SHARE CAPITAL | 17. SHARE CAPITAL Authorized share capital Unlimited number of common shares without par value. Issued share capital During the three months ended March 31, 2022, ● The Company issued 16,538 74,227 ● The Company issued 12,500 26,875 During the year ended December 31, 2021, ● The Company issued 1,580,525 3,951,312 ● The Company issued 149,999 ● The Company issued 392,999 987,248 ● The Company issued 15,000 ● The Company issued 6,488,691 18,815,485 Each unit is comprised of one common share and one share purchase warrant. These warrants had a fair value of $0.57 USD allocated to them, have an exercise price of $3.55 USD per warrant, each convert to one common share, and have a life of two years 8,261,511 ● The Company issued 1,200,000 Each unit is comprised of one common share and one warrant. These warrants have an exercise price of $13.35 per warrant, each convert to one common share, and have a life of two years. ● The Company issued 5,095,966 25,538,213 ● The Company issued 359,009 978,478 ● The Company issued 298,661 ● The Company issued 12,500 26,875 ● The Company issued 356,901 Stock Options The Company has adopted an incentive share compensation plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the CSE requirements, grant to directors, officers, employees, and technical consultants to the Company, non-transferable stock options to purchase common shares. The total number of common shares reserved and available for grant and issuance pursuant to this plan shall not exceed 20% (in the aggregate) of the issued and outstanding common shares from time to time. The number of options awarded and underlying vesting conditions are determined by the Board of Directors in its discretion. As at March 31, 2022, the Company had the following options outstanding and exercisable: SCHEDULE OF STOCK 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 $ 2.50 7.59 296,665 296,665 November 19, 2019 November 19, 2029 $ 2.50 7.64 50,000 50,000 April 30, 2020 April 30, 2030 $ 2.50 8.09 87,000 78,666 April 30, 2020 April 30, 2030 $ 3.85 8.09 110,000 70,000 July 3, 2020 July 3, 2025 $ 3.20 3.26 200,000 166,666 November 24, 2020 November 24, 2030 $ 2.50 8.66 32,000 21,000 February 2, 2021 February 2, 2031 $ 13.20 8.85 30,000 20,000 March 8, 2021 March 8, 2026 $ 13.90 3.94 10,000 7,500 April 27, 2021 April 27, 2031 $ 10.15 8.98 182,000 - September 9, 2021 September 9, 2026 $ 4.84 4.44 25,826 - 1,023,491 710,497 Draganfly Inc. Notes to the Condensed Consolidated Interim Financial Statements For The Three Months Ended March 31, 2022 Expressed in Canadian Dollars (unaudited) 17. SHARE CAPITAL (CONT’D) Stock options (cont’d) SUMMARY OF CHANGES IN STOCK OPTIONS Number of Options Weighted Average Exercise Price Outstanding, December 31, 2020 1,193,659 $ 2.75 Forfeited (405,494 ) 2.50 Granted 247,826 10.12 Outstanding, December 31, 2021 1,035,991 $ 4.60 Exercised (12,500 ) 2.50 Outstanding, March 31, 2022 1,023,491 $ 3.22 No During the year ended December 31, 2021, ● The Company granted 30,000 13.20 10 years ● The Company granted 10,000 13.90 5 years ● The Company granted 182,000 10.15 10 years ● The Company granted 25,826 4.84 5 years During the three months ended March 31, 2022, the Company recorded $ 297,566 516,351 SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS Three months ended March 31, 2022 2021 Risk free interest rate 2.38 % 0.69% 1.40 % Expected volatility 69.83 % 111.87% 113.16 % Expected life 5 years 5 years Expected dividend yield 0 % 0 % Exercise price $ 13.90 $ 13.20 13.90 Volatility is calculated using the historical volatility method based on a comparative company’s stock price. Restricted Share Units The Company has adopted an incentive share compensation plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the Exchange requirements, grant to directors, officers, employees, and technical consultants to the Company, restricted stock units (RSUs). The number of RSUs awarded and underlying vesting conditions are determined by the Board of Directors in its discretion. RSUs will have a 3-year vesting period following the award date. The total number of common shares reserved and available for grant and issuance pursuant to this plan, and the total number of Restricted Share Units that may be awarded pursuant to this plan, shall not exceed 20% (in the aggregate) of the issued and outstanding common shares from time to time. Draganfly Inc. Notes to the Condensed Consolidated Interim Financial Statements For The Three Months Ended March 31, 2022 Expressed in Canadian Dollars (unaudited) 17. SHARE CAPITAL (CONT’D) SUMMARY OF CHANGES IN RESTRICTED STOCK UNITS As at March 31, 2022, the Company had the following RSUs outstanding: Number of RSUs Outstanding, December 31, 2020 614,666 Vested (448,660 ) Issued 348,826 Outstanding, December 31, 2021 514,832 Issued - Outstanding, March 31, 2022 514,832 The Company did not issue any RSU’s for the three months ended March 31, 2022. During the year ended December 31, 2021, 323,661 124,999 348,826 During the three months ended March 31, 2022, the Company recorded share-based payment expense of $ 345,759 533,515 Warrants During the years ended December 31, 2021 and 2020, the Company issued warrants (“USD Warrants”) with a USD exercise price. Being in a foreign currency that is not the Company’s functional currency, these USD Warrants are required to be recorded as a financial liability and not as equity. As a financial liability, these USD Warrants are revalued on a quarterly basis to fair market value with the change in fair value being recorded profit or loss. The initial fair value of these USD Warrants was parsed out from equity and recorded as a financial liability. To reach a fair value of the USD Warrants, a Black Scholes calculation is used, calculated in USD as the Company also trades on the Nasdaq. The Black Scholes value per USD Warrant is then multiplied by the number of outstanding warrants and then multiplied by the foreign exchange rate at the end of the period from the Bank of Canada. Warrant Derivative Liability SCHEDULE OF WARRANT DERIVATIVE LIABILITY Balance at January 1, 2021 $ 748,634 Warrant issuance 8,261,511 Exercised (98,048 ) Change in fair value of warrants outstanding (4,046,325 ) Balance at December 31, 2021 $ 4,865,772 Exercised (74,227 ) Change in fair value of warrants outstanding 1,022,501 Warrant Balance at March 31, 2022 $ 5,814,046 Derivative liability Warrants $ 5,814,046 Contingent consideration (note 5) 976,816 Derivative liability at March 31, 2022 $ 6,790,862 Draganfly Inc. Notes to the Condensed Consolidated Interim Financial Statements For The Three Months Ended March 31, 2022 Expressed in Canadian Dollars (unaudited) 17. SHARE CAPITAL (CONT’D) Warrants (cont’d) Details of these warrants and their fair values are as follows: SCHEDULE OF WARRANTS AND FAIR VALUE OUTSTANDING Issue Date Exercise Price Number of Warrants Outstanding at March 31, 2022 Fair Value at March 31, 2022 Number of Warrants Outstanding at December 31, 2021 Fair Value at December 31, 2021 November 30, 2020 US$ 3.55 481,484 $ 353,777 482,425 $ 182,262 February 5, 2021 US$ 3.55 1,319,675 1,076,840 1,323,275 951,226 March 5, 2021 US$ 3.55 5,142,324 4,383,429 5,154,321 3,731,284 6,943,483 $ 5,814,046 6,960,021 $ 4,864,772 T SCHEDULE OF WEIGHTED AVERAGE ASSUMPTION FOR WARRANTS March 31, 2022 December 31, 2021 Risk free interest rate 2.17 % 0.23% 0.95 % Expected volatility 72.74% 126.97 % 70.95% 144.59 % Expected life 0.67 2.46 2 3 Expected dividend yield 0 % 0 % Volatility is calculated using the historical volatility method. During the year ended December 31, 2020, the Company amended the expiry date of the November 5, 2019 warrants from November 5, 2020 to November 5, 2021 provided that 25% of the warrants were exercised by October 21, 2020 and 25% were exercised by May 5, 2021. SUMMARY OF CHANGES IN WARRANTS Number of Warrants Weighted Average Exercise Price Outstanding, December 31, 2020 2,416,864 $ 2.95 Exercised (1,939,534 ) 2.54 Forfeited (6,000 ) 2.50 Issued 7,943,489 5.10 Outstanding, December 31, 2021 8,414,819 $ 4.99 Exercised (16,538 ) 4.44 Outstanding, March 31, 2022 8,398,281 $ 4.99 As at March 31, 2022, the Company had the following warrants outstanding: SCHEDULE OF WARRANTS OUTSTANDING Date issued Expiry date Exercise price Number of warrants outstanding November 30, 2020 November 30, 2022 3.55 481,484 February 5, 2021 February 5, 2023 3.55 1,319,675 March 5, 2021 March 5, 2023 US$ 3.55 5,142,324 March 22, 2021 March 22, 2023 13.35 1,200,000 July 29, 2021 July 29, 2024 US$ 5.00 250,000 September 14, 2021 September 14, 2024 US$ 5.00 4,798 8,398,281 Draganfly Inc. Notes to the Condensed Consolidated Interim Financial Statements For The Three Months Ended March 31, 2022 Expressed in Canadian Dollars (unaudited) 17. SHARE CAPITAL (CONT’D) Warrants (cont’d) The weighted average remaining contractual life of warrants outstanding as of March 31, 2022, was 0.96 years (December 31, 2021 – 1.20 years). Of 1,200,000 900,000 |