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INTANGIBLE ASSETS AND GOODWILL | 12 Months Ended
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Dec. 31, 2021
INTANGIBLE ASSETS AND GOODWILL | 13. INTANGIBLE ASSETS AND GOODWILL SCHEDULE OF INTELLECTUAL PROPERTY
|  | Patents |  |  | Customer Relationships |  |  | Brand |  |  | Software |  |  | Goodwill |  |  | Total |
Cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2019 |  | $ | 41,931 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 41,931 |
Intangible assets acquired in the Transaction |  |  | - |  |  |  | 197,000 |  |  |  | - |  |  |  | 119,000 |  |  |  | 2,166,563 |  |  |  | 2,482,563 |
Balance at December 31, 2020 |  | $ | 41,931 |  |  | $ | 197,000 |  |  | $ | - |  |  | $ | 119,000 |  |  | $ | 2,166,563 |  |  | $ | 2,524,494 |
Intellectual properties and goodwill, beginning balance |  | $ | 41,931 |  |  | $ | 197,000 |  |  | $ | - |  |  | $ | 119,000 |  |  | $ | 2,166,563 |  |  | $ | 2,524,494 |
Intangible assets acquired in the Acquisition |  |  | - |  |  |  | - |  |  |  | 23,000 |  |  |  | 433,000 |  |  |  | 8,353,609 |  |  |  | 8,809,609 |
Impairment of goodwill |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4,579,763 | ) |  |  | (4,579,763 | )
Balance at December 31, 2021 |  | $ | 41,931 |  |  | $ | 197,000 |  |  | $ | 23,000 |  |  | $ | 552,000 |  |  | $ | 5,940,409 |  |  | $ | 6,754,340 |
Intellectual properties and goodwill, Ending balance |  | $ | 41,931 |  |  | $ | 197,000 |  |  | $ | 23,000 |  |  | $ | 552,000 |  |  | $ | 5,940,409 |  |  | $ | 6,754,340 |
Accumulated amortization |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at December 31, 2019 |  | $ | 40,546 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 40,546 |
Change for the year |  |  | 1,385 |  |  |  | 26,267 |  |  |  | - |  |  |  | 15,866 |  |  |  | - |  |  |  | 43,518 |
Balance at December 31, 2020 |  |  | 41,931 |  |  |  | 26,267 |  |  |  | - |  |  |  | 15,866 |  |  |  | - |  |  |  | 84,064 |
Accumulated amortization, beginning balance |  | $ | 41,931 |  |  | $ | 26,267 |  |  |  | - |  |  | $ | 15,866 |  |  | $ | - |  |  | $ | 84,064 |
Change for the year |  |  | - |  |  |  | 34,147 |  |  |  | 3,450 |  |  |  | 98,369 |  |  |  | - |  |  |  | 135,966 |
Balance at December 31, 2021 |  | $ | 41,931 |  |  | $ | 60,414 |  |  | $ | 3,450 |  |  | $ | 114,235 |  |  | $ | - |  |  | $ | 220,030 |
Accumulated amortization, ending balance |  | $ | 41,931 |  |  | $ | 60,414 |  |  | $ | 3,450 |  |  | $ | 114,235 |  |  | $ | - |  |  | $ | 220,030 |
Net book value: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2020 |  | $ | - |  |  | $ | 170,733 |  |  | $ | - |  |  | $ | 103,134 |  |  | $ | 2,166,563 |  |  | $ | 2,440,430 |
December 31, 2021 |  | $ | - |  |  | $ | 136,586 |  |  | $ | 19,550 |  |  | $ | 437,765 |  |  | $ | 5,940,409 |  |  | $ | 6,534,310 |
Intellectual properties and goodwill |  | $ | - |  |  | $ | 136,586 |  |  | $ | 19,550 |  |  | $ | 437,765 |  |  | $ | 5,940,409 |  |  | $ | 6,534,310 |
Customer relationships On April 30, 2020, the Company acquired a 100% interest in Dronelogics (note 3) and assigned $197,000 to the fair value of customer relationships. Brand On April 30, 2020, the Company acquired a 100% interest in Dronelogics and assigned $119,000 to the fair value of the website/domain name. On March 25, 2021, the Company acquired the assets of Vital (note 4) and assigned $23,000 to the fair value of the brand. Software On March 25, 2021, the Company acquired the assets of Vital and assigned $433,000 to the fair value of the software. Goodwill On April 30, 2020, the Company acquired a 100% interest in Dronelogics, which included goodwill. Goodwill was valued at $2,166,563. On March 25, 2021, the Company acquired the assets of Vital, which included goodwill. Goodwill was valued at $8,353,609. Draganfly Inc. Notes to the Consolidated Financial Statements For The Year Ended December 31, 2021 Expressed in Canadian Dollars 13. INTELLECTUAL PROPERTIES AND GOODWILL (CONT’D) On December 31, 2021 the Company performed its annual goodwill impairment test on Vital and Dronelogics. The Company determined the recoverable amount based on a value in use calculation using the following key assumptions:
| ● | 5 year post tax cash flow projections expected to be generated based on a financial forecast with a terminal growth rate of 2%
| ● | Budgeted cash flows calculated using a weighted average revenue EBITDA margin of 14% for Drone and 42% for Vital respectively were estimated by management based on the past performance and future growth prospects as well as observed trends among comparable companies.
| ● | Cash flows were discounted at the weighted average cost of capital of 17% for Dronelogics and 24% for Vital based on peer group averages and adjusted for the Company’s risk factors.
Based on the annual goodwill impairment test, the Company deemed that the goodwill for Vital required impairment, as such the Company recorded an impairment of $4,579,763. The most sensitive inputs to the value in use model are the growth and discount rates. All else being equal:
| ● | A 10% reduction in the Value in use for the discounted cash flow model would result in a reduction of $597,100 for Dronelogics and $570,133 for Vital.
Changing the above assumption would result in an impairment for Dronelogics, and would result in additional impairment for Vital. The key assumptions used in the calculations of the recoverable amounts include sales growth per year, changes in cost of sales and capital expenditures based on internal forecasts.

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