Ms. Arian Hopkins reports

DRAGANFLY REPORTS ITS 2023 RESULTS

Draganfly Inc. has released its fourth quarter and fiscal 2023 financial results. Revenue for the fourth quarter and the year was dictated by the shift to larger in-house capacity and drone production capabilities.

The financial year 2023 was a transition year for Draganfly as 2023 marked new production capacity coming on-line along with the commercialization of its flagship Commander 3XL and Heavy Lift drone platforms.

Key financial highlights for 2023:

• Total revenue for the year ended Dec. 31, 2023, was $6,554,842. Product sales decreased $263,339 in 2023 as compared with 2022 while service revenue decreased $786,878. This is largely due to product line transition and a focus on building new and increased production capabilities.
• Gross profit was $2,064,114, an increase of $1,273,439 or up 161.1 per cent from the prior year. As a percentage of sales, gross margin increased from 10.4 per cent in 2022 to 31.5 per cent in 2023. This year's gross profit included a one-time non-cash writedown of inventory of $331,671 while last year's gross profit included a non-cash downward adjustment of $1,976,514. Excluding these adjustments, gross profit decreased by $371,404 year over year. As a percentage of sales, adjusted gross margin increased from 36.4 per cent in 2022 to 36.5 per cent in 2023.
• The company recorded a comprehensive loss, including all non-cash items of $23,709,851, compared with a comprehensive loss of $27,305,305 in 2022. The comprehensive loss for the year ended Dec. 31, 2023, includes non-cash changes composed of a gain in fair value of derivative liability from warrants of $211,110, an expense for impairment of notes receivable of $101,351, a writedown of inventory of $331,671, and an expense for goodwill and intangibles impairment of $87,415, and would otherwise have been a comprehensive loss of $23,400,524 compared with a comprehensive loss of $24,067,180 excluding non-cash items in the same period last year.
• Cash used in operating activities decreased by $1,304,184 year over year.
• The company's cash balance on Dec. 31, 2023, was $3,093,612.

Key financial and operational highlights for Q4 2023 and early 2024:

• Revenue for Q4 2023 was $916,299 compared with $1,314,162 for Q4 2022 largely due to a decrease in Q4 product sales relating to product line transition and new customer category integration requirements along with slightly lower service sales.
• Gross profit was $258,879 for Q4 2023 compared with ($1,665,971) in Q4 2022, representing an increase of $1,924,850 year over year. Gross profit for Q4 2023 would have been $382,303 if it were not for a one-time non-cash writedown of inventory of $123,424 while Q4 2022 would have been $310,543 not including a one-time non-cash writedown of inventory for $1,976,514. Hence, gross profit on an adjusted basis was up 23.1 per cent year over year. Gross profit as a percentage of sales for Q4 2023 was 28.3 per cent but on an adjusted basis was 41.7 per cent.
• The company recorded a comprehensive loss including non-cash items for Q4 2023 of $4,191,796 compared with a comprehensive loss of $16,660,602 for the same period in 2022, a 69.3-per-cent improvement over 2022. The comprehensive loss for the fourth quarter of 2023 includes non-cash changes composed of a gain in fair value derivative liability of $153,798, as well as a one-time writedown of inventory of $123,424, and would otherwise be a comprehensive loss of $4,222,170 compared with a comprehensive loss of $7,482,545 excluding non-cash items in the same period last year. The decrease in loss was primarily due to lower professional fees, wages and share-based compensation charges.
• The company received a Transport Canada special flight operations certificate for its Heavy Lift drone to support advanced flight testing above 55-pound/25-kilogram maximum takeoff weight. This will allow the highly specialized development of advanced delivery, industrial and defence applications. The Heavy Lift flight testing SFOC allows Draganfly to conduct these specialized and advanced operations utilizing the Heavy Lift within an approved flight test area. This development also enables the company to initiate direct application and use-case testing. Draganfly can enhance and optimize highly specialized operational and maintenance manuals and standard operating procedures for various conditions and scenarios.
• The company addressed United Nations experts speaking on emerging technologies for disaster risk reduction organized by the World Meteorological Organization, the International Telecommunication Union and the United Nations Convention to Combat Desertification as part of ITU's webinar series on digital transformation. It focused on the transformative ability of cutting-edge technologies such as artificial intelligence, the Internet of Things, unmanned aerial vehicles, digital twin, and the metaverse and its use in disaster management. This event explored how these technological innovations can effectively mitigate and respond to natural hazards and disasters.
• The company showcased the Commander 3XL and new military special-purpose capabilities at Modern Warfare Week in Fayetteville, N.C. The event is a premier gathering for the special operations forces community, providing a platform for education and collaboration on the evolving landscape of warfare. Eight hundred select military and government representatives are anticipated to attend. The Global Special Operations Foundation and the U.S. Army Special Operations Command jointly sponsor the event.
• Draganfly announced the closing of a $3.5-million (U.S.) underwritten offering, with the company planning to allocate the net proceeds toward general corporate purposes. These purposes included financing its capabilities to meet the demand for its new products, supporting growth initiatives, covering working capital requirements, continuing the development and marketing of the company's core product, potential acquisitions, and research and development efforts.
• Draganfly announced record third quarter results for 2023, recording revenue of $2,138,017, which marked a 14.0-per-cent increase from the same period the previous year. The revenue for Q3 of 2023 comprised product sales amounting to $1,653,111 and drone services totalling $484,906. This performance was compared with the Q3 revenue in 2022, which stood at $1,876,221, consisting of $1,359,986 from product sales and $516,235 from drone services, highlighting the company's growth and expansion in its market segments.

Draganfly will hold a shareholder update call on March 27, 2024, at 2:30 p.m. PDT/5:30 p.m. EDT. Register for the call.

Selected financial information is outlined herein and should be read with Draganfly's consolidated financial statements for the quarter ended Dec. 31, 2023, and associated management discussion and analysis, which will be available under the company's profile on SEDAR+ and filed on EDGAR.

As previously disclosed, on Sept. 22, 2023, the company received a letter from the listing qualifications department of the Nasdaq Stock Market notifying the company of its non-compliance with Nasdaq listing Rule 5550(a)(2) by failing to maintain a minimum bid price for the company's common shares of at least $1 per share for 30 consecutive business days. The company was allowed an initial 180-day grace period, or until March 20, 2024, to regain compliance with the rule. To regain compliance with the rule, the closing bid price of the company's common shares needed to be at least $1 per share for a minimum of 10 consecutive business days during the compliance period.

On March 21, 2024, the company received notification that it had failed to regain compliance with the rule and is not eligible for a second 180-day compliance period because of its failure to comply with the $5-million minimum stockholders equity initial listing requirement for the period ended Sept. 30, 2023. Unless the company timely requests a hearing before an independent Nasdaq hearings panel, the company's securities will be subject to delisting. Accordingly, the company will request a hearing before the panel. The hearing request will automatically stay any suspension or delisting action pending the hearing and the expiration of any additional extension period granted by the panel following the hearing. In that regard, pursuant to the Nasdaq listing rules, the panel has the discretion to grant an additional extension period that can expire as late as Sept. 17, 2024. At the hearing, the company will be asked to provide a plan to regain compliance to the panel. The company intends to present a plan to regain compliance with the rule and request the continued listing of its common shares on Nasdaq pending such compliance. However, there can be no assurance that the panel will grant the company's request or that the company will ultimately regain compliance with all applicable requirements for continued listing on Nasdaq.

About Draganfly Inc.

Draganfly (Nasdaq: DPRO, Canadian Securities Exchange: DPRO and Frankfurt Stock Exchange: 3U8) is the creator of quality, cutting-edge drone solutions, software and AI systems that revolutionize how organizations can do business and service their stakeholders. Recognized as being at the forefront of technology for over 24 years, Draganfly is an award-winning industry leader serving the public safety, agriculture, industrial inspections, security, 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.

We seek Safe Harbor.