| SHARE CAPITAL |
12. SHARE CAPITAL
Authorized
share capital
Unlimited
number of common shares without par value.
Issued
share capital
During
the three months ended March 31, 2026,
| ● | On
February 23, 2026, the Company issued 5,030,000
common shares and 2,120,000
pre-funded warrants in a financing for $68,277,951
with share issue costs of $8,136,847
($5,724,416 allocated to equity and $2,412,431 to expense), including $2,976,520
related to broker warrants, for net proceeds of $60,141,104.
The value of the issuance was allocated $48,033,503
to common shares and $20,244,448
to the pre-funded warrants as a derivative liability. The pre-funded warrants were fully exercised by March 31, 2026 using the
cashless exercise option. |
During
the year ended December 31, 2025,
| ● | The
Company issued 216,738 common shares for the vesting of restricted share units. |
| ● | On
May 5, 2025, the Company issued 1,715,000 units consisting of one common share and one warrant
in a financing for $4,973,404 with share issue costs of $829,316, including $163,757 related
to broker warrants, for net proceeds of $4,144,088. The value of the issuance was allocated
$4,545,997 to the shares and $427,407 to the warrants based on the residual method. This
issuance included an overallotment of 100,000 warrants convertible to 100,000 shares. |
| ● | The
Company issued 100,000 shares related to the overallotment of the May 5, 2025 share issuance
for gross proceeds of $294,000 with share issue costs of $28,030 for net proceeds of $265,970. |
| ● | On
June 12, 2025 the Company issued 5,500,000 units consisting of one common share and one warrant
in a financing for $18,758,889 with share issue costs of $2,258,143, including $632,798 related
to broker warrants, for net proceeds of $16,500,747. The value of the issuance was allocated
$18,082,472 to the shares and $676,418 to the warrants based on the residual method. |
| ● | On
July 21, 2025 the Company issued 4,672,895 units consisting of one common share and one warrant
in a financing for $34,279,276 with share issue costs of $4,100,807, including $1,429,172
related to broker warrants, for net proceeds of $30,178,469. The warrants were valued at
$nil based on the residual method. |
| ● | 11,712,347
shares were issued for the exercise of warrants |
| ● | The
Company incurred share issue costs of $140,000 related to the June 30, 2023 base shelf prospectus
and included in share issuance costs. |
Draganfly
Inc.
Notes
to the Condensed Consolidated Interim Financial Statements
For
the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
12.
SHARE CAPITAL (CONTINUED)
Stock
Options
The
Company has adopted an incentive share compensation plan, which provides that the Board of Directors of the Company may from time to
time, in its discretion, and in accordance with the CSE requirements, grant to directors, officers, employees, and technical consultants
to the Company, non-transferable stock options to purchase common shares. The total number of common shares reserved and available for
grant and issuance pursuant to this plan shall not exceed 15% (in the aggregate) of the issued and outstanding common shares from time
to time. The number of options awarded and underlying vesting conditions are determined by the Board of Directors in its discretion.
As
at March 31, 2026, the Company had the following outstanding and exercisable options:
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 | |
$ | 62.50 | | |
| 3.58 | | |
| 10,464 | | |
| 10,464 | |
| April 30, 2020 | |
April 30, 2030 | |
$ | 62.50 | | |
| 4.07 | | |
| 240 | | |
| 240 | |
| April 30, 2020 | |
April 30, 2030 | |
$ | 96.25 | | |
| 4.07 | | |
| 4,400 | | |
| 4,400 | |
| November 24, 2020 | |
November 24, 2030 | |
$ | 62.50 | | |
| 4.64 | | |
| 1,280 | | |
| 1,280 | |
| February 2, 2021 | |
February 2, 2031 | |
$ | 330.00 | | |
| 4.83 | | |
| 1,200 | | |
| 1,200 | |
| April 27, 2021 | |
April 27, 2031 | |
$ | 253.75 | | |
| 5.06 | |
| | 3,640 | |
| | 3,640 |
| September 9, 2021 | |
September 9, 2026 | |
$ | 121.00 | | |
| 0.44 | | |
| 1,034 | | |
| 1,034 | |
| November 9, 2023 | |
November 9, 2033 | |
$ | 15.75 | | |
| 7.60 | | |
| 1,200 | | |
| 1,200 | |
| | |
| |
| | | |
| | | |
| 23,458 | | |
| 23,458 | |
SCHEDULE
OF STOCK OPTIONS OUTSTANDING
| | |
Number of Options | | |
Weighted Average Exercise Price | |
| Outstanding, December 31, 2024 | |
| 31,604 | | |
$ | 112.05 | |
| Forfeited | |
| (3,746 | ) | |
| 113.55 | |
| Expired | |
| (4,000 | ) | |
| 80.00 | |
| Outstanding, December 31, 2025 | |
| 23,858 | | |
$ | 116.34 | |
| Forfeited | |
| (400 | ) | |
| 347.50 | |
| Outstanding, March 31, 2026 | |
| 23,458 | | |
$ | 112.39 | |
No
options were granted by the Company during the three months ended March 31, 2026.
During
the three months ended March 31, 2026, the Company recorded $nil (2025 – $1,013) in stock-based compensation in relation to the
vesting of stock options.
Draganfly
Inc.
Notes
to the Condensed Consolidated Interim Financial Statements
For
the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
12.
SHARE CAPITAL (CONTINUED)
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 up to a 3-year vesting period following the award date. The total number of common shares
reserved and available for grant and issuance pursuant to this plan, and the total number of Restricted Share Units that may be awarded
pursuant to this plan, shall not exceed 15% (in the aggregate) of the issued and outstanding common shares from time to time.
As
at March 31, 2026, the Company had the following RSUs outstanding:
SCHEDULE
OF CHANGES IN RESTRICTED STOCK UNITS
| | |
Number of RSUs | |
| Outstanding, December 31, 2024 | |
| 188,100 | |
| Vested | |
| (216,738 | ) |
| Issued | |
| 450,964 | |
| Forfeited | |
| (9,175 | ) |
| Outstanding, December 31, 2025 and March 31, 2026 | |
| 413,151 | |
Each
RSU is exercisable into one common share of the Company upon the vesting conditions being met for a period of eighteen months to 3 years
from the grant date.
During
the three months ended March 31, 2026, the Company recorded share-based payment expense of $244,064 (2025 - $287,869) for RSUs, based
on the fair values of RSUs granted which were calculated using the closing price of the Company’s stock on the day prior to grant.
Warrants
During
the three months ended March 31, 2026 the Company issued pre-funded warrants (“USD pre-funded Warrants”) where a portion
of the funds related to the eventual exercise have already been received with the remaining exercise price in USD. As the pre-funded
warrants have a cashless exercise option and were not issued in exchange for services, the value related to the future exercise price
of the USD pre-funded Warrants are required to be recorded as a financial liability and not as equity. As a financial liability, the
portion of the USD pre-funded Warrants related to the future exercise price will be revalued on a quarterly basis to fair market value
with the change in fair value being recorded in profit or loss. The Company valued the prefunded warrants in relation to the Company’s
share price as the exercise price of the prefunded warrants was nominal.
Draganfly
Inc.
Notes
to the Condensed Consolidated Interim Financial Statements
For
the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
12.
SHARE CAPITAL (CONTINUED)
SCHEDULE
OF ISSUE DATE FAIR VALUE INPUTS OF WARRANTS
| 2026 issuances | |
February issuance | |
| | |
Broker | |
| Volatility | |
| 137.94 | % |
| Risk free rate | |
| 3.45 | % |
| Expected life | |
| 3 years | |
| Expected dividend yield | |
| 0 | % |
| 2025 issuances | |
May Issuance | | |
June Issuance | | |
July Issuance | |
| | |
Broker | | |
Broker | | |
Broker | |
| Volatility | |
| 122.15 | % | |
| 125.42 | % | |
| 131.17 | % |
| Risk free rate | |
| 3.63 | % | |
| 3.85 | % | |
| 3.89 | % |
| Expected life | |
| 3 years | | |
| 3 years | | |
| 3 years | |
| Expected dividend yield | |
| 0 | % | |
| 0 | % | |
| 0 | % |
Warrant
Derivative Liability
SCHEDULE
OF WARRANT DERIVATIVE LIABILITY
| Balance at December 31, 2024 | |
$ | 2,198,121 | |
| Exercised | |
| (4,353,939 | ) |
| Change in fair value of warrants outstanding | |
| 2,648,288 | |
| Balance at December 31, 2025 | |
$ | 492,470 | |
| Pre-funded warrants issued | |
| 20,244,448 | |
| Warrants and pre-funded warrants exercised | |
| (19,360,086 | ) |
| Change in fair value of warrants and pre-funded outstanding | |
| (1,047,731 | ) |
| Balance at March 31, 2026 | |
$ | 329,101 | |
Details
of liability 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, 2026 | | |
Fair
Value at March 31, 2026 | | |
Number
of Warrants Outstanding at December 31, 2025 | | |
Fair
Value at December 31, 2025 | |
| Derivative
Liability | |
| | | |
| | | |
| | | |
| | | |
| | |
| February
26, 2024 (1) | |
US$ | 4.4025 | | |
| 60,715 | | |
$ | 329,101 | | |
| 61,911 | | |
$ | 492,470 | |
| February
23, 2026 (2) | |
$ | 0.00014 | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| 60,715 | | |
$ | 329,101 | | |
| 61,911 | | |
$ | 492,470 | |
| 1) | The
warrants expire February 26, 2029. |
| 2) | These
warrants were exercised during the quarter ended March 31, 2026 |
Draganfly
Inc.
Notes
to the Condensed Consolidated Interim Financial Statements
For
the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
12.
SHARE CAPITAL (CONTINUED)
The
fair values of the broker 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, 2026 | | |
December 31, 2025 | |
| Risk free interest rate | |
| 3.66 | % | |
| 3.55 | % |
| Expected volatility | |
| 140.00 | % | |
| 139.39 | % |
| Expected life | |
| 2.91 years | | |
| 3.16 years | |
| Expected dividend yield | |
| 0 | % | |
| 0 | % |
The
weighted average remaining contractual life of warrants outstanding as of March 31, 2026, was 2.9 years (2025 – 4.5 years).
SCHEDULE
OF CHANGES IN WARRANTS
| | |
Number of Warrants | | |
Weighted Average Exercise Price | |
| Outstanding, December 31, 2024 | |
| 3,717,502 | | |
$ | 5.16 | |
| Issued | |
| 12,587,289 | | |
| 5.81 | |
| Exercised | |
| (11,712,348 | ) | |
| 4.80 | |
| Outstanding, December 31, 2025 | |
| 4,592,443 | | |
$ | 6.90 | |
| Issued | |
| 2,477,500 | | |
| 11.97 | |
| Exercised | |
| (2,121,196 | ) | |
| 0.0037 | |
| Outstanding, March 31, 2026 | |
| 4,948,747 | | |
$ | 7.27 | |
As
at March 31, 2026, the Company had the following warrants outstanding:
SCHEDULE
OF WARRANTS OUTSTANDING
| Date issued | |
Expiry date | |
Exercise price | | |
Number of warrants outstanding | |
| October 30, 2023 | |
October 30, 2026 | |
$ | 23.20 | | |
| 12,800 | |
| February 26, 2024 | |
February 26, 2029 | |
US$ | 4.4025 | | |
| 60,715 | |
| May 5, 2025 | |
May 5, 2030 | |
$ | 3.9779 | | |
| 7,500 | |
| June 12, 2025 | |
June 12, 2030 | |
$ | 5.0768 | | |
| 1,014,500 | |
| July 21, 2025 | |
July 21, 2030 | |
$ | 7.3579 | | |
| 3,495,732 | |
| February 23, 2026 | |
February 23, 2029 | |
$ | 11.9744 | | |
| 357,500 | |
| | |
| |
| | | |
| 4,948,747 | |
The
weighted average remaining contractual life of warrants outstanding as of March 31, 2026, was 4.16 years (December 31, 2025 – 4.5
years).
|