Exhibit 99.1
Draganfly Inc.
Condensed Consolidated Interim Financial Statements - Unaudited
For the Three Months Ended March 31, 2026
(Expressed in Canadian Dollars)
Draganfly Inc.
Condensed Consolidated Interim Statements of Financial Position
Expressed in Canadian Dollars
| March 31, | December 31, | |||||||||||
| As at | Notes | 2026 | 2025 | |||||||||
| ASSETS | ||||||||||||
| Current Assets | ||||||||||||
| Cash | $ | $ | ||||||||||
| Receivables | 4 | |||||||||||
| Inventory | 5 | |||||||||||
| Prepaids and Deposits | 6 | |||||||||||
| Non-current Assets | ||||||||||||
| Equipment | 7 | |||||||||||
| Intangible assets | ||||||||||||
| Investments | ||||||||||||
| Right of use assets | 8 | |||||||||||
| TOTAL ASSETS | $ | $ | ||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| Current Liabilities | ||||||||||||
| Trade payables and accrued liabilities | 10,16 | $ | $ | |||||||||
| Customer deposits | ||||||||||||
| Deferred income | 11 | |||||||||||
| Derivative liability | 12 | |||||||||||
| Lease liabilities | 9 | |||||||||||
| Non-current Liabilities | ||||||||||||
| Deferred Income | 11 | |||||||||||
| Lease liabilities | 9 | |||||||||||
| TOTAL LIABILITIES | ||||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Share capital | 12 | |||||||||||
| Reserves - share-based payments | 12 | |||||||||||
| Reserves - warrants | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||||||
Subsequent event (Note 18)
Approved and authorized for issuance by the Board of Directors on May 11, 2026.
| “Kim Moody” | “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, 2026 | March 31, 2025 | |||||||||||
| Sales of goods | 13 | $ | $ | |||||||||
| Provision of services | 13 | |||||||||||
| TOTAL REVENUE | ||||||||||||
| COST OF SALES | 5 | ( | ) | ( | ) | |||||||
| GROSS PROFIT | ||||||||||||
| OPERATING EXPENSES | ||||||||||||
| Amortization | $ | $ | ||||||||||
| Depreciation | 7,8 | |||||||||||
| Director fees | 16 | |||||||||||
| Insurance | ||||||||||||
| Office and miscellaneous | 14 | |||||||||||
| Professional fees | ||||||||||||
| Research and development | ||||||||||||
| Share-based payments | 12,16 | |||||||||||
| Travel | ||||||||||||
| Employee and management costs | 16 | |||||||||||
| ( | ) | ( | ) | |||||||||
| OTHER INCOME | ||||||||||||
| Change in fair value of derivative liability | 12 | |||||||||||
| Finance and other costs | ||||||||||||
| Foreign exchange gain (loss) | ( | ) | ||||||||||
| Gain on disposal of assets | ( | ) | ||||||||||
| Gain on recovery of notes receivable | ||||||||||||
| Other expense | 15 | ( | ) | ( | ) | |||||||
| $ | $ | |||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||||||
| OTHER COMPREHENSIVE LOSS | ||||||||||||
| Items that may be reclassified to profit or loss | ||||||||||||
| Foreign exchange translation | ( | ) | ( | ) | ||||||||
| Items that will not be reclassified to profit or loss | ||||||||||||
| Change in fair value of equity investments at FVOCI | ( | ) | ||||||||||
| COMPREHENSIVE LOSS | ( | ) | ( | ) | ||||||||
| 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 |
Reserves – Warrants | Accumulated Deficit | Change in Fair Value of Investments at FVTOCI | Exchange Differences on Translation of Foreign Operations | Total Shareholders’ Equity | |||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Share issue costs | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for the exercise of RSUs | ( | ) | ||||||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Change in fair value of equity investments at FVOCI | - | |||||||||||||||||||||||||||||||
| Translation of foreign operations | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Shares issued - overallotment | ||||||||||||||||||||||||||||||||
| Share issue costs - overallotment | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for financing | ||||||||||||||||||||||||||||||||
| Share issue costs | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Shares issued for the exercise of warrant | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Shares issued for the exercise of RSUs | ( | ) | ||||||||||||||||||||||||||||||
| Warrants – equity treatment | - | |||||||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Change in fair value of equity investments at FVOCI | - | |||||||||||||||||||||||||||||||
| Translation of foreign operations | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Shares issued for financing | ||||||||||||||||||||||||||||||||
| Share issue costs | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Shares issued for the exercise of warrant | ||||||||||||||||||||||||||||||||
| Share-based payments | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Unrealized gain on investments available for sale | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Other comprehensive income (loss) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
| 4 |
Draganfly Inc.
Condensed Consolidated Interim Statements of Cash Flows - Unaudited
Expressed in Canadian Dollars
| For the three months ended | ||||||||
| March 31, 2026 | March 31, 2025 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments for: | ||||||||
| Amortization | ||||||||
| Depreciation | ||||||||
| Impairment of accounts receivable | ( | ) | ||||||
| Change in fair value of derivative liability | ( | ) | ( | ) | ||||
| Impairment (recovery) of inventory | ( | ) | ||||||
| Impairment (Gain) on recovery of notes receivable | ( | ) | ||||||
| Finance and other costs | ( | ) | ||||||
| Gain on disposal of assets | ||||||||
| Share-based payments | ||||||||
| ( | ) | ( | ) | |||||
| Net changes in non-cash working capital items: | ||||||||
| Receivables | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaids | ( | ) | ||||||
| Trade payables and accrued liabilities | ( | ) | ||||||
| Customer deposits | ( | ) | ( | ) | ||||
| Deferred income | ||||||||
| Cash used in operating activities | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Repayment of notes receivable | ||||||||
| Cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common shares for financing | ||||||||
| Share issue costs | ( | ) | ||||||
| Proceeds from issuance of common shares for warrants exercised | ||||||||
| Repayment of lease liabilities | ( | ) | ( | ) | ||||
| Cash provided by (used in) financing activities | ( | ) | ||||||
| Effects of exchange rate changes on cash | ( | ) | ||||||
| Change in cash | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| SUPPLEMENTARY CASH FLOW DISCLOSURE | ||||||||
| Interest paid in cash | $ | $ | ||||||
| Interest received | ||||||||
| Share issue costs in accounts payable | ||||||||
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, 2026
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 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 following stock exchanges: NASDAQ: DPRO; CSE: DPRO; FSE: 3U8. 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.
Recognized as being at the forefront of UAV (“unmanned aerial vehicle”) technology for over two decades, Draganfly is an award-winning, industry-leading manufacturer, contract engineering, and product development company within the commercial UAV space serving the public safety, civil, military, agriculture, industrial inspections, and mapping and surveying markets. Draganfly is a company driven by passion, ingenuity, and the need to provide efficient solutions and first-class services to its customers around the world with the goal of saving time, money, and lives.
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”. The Company has prepared these financial statements on the basis that it will continue to operate as a going concern. 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, 2025.
These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on May 11, 2026.
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:
| Name of Subsidiary | Place of Incorporation | Ownership Interest | ||||
| % | ||||||
| % | ||||||
| % | ||||||
All intercompany balances and transactions were eliminated on consolidation.
2. BASIS OF PREPARATION (CONTINUED)
Reclassification
Certain prior year amounts have been reclassified to conform to the fiscal 2026 presentation. Overall results were not impacted by the reclassification of items within the Operating Expenses of the Consolidated Statements of Comprehensive Loss. For the quarter ended March 31, 2025 the reclassified amounts were as follows:
| March 31, 2025 | ||||||||||||
| Before | Adjustment | After | ||||||||||
| Professional fees | $ | $ | ( | ) | $ | |||||||
| Office and miscellaneous | $ | $ | $ | |||||||||
| Employee and management expenses | $ | $ | $ | |||||||||
| 6 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
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 outlined in the Company’s consolidated financial statements for the year ended December 31, 2025. A description of the accounting standards and interpretations that have been adopted by the Company can be found in the notes of the annual consolidated financial statements for the year ended December 31, 2025.
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, 2025.
4. RECEIVABLES
| As at | March 31, 2026 | December 31, 2025 | ||||||
| Trade accounts receivable | $ | $ | ||||||
| Sales tax receivable | ||||||||
| $ | $ | |||||||
The average trade credit allowed on the sale of goods is between 30 and 60 days from the date of shipment. Sales that require deposits are typically agreed to in advance to mitigate the potential for default.
The Company has recognized an allowance for doubtful trade receivables on accounts that are past due by more than 31 days based on best estimates of future expected credit losses and estimated irrecoverable amounts determined by reference to past experiences.
In determining the recoverability of a trade receivable, the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting year. The concentration of credit risk is limited due to the fact that the customer base is diversified. The provision for expected credit losses is as follows:
Provision for doubtful accounts
| Balance at December 31, 2024 | $ | ( | ) | |
| Additional amounts provided for during the year | ( | ) | ||
| Trade receivables written off during the year | ||||
| Foreign exchange | ||||
| Balance at December 31, 2025 | ( | ) | ||
| Additional amounts provided for during the period | ( | ) | ||
| Foreign exchange | ( | ) | ||
| Balance at March 31, 2026 | ( | ) |
During
the three months ended March 31, 2026, the Company recorded a provision for doubtful accounts of $
| 7 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
4. RECEIVABLES (CONTINUED)
The Company assumes that the credit risk on a financial asset has increased if it is outstanding beyond the agreed payment terms. The Company considers a receivable to be in default when the customer is unlikely to pay its obligations to the Company in full. The carrying amount of a receivable is written off (either partially or in full) to the extent that there is no realistic prospect 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.
5. INVENTORY
| As at | March 31, 2026 | December 31, 2025 | ||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| $ | $ | |||||||
During
the three months ended March 31, 2026, $
Cost of sales consist of the following:
| For the three months ended | March 31, 2026 | March 31, 2025 | ||||||
| Inventory | $ | $ | ||||||
| Consulting and services | ||||||||
| Other | ||||||||
| $ | $ | |||||||
6. PREPAIDS AND DEPOSITS
| As at | March 31, 2026 | December 31, 2025 | ||||||
| Insurance | $ | $ | ||||||
| Prepaid other | ||||||||
| Deposits | ||||||||
| $ | $ | |||||||
| 8 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
7. EQUIPMENT
| Computer Equipment | Furniture and Equipment | Leasehold Improvements | Vehicles | Total | ||||||||||||||||
| Cost | ||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| Additions | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance at December 31, 2025 | ||||||||||||||||||||
| Additions | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ||||||||||||||||
| Foreign exchange | ||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | $ | |||||||||||||||
| Accumulated depreciation | ||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| Charge for the year | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance at December 31, 2025 | ||||||||||||||||||||
| Charge for the period | ||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ||||||||||||||||
| Foreign exchange | ||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | $ | |||||||||||||||
| Net book value: | ||||||||||||||||||||
| December 31, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
| March 31, 2026 | $ | $ | $ | $ | $ | |||||||||||||||
Depreciation
commences when assets are available for use. Depreciation expense for the quarter ended March 31, 2026 in the amount of $
8. RIGHT OF USE ASSETS
The Company has three leases with expiration dates of May 31, 2026, January 31, 2027, and September 30, 2028.
| Total | ||||
| Cost | ||||
| Balance at December 31, 2025 and March 31, 2026 | $ | |||
| Accumulated depreciation | ||||
| Balance at December 31, 2024 | $ | |||
| Charge for the year | ||||
| Balance at December 31, 2025 | $ | |||
| Charge for the period | ||||
| Balance at March 31, 2026 | $ | |||
| Net book value: | ||||
| December 31, 2025 | $ | |||
| March 31, 2026 | $ | |||
| 9 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
8. RIGHT OF USE ASSET (CONTINUED)
Depreciation
expense for the period ended March 31, 2026 in the amount of $
| March 31, 2026 | December 31,2025 | |||||||
| Buildings | $ | $ | ||||||
9. 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
| Total | ||||
| Balance at December 31, 2024 | $ | |||
| Interest expense | ||||
| Lease payments | ( | ) | ||
| Balance at December 31, 2025 | ||||
| Interest expense | ||||
| Lease payments | ( | ) | ||
| Balance at March 31, 2026 | $ | |||
Which consists of:
| March 31, 2026 | December 31, 2025 | |||||||
| Current lease liability | $ | $ | ||||||
| Non-current lease liability | ||||||||
| Ending balance | $ | $ |
| Maturity analysis | March 31, 2026 | December 31, 2025 | ||||||
| Less than one year | $ | $ | ||||||
| One to three years | ||||||||
| Total undiscounted lease liabilities | $ | $ | ||||||
| Amount representing interest | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Variable
lease payments of $
10. TRADE PAYABLES AND ACCRUED LIABILITIES
| As at | March 31, 2026 | December 31, 2025 | ||||||
| Trade accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| $ | $ | |||||||
| 10 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
11. 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.
| March 31, 2026 | December 31, 2025 | |||||||
| Deferred, revenue beginning | $ | $ | ||||||
| Revenue recognized | ( | ) | ( | ) | ||||
| Unearned revenues received | ||||||||
| Foreign exchange | ( | ) | ||||||
| $ | $ | |||||||
| Current portion | $ | $ | ||||||
| Long term portion | ||||||||
| $ | $ | |||||||
Deferred
revenue of $
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
common shares and |
During the year ended December 31, 2025,
| ● | The Company issued common shares for the vesting of restricted share units. | |
| ● | On May 5, 2025, the Company issued units consisting of one common share and one warrant in a financing for $ with share issue costs of $, including $ related to broker warrants, for net proceeds of $. The value of the issuance was allocated $ to the shares and $ to the warrants based on the residual method. This issuance included an overallotment of warrants convertible to shares. | |
| ● | The Company issued shares related to the overallotment of the May 5, 2025 share issuance for gross proceeds of $ with share issue costs of $ for net proceeds of $. | |
| ● | On June 12, 2025 the Company issued units consisting of one common share and one warrant in a financing for $ with share issue costs of $, including $ related to broker warrants, for net proceeds of $. The value of the issuance was allocated $ to the shares and $ to the warrants based on the residual method. | |
| ● | On July 21, 2025 the Company issued units consisting of one common share and one warrant in a financing for $ with share issue costs of $, including $ related to broker warrants, for net proceeds of $. The warrants were valued at $nil based on the residual method. | |
| ● | shares were issued for the exercise of warrants | |
| ● | The Company incurred share issue costs of $ related to the June 30, 2023 base shelf prospectus and included in share issuance costs. |
| 11 |
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.
| Grant Date | Expiry Date | Exercise Price | Remaining Contractual Life (years) | Number of Options Outstanding | Number of Options Exercisable | |||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding, December 31, 2024 | $ | |||||||
| Forfeited | ) | |||||||
| Expired | ) | |||||||
| Outstanding, December 31, 2025 | $ | |||||||
| Forfeited | ) | |||||||
| Outstanding, March 31, 2026 | $ | |||||||
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 $ (2025 – $) in stock-based compensation in relation to the vesting of stock options.
| 12 |
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:
| Number of RSUs | ||||
| Outstanding, December 31, 2024 | ||||
| Vested | ) | |||
| Issued | ||||
| Forfeited | ) | |||
| Outstanding, December 31, 2025 and March 31, 2026 | ||||
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 $ (2025 - $) 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.
| 13 |
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)
| 2026 issuances | February issuance | |||
| Broker | ||||
| Volatility | % | |||
| Risk free rate | % | |||
| Expected life | ||||
| Expected dividend yield | % | |||
| 2025 issuances | May Issuance | June Issuance | July Issuance | |||||||||
| Broker | Broker | Broker | ||||||||||
| Volatility | % | % | % | |||||||||
| Risk free rate | % | % | % | |||||||||
| Expected life | ||||||||||||
| Expected dividend yield | % | % | % | |||||||||
Warrant Derivative Liability
| Balance at December 31, 2024 | $ | |||
| Exercised | ( | ) | ||
| Change in fair value of warrants outstanding | ||||
| Balance at December 31, 2025 | $ | |||
| Pre-funded warrants issued | ||||
| Warrants and pre-funded warrants exercised | ( | ) | ||
| Change in fair value of warrants and pre-funded outstanding | ( | ) | ||
| Balance at March 31, 2026 | $ |
Details of liability warrants and their fair values are as follows:
| 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 | ||||||||||||||||||||
| (1) | US$ | $ | $ | |||||||||||||||||
| (2) | $ | |||||||||||||||||||
| $ | $ | |||||||||||||||||||
| 1) | |
| 2) |
| 14 |
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:
| March 31, 2026 | December 31, 2025 | |||||||
| Risk free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life | years | years | ||||||
| Expected dividend yield | % | % | ||||||
The weighted average remaining contractual life of warrants outstanding as of March 31, 2026, was years (2025 – years).
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Outstanding, December 31, 2024 | $ | |||||||
| Issued | ||||||||
| Exercised | ) | |||||||
| Outstanding, December 31, 2025 | $ | |||||||
| Issued | ||||||||
| Exercised | ) | |||||||
| Outstanding, March 31, 2026 | $ | |||||||
| Date issued | Expiry date | Exercise price | Number of warrants outstanding | |||||||
| $ | ||||||||||
| US$ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
The weighted average remaining contractual life of warrants outstanding as of March 31, 2026, was years (December 31, 2025 – years).
| 13. | SEGMENTED INFORMATION |
As
at and for the three months ended March 31, 2026 the Company operates in
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
| 15 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
13. SEGMENTED INFORMATION (CONTINUED)
The board of the Company relies on executive management which assesses the financial performance and position of the group and makes strategic decisions. Executive management, which has been identified as being the chief operating decision maker, consists of the chief executive officer, chief operating officer and chief financial officer.
| March 31, 2026 | Drones | Corporate | Total | |||||||||
| Sales of goods | $ | $ | $ | |||||||||
| Provision of services | ||||||||||||
| Total revenue | ||||||||||||
| Segment loss | ||||||||||||
| Finance and other costs | ||||||||||||
| Depreciation | ||||||||||||
| Amortization | ||||||||||||
| Change in fair value of derivative liability | ||||||||||||
| Write down of inventory (note 5) | ||||||||||||
| Net loss for the period | $ | $ | $ | |||||||||
| March 31, 2025 | Drones | Corporate | Total | |||||||||
| Sales of goods | $ | $ | $ | |||||||||
| Provision of services | ||||||||||||
| Total revenue | ||||||||||||
| Segment loss | ||||||||||||
| Finance and other costs | ||||||||||||
| Depreciation | ||||||||||||
| Amortization | ||||||||||||
| Change in fair value of derivative liability | ||||||||||||
| Loss on write-off of notes receivable | ||||||||||||
| Recovery of write down of inventory (note 5) | ( | ) | ( | ) | ||||||||
| Net loss for the period | $ | $ | $ | |||||||||
Geographic revenue is measured by aggregating sales based on the country and the entity where the sale was made.
| March 31, 2026 | December 31, 2025 | |||||||
| Non-current assets | ||||||||
| Canada | $ | $ | ||||||
| United States | ||||||||
| $ | $ | |||||||
| For the three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | ||||||||
| Canada | $ | $ | ||||||
| United States | ||||||||
| $ | $ | |||||||
| 16 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
14. OFFICE AND MISCELLANEOUS
| For the three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Advertising, marketing, and investor relations | $ | $ | ||||||
| Compliance fees | ||||||||
| Business development | ||||||||
| General freight | ||||||||
| Subscription, membership & IT support | ||||||||
| General office | ||||||||
| $ | $ | |||||||
15. OTHER EXPENSE
| For the three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Share issue costs | $ | $ | ||||||
| Write off of accounts (payable) receivable | ( | ) | ||||||
| Other | ( | ) | ||||||
| $ | $ | ( | ) | |||||
16. RELATED PARTY TRANSACTIONS
On
August 1, 2019, the Company entered in a business services agreement (the “Agreement”) with Business Instincts Group (“BIG”),
a company that Cameron Chell, CEO and director has a material interest in that he previously controlled, to provide: corporate development
and governance, strategic facilitation and management, general business services, office space, corporate business development video
content, website redesign and management, and online visibility management. The services are provided by a team of consultants and the
costs of all charges are based on the fees set in the Agreement. For the three months ended March 31, 2026, the Company incurred fees
of $
On
October 1, 2019, the Company entered into an independent consultant agreement (“Consultant Agreement”) with 1502372 Alberta
Ltd, a company controlled by Cameron Chell, CEO and director, to provide executive consulting services to the Company. The costs of all
charges are based on the fees set in the Consultant Agreement. For the three months ended March 31, 2026, the Company incurred fees of
$
On
July 3, 2020, the Company entered into an executive consultant agreement (“Executive Agreement”) with Scott Larson, a director
of the Company, to provide executive consulting services, as President, to the Company. On May 9, 2022, Scott Larson ceased to be President
of the Company and entered into an agreement to provide executive consulting services to the Company and all fees are set in the consulting
agreement. For the three months ended March 31, 2026, the Company incurred fees of $
For
the three months ended March 31, 2026 and 2025 salary and commissions were paid to family members of key management. In addition, during
2025, one family member was paid as a contractor prior to becoming an employee. The amounts paid for March 31, 2026 were $
| 17 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
16. RELATED PARTY TRANSACTIONS (CONTINUED)
As
at March 31, 2026, the Company had $
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, 2026 and 2025 included:
| For the three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Director fees | $ | $ | ||||||
| Salaries | ||||||||
| Share-based payments | ||||||||
| $ | $ | |||||||
Other related party transactions
| For the three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Management fees paid to a company controlled by CEO and director | $ | $ | ||||||
| Management fees paid to a company that the CEO holds an economic interest in | ||||||||
| Salary and commission paid to family of key management | ||||||||
| Management fees paid to a company controlled by a director | ||||||||
| $ | $ | |||||||
17. 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 Company limits its exposure to credit loss on cash by placing its cash with a high-quality financial institution. The Company performs credit evaluations of its customers to reduce the credit risk of receivable balances.
| 18 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
17. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
Receivables
Receivables primarily consist of trade receivables, accrued receivables and taxes receivable. The Corporation’s exposure to credit risk is associated with trade receivables and the potential risk that any customer is unable to pay amounts due. Allowances for doubtful accounts and bad debts are estimated as at the balance sheet date. The amounts reported for trade receivables on the balance sheet are net of allowances for doubtful accounts and the net carrying value represents the Corporation’s maximum exposure to credit risk.
Management reviews past due trade receivables balances on a continuous basis to monitor potential credit risks. Accounts are considered for impairment on a case-by-case basis when they are past due or when objective evidence is received that a customer may default. A number of factors are considered in determining the likelihood of impairment. All bad debt write-offs and changes in the doubtful trade receivables reserve are expensed or credited, as applicable, to selling expenses in the condensed consolidated interim statement of comprehensive loss.
Draganfly believes that credit risk associated with its trade receivables is limited for the following reasons:
| ● | Trade receivables balances are spread amongst a broad customer base; | |
| ● | The aging profile of trade receivables balances is systematically monitored by management; and | |
| ● | Payments for larger orders are requested at least partially in advance of products being shipped |
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.
The following table summarizes the sensitivity of the fair value of the Company’s risk to foreign exchange rates, with all other variables held constant. Fluctuations of 10 percent in the foreign exchange rate between US dollars and Canadian dollars could have resulted in a change impacting net loss upon consolidation as follows:
| March 31, 2026 | March 31, 2025 | |||||||||||||||||||||||
| USD | Change in currency | Effect on after tax loss | USD | Change in currency | Effect on after tax loss | |||||||||||||||||||
| Net monetary assets | $ | % | $ | $ | % | $ | ||||||||||||||||||
| Net monetary liabilities | ( | ) | % | ( | ) | ( | ) | % | ( | ) | ||||||||||||||
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.
Cash, 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 and liabilities are measured at fair value through profit and loss.
| March 31, 2026 | Level 1 | Level 3 | Total | |||||||||
| Cash | $ | $ | $ | |||||||||
| Equity securities in investee companies | ||||||||||||
| Derivative liability | ( | ) | ( | ) | ||||||||
| Total | $ | $ | ( | ) | $ | |||||||
| December 31, 2025 | Level 1 | Level 3 | Total | |||||||||
| Cash | $ | $ | $ | |||||||||
| Equity securities in investee companies | ||||||||||||
| Derivative liability | ( | ) | ( | ) | ||||||||
| Total | $ | $ | ( | ) | $ | |||||||
| 19 |
Draganfly Inc.
Notes to the Condensed Consolidated Interim Financial Statements
For the Three Months Ended March 31, 2026
Expressed in Canadian Dollars (unaudited)
17. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
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:
| Impact on comprehensive loss | ||||||||||||
| Unobservable Inputs | Change | Three months ended March 31, 2026 | Year ended December 31, 2025 | |||||||||
| Volatility | % | $ | $ | |||||||||
18. SUBSEQUENT EVENT
On April 15, 2026 the company granted RSU’s to employees, executives and directors with a total value of $ million. of the RSU’s issued to executives have performance criteria for vesting to occur.
| 20 |