Exhibit 99.1
Draganfly Inc.
Condensed Consolidated Interim Financial Statements – Unaudited
For the Three Months Ended March 31, 2024
(Expressed in Canadian Dollars)
Draganfly Inc.
Condensed Consolidated Interim Statements of Financial Position - Unaudited
Expressed in Canadian Dollars
As at | Notes | March 31, 2024 | December 31, 2023 | |||||||
ASSETS | ||||||||||
Current Assets | ||||||||||
Cash and cash equivalents | 4 | $ | 4,339,736 | $ | 3,093,612 | |||||
Receivables | 5 | 490,580 | 649,612 | |||||||
Inventory | 6 | 1,459,621 | 1,596,536 | |||||||
Prepaids and Deposits | 7 | 1,073,936 | 1,342,215 | |||||||
Total current assets | 7,363,873 | 6,681,975 | ||||||||
Equipment | 9 | 600,365 | 680,801 | |||||||
Intangible assets | 53,605 | 56,426 | ||||||||
Investments | 8 | 178,357 | 189,403 | |||||||
Receivable | 5 | 156,200 | - | |||||||
Right of use assets | 10 | 638,148 | 721,687 | |||||||
TOTAL ASSETS | $ | 8,990,548 | $ | 8,330,292 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Current Liabilities | ||||||||||
Trade payables and accrued liabilities | 12,19 | $ | 2,396,936 | $ | 2,638,981 | |||||
Customer deposits | 62,394 | 104,715 | ||||||||
Deferred income | 13 | 16,439 | 12,112 | |||||||
Loans payable | 14 | 3,373 | 85,058 | |||||||
Derivative liability | 15 | 4,033,574 | 4,196,125 | |||||||
Lease liabilities | 11 | 316,931 | 362,001 | |||||||
Total current liabilities | 6,829,647 | 7,398,992 | ||||||||
Non-current Liabilities | ||||||||||
Deferred Income | 13 | 91,463 | 95,562 | |||||||
Lease liabilities | 11 | 390,911 | 428,022 | |||||||
TOTAL LIABILITIES | 7,312,021 | 7,922,576 | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||||
Share capital | 15 | 100,023,862 | 97,070,976 | |||||||
Reserve – share-based payments | 15 | 7,072,480 | 6,870,139 | |||||||
Accumulated deficit | (105,452,164 | ) | (103,588,356 | ) | ||||||
Accumulated other comprehensive income | 34,349 | 54,957 | ||||||||
TOTAL SHAREHOLDERS’ EQUITY | 1,678,527 | 407,716 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 8,990,548 | $ | 8,330,292 |
Nature and Continuance of Operations (Note 1)
Subsequent event (Note 21)
Approved and authorized for issuance by the Board of Directors on May 14, 2024.
“Scott Larson” | “Cameron Chell” | |
Director | Director |
2 |
Draganfly Inc.
Condensed Consolidated Interim Statements of Comprehensive Loss - Unaudited
Expressed in Canadian Dollars
For the three months ended | ||||||||||
March 31, 2024 | March 31, 2023 | |||||||||
Sales of goods | 16 | $ | 1,237,948 | $ | 1,380,816 | |||||
Provision of services | 16 | 91,633 | 220,670 | |||||||
TOTAL REVENUE | 1,329,581 | 1,601,486 | ||||||||
COST OF SALES | 6 | (1,049,570 | ) | (1,158,052 | ) | |||||
GROSS PROFIT | 280,011 | 443,434 | ||||||||
OPERATING EXPENSES | ||||||||||
Amortization | $ | 2,821 | $ | 8,989 | ||||||
Depreciation | 9,10 | 143,122 | 57,506 | |||||||
Director fees | 19 | 152,438 | 151,663 | |||||||
Insurance | 364,274 | 498,006 | ||||||||
Office and miscellaneous | 17 | 346,270 | 2,800,652 | |||||||
Professional fees | 580,260 | 847,187 | ||||||||
Research and development | 121,391 | 793,224 | ||||||||
Share-based payments | 15,19 | 198,907 | 540,563 | |||||||
Travel | 40,019 | 89,262 | ||||||||
Wages and salaries | 19 | 1,581,431 | 1,821,081 | |||||||
Total operating expenses | (3,530,933 | ) | (7,608,133 | ) | ||||||
OTHER INCOME | ||||||||||
Change in fair value of derivative liability | 15 | 1,817,569 | 57,314 | |||||||
Finance and other costs | 4,825 | 35,861 | ||||||||
Foreign exchange gain (loss) | 66,736 | (18,156 | ) | |||||||
Gain on disposal of assets | 43,528 | 21,203 | ||||||||
Gain on recovery of notes receivable | 6,751 | - | ||||||||
Government income | - | 1,275 | ||||||||
Other expense | 18 | (552,295 | ) | (424 | ) | |||||
Total Other income (expenses) | $ | 1,387,114 | $ | 97,073 | ||||||
NET LOSS | $ | (1,863,808 | ) | $ | (7,067,626 | ) | ||||
OTHER COMPREHENSIVE LOSS | ||||||||||
Items that may be reclassified to profit or loss | ||||||||||
Foreign exchange translation | (9,562 | ) | (86,402 | ) | ||||||
Items that will not be reclassified to profit or loss | ||||||||||
Change in fair value of equity investments at FVOCI | 8 | (11,046 | ) | 57,033 | ||||||
COMPREHENSIVE LOSS | (1,884,416 | ) | (7,096,995 | ) | ||||||
Net Loss per share – Basic & diluted | $ | ) | $ | ) | ||||||
Weighted average number of common shares outstanding – Basic & diluted |
3 |
Draganfly Inc.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity - Unaudited
Expressed in Canadian Dollars
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||
Number of Shares | Share Capital | Reserve – Share-Based Payments | Accumulated Deficit | Change in Fair Value of Investments at FVTOCI | Exchange Differences on Translation of Foreign Operations | Total Shareholders’ Equity | ||||||||||||||||||||||
Balance at December 31, 2022 | 34,270,579 | $ | 83,600,089 | $ | 7,264,340 | $ | (79,976,546 | ) | $ | (431,123 | ) | $ | 584,121 | $ | 11,040,881 | |||||||||||||
Shares issued for financing – ATM (“At-the-Market”) | 650,729 | 1,748,946 | - | - | - | - | 1,748,946 | |||||||||||||||||||||
Share issue costs | - | (187,697 | ) | - | - | - | - | (187,697 | ) | |||||||||||||||||||
Shares issued for financing | 8,000,000 | 10,856,166 | - | - | - | - | 10,856,166 | |||||||||||||||||||||
Share issue costs | - | (1,206,040 | ) | - | - | - | - | (1,206,040 | ) | |||||||||||||||||||
Shares issued for the exercise of warrants | 3,800,000 | 1,261,245 | - | - | - | - | 1,261,245 | |||||||||||||||||||||
Shares issued for the exercise of RSUs | 63,657 | 68,750 | (68,750 | ) | - | - | - | - | ||||||||||||||||||||
Share-based payments | - | - | 540,563 | - | - | - | 540,563 | |||||||||||||||||||||
Shares returned to treasury | (900,000 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Net loss | - | - | - | (7,067,626 | ) | - | - | (7,067,626 | ) | |||||||||||||||||||
Change in fair value of equity investments at FVOCI | - | - | - | - | 57,033 | - | 57,033 | |||||||||||||||||||||
Translation of foreign operations | - | - | - | - | - | (86,402 | ) | (86,402 | ) | |||||||||||||||||||
Balance at March 31, 2023 | 42,984,965 | $ | 94,880,214 | $ | 7,736,153 | $ | (87,044,172 | ) | $ | (374,090 | ) | $ | 497,719 | $ | 15,695,824 | |||||||||||||
Shares issued for financing | 4,800,000 | 520,064 | - | - | - | - | 520,064 | |||||||||||||||||||||
Share issue costs | - | (901,285 | ) | 224,868 | (676,417 | ) | ||||||||||||||||||||||
Shares issued for the exercise of warrants | 3,800,000 | 1,261,245 | - | - | - | - | 1,261,245 | |||||||||||||||||||||
Shares issued for the exercise of RSUs | 1,444,598 | 2,571,983 | (2,571,983 | ) | - | - | - | - | ||||||||||||||||||||
Share-based payments | - | - | 1,481,101 | - | - | - | 1,481,101 | |||||||||||||||||||||
Shares returned to treasury | (900,000 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Net loss | - | - | - | (16,544,184 | ) | - | - | (16,544,184 | ) | |||||||||||||||||||
Change in fair value of equity investments at FVOCI | - | - | - | - | (60,213 | ) | - | (60,213 | ) | |||||||||||||||||||
Translation of foreign operations | - | - | - | - | - | (8,459 | ) | (8,459 | ) | |||||||||||||||||||
Balance at December 31, 2023 | 49,229,563 | $ | 97,070,976 | $ | 6,870,139 | $ | (103,588,356 | ) | $ | (434,303 | ) | $ | 489,260 | $ | 407,716 | |||||||||||||
Balance | 49,229,563 | $ | 97,070,976 | $ | 6,870,139 | $ | (103,588,356 | ) | $ | (434,303 | ) | $ | 489,260 | $ | 407,716 | |||||||||||||
Shares issued for financing | 11,200,000 | 2,017,966 | - | - | - | - | 2,017,966 | |||||||||||||||||||||
Share issue costs | - | (338,836 | ) | 72,185 | - | - | - | (266,651 | ) | |||||||||||||||||||
Shares issued for the exercise of warrants | 3,800,000 | 1,205,005 | - | - | - | - | 1,205,005 | |||||||||||||||||||||
Shares issued for the exercise of RSUs | 63,658 | 68,751 | (68,751 | ) | - | - | - | - | ||||||||||||||||||||
Share-based payments | - | - | 198,907 | - | - | - | 198,907 | |||||||||||||||||||||
Shares returned to treasury | (900,000 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Net loss | - | - | - | (1,863,808 | ) | - | - | (1,863,808 | ) | |||||||||||||||||||
Change in fair value of equity investments at FVOCI | - | - | - | - | (11,046 | ) | - | (11,046 | ) | |||||||||||||||||||
Translation of foreign operations | - | - | - | - | - | (9,562 | ) | (9,562 | ) | |||||||||||||||||||
Balance at March 31, 2024 | 63,393,221 | $ | 100,023,862 | $ | 7,072,480 | $ | (105,452,164 | ) | $ | (445,349 | ) | $ | 479,698 | $ | 1,678,527 | |||||||||||||
Balance | 63,393,221 | $ | 100,023,862 | $ | 7,072,480 | $ | (105,452,164 | ) | $ | (445,349 | ) | $ | 479,698 | $ | 1,678,527 |
4 |
Draganfly Inc.
Condensed Consolidated Interim Statements of Cash Flows - Unaudited
Expressed in Canadian Dollars
For the three months ended March 31, | ||||||||
2024 | 2023 | |||||||
OPERATING ACTIVITIES | ||||||||
Net loss | $ | (1,863,808 | ) | $ | (7,067,626 | ) | ||
Adjustments for: | ||||||||
Amortization | 2,821 | 8,989 | ||||||
Depreciation | 143,122 | 57,506 | ||||||
Impairment of accounts receivable | - | 198,513 | ||||||
Change in fair value of derivative liability | (1,817,569 | ) | (57,314 | ) | ||||
Impairment of inventory | 148,760 | 77,047 | ||||||
Impairment (Gain) on recovery of notes receivable | (6,751 | ) | - | |||||
Finance and other costs | 485,849 | 1,275 | ||||||
Gain on disposal of assets | (43,528 | ) | (21,203 | ) | ||||
Income from government assistance | - | - | ||||||
Share-based payments | 198,907 | 540,563 | ||||||
Adjustments for profit loss | (2,752,197 | ) | (6,262,250 | ) | ||||
Net changes in non-cash working capital items: | ||||||||
Receivables | 2,832 | 404,458 | ||||||
Inventory | (11,845 | ) | (558,352 | ) | ||||
Prepaids | 268,279 | 419,350 | ||||||
Trade payables and accrued liabilities | (111,045 | ) | 392,643 | |||||
Customer deposits | (42,321 | ) | 40,467 | |||||
Deferred income | 228 | (59,732 | ) | |||||
Cash used in operating activities | (2,646,069 | ) | (5,623,416 | ) | ||||
INVESTING ACTIVITIES | ||||||||
Purchase of equipment | (4,066 | ) | (74,415 | ) | ||||
Disposal of equipment | 73,366 | 45,774 | ||||||
Repayment of notes receivable | 6,751 | 33,369 | ||||||
Cash provided by (used in) investing activities | 76,051 | 4,728 | ||||||
FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of common shares for financing | 4,877,475 | 12,605,112 | ||||||
Share issue costs | (889,482 | ) | (1,393,737 | ) | ||||
Proceeds from issuance of common shares for warrants exercised | 513 | - | ||||||
Repayment of loans | (81,685 | ) | (1,686 | ) | ||||
Repayment of lease liabilities | (81,117 | ) | (30,444 | ) | ||||
Cash provided by (used in) financing activities | 3,825,704 | 11,179,245 | ||||||
Effects of exchange rate changes on cash | (9,562 | ) | (86,402 | ) | ||||
Change in cash | 1,255,686 | 5,560,557 | ||||||
Cash and cash equivalents, beginning of period | 3,093,612 | 7,894,781 | ||||||
Cash and cash equivalents, end of period | $ | 4,339,736 | $ | 13,368,936 | ||||
SUPPLEMENTARY CASH FLOW DISCLOSURE | ||||||||
Interest paid | $ | 21,522 | $ | 11,817 | ||||
Share issue costs in accounts payable | 153,455 | 246,836 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
1. NATURE AND CONTINUANCE OF OPERATIONS
Draganfly Inc. (the “Company”) was incorporated on June 1, 2018 under the Business Corporations Act (British Columbia). The Company creates quality, cutting-edge unmanned and remote data collection and analysis platforms and systems that are designed to revolutionize the way companies do business. The Company’s shares trade on the Canadian Securities Exchange (the “CSE”), on the Nasdaq Capital Market (the “Nasdaq”) under the symbol “DPRO” and on the Frankfurt Stock Exchange under the symbol “3U8A”. The Company’s head office is located at 235 103rd St. E, Saskatoon, SK, S7N 1Y8 and its registered office is located at 2800 – 666 Burrard Street, Vancouver, BC, V6C 2Z7.
These condensed consolidated interim financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. To date, the Company has not been profitable and has an accumulated deficit of $105,452,164. The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing and or achieve profitable operations in the future. These factors raise substantial doubt over the Company’s ability to continue as a going concern. These condensed consolidated interim financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. These adjustments could be material.
2. BASIS OF PREPARATION
Statement of Compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. These condensed consolidated interim financial statements include all necessary disclosures required for interim financial statements but do not include all disclosures required for annual financial statements. These condensed consolidated interim financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2023.
These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on May 14, 2024.
Basis of consolidation
Each subsidiary is fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continues to be consolidated until the date when such control ceases.
The condensed consolidated interim financial statements include the accounts and results of operations of the Company and its wholly owned subsidiaries listed in the following table:
SCHEDULE OF WHOLLY OWNED SUBSIDIARIES
Name of Subsidiary | Place of Incorporation | Ownership Interest | ||||||
Draganfly Innovations Inc. (DII) | Canada | 100 | % | |||||
Draganfly Innovations USA, Inc. (DI USA) | US | 100 | % | |||||
Dronelogics Systems Inc. (“Dronelogics”) | Canada | 100 | % |
All intercompany balances and transactions were eliminated on consolidation.
6 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
3. MATERIAL ACCOUNTING POLICY INFORMATION, ESTIMATES, AND JUDGEMENTS
These condensed consolidated interim financial statements have been prepared following the same accounting principles and methods of computation as in outlined in the Company’s consolidated financial statements for the year ended December 31, 2023. A description of the accounting standards and interpretations that have been adopted by the Company can be found in the notes of the annual financials statements for the year ended December 31, 2023.
The preparation of the condensed consolidated interim financial statements requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of income and expenses during the reporting period. These condensed consolidated interim financial statements include estimates, which by their nature, are uncertain. These assumptions and associated estimates are based on historical experience and other factors that are considered to be relevant. As such, actual results may differ from estimates and the effect of such differences may be material. Significant estimates and judgements used in the preparation of these condensed consolidated interim financial statements remained unchanged from those disclosed in the Company’s annual consolidated financial statements for the year ended December 31, 2023.
4. CASH AND CASH EQUIVALENTS
SCHEDULE OF CASH AND CASH EQUIVALENTS
As at | March 31, 2024 | December 31, 2023 | ||||||
Cash held in banks | $ | 4,339,736 | $ | 3,093,612 |
5. RECEIVABLES
SCHEDULE OF AMOUNTS RECEIVABLE
As at | March 31, 2024 | December 31, 2023 | ||||||
Trade accounts receivable | $ | 599,050 | $ | 610,443 | ||||
Sales tax receivable | 47,730 | 39,169 | ||||||
Trade and other receivables | $ | 646,780 | $ | 649,612 | ||||
Current portion | $ | 490,580 | $ | 649,612 | ||||
Long term portion | 156,200 | - | ||||||
Trade and other receivables | $ | 646,780 | $ | 649,612 |
During the three months ended March 31, 2024, the Company recorded a provision for doubtful accounts of $nil (2023 – $198,513).
The long-term receivable represents a refundable deposit that allows for a two-year repayment term.
6. INVENTORY
SCHEDULE OF INVENTORIES
As at | March 31, 2024 | December 31, 2023 | ||||||
Finished goods | $ | 1,104,798 | $ | 904,858 | ||||
Parts | 354,823 | 691,678 | ||||||
Inventories | $ | 1,459,621 | $ | 1,596,536 |
During the three months ended March 31, 2024, $966,339 (2023 - $1,012,881) of inventory was recognized in cost of sales including an allowance to value its inventory for obsolete and slow-moving inventory of $148,760 (2023 -$77,047).
Cost of sales consist of the following:
SCHEDULE OF COST OF SALES
For the three months ended | March 31, 2024 | March 31, 2023 | ||||||
Inventory | $ | 966,339 | $ | 1,012,881 | ||||
Consulting and services | 22,474 | 93,654 | ||||||
Other | 60,757 | 51,517 | ||||||
Cost of sales | $ | 1,049,570 | $ | 1,158,052 |
7 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
7. PREPAIDS AND DEPOSITS
SCHEDULE OF PREPAID EXPENSES AND DEPOSITS
As at | March 31, 2024 | December 31, 2023 | ||||||
Insurance | $ | 490,811 | $ | 838,445 | ||||
Prepaid other | 180,701 | 142,124 | ||||||
Deposits | 402,424 | 361,646 | ||||||
Prepaid expenses and deposits | $ | 1,073,936 | $ | 1,342,215 |
8. INVESTMENTS
SCHEDULE OF INVESTMENTS
Balance at December 31, 2023 | $ | 189,403 | ||
Change in fair value | (11,046 | ) | ||
Balance at March 31 2024 | $ | 178,357 |
Fair value of investments is comprised of:
SCHEDULE OF FAIR VALUE OF INVESTMENT
Public company shares | $ | |||
Private company shares | ||||
Balance at March 31, 2024 | $ | 178,357 |
The Company holds
shares of a publicly listed company with an initial cost of $ .
The Company holds
common shares of a private company with an initial value of USD$ . The Company considers if observable market data exists on a quarterly basis to value the investment. Since inception, the Company has not had any adjustments to the fair value of the investment based on observable market data.
8 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
9. EQUIPMENT
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
Computer Equipment | Furniture and Equipment | Leasehold Improvements | Vehicles | Total | ||||||||||||||||
Cost | ||||||||||||||||||||
Balance at December 31, 2022 | $ | 95,662 | $ | 834,453 | $ | - | $ | 36,033 | $ | 966,148 | ||||||||||
Additions | 58,611 | 320,941 | 86,530 | 24,310 | 490,394 | |||||||||||||||
Disposals | (21,000 | ) | (115,204 | ) | - | - | (136,204 | ) | ||||||||||||
Balance at December 31, 2023 | 133,273 | 1,040,192 | 86,530 | 60,343 | 1,320,338 | |||||||||||||||
Property, plant and equipment, beginning balance | 133,273 | 1,040,192 | 86,530 | 60,343 | 1,320,338 | |||||||||||||||
Additions | - | 1,706 | 2,358 | - | 4,064 | |||||||||||||||
Disposals | - | (76,901 | ) | - | - | (76,901 | ) | |||||||||||||
Balance at March 31, 2024 | $ | 133,273 | $ | 964,997 | $ | 88,888 | $ | 60,343 | $ | 1,247,501 | ||||||||||
Property, plant and equipment, ending balance | $ | 133,273 | $ | 964,997 | $ | 88,888 | $ | 60,343 | $ | 1,247,501 | ||||||||||
Accumulated depreciation | ||||||||||||||||||||
Balance at December 31, 2022 | $ | 41,998 | $ | 502,790 | $ | - | $ | 16,669 | $ | 561,457 | ||||||||||
Charge for the year | 22,762 | 112,361 | 6,790 | 12,497 | 154,410 | |||||||||||||||
Disposals | (6,582 | ) | (69,748 | ) | - | - | (76,330 | ) | ||||||||||||
Balance at December 31, 2023 | 58,178 | 545,403 | 6,790 | 29,166 | 639,537 | |||||||||||||||
Accumulated depreciation Property, plant and equipment, beginning balance | 58,178 | 545,403 | 6,790 | 29,166 | 639,537 | |||||||||||||||
Charge for the period | 10,225 | 37,667 | 4,431 | 2,338 | 54,661 | |||||||||||||||
Disposals | - | (47,062 | ) | - | - | (47,062 | ) | |||||||||||||
Balance at March 31, 2024 | $ | 68,403 | $ | 536,008 | $ | 11,221 | $ | 31,504 | $ | 647,136 | ||||||||||
Accumulated depreciation Property, plant and equipment, ending balance | $ | 68,403 | $ | 536,008 | $ | 11,221 | $ | 31,504 | $ | 647,136 | ||||||||||
Net book value: | ||||||||||||||||||||
December 31, 2023 | $ | 75,095 | $ | 494,789 | $ | 79,740 | $ | 31,177 | $ | 680,801 | ||||||||||
March 31, 2024 | $ | 64,870 | $ | 428,989 | $ | 77,667 | $ | 28,839 | $ | 600,365 | ||||||||||
Property, plant and equipment | $ | 64,870 | $ | 428,989 | $ | 77,667 | $ | 28,839 | $ | 600,365 |
9 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
10. RIGHT OF USE ASSETS
SCHEDULE OF RIGHT OF USE ASSETS
Vehicles | Buildings | Land | Total | |||||||||||||
Balance at December 31, 2022 | $ | 2,385 | $ | 342,361 | $ | - | $ | 344,746 | ||||||||
Additions | - | 322,354 | 418,001 | 740,355 | ||||||||||||
Depreciation | (2,385 | ) | (149,644 | ) | (211,057 | ) | (363,086 | ) | ||||||||
Foreign exchange translation | - | - | (328 | ) | (328 | ) | ||||||||||
Balance at December 31, 2023 | $ | - | $ | 515,071 | $ | 206,616 | $ | 721,687 | ||||||||
Right of use assets, Cost, Balance | $ | - | $ | 515,071 | $ | 206,616 | $ | 721,687 | ||||||||
Depreciation | $ | - | $ | (35,681 | ) | $ | (52,777 | ) | $ | (88,458 | ) | |||||
Foreign exchange translation | - | - | 4,919 | 4,919 | ||||||||||||
Balance at March 31, 2024 | $ | - | $ | 479,390 | $ | 158,758 | $ | 638,148 | ||||||||
Right of use assets, Cost, Balance | $ | - | $ | 479,390 | $ | 158,758 | $ | 638,148 |
The Company added two new leases during the year ended December 31, 2023. A lease for land in the amount of $418,001 with an expiration date of December 31, 2024, and another lease for a facility in the amount of $322,354 with an expiration date of September 30, 2028. The Company has four leases with expiration dates of December 31, 2024, May 31, 2026, January 31, 2027, and September 30, 2028.
11. LEASE LIABILITIES
The Company leases certain assets under lease agreements. The lease liabilities consist of leases of facilities and vehicles with terms ranging from one to five years. The leases are calculated using incremental borrowing rates ranging from 7.5% to 13.25%. Extension options are included in a majority of the leases with options that are only exercisable by the Company and not the other party.
SCHEDULE OF OPERATING LEASE LIABILITIES
As at | Total | |||
Balance at December 31, 2022 | $ | 378,643 | ||
Interest expense | 96,423 | |||
Additions | 734,903 | |||
Lease payments | (423,410 | ) | ||
Foreign exchange translation | 3,464 | |||
Balance at December 31, 2023 | 790,023 | |||
Interest expense | 20,323 | |||
Lease payments | (101,440 | ) | ||
Foreign exchange translation | (1,064 | ) | ||
Balance at March 31, 2024 | $ | 707,842 |
Which consists of:
March 31, 2024 | December 31, 2023 | |||||||
Current lease liability | $ | 316,931 | $ | 362,001 | ||||
Non-current lease liability | 390,911 | 428,022 | ||||||
Ending balance | $ | 707,842 | $ | 790,023 |
SCHEDULE OF OPERATING MATURITY ANALYSIS
Maturity analysis | Total | |||
Less than one year | $ | 372,356 | ||
One to three years | 334,746 | |||
Four to five years | 114,937 | |||
Total undiscounted lease liabilities | 822,039 | |||
Amount representing interest | (114,197 | ) | ||
Lease liability | $ | 707,842 |
10 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
12. TRADE PAYABLES AND ACCRUED LIABILITIES
SCHEDULE OF TRADE PAYABLES AND ACCRUED LIABILITIES
As at | March 31, 2024 | December 31, 2023 | ||||||
Trade accounts payable | $ | 1,159,489 | $ | 1,259,623 | ||||
Accrued liabilities | 1,203,738 | 1,345,649 | ||||||
Government grant payable | 33,709 | 33,709 | ||||||
Trade payables and accrued liabilities | $ | 2,396,936 | $ | 2,638,981 |
13. DEFERRED INCOME
At times, the Company may take payment in advance for services to be rendered. These amounts are held and recognized as services are rendered.
SCHEDULE OF DEFERRED INCOME
As at | March 31, 2024 | December 31, 2023 | ||||||
Deferred income from customers | $ | 6,287 | $ | 12,112 | ||||
Deferred income from government | 101,615 | 95,562 | ||||||
Deferred income gross | $ | 107,902 | $ | 107,674 | ||||
Current portion | $ | 16,439 | $ | 12,112 | ||||
Long-term portion | 91,463 | 95,562 | ||||||
Deferred income net | $ | 107,902 | $ | 107,674 |
Deferred revenue of $16,439 as of March 31, 2024 is expected to be recognized as revenue within one year. The remaining is related to a long-term support and maintenance arrangements and will be recognized according to the terms of these arrangements over the next 4.3 years.
14. LOANS PAYABLE
SCHEDULE OF LOANS PAYABLE
As at | March 31, 2024 | December 31, 2023 | ||||||
Opening balance | $ | 85,058 | $ | 86,571 | ||||
Repayment of loans payable | (81,685 | ) | (6,747 | ) | ||||
Accretion expense | - | 5,234 | ||||||
Ending balance | $ | 3,373 | $ | 85,058 |
SCHEDULE OF LOANS
Start Date | Maturity Date | Rate | Carrying Value March 31, 2024 | Carrying Value December 31, 2023 | ||||||||||||
CEBA | 2020-05-19 | 2024-03-28 | 0 | % | $ | - | $ | 40,000 | ||||||||
CEBA | 2021-04-23 | 2024-03-28 | 0 | % | - | 40,000 | ||||||||||
Vehicle loan | 2019-08-30 | 2024-09-11 | 6.99 | % | 3,373 | 5,058 | ||||||||||
Total | $ | 3,373 | $ | 85,058 | ||||||||||||
Total Carrying Value | $ | 3,373 | $ | 85,058 |
The CEBA loans are unsecured, and the vehicle loan is secured by the vehicle. The CEBA loans were repaid March 25, 2024.
11 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
Authorized share capital
Unlimited number of common shares without par value.
Issued share capital
During the three months ended March 31, 2024,
● | The Company issued common shares for the vesting of restricted share units. | |
● | The Company issued common shares for the exercise of warrants | |
● | The Company issued units consisting of one common share and one warrant and units consisting of one prefunded warrant and one warrant in a financing for $with share issuance costs of $752,498 for net proceeds of $. Of the total share issuance costs $were expensed in other income (expense). Value of the issuance was allocated to the shares, and $ to the warrants, including $ allocated to prefunded warrants. The prefunded warrants were exercised on the date of issue. | |
● | shares were returned to treasury that were held in escrow related to the Vital Intelligence Inc. acquisition for failure to meet required milestones. All value that had been recorded related to these shares had been previously written off. |
During the year ended December 31, 2023,
● | The Company issued common shares for the vesting of restricted share units. | |
● | The Company issued 1,953,032 for net proceeds of $ . common shares in a financing for $ with share issuance costs of $ | |
● | The Company issued common shares in an ATM (“At – the - market”) financing for $ with share issuance costs of $ for net proceeds of $ . | |
● | The Company issued common shares in a financing for proceeds of $with share issuance costs of $for net proceeds of $. Of the total share issuance costs $were expensed in other income (expense). Value of the issuance was allocated $ to the shares and $4,338,931 to derivative liability. |
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.
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 | |||||||||||||
$ | 2.50 | 278,332 | 278,332 | |||||||||||||||
$ | 2.50 | 50,000 | 50,000 | |||||||||||||||
$ | 2.50 | 85,000 | 85,000 | |||||||||||||||
$ | 3.85 | 110,000 | 110,000 | |||||||||||||||
$ | 3.20 | 100,000 | 100,000 | |||||||||||||||
$ | 2.50 | 32,000 | 32,000 | |||||||||||||||
$ | 13.20 | 30,000 | 30,000 | |||||||||||||||
$ | 13.90 | 10,000 | 10,000 | |||||||||||||||
$ | 10.15 | 137,665 | 113,994 | |||||||||||||||
$ | 4.84 | 25,826 | 17,217 | |||||||||||||||
$ | 0.626 | 30,000 | 10,000 | |||||||||||||||
888,823 | 836,543 |
12 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
15. | SHARE CAPITAL (CONT’D) |
Number of Options | Weighted Average Exercise Price | |||||||
Outstanding, December 31, 2022 | $ | 4.60 | ||||||
Forfeited | ) | 3.77 | ||||||
Issued | 0.63 | |||||||
Outstanding, December 31, 2023 | $ | 4.48 | ||||||
Forfeited | ) | 10.15 | ||||||
Outstanding, March 31, 2024 | $ | 4.42 |
No options were granted by the Company during the three months ended March 31, 2024.
During the three months ended March 31, 2024, the Company recorded $ (2023 – $ ) in stock-based compensation in relation to the vesting of stock options. The fair values of stock options granted were estimated using the Black-Scholes Option Pricing Model.
Restricted Share Units
During the three months ended March 31, 2024, the Company recorded share-based payment expense of $ (2023 - $ ) for RSUs, based on the fair values of RSUs granted which were calculated using the closing price of the Company’s stock on the day prior to grant.
The Company has adopted an incentive share compensation plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the Exchange requirements, grant to directors, officers, employees and technical consultants to the Company, restricted stock units (RSUs). The number of RSUs awarded and underlying vesting conditions are determined by the Board of Directors in its discretion. RSUs will have a 3-year vesting period following the award date. The total number of common shares reserved and available for grant and issuance pursuant to this plan, and the total number of Restricted Share Units that may be awarded pursuant to this plan, shall not exceed 20% (in the aggregate) of the issued and outstanding common shares from time to time.
As at March 31, 2024, the Company had the following RSUs outstanding:
SUMMARY OF CHANGES IN RESTRICTED STOCK UNITS
Number of RSUs | ||||
Outstanding, December 31, 2022 | 1,198,875 | |||
Vested | (1,508,255 | ) | ||
Issued | 1,685,316 | |||
Forfeited | (262,969 | ) | ||
Outstanding, December 31, 2023 | 1,112,967 | |||
Vested | (63,658 | ) | ||
Forfeited | (36,203 | ) | ||
Outstanding, March 31, 2024 | 1,013,106 |
13 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
15. | SHARE CAPITAL (CONT’D) |
Warrants
During the three months ended March 31, 2024 and the year ended December 31, 2023, the Company issued pre-funded warrants (“USD pre-funded Warrants”) where a portion of the funds related to the eventual exercise have already been received with the remaining exercise price in USD. Being in a foreign currency that is not the Company’s functional currency and these pre-funded warrants were not issued in exchange for services, the value related to the future exercise price of the USD pre-funded Warrants are required to be recorded as a financial liability and not as equity. As a financial liability, the portion of the USD pre-funded Warrants related to the future exercise price will be revalued on a quarterly basis to fair market value with the change in fair value being recorded in profit or loss.
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. At the date of issue the warrants were valued with a risk free rate of 5 years and an expected dividend yield rate of %. The broker warrants were valued with a risk free rate of %, volatility of %, expected life of 3 years and an expected dividend yield of %.
%, volatility of %, expected life of
Warrant Derivative Liability
SCHEDULE OF WARRANT DERIVATIVE LIABILITY
Balance at December 31, 2022 | $ | - | ||
Warrants issued | 3,985,015 | |||
Change in fair value of warrants outstanding | 211,110 | |||
Balance at December 31, 2023 | $ | 4,196,125 | ||
Warrants issued | 2,859,509 | |||
Warrants exercised | (1,204,491 | ) | ||
Change in fair value of warrants outstanding | (1,817,569 | ) | ||
Balance at March 31, 2024 | $ | 4,033,574 |
Derivative liability balance at | March 31, 2024 | December 31, 2023 | ||||||
Warrants | $ | 4,033,574 | $ | 4,196,125 |
14 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
15. | SHARE CAPITAL (CONT’D) |
Details of these warrants and their fair values are as follows:
SCHEDULE OF WARRANT AND FAIR VALUE OUTSTANDING
Issue Date | Exercise Price | Number of Warrants Outstanding at March 31, 2024 | Fair Value at March 31, 2024 | Number of Warrants Outstanding at December 31, 2023(5) | Fair Value at December 31, 2023 | |||||||||||||||
(1) | US$ | 6,400,000 | 1,130,828 | 6,400,000 | 3,180,543 | |||||||||||||||
(2) | US$ | - | - | 1,600,000 | 1,015,582 | |||||||||||||||
(3) | US$ | 13,400,000 | 2,902,746 | - | - | |||||||||||||||
(4) | US$ | - | - | - | - | |||||||||||||||
19,800,000 | $ | 4,033,574 | 8,000,000 | $ | 4,196,125 |
1) | The warrants expire October 30, 2028. | |
2) | The warrants have no expiry date. They were exercised January 5, 2024. | |
3) | The warrants expire February 26, 2029. | |
4) | The warrants have no expiry date. They were exercised February 26, 2024. |
The fair values of these warrants were estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions:
SCHEDULE OF WEIGHTED AVERAGE ASSUMPTION FOR WARRANTS
March 31, 2024 | December 31, 2023 | |||||||
Risk free interest rate | % | % | ||||||
Expected volatility | % | % | ||||||
Expected life | - years | years | ||||||
Expected dividend yield | % | % |
SUMMARY OF CHANGES IN WARRANTS
Number of Warrants | Weighted Average Exercise Price | |||||||
Outstanding, December 31, 2022 | 7,916,797 | $ | 5.08 | |||||
Issued | 8,320,000 | 0.50 | ||||||
Expired | (7,661,999 | ) | 5.89 | |||||
Outstanding, December 31, 2023 | 8,574,798 | $ | 0.63 | |||||
Issued | 16,270,000 | 0.22 | ||||||
Exercised | (3,800,000 | ) | 0.0001 | |||||
Outstanding March 31, 2024 | 21,044,798 | $ | 0.51 |
15 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
15. | SHARE CAPITAL (CONT’D) |
SCHEDULE OF WARRANTS OUTSTANDING
Date issued | Expiry date | Exercise price | Number of warrants outstanding | |||||||
US$ | 250,000 | |||||||||
US$ | 4,798 | |||||||||
US$ | 320,000 | |||||||||
US$ | 6,400,000 | |||||||||
US$ | 670,000 | |||||||||
US$ | 13,400,000 | |||||||||
21,044,798 |
The weighted average remaining contractual life of warrants outstanding as of March 31, 2024, was years (December 31, 2023 – years).
16. SEGMENTED INFORMATION
The Company organizes its three segments based on product lines as well as a Corporate segment. The three segments are Drones, Vital (Vital Intelligence), and Corporate. The Drones segment derives its revenue from products and services related to the sale of unmanned aerial vehicles (UAV). The Vital segment derives its revenue from the sale of products that measure vitals to help detect symptoms from large groups of people from a distance. The Corporate segment includes all costs not directly associated with the Drone and Vital segments. The Company aggregates the information for the segments by analyzing the revenue steam and allocating direct costs to that respective segment. The Corporate segment is aggregated by relying on the entity that includes corporate costs (Draganfly Inc.).
SCHEDULE OF SEGMENTED INFORMATION
March 31, 2024 | Drones | Vital | Corporate | Total | ||||||||||||
Sales of goods | $ | 1,237,948 | $ | - | $ | - | $ | 1,237,948 | ||||||||
Provision of services | 91,633 | - | - | 91,633 | ||||||||||||
Total revenue | 1,329,581 | - | - | 1,329,581 | ||||||||||||
Segment loss (income) | 1,267,167 | - | (1,500,860 | ) | (233,693 | ) | ||||||||||
Finance and other costs | (21,522 | ) | - | - | (21,522 | ) | ||||||||||
Depreciation | 139,109 | - | 4,013 | 143,122 | ||||||||||||
Amortization | 2,821 | - | - | 2,821 | ||||||||||||
Change in fair value of derivative liability | - | - | 1,817,569 | 1,817,569 | ||||||||||||
Loss on write-off of notes receivable | - | - | 6,751 | 6,751 | ||||||||||||
Loss on write down of inventory | 148,760 | - | - | 148,760 | ||||||||||||
Net loss for the period | $ | 1,536,335 | $ | - | $ | 327,473 | $ | 1,863,808 |
March 31, 2023 | Drones | Vital | Corporate | Total | ||||||||||||
Sales of goods | $ | 1,380,816 | $ | - | $ | - | $ | 1,380,816 | ||||||||
Provision of services | 220,670 | - | - | 220,670 | ||||||||||||
Total revenue | 1,601,486 | - | - | 1,601,486 | ||||||||||||
Segment loss | 4,545,828 | 73,817 | 2,397,614 | 7,017,259 | ||||||||||||
Segment loss (income) | 4,545,828 | 73,817 | 2,397,614 | 7,017,259 | ||||||||||||
Finance and other costs | (34,304 | ) | - | (1,557 | ) | (35,861 | ) | |||||||||
Depreciation | 55,113 | - | 2,393 | 57,506 | ||||||||||||
Amortization | 8,989 | - | - | 8,989 | ||||||||||||
Change in fair value of derivative liability | - | - | (57,314 | ) | (57,314 | ) | ||||||||||
Loss on write-off of notes receivable | 77,047 | - | - | 77,047 | ||||||||||||
Net loss for the period | $ | 4,652,673 | $ | 73,817 | $ | 2,341,136 | $ | 7,067,626 |
16 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
16. | SEGMENTED INFORMATION (CONT’D) |
Geographic revenue is measured by aggregating sales based on the country and the entity where the sale was made.
SCHEDULE OF GEOGRAPHIC REVENUE
2024 | 2023 | |||||||
Geographic segmentation is as follows: | For the three months ended March 31, | |||||||
2024 | 2023 | |||||||
Non-current assets | ||||||||
Canada | $ | 1,467,917 | $ | 1,162,200 | ||||
United States | 158,758 | - | ||||||
$ | 1,626,675 | $ | 1,162,200 | |||||
Revenue | ||||||||
Canada | $ | 1,327,333 | $ | 1,592,094 | ||||
United States | 2,248 | 9,392 | ||||||
Revenue | $ | 1,329,581 | $ | 1,601,486 |
17. OFFICE AND MISCELLANEOUS
SCHEDULE OF OFFICE AND MISCELLANEOUS EXPENSES
2024 | 2023 | |||||||
For the three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Advertising, Marketing, and Investor Relations | $ | 110,073 | $ | 2,306,452 | ||||
Compliance fees | 64,031 | 27,307 | ||||||
Impairment of accounts receivable | - | 198,513 | ||||||
Contract Work | - | 47,081 | ||||||
Other | 172,166 | 221,299 | ||||||
Office and Miscellaneous Expenses | $ | 346,270 | $ | 2,800,652 |
18. OTHER EXPENSE
SCHEDULE OF OTHER EXPENSES
2024 | 2023 | |||||||
For the three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Share issue costs | $ | 598,529 | $ | - | ||||
Write off of accounts (payable) receivable | (48,833 | ) | - | |||||
Other | 2,598 | 424 | ||||||
Total Other expenses | $ | 525,948 | $ | 424 |
19. RELATED PARTY TRANSACTIONS
Trade receivables/payables and accrued receivables/payables:
As at March 31, 2024, the Company had $298,100 (2023 - $22,350) payable to related parties that was included in accounts payable. The balances outstanding are unsecured, non-interest bearing and due on demand.
Key management compensation
Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. Compensation awarded to key management for the three months ended March 31, 2024 and 2023 included:
SCHEDULE OF KEY COMPENSATION AWARDS
2024 | 2023 | |||||||
For the three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Director fees | $ | 152,438 | $ | 151,663 | ||||
Salaries | 142,068 | 102,115 | ||||||
Share-based payments | 122,112 | 263,242 | ||||||
Total | $ | 416,618 | $ | 517,020 |
17 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
Other related party transactions
SCHEDULE OF KEY MANAGEMENT TRANSACTIONS
2024 | 2023 | |||||||
For the three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Management fees paid to a company controlled by CEO and director | $ | 106,250 | $ | 100,000 | ||||
Management fees paid to a company that the CEO holds an economic interest in | 60,000 | 103,629 | ||||||
Management fees paid to a company controlled by the former President and director | 40,433 | 58,398 | ||||||
Management fees paid to a company, total | $ | 206,683 | $ | 262,027 |
20. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:
Credit risk
Credit risk is the risk that of an unexpected loss if a customer or third party fails to meet its contractual obligations.
The Company is subject to credit risk on its cash and receivables. The majority of cash is deposited in bank accounts held with a major bank in Canada and the United States. As most of the Company’s cash is held by one bank there is a concentration of credit risk. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies.
Receivables
Receivables primarily consist of trade receivables and taxes receivable. The Company provides credit in the normal course of business in the form of payment terms and has an established process for determining terms to offer customers to mitigate credit risk. Receivables are shown net of any provision made for impairment of the receivables. Due to this factor, the Company believes that no additional credit risk, beyond amounts provided for collection loss, is inherent in receivables.
Expected credit loss (“ECL”) analysis is performed at each reporting date using an objective approach to measure expected credit losses. The provision amounts are based on direct management interface with the customer. The calculations reflect the probability-weighted outcome, the time value of money and reasonable supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, business failure, the failure of a debtor to engage in a repayment plan, and a failure to make contractual payments over the negotiated contract period.
Trade receivables include balances of $170,211 that are past due with no corresponding allowance recorded.
The Company does have past due outstanding receivables however the expected loss rate for undue balance is estimated to be nominal.
18 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2024
Expressed in Canadian Dollars (unaudited)
20. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONT’D)
Fair value
A number of the Company’s accounting policies and disclosures require the measurement of fair values for financial assets and liabilities. The Company has established a control framework with respect to the measurement of fair values. Fair values are categorized into different levels of a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
Equity securities in investee companies and warrants are measured at fair value. The financial assets and liabilities measured at fair value by hierarchy are shown in the table below. The amounts shown are based on the amounts recognized in the condensed consolidated interim statements of financial position. These financial assets are measured at fair value through profit and loss.
SCHEDULE OF FINANCIAL ASSETS MEASURED FAIR VALUE THROUGH PROFIT AND LOSS
March 31 2024 | Level 1 | Level 3 | Total | |||||||||
Cash and cash equivalents | $ | 4,339,736 | $ | - | $ | 4,339,736 | ||||||
Equity securities in investee companies | 42,857 | 135,500 | 178,357 | |||||||||
Derivative liability | - | 4,033,574 | 4,033,574 | |||||||||
Total | $ | 4,382,593 | $ | 4,169,074 | $ | 8,551,667 |
December 31, 2023 | Level 1 | Level 3 | Total | |||||||||
Cash and cash equivalents | $ | 3,093,612 | - | $ | 3,093,612 | |||||||
Equity securities in investee companies | $ | 57,143 | $ | 132,260 | $ | 189,403 | ||||||
Derivative liability | - | 4,196,125 | 4,196,125 | |||||||||
Total | $ | 3,150,755 | $ | 4,328,385 | $ | 7,479,140 |
The following table shows the valuation techniques used in measuring Level 3 fair values for the derivative liability as well as the significant unobservable inputs used.
Type | Valuation technique | Key inputs | Inter-relationship between significant inputs and fair value measurement | |||
Warrant derivative liability | The fair value of the warrants derivative liability at initial recognition and at year end has been calculated using the Black Scholes Option Pricing Model | Key observable inputs ● Share price ● Risk free interest rate ● Dividend yield Key unobservable inputs ● Expected volatility | The estimated fair value would increase (decrease) if: ● The price was higher (lower) ● The risk-free rate was higher (lower) ● The dividend yield was lower (higher) ● The expected volatility was higher (lower) |
For the fair value of the derivative liability, reasonable possible changes to the expected volatility, the most significant unobservable input would have the following effects:
SCHEDULE OF FAIR VALUE FOR DERIVATIVE LIABILITY
Impact on comprehensive loss | ||||||||||||
Unobservable Inputs | Change | Three months ended March 31, 2024 | Year ended December 31, 2023 | |||||||||
Volatility | % | $ | 354,412 | $ | 291,149 |
21. SUBSEQUENT EVENT
May 1, 2024 the Company entered into a securities purchase agreement with a single institutional investor to purchase 3.5 million before deducting underwriting discounts and offering expenses. units of the Company, with each unit consisting of one common share (or one prefunded warrant to purchase one common share in lieu thereof) and one warrant to purchase one common share. Each unit was sold at an offering price of US$ for gross proceeds of approximately US$
Pursuant to a prior underwritten public offering, the Company issued common share warrants (the “October Warrants”) with each warrant entitling the holder thereof to purchase one common share of the Company at an exercise price of US$ , subject to adjustment, until October 28, 2028. In connection with the closing of the offering above, the Company and the holder of the October Warrants have entered into an amendment agreement whereby the exercise price of the October Warrants was reduced and converted to Canadian dollars for a new exercise price of $ and the cashless exercise provision was removed.
19 |