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SHARE CAPITAL
 12 Months Ended
Dec. 31, 2021
Share Capital  
SHARE CAPITAL

20. SHARE CAPITAL

 

Authorized share capital

 

Unlimited number of common shares without par value.

 

Issued share capital

 

During the year ended December 31, 2021,

 

-The Company issued 1,580,525 common shares for the exercise of warrants for $3,951,312.
-The Company issued 149,999 common shares for the vesting of Restricted Share Units.
-The Company issued 392,999 common shares for the exercise of stock options for $987,248.
-The Company issued 15,000 common shares in lieu of cash.
-The Company issued 6,488,691 units for the Regulation A+ financing in the United States for proceeds of $18,815,485. Each unit is comprised of one common share and one share purchase warrant. These warrants had a fair value of $0.57 USD allocated to them, have an exercise price of $3.55 USD per warrant, each convert to one common share, and have a life of two years. The fair value of $8,261,511 was allocated to the warrant derivative liability.
-The Company issued 1,200,000 units for the acquisition of Vital Intelligence. Each unit is comprised of one common share and one warrant. These warrants have an exercise price of $13.35 per warrant, each convert to one common share, and have a life of two years.
-The Company issued 5,095,966 common shares in a private placement for $25,538,213.
-The Company issued 359,009 common shares for the exercise of warrants for $978,478.
-The Company issued 298,661 common shares for the vesting of Restricted Share Units.
-The Company issued 12,500 common shares for the exercise of stock options for $26,875.
-The Company issued 356,901 common shares in lieu of cash.

 

For the year ended December 31, 2020,

 

-The Company issued 24,000 common shares for the exercise of warrants for $60,000.
-The Company issued 20,000 common shares for the exercise of warrants for $50,000.
-The Company issued 210,320 common shares for the exercise of warrants for $105,160.
-The Company issued 73,000 common shares for the exercise of warrants for $36,500.
-The Company issued 294,840 common shares for the exercise of warrants for $147,420.
-The Company issued 121,840 common shares for the exercise of warrants for $60,920.
-The Company issued 126,000 common shares for the exercise of warrants for $115,000.
-The Company issued 645,088 common shares for the acquisition of Dronelogics and an additional 40,000 common shares as finder’s fees.
-The Company issued 12,000 common shares for the exercise of warrants for $30,000.
-The Company issued 45,600 common shares for the exercise of warrants for $114,000.
-The Company issued 192,308 common shares for cash proceeds of $500,000.
-The Company issued 111,082 common shares for debt settlement of $344,354 and recognized a loss of $38,879 in the statement of comprehensive loss.
-The Company issued 2,000 common shares for the exercise of warrants for $5,000.
-The Company issued 2,200 common shares for the exercise of warrants for $5,500.
-The Company issued 637,975 common shares for the exercise of warrants for $1,594,938.
-The Company issued 7,117 common shares for the vesting of Restricted Share Units.
-The Company issued 511,299 units for the Regulation A+ financing in the United States for proceeds of $1,518,845. Each unit is comprised of one common share and one share purchase warrant. These warrants have an exercise price of $3.55 USD per warrant, each convert to one common share, and have a life of two years, expiring on November 30, 2022.
-The Company issued 2,040 common shares for the vesting of Restricted Share Units.
-The Company issued 2,647 common shares for the vesting of Restricted Share Units.
-The Company issued 188,194 common shares for the vesting of Restricted Share Units.
-The Company issued 15,000 common shares for the exercise of warrants for $37,500.

 

 

Draganfly Inc.

Notes to the Consolidated Financial Statements

For The Year Ended December 31, 2021

Expressed in Canadian Dollars

 

20. SHARE CAPITAL (CONT’D)

 

For the year ended December 31, 2019,

 

-The Company issued 143,985 common shares to a company controlled by a former director of the Company for settlement of $799,341 in accounts payable and application of $153,566 in subscription receivable.
-The Company issued 222,965 common shares with a value of $1,000,000 as transaction fees for the Draganfly Innovations amalgamation to related parties.
-The Company issued 8,517,671 common shares for the amalgamation with Draganfly Innovations.
-The Company issued 9,065 common shares for settlement of $22,662 in trades payables at a value of $2.50 per share.
-The Company issued 423,698 common shares for settlement of $740,000 in convertible debentures and interest. As a result of the settlement, the Company recognized loss on settlement of debt of $319,246 in the statement of loss and comprehensive loss.
-The Company issued 63,388 common shares for exercise of share purchase warrants of the Company for proceeds of $8,833. As a result of the exercise, $212,908 from reserve was reclassification to share capital.
-The Company issued 2,810,300 units in a private placement. Each unit consists of one common share and one warrant. These warrants have an exercise price of $2.50 per warrant, each convert to one common share, and have a life of one year, expiring on October 25, 2020.

 

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.

 

As at December 31, 2021, the Company had the following 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  $2.50    7.84    296,665    296,665 
November 19, 2019  November 19, 2029  $2.50    7.89    50,000    50,000 
April 30, 2020  April 30, 2030  $2.50    8.33    87,000    78,666 
April 30, 2020  April 30, 2030  $3.85    8.33    110,000    70,000 
July 3, 2020  July 3, 2025  $3.20    3.51    200,000    166,666 
November 24, 2020  November 24, 2030  $2.50    8.90    32,000    21,000 
December 11, 2020  December 11, 2030  $2.15    8.95    12,500    12,500 
February 2, 2021  February 2, 2031  $13.20    9.09    30,000    10,000 
March 8, 2021  March 8, 2026  $13.90    4.19    10,000    5,000 
April 27, 2021  April 27, 2031  $10.15    9.23    182,000    - 
September 9, 2021  September 9, 2026  $4.84    4.69    25,826    - 
                1,035,991    710,497 

 

 

  

Number of

Options

  

Weighted Average

Exercise Price

 
Outstanding, December 31, 2019   744,993   $2.50 
Forfeited   (43,334)   2.50 
Granted   492,000    3.08 
Outstanding, December 31, 2020   1,193,659   $2.75 
Exercised   (405,494)   2.50 
Granted   247,826    10.12 
Outstanding, December 31, 2021   1,035,991   $4.60 

 

During the year ended December 31, 2021,

 

-The Company granted 30,000 options to an employee. Each option is exercisable at $13.20 per share for 10 years.
-The Company granted 10,000 options to a consultant. Each option is exercisable at $13.90 per share for 5 years.
-The Company granted 182,000 options to employees and a consultant. Each option is exercisable at $10.15 per share for 10 years.
-The Company granted 25,826 options to an employee. Each option is exercisable at $4.84 per share for 5 years.

 

 

Draganfly Inc.

Notes to the Consolidated Financial Statements

For The Year Ended December 31, 2021

Expressed in Canadian Dollars

 

20. SHARE CAPITAL (CONT’D)

 

Stock Options (cont’d)

 

During the year ended December 31, 2020,

 

-The Company granted 89,000 options to employees. Each option is exercisable at $2.50 per share for a period of 10 years from the grant date.
  - The Company granted 120,000 options to consultants. Each option is exercisable at $3.85 per share for a period of 10 years from the grant date.
-The Company granted 200,000 options to employees. Each option is exercisable at $3.20 per share for a period of 5 years from the grant date.
-The Company granted 33,000 options to employees. Each option is exercisable at $2.50 per share for a period of 10 years from the grant date.
-The Company granted 50,000 options to a consultant. Each option is exercisable at $2.15 per share for a period of 10 years from the grant date.

 

During the year ended December 31, 2021, the Company recorded $1,660,894 (2020 - $1,724,853 and 2019 – $599,701) in stock-based compensation for stock options, based on the fair values of stock options granted which were estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

 

Year ended December 31,  2021   2020    2019  
Risk free interest rate   0.69%-1.40%    0.43%-0.66%    1.45%-1.46 %
Expected volatility   62.84%-113.16%    113.53%-119.03%    100 %
Expected life   5 years    5-10 years    7.5 years  
Expected dividend yield   0%   0%   0 %
Exercise price  $4.84-13.90   $2.15-3.85  $ 2.50

 

Volatility is calculated using the historical volatility method based on a comparative company’s stock price.

 

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 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 December 31, 2021, the Company had the following RSUs outstanding:

 

   Number of RSUs 
Outstanding, December 31, 2019   634,997 
Vested   (199,998)
Forfeited   (68,333)
Issued   248,000 
Outstanding, December 31, 2020   614,666 
Vested   (448,660)
Issued   348,826 
Outstanding, December 31, 2021   514,832 

 

 

Draganfly Inc.

Notes to the Consolidated Financial Statements

For The Year Ended December 31, 2021

Expressed in Canadian Dollars

 

20. SHARE CAPITAL (CONT’D)

 

Restricted Share Units (cont’d)

 

During the year ended December 31, 2021, 323,661 RSUs fully vested according to the terms and the Company accelerated the vesting of 124,999 RSUs. The Company issued 348,826 RSUs to employees of the Company with each RSU exercisable into one common share of the Company or the cash equivalent thereof upon the vesting conditions being met for a period of three years from the grant date.

 

During the year ended December 31, 2020, the Company committed to grant 248,000 RSUs to employees and consultants of the Company with each RSU exercisable into one common share of the Company or the cash equivalent thereof upon the vesting conditions being met for a period of three years from the grant date.

 

During the year ended December 31, 2021, the Company recorded share-based payment expense of $2,291,701 (2020: $943,611, 2019: $161,858) in stock-based compensation 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 years ended December 31, 2021 and 2020, the Company issued warrants (“USD Warrants”) with a USD exercise price. Being in a foreign currency that is not the Company’s functional currency, these USD Warrants are required to be recorded as a financial liability and not as equity. As a financial liability, these USD Warrants are revalued on a quarterly basis to fair market value with the change in fair value being recorded profit or loss. The initial fair value of these USD Warrants was parsed out from equity and recorded as a financial liability.

 

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 from the Bank of Canada.

 

Warrant Derivative Liability

 

Balance at January 1, 2020  $- 
Warrant issuance   

281,732

 
Change in fair value of warrants outstanding   466,902 
Balance at December 31, 2020  $748,634 
Warrant issuance   

8,261,511

 
Exercised   

(98,048

)
Change in fair value of warrants outstanding   (4,046,325) 
Warrant Balance at December 31, 2021  4,865,772 
Derivative liability     
Warrants  $4,865,772 
Contingent consideration (note 4)   694,230
Contingent consideration at December 31, 2021  $5,560,002 

 

Details of these warrants and their fair values are as follows:

 

Issue Date  Exercise Price 

Number of

Warrants

Outstanding at

December 31,

2021

  

Fair Value at

December 31,

2021

  

Number of

Warrants

Outstanding at

December 31,

2020

  

Fair Value at

December 31,

2020

 
November 30, 2020  US$ 3.55   482,425   $182,262    511,299   $748,634 
February 5, 2021  US$ 3.55   1,323,275    951,226    -    - 
March 5, 2021  US$ 3.55   5,154,321    3,731,285    -    - 
July 29, 2021  US$ 5.00   250,000    84,625    -    - 
September 14, 2021  US$ 5.00   4,798    1,685    -    - 
       7,214,819   $4,865,772    511,299   $748,634 

 

 

Draganfly Inc.

Notes to the Consolidated Financial Statements

For The Year Ended December 31, 2021

Expressed in Canadian Dollars

 

20. SHARE CAPITAL (CONT’D)

 

Warrants (cont’d)

 

The fair values of these warrants were estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

 

Year ended December 31,  2021   2020 
Risk free interest rate   0.23%-0.95%    0.20%-0.24% 
Expected volatility   70.95%-144.59%    72.76%-74.10% 
Expected life   2-3 years    2 years 
Expected dividend yield   0%   0%

 

Volatility is calculated using the historical volatility method.

 

During the year ended December 31, 2020, the Company amended the expiry date of the November 5, 2019 warrants from November 5, 2020 to November 5, 2021 provided that 25% of the warrants were exercised by October 21, 2020 and 25% were exercised by May 5, 2021.

 

  

Number of

Warrants

  

Weighted Average

Exercise Price

 
Outstanding, December 31, 2019   3,610,340   $2.05 
Exercised   (1,584,775)   1.50 
Forfeited   (120,000)   2.50 
Issued   511,299    3.55 
Outstanding, December 31, 2020   2,416,864   $2.95 
Exercised   (1,939,534)   2.54 
Forfeited   (6,000)   2.50 
Issued   7,943,489    5.10 
Outstanding, December 31, 2021   8,414,819   $4.99 

 

As at December 31, 2021, the Company had the following warrants outstanding:

 

Date issued  Expiry date  Exercise price 

Number of warrants

outstanding

 
November 30, 2020  November 30, 2022  US$ 3.55   482,425 
February 5, 2021  February 5, 2023  US$ 3.55   1,323,275 
March 5, 2021  March 5, 2023  US$ 3.55   5,154,321 
March 22, 2021  March 22, 2023  CDN$13.35   1,200,000 
July 29, 2021  July 29, 2024  US$ 5.00   250,000 
September 14, 2021  September 14, 2024  US$ 5.00   4,798 
          8,414,819 

 

The weighted average remaining contractual life of warrants outstanding as of December 31, 2021, was 1.20 years (December 31, 2020 – 1.07 years).

 

Of 1,200,000 warrants issued on March 22, 2021 to acquire Vital, 900,000 of the warrants are currently held in escrow, to be released upon completion of the milestones (note 4).

 

 

Draganfly Inc.

Notes to the Consolidated Financial Statements

For The Year Ended December 31, 2021

Expressed in Canadian Dollars