of any such laws, or the holder of any such legended certificate, at that holder's expense, provides the Company with evidence satisfactory in form and substance to the Company (which may include an opinion of legal counsel satisfactory to the Company) to the effect that such holder is entitled to sell or otherwise transfer such Shares in a transaction in which such legends are not required, such legended certificate may thereafter be surrendered to the Company in exchange for a certificate which does not bear such legend.

PART 8

MODIFICATION OF TERMS, SUCCESSORS

Modification of Terms and Conditions for Certain Purposes

8.1 From time to time the Company may, subject to the provisions of the Warrant Certificate and approval of the Exchange, when so directed by the Holders, modify the terms and conditions hereof, for any one or more or all of the following purposes:

(a) adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of counsel for the Company, are necessary or advisable in the circumstances;

(b) making such provisions not inconsistent herewith as may be necessary or desirable with respect to matters or questions arising hereunder or for the purpose of obtaining a listing or quotation of Warrants on any stock exchange or house;

(c) adding to or altering the provisions hereof in respect of the registration of Warrants making provision for the exchange of Warrant Certificates of different denominations; and making any modification in the form of Warrant Certificates which does not affect the substance thereof;

(d) for any other purpose not inconsistent with the terms hereof, including the correction or rectification of any ambiguities, defective provisions, errors or omissions herein; and

(e) to evidence any succession of any corporation and the assumption by any successor of the covenants of the Company herein and in the Warrants contained as provided hereafter in this Part 8.

Company may Amalgamate on Certain Terms

8.2 Nothing herein contained will prevent any amalgamation or merger of the Company with or into any other company, or the sale of the property or assets of the Company to any company lawfully entitled to acquire the same; provided however that the company formed by such merger or amalgamation or which acquires by conveyance or transfer all or substantially all the properties and assets of the Company will be a company organized and existing under the laws of Canada or of the United States of America or any Province, State, District or Territory thereof, which will, simultaneously with such amalgamation, merger, conveyance or transfer, assume the due and punctual performance and observance of all the covenants and conditions hereof to be performed or observed by the Company and will succeed to and be substituted for the Company, and such changes in phraseology and form (but not in substance) may be made in the Warrant Certificate as may be appropriate in view of such amalgamation, merger or transfer.

Additional Financings

8.3 Nothing herein contained will prevent the Company from issuing any other securities or rights with respect thereto during the period within which a Warrant is exercisable, upon such terms as the Company may deem appropriate.

[End of Schedule “A”]

APPENDIX “A”

INSTRUCTIONS TO HOLDERS

TO EXERCISE:

To exercise Warrants, the Holder must complete, sign and deliver the Warrant Exercise Form, attached as Appendix “B” and deliver the Warrant Certificate(s) to the Company, indicating the number of common shares to be acquired.

TO TRANSFER:

To transfer Warrants, the Holder must complete, sign and deliver the Warrant Transfer Form, attached as Appendix “C” and deliver the Warrant Certificate(s) to the Company.  The Company may require such other certificates or opinions to evidence compliance with applicable securities legislation in Canada.

To transfer Warrants, the Warrant Holder's signature on the Warrant Transfer Form must be guaranteed by an authorized officer of a chartered bank, trust company or an investment dealer who is a member of a recognized stock exchange.

GENERAL:

If forwarding any documents by mail, registered mail must be employed.

If the Warrant Exercise Form is signed by a trustee, executor, administrator, curator, guardian, attorney, officer of a corporation or any person acting in a fiduciary or representative capacity, the Warrant Certificate must also be accompanied by evidence of authority to sign satisfactory to the Company.

The address of the Company is:

Draganfly Inc.

2108 St. George Avenue

Saskatoon, Saskatchewan, S7M 0K7

Attention: Chief Financial Officer

Telephone: +1 (306)-955-9907

[End of Appendix “A”]

APPENDIX “B”

WARRANT EXERCISE FORM

TO:	Draganfly Inc.
	2108 St. George Avenue Saskatoon, Saskatchewan, S7M 0K7 Attention: Chief Financial Officer Telephone: +1 (306)-955-9907

The undersigned Holder of the within Warrants hereby subscribes for ____________ common shares (the “Shares”) of DRAGANFLY INC. (the “Company”) pursuant to the within Warrants on the terms and price specified in the Warrants.  This subscription is accompanied by a certified cheque or bank draft payable to or to the order of the Company for the whole amount of the purchase price of the Shares.

The undersigned hereby directs that the Shares be registered as follows:

NAME(S) IN FULL ADDRESS(ES) NUMBER OF SHARES

The undersigned Holder represents and warrants that he or she is an “accredited investor”, as defined in Rule 501(a) of Regulation D under the U.S. Securities Act (a “U.S. Accredited Investor”), and has completed the U.S. Accredited Investor Status Certificate in the form attached to this exercise form; OR Holder is a “qualified investor” meaning the aggregate exercise price you pay is not more than ten percent (10%) of the greater of your annual income or your net worth. DIFFERENT RULES MAY APPLY TO NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A+.

STOP:

COMPLETE THE FOLLOWING ONLY IF THE WARRANTS AND/OR THE UNDERLYING SHARES ARE NOT QUALIFIED UNDER REGULATION A, TIER 2.

Unless the Shares have been registered or qualified under Regulation A under the U.S. Securities Act, and the applicable state securities legislation, as at the time of exercise hereunder, the undersigned Warrantholder represents, warrants and certifies as follows (check one):

(A) ☐ the undersigned Warrantholder at the time of exercise of the Warrant is not in the United States, is not a “U.S. person” as defined in Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and is not exercising the Warrant for the account or benefit of a U.S. person or a person in the United States (as defined in Regulation S), and did not execute or deliver this exercise form in the United States; OR

(B)

☐ the undersigned Warrantholder is resident in the United States, is a U.S. person, or is exercising the Warrant for the account or benefit of a U.S. person or a person in the United States (a “U.S. Holder”), and is an “accredited investor”, as defined in Rule 501(a) of Regulation D under the U.S. Securities Act (a “U.S. Accredited Investor”), and has completed the U.S. Accredited Investor Status Certificate in the form attached to this exercise form; OR

(C)

☐ if the undersigned Warrantholder is a U.S. Holder, the undersigned Warrantholder has delivered to the Company and the Company’s transfer agent an opinion of counsel (which will not be sufficient unless it is in form and substance satisfactory to the Company) or such other evidence satisfactory to the Company to the effect that with respect to the common shares to be delivered upon exercise of the Warrant, the issuance of such securities has been registered under the U.S. Securities Act and applicable state securities laws, or an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws is available.

    

Note:  Unless the Shares have been registered or qualified under Regulation A under the U.S. Securities Act and the applicable state securities legislation certificates representing Shares will not be registered or delivered to an address in the United States unless box (B) or (C) immediately above is checked.

If the undersigned Warrantholder has indicated that the undersigned Warrantholder is a U.S. Accredited Investor by marking box (B) above, the undersigned Warrantholder additionally represents and warrants to the Company that:

1	the undersigned Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Common Shares, and the undersigned is able to bear the economic risk of loss of his or her entire investment;
2.	the undersigned is: (i) purchasing the Shares for his or her own account or for the account of one or more U.S. Accredited Investors with respect to which the undersigned is exercising sole investment discretion, and not on behalf of any other person; (ii) is purchasing the Shares for investment purposes only and not with a view to resale, distribution or other disposition in violation of United States federal or state securities laws; and (iii) in the case of the purchase by the undersigned of the Shares as agent or trustee for any other person or persons (each a “Beneficial Owner”), the undersigned Warrantholder has due and proper authority to act as agent or trustee for and on behalf of each such Beneficial Owner in connection with the transactions contemplated hereby; provided that: (x) if the undersigned Warrantholder, or any Beneficial Owner, is a corporation or a partnership, syndicate, trust or other form of unincorporated organization, the undersigned Warrantholder or each such Beneficial Owner was not incorporated or created solely, nor is it being used primarily to permit purchases without a prospectus or registration statement under applicable law; and (y) each Beneficial Owner, if any, is a U.S. Accredited Investor; and
3.	the undersigned has not exercised the Warrants as a result of any form of general solicitation or general advertising (as such terms are used in Rule 502 of Regulation D under the U.S. Securities Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio, television, the Internet or other form of telecommunications, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

If the undersigned has indicated that the undersigned is a U.S. Accredited Investor by marking box (B) above, the undersigned also acknowledges and agrees that:

1.	the Company has provided to the undersigned the opportunity to ask questions and receive answers concerning the terms and conditions of the offering, and the undersigned has had access to such information concerning the Company as the undersigned has considered necessary or appropriate in connection with the undersigned’s investment decision to acquire the Shares;
2.	if the undersigned decides to offer, sell or otherwise transfer any of the Shares, the undersigned must not, and will not, offer, sell or otherwise transfer any of such Shares directly or indirectly, unless:

(a)	the sale is to the Company;
(b)	the sale is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations;
(c)	the sale is made pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder, if available, and in accordance with any applicable state securities or “blue sky” laws; or
(d)	the Shares are sold in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of securities,
and in the case of (c) or (d) above, it has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company;

3.	the Shares are “restricted securities” under applicable federal securities laws and that the U.S. Securities Act and the rules of the United States Securities and Exchange Commission provide in substance that the undersigned may dispose of the Shares only pursuant to an effective registration statement under the U.S. Securities Act or an exemption therefrom;
4.	the Company has no obligation to register any of the Shares or to take action so as to permit sales pursuant to the U.S. Securities Act (including Rule 144 thereunder);
5.	the certificates representing the Shares (and any certificates issued in exchange or substitution for the Shares) will bear a legend stating that such securities have not been registered under the U.S. Securities Act or the securities laws of any state of the United States, and may not be offered for sale or sold unless registered under the U.S. Securities Act and the securities laws of all applicable states of the United States, or unless an exemption from such registration requirements is available;
6.	the legend may be removed by delivery to the registrar and transfer agent and the Company of an opinion of counsel, reasonably satisfactory to the Company, that such legend is no longer required under applicable requirements of the U.S. Securities Act or state securities laws;

7.	there may be material tax consequences to the undersigned of an acquisition or disposition of the Shares;
8.	the Company gives no opinion and makes no representation with respect to the tax consequences to the undersigned under United States, state, local or foreign tax law of the undersigned’s acquisition or disposition of any Shares; in particular, no determination has been made whether the Company will be a “passive foreign investment company” (commonly known as a “PFIC”) within the meaning of Section 1297 of the United States Internal Revenue Code;
9.	funds representing the subscription price for the Shares which will be advanced by the undersigned to the Company upon exercise of the Warrants will not represent proceeds of crime for the purposes of the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the “PATRIOT Act”), and the undersigned acknowledges that the Company may in the future be required by law to disclose the undersigned’s name and other information relating to this exercise form and the undersigned’s subscription hereunder, on a confidential basis, pursuant to the PATRIOT Act. No portion of the subscription price to be provided by the undersigned (i) has been or will be derived from or related to any activity that is deemed criminal under the laws of the United States of America, or any other jurisdiction, or (ii) is being tendered on behalf of a person or entity who has not been identified to or by the undersigned, and it shall promptly notify the Company if the undersigned discovers that any of such representations ceases to be true and provide the Company with appropriate information in connection therewith; and
10.	the undersigned consents to the Company making a notation on its records or giving instructions to any transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this subscription form.

In the absence of instructions to the contrary, the securities or other property will be issued in the name of or to the Warrantholder hereof and will be sent by first class mail to the last address of the Warrantholder appearing on the register maintained for the Warrants.

DATED this _________ day of _______________, 20_____.

In the presence of:
Signature of Witness	Signature of Holder
Witness’s Name	Name and Title of Authorized Signatory for the Holder

Please print below your name and address in full.

Legal Name

Address  

INSTRUCTIONS FOR SUBSCRIPTION

The signature to the subscription must correspond in every particular with the name written upon the face of the Warrant Certificate without alteration.  If the registration in respect of the certificates representing the Shares to be issued upon exercise of the Warrants differs from the registration of the Warrant Certificates the signature of the registered holder must be guaranteed by an authorized officer of a Canadian chartered bank, or of a major Canadian trust company, or by a medallion signature guarantee from a member recognized under the Signature Medallion Guarantee Program, or from a similar entity in the United States, if this transfer is executed in the United States, or in accordance with industry standards.

In the case of persons signing by agent or attorney or by personal representative(s), the authority of such agent, attorney or representative(s) to sign must be proven to the satisfaction of the Company.

If the Warrant Certificate and the form of subscription are being forwarded by mail, registered mail must be employed.

U.S. ACCREDITED INVESTOR STATUS CERTIFICATE

In connection with the exercise of certain outstanding warrants of DRAGANFLY INC. (the “Company”) by the Warrantholder, the Warrantholder hereby represents and warrants to the Company that the Warrantholder, and each beneficial owner (each a “Beneficial Owner”), if any, on whose behalf the Warrantholder is exercising such warrants, satisfies one or more of the following categories of Accredited Investor (please write “W/H” for the undersigned Warrantholder, and “B/O” for each beneficial owner, if any, on each line that applies):

_______ (1)	Any bank as defined in Section 3(a)(2) of the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the U.S. Securities Exchange Act of 1934; any insurance company as defined in Section 2(a)(13) of the U.S. Securities Act; any investment company registered under the U.S. Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the U.S. Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of US$5,000,000; any employee benefit plan within the meaning of the U.S. Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are “accredited investors” (as such term is defined in Rule 501 of Regulation D of the U.S. Securities Act);
_______ (2)	Any private business development company as defined in Section 202(a)(22) of the U.S. Investment Advisers Act of 1940;
_______ (3)	Any organization described in Section 501(c)(3) of the U.S. Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000;
_______ (4)	Any trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person (being defined as a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment);

_______ (5)	A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of purchase, exceeds US$1,000,000 (for the purposes of calculating net worth, (i) the person’s primary residence shall not be included as an asset; (ii) indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of this certification, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of this certification exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and (iii) indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence shall be included as a liability);
_______ (6)	A natural person who had annual gross income during each of the last two full calendar years in excess of US$200,000 (or together with his or her spouse in excess of US$300,000) and reasonably expects to have annual gross income in excess of US$200,000 (or together with his or her spouse in excess of US$300,000) during the current calendar year, and no reason to believe that his or her annual gross income will not remain in excess of US$200,000 (or that together with his or her spouse will not remain in excess of US$300,000) for the foreseeable future;
_______ (7)	Any director or executive officer of the Company; or
_______ (8)	Any entity in which all of the equity owners meet the requirements of at least one of the above categories (if this alternative is selected you must identify each equity owner and provide statements for each demonstrating how they qualify as an accredited investor).

 

__________

[End of Appendix “B”]

APPENDIX “C”

WARRANT TRANSFER FORM

TO:	Draganfly Inc.
	2108 St. George Avenue Saskatoon, Saskatchewan, S7M 0K7 Attention: Chief Financial Officer Telephone: +1 (306)-955-9907

FOR VALUE RECEIVED, the undersigned holder of the within Warrants hereby sells, assigns and transfers to _______________________________, ________________ Warrants of Draganfly Inc. (the “Company”) registered in the name of the undersigned on the records of the Company and irrevocably appoints ________________ the attorney of the undersigned to transfer the said securities on the books or register with full power of substitution.

The undersigned hereby directs that the Warrants hereby transferred be issued and delivered as follows:

NAME IN FULL ADDRESS NUMBER OF WARRANTS

DATED this _________ day of _______________, 20____.

  Signature of Warrant Holder   Signature Guaranteed

INSTRUCTIONS FOR TRANSFER

Signature of the Warrant Holder must be the signature of the person appearing on the face of this Warrant Certificate.

If the Transfer Form is signed by a trustee, executor, administrator, curator, guardian, attorney, officer of a corporation or any person acting in a fiduciary or representative capacity, the certificate must be accompanied by evidence of authority to sign satisfactory to the Company.

The signature on the Transfer Form must be guaranteed by a chartered bank or trust company, or a member firm of an approved signature guarantee medallion program.  The guarantor must affix a stamp bearing the actual words: “SIGNATURE GUARANTEED”.

The Warrants will only be transferable in accordance with applicable laws.  The Warrants and the common shares issuable upon exercise thereof not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or under the securities laws of any state of the United States, and may not be transferred to or for the account or benefit of a U.S. person or any person in the United States without registration under the U.S. Securities Act and applicable state securities laws, or compliance with the requirements of an exemption from registration.  “United States” and “U.S. person” are as defined in Regulation S under the U.S. Securities Act.

[End of Appendix “C”]

EX1A-6 MAT CTRCT.7

EXHIBIT 6.7

June 14, 2020

Dear John,

This letter confirms that Draganfly Inc. (the “Company”) has offered you employment on the following terms, to begin July 14th, 2020:

1.	Your position will be Chief Revenue Officer.
	Your annual compensation shall be $140,000USD. This will be reviewed within 3 Months based on milestones being met and contingent upon the financial strength of the Company.
2.	Within the first 90 days of your employment we will structure a commission plan with an annual target of $140,000USD.
3.	The Company will grant you 500,000 Options issued and vesting within the company’s standard share compensation plan. These will be granted and set within 30 days as per the Board’s approval.
4.	As an employee of the Company, you will receive fifteen paid holiday days annually.
5.	You shall be reimbursed for reasonable and necessary business expenses authorized and verified to the Company’s satisfaction.
6.	Your employment is “at will”. Either you or the Company may terminate this employment relationship at any time for any reason with or without cause. Following a 3 month probationary period, the Company will grant you 2 months severance upon termination assuming that the termination is not for cause.
7.	Your employment is contingent upon your execution of the Company’s Non-Disclosure Agreement and the signing of an IP Assignment agreement.
8.	The Company and you hereby mutually agree to arbitrate any and all differences, claims, or disputes, of every kind (statutory or other) arising out of your employment or its termination. Such arbitration would be in the State of Florida, or another mutually agreed location, before the American Arbitration Association, and in lieu of any court action.
9.	Your employment shall be governed by Florida law.

No other promises or representations have been made to you.

Please sign in the space provided below to indicate your acceptance of this offer, and return it by Friday, June 19, 2020

Please note that this offer is subject to board approval.

Sincerely, /s/ Cameron Chell                                                     Cameron Chell Chairman cameron@businessinstincts.com (310)658-4413
/s/ John Bagocius                                                      By signing, I accept the above engagement.	June 17, 2020                                                   Date

SCHEDULE A

JOB DESCRIPTION

Responsibilities include:

· Work with the CEO and other leadership to develop growth targets

· Develop and execute short, mid and long term strategies for Sales, Marketing, customer acquisition and engagement.

· Grow, and develop a dynamic sales and marketing team

· Mentor and provide leadership to a growing business and develop an engaging and positive work culture

· Overall responsibility for leading Sales, new product launches, the development and execution of marketing plans and budgets

EX1A-11 CONSENT.1

EXHIBIT 11.1

Consent of Independent Auditors

We hereby consent to the use in this Offering Circular constituting a part of this Offering Statement on Form 1-A, of our report dated June 10, 2020 relating to the consolidated financial statements of Draganfly Inc. for the years ended December 31, 2019 and 2018, which is contained in this Offering Statement. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

DALE MATHESON CARR-HILTON LABONTE LLP

/s/DMCL

Chartered Professional Accountants

Vancouver, British Columbia

August 7, 2020

EX1A-11 CONSENT.2

EXHIBIT 11.2

Consent of Independent Auditors

We hereby consent to the use in this Offering Circular constituting a part of this Offering Statement on Form 1-A, of our report dated August 4, 2020 relating to the carve-out financial statements of Candrone (the “Company”), a division of DroneLogics Systems Inc. for the year ended December 31, 2018, which is contained in this Offering Statement. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

DALE MATHESON CARR-HILTON LABONTE LLP

/s/ DMCL

Chartered Professional Accountants

Vancouver, British Columbia

August 7, 2020

EX1A-12 OPN CNSL.1

EXHIBIT 12.1

DLA Piper (Canada) LLP Suite 2800, Park Place 666 Burrard St Vancouver, British Columbia V6C 2Z7 www.dlapiper.com   T 604.687.9444 F 604.687.1612

[l], 2020

Draganfly Inc.

2108 St. George Avenue

Saskatoon, SK

S7M 0K7

Dear Sirs/Mesdames:   

Re: Draganfly Inc.

We have acted as Canadian counsel to Draganfly Inc., a British Columbia Company (the “Company”), in connection with the Company’s filing of an offering statement on Form 1-A filed on the date hereof (the “Offering Statement”) with the Securities and Exchange Commission (the “SEC”) pursuant to Regulation A under the U.S. Securities Act of 1933, as amended (the “Act”). The Offering Statement contemplates the offering (the “Offering”) of up to 35,000,000 units (the “Units”) of the Company to raise aggregate gross proceeds of up to US$[l].

Each Unit consists of: (i) one common share in the capital of the Company (“Common Share”) (each, a “Share”), for an aggregate of up to 35,000,000 Shares, and (ii) one common share purchase warrant (each, a “Warrant”), for an aggregate of up to 35,000,000 Warrants. Each Warrant entitles the holder thereof to purchase one Common Share (each, a “Warrant Share”) at an exercise price of US$[l] per Warrant Share, and is exercisable starting from the date of issuance until any time prior to the date that is 24 months from the date of issuance. If the maximum Offering is completed and the Warrants are exercised in full, the maximum gross proceeds from the sale of Units in the Offering (including the proceeds from the issuance of all Warrant Shares upon exercise of Warrants issued in the Offering) is US$[l].

For the purposes of this opinion, the Units, Shares, Warrants and Warrant Shares shall be collectively referred to as the “Securities”.

This opinion letter is furnished to you at your request in accordance with the requirements of Item 17(12) of Form 1-A in connection with the filing of the Offering Statement.

Page 2 of 5

1.Scope of Enquiry/Documentation

In connection with giving the opinions expressed below, we have examined and relied on, but have not participated in the preparation of, among other things, the following:

(a)	a certified copy dated [l], 2020 of the constating documents of the Company including, articles and notice of articles of the Company;
(b)	a Certificate of Good Standing dated [l], 2020 issued pursuant to the Business Corporations Act (British Columbia) with respect to the Company (the “Certificate of Good Standing”); and
(c)	resolutions of the directors of the Company relating to the Offering and the transactions contemplated thereby, including resolutions of the directors approving, among other things, the Offering, the form of subscription agreement to be entered into between the Company and purchasers of the Units (the “Subscription Agreement”) and the form of the certificate representing the Warrants (the “Warrant Certificate”).

We have examined originals or photostatic or certified copies of such corporate records, contracts and instruments of the Company or other corporations, certificates, permits, licenses or orders of public officials, commissions, boards and governmental bodies and authorities, certificates of officers or representatives of the Company or other corporations and such other records, contracts and instruments all as we believe necessary and relevant as the basis of the opinion set forth herein. We have relied, exclusively and without independent investigation or inquiry, upon a certificate of an officer of the Company dated as of the date hereof (the “Officer’s Certificate”) addressed to DLA Piper (Canada) LLP, as to the facts referred to therein.

We have also considered such questions of law and examined such statutes, regulations and orders, certificates, records of corporate proceedings and other documents and have made such other examinations, searches and investigations as we have considered necessary for the purpose of rendering this opinion. In particular, we have not reviewed, and express no opinion on, any document that is referred to or incorporated by reference into the documents reviewed by us. As to various questions of fact material to this opinion which we have not independently established, we have examined and relied upon, without independent verification, certificates of public officials and officers of the Company including, without limitation, the Officer’s Certificate.

In all such examinations, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as certified, conformed, notarized or photostatic copies or facsimiles and the authenticity of all originals of such documents. We have also assumed the completeness and accuracy of all certificates of public officials and corporate officials, that the parties delivering any certificates other than those executing certificates on behalf of the Company have been duly appointed to the positions indicated and have the power, capacity and authority to certify the information contained therein and that the certificates referred to herein, if dated earlier than the date hereof, continue to be accurate as of the date hereof. To the extent that any certificates upon which we have relied are based on any assumption, are given in reliance on any other certificate or other document or are made subject to any limitation, qualification or exception, our opinion given in reliance thereon is also based on such assumption, is given in reliance on such other certificate or other document and is subject to such limitation, qualification or exception.

2.Jurisdiction and Applicable Laws

We are qualified to carry on the practice of law in the Province of British Columbia. The opinion hereinafter expressed is limited to the laws of the Province of British Columbia and the federal laws of Canada applicable therein.

Page 3 of 5

3.Assumptions

In the opinions expressed below, we have assumed, without independent verification, as follows:

(a)	that all persons, other than the Company, executing documents on behalf of themselves or on behalf of another party have been duly authorized to do so and that such documents have been validly executed and delivered by and constitute legal, valid and binding and enforceable obligations of such parties in accordance with the terms of such documents;
(b)	the completeness and accuracy of the Company’s corporate records as filed in the minute books of the Company;
(c)	that all cheques, bank drafts and other methods of payment delivered in consideration for the Units will be honoured upon presentation or will otherwise result in receipt by the Company of the funds represented by such cheques, bank drafts or other methods of payment;
(d)	that at the time of any distribution or trade of the Securities, no order, ruling or decision has been issued or granted by a securities regulatory authority or any court or other regulatory or administrative authority that has the effect of prohibiting or restricting the distribution or trade of the Securities or affecting any person who engages in any such distribution or trade; and
(e)	the Units will be offered, issued and sold in compliance with applicable United States federal and state securities laws, and in the manner stated in the Offering Statement.

4.Opinions

Based and relying upon, and subject to the foregoing, and subject to the qualifications and limitations set out below, we are of the opinion that:

1.	The Company is a valid and existing company and is in good standing with respect to the filing of annual reports with the British Columbia Registrar of Companies.
2.	The Shares have been duly authorized by all necessary corporate action on the part of the Company and, when the Shares are issued in accordance with the terms of the Subscription Agreements, will be validly issued, fully paid and non-assessable.
3.	The Warrants have been duly authorized by all necessary corporate action on the part of the Company and, when issued in accordance with the terms of the Subscription Agreements, shall be validly created and issued by the Company.
4.	The Warrant Certificates constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms.
5.	The Warrant Shares have been reserved and authorized for issuance and such Warrant Shares, when issued and delivered by the Company in accordance with the terms and conditions of the Warrants Certificates against payment of the exercise price therefor, will be validly issued as fully paid and non-assessable common shares in the capital of the Company.

Page 4 of 5

5. Qualifications and Reliance

The foregoing opinions are subject to the following qualifications:

(a)	In expressing the opinion set forth in paragraph 1 above with respect to the existence and good standing of the Company, we have relied exclusively and without independent investigation upon the Certificate of Good Standing.
(b)	The opinion expressed herein with respect to the validity, binding effect and enforceability of the terms of the Warrant Certificates is subject to the qualifications that such validity, binding effect and enforceability may be limited by:

(i)	any applicable bankruptcy, insolvency, moratorium, arrangement, winding up laws or similar laws affecting the enforcement of creditors’ rights generally and laws regarding limitations of action;
(ii)	general principles of equity, including the principle that the granting of equitable remedies such as specific performance and injunctive relief is within the discretion of a court of competent jurisdiction;
(iii)	the powers of a court of competent jurisdiction to grant relief from forfeiture, to stay proceedings before it and to stay execution on judgments;
(iv)	the qualification that the costs of and incidental to all proceedings authorized to be taken in court are in the discretion of the court and the court has full power to determine by whom and to what extent such costs shall be paid;
(v)	the qualification that the enforceability of the Warrants will be subject to the Limitation Act (British Columbia);
(vi)	the qualification that rights to indemnity and contribution may be limited by applicable law;
(vii)	the qualification that judgment debts in the Province of British Columbia may be limited to the interest rate established pursuant to the Court Order Interest Act (British Columbia);
(viii)	the qualification that a court may require the discretionary powers expressed to be conferred on any party to such agreement or other document to be exercised reasonably and in good faith notwithstanding any provisions to the contrary and may decline to accept as conclusive factual or legal determinations described as conclusive therein;

Page 5 of 5

(ix)

the qualification that any provision in such agreement or other document which purports to sever from such agreement or other document, as the case may be, any provision therein which is prohibited or unenforceable under applicable law without affecting the validity of the remainder of the agreement or other document, as the case may be, would be enforced only to the extent that the court determined that such prohibited or unenforceable provision could be severed without impairing the interpretation and application of the remainder of the agreement or other document, as the case may be; and

(x)

the qualification that the effectiveness of terms exculpating a party from liability or duty otherwise owed by it to another and certain remedial terms and waivers of equitable defences provided for in such agreement, indenture or other document are limited by law.

 

(c)

Our opinion is based on legislation, regulations and rulings in effect on the date hereof and we disclaim any obligation or undertaking to advise any person of any change in the law or fact which may come to our attention after the date hereof.

(d)

Whenever our opinion refers to Common Shares to be issued as being “fully paid and non-assessable”, such opinion indicates that the holder of such Securities cannot be required to contribute any further amounts to the Company by virtue of his, her or its status as holder of such Securities, either in order to complete payment for the Securities, to satisfy claims of creditors or otherwise. No opinion is expressed as to the adequacy of any consideration received for such Securities.

   

We hereby consent to the filing of this opinion with the SEC as an exhibit to the Offering Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the SEC promulgated thereunder.

This opinion relates exclusively to the transaction outlined above and is for the sole use and benefit of the persons to whom it is addressed. Accordingly, this opinion may not be delivered to, or relied upon, by any other person or used in connection with any other transaction without our prior written consent. This opinion is limited to the matters stated herein, and no opinion or belief is implied or may be inferred beyond the matters expressly stated herein. 

Sincerely,

DLA Piper (Canada) LLP

CORRESP

Rebecca G. DiStefano

Tel +1.954.768.8221

distefanor@gtlaw.com

August 7, 2020

VIA EDGAR

Securities and Exchange Commission

100 F Street, N.E.

Division of Corporation Finance

Office of Manufacturing

Washington, D.C. 20549

Attention: Thomas Jones Sherry Haywood

Re: Draganfly Inc. Offering Statement on Form 1-A Filed June 16, 2020 File No. 024-11239

Dear Mr. Jones and Ms. Haywood:

On behalf of our client Draganfly Inc. (the “Company”), this letter responds to the comments received from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) in the Staff’s letter to the Company dated July 13, 2020, with respect to the Offering Statement on Form 1-A filed on June 16, 2020 (the “Offering Statement”). For convenience, the number of each response set forth below corresponds to the numbered comment in the Staff’s letter dated July 13, 2020, and the text of the Staff’s comment appears in bold type and the Company’s response appears immediately after such comment in regular type. Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Offering Statement.

If the Staff would like marked copies of Amendment No. 1 to the Offering Statement as filed with the Commission on the date hereof (“Amendment No. 1”) marked against the Offering Statement, please so advise and we would be happy to provide them.

GREENBERG TRAURIG, P.A.  ■  ATTORNEYS AT LAW  ■  WWW.GTLAW.COM

401 East Las Olas Boulevard, Suite 2000, Fort Lauderdale, FL  33301  ■ Tel 954.765.0500  ■  Fax 954.765.1477

Mr. Jones and Ms. Haywood

Securities and Exchange Commission

August 7, 2020

Page 2

Offering Statement on Form 1-A filed June 16, 2020

Cover Page of Offering Circular, page 1

1. Please disclose on the cover page the number of units, the number of shares and warrants in the units, and the number common share underlying the warrants. For guidance, see Item 1(d) of Form 1-A.

Response: The Company respectfully acknowledges this comment and has included 35,000,000 as the maximum number of each of the units, number of shares and warrants in the units and the number of common shares underlying the warrants. The Company has omitted pricing of the securities until immediately prior to or immediately after Qualification in reliance on Rule 253(b) of Regulation A which allows the Company to omit price dependent information including public offering price, broker-dealer discounts or commissions, and the amount of proceeds, as well as the terms of the securities dependent upon the offering date.

Use of Proceeds to Issuer, page 26

2. Please revise the table to include columns for net proceeds received from the sale of units based on the company receiving 25%, 50%, 75% and 100% of the maximum gross proceeds.

Response: The Company respectfully acknowledges this comment and has revised the table to include columns for net proceeds received from the sale of units based on the Company receiving 25%, 50%, 75% and 100% of the maximum gross proceeds. As discussed in the Company’s prior response to Comment 1, the Company will complete the Use of Proceeds table upon pricing of the securities.

3. Please disclose the amount of proceeds from the offering that will be used to fund the compensation payable to your Chief Executive Officer. Also, we note your disclosure in the last paragraph on page 26 about the use of proceeds for repayment of indebtedness of the company. Please provide the disclosure required by Instruction 6 to Item 6 of Form 1A.

Response: The Company respectfully acknowledges this comment and has revised the disclosure to state that proceeds from the Offering will be used to fund 100% of the amount of the Chief Executive Officer’s direct compensation, which is $120,000.00. The Company has further revised the disclosure to provide that the Company does not at this time have indebtedness for which a material part of the proceeds is to be used for repayment (other than trade and vendor payables in the ordinary course of business for which amounts are not material).

Director and Named Executive Officer Compensation, Excluding Compensation Securities, page 47

4. You disclose compensation of “Nil” for a number of your directors and the title in this section discloses that the summary compensation table is “excluding compensation securities.” Please include a dollar amount for your disclosures in the table and revise the title in this section. Please include all compensation during your last completed fiscal year. See Instruction 11(a) to Form 1-A.

Response: The Company respectfully acknowledges this comment. The Company has revised the table to include a dollar amount of $0 for the director compensation that was previously marked “Nil” and has removed “Excluding Compensation Securities” from the title in this section. The fair value of equity compensation granted during the last fiscal year is now included in the table under the column "Other Compensation."

Mr. Jones and Ms. Haywood

Securities and Exchange Commission

August 7, 2020

Page 2

Securities Being Offered, page 51

5. Please revise to include disclosure regarding your units and warrants, and clarify, if true, that holders of common shares receive one vote per share. See Item 14 of Form 1-A.

Response: The Company respectfully acknowledges this comment and has revised the disclosure to provide that, pursuant to its Articles, and subject to the BCBCA, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the Company’s directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time. The Company has further revised the disclosure to clarify that pursuant to the Company’s Articles, on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy.

Financial Statements

21. Subsequent Events, page F-32

6. On April 30, 2020, you completed the acquisition of Dronelogics Systems Inc. by acquiring all of the shares of Dronelogics, resulting in Dronelogics becoming a wholly-owned subsidiary. On closing of the Dronelogics acquisition, you paid the Dronelogics shareholders $2,000,000, consisting of a cash payment of $500,000, subject to a post-closing working capital adjustment and issued the Dronelogics shareholders 3,225,438 common shares in satisfaction of the balance of the purchase price. Please tell us what consideration you gave to including the financial statements of Dronelogics Systems Inc. and pro forma financial information related to this acquisition in accordance with paragraphs (b)(7)(iii) through (iv) of Part F/S of Form 1-A.

Response: The Company respectfully acknowledges this comment. As discussed with the SEC accounting staff telephonically on July 27, 2020 the Company is including the audited financial statements of Dronelogics Systems Inc. for the year ended December 31, 2018 and the financial statements for the nine-months ended September 30, 2019 given that these are the statements available and the statements required by the Company in its acquisition documents. The Company confirms to the Staff there have been no material changes in the financial condition of Dronelogics Systems Inc. from the period October 1, 2019 through the date of the acquisition on April 30, 2020. The Company further advises the Staff that as discussed with the Staff it will include the pro-forma statements of the Company including the effects of the acquisition of Dronelogics by further amendment to the Form 1-A/A as soon as such pro-forma statements are completed. The Company’s completion and filing of the pro-forma statements by Form 1-A/A are anticipated in mid-August, 2020.

Exhibits

7. Please have counsel revise the legal opinion to disclose the number of units, the number of common shares and common share purchase warrants in the units, and the number of common shares underlying the common share purchase warrants.

Response: The Company respectfully acknowledges this comment and Canadian counsel for the Company has included in the legal opinion the maximum number of securities the Company will issue in connection with the offering.

Mr. Jones and Ms. Haywood

Securities and Exchange Commission

August 7, 2020

Page 2

8. Please tell us why counsel included assumptions (a) - (f) on pages 2 and 3 and exceptions and qualifications (a), (b) and (c) on page 4 of the legal opinion.

Response: The Company respectfully acknowledges this comment. The assumptions included in the legal opinion are a set of facts that its counsel assumes to be true in order to reach the opinions provided. Counsel has included the assumptions (a) - (d) under Section 3 of the revised legal opinion as these matters relate to facts that Counsel has not or is not able to verify. Counsel has included the assumption (f) under Section 3 as it relates to United States federal and state securities laws, which is a jurisdiction where counsel is not qualified to carry on the practice of law. The qualifications (a) - (d) included under Section 5 in the revised legal opinion are required in order for the opinions provided to be correct and are commonly included in connection with such opinions.

9. It appears from footnote “*” on page III-1 that you have omitted portions of an exhibit containing confidential information. However, it is unclear from the list of exhibits as to which agreement has been filed as an exhibit contains confidential information that has been omitted. Please advise or revise.

Response: The Company respectfully acknowledges this comment. No portions of an exhibit having confidential information have been omitted. The footnote was inadvertently included in Part III - Exhibits. Accordingly, the Company has removed this footnote.

**************

Mr. Jones and Ms. Haywood

Securities and Exchange Commission

August 7, 2020

Page 4

We appreciate your time and attention to the response to the Staff’s comments set forth in this letter. We would be happy to answer any questions you may have in connection with the same and/or provide you with any additional information. If any member of the Staff has questions with regard to the foregoing, please do not hesitate to contact the undersigned at 954.768.8221.

	Very truly yours,
	/s/ Rebecca G. DiStefano
	Rebecca G. DiStefano
Enclosures

cc:            Mr. Cameron Chell, Chief Executive Officer and Mr. Paul Sun, Chief Financial Officer