Draganfly Inc.

Hi, everyone. How you doing? It's Cameron Chell here, CEO and chairman of Dragonfly. I'd like to welcome you to our Q3 earnings call. Joining me today, we have Scott Larson, our president. We have Paul Sun, our CFO. And also, we've got a couple of facilitators and people that are helping us manage some questions and such, including Roli Booster, who handles our internal IR. So the format for today's call, if it's okay with everybody, is that basically we'll run through a short corporate presentation. And during that time, I'll give some overview of how our earnings outlaid or unfolded for the queue. I'll have... run through some of the details of that. During that time, we really encourage you to participate in the Q&A session, and we'll do our best at the end, facilitated by Scott Larson, our president, in order to answer all the questions that we possibly can. So on that note, I wanted to say thank you first and foremost to all of our staff and our team for the incredible commitment and work in this last quarter and all the quarters before. We continue to hit tremendous growth. We did see some delays in a number of shipments due to some supply chain stuff. Nonetheless, we still had a record quarter and have an incredible backlog here going forward. I'm really, really proud of the team and our customers and partners as it relates to the initiatives that we have currently unfolding and the size of the business that we continue to scale on. So on that note, I'll just mention quick that we're up over 30% year over year. So again, another record quarter at $1.896 million, notwithstanding a bunch of supply chain issues and delivery challenges as it relates to some global events. And our gross profit was increased 212% So up almost 40% for the third quarter. I'm going to let Paul get into a bunch of the details, but what I'll do is I'll just give a quick company overview and highlight a bunch of the customer initiatives that we are in the midst of, have completed, are in the midst of, and should give some pretty good insights as to how the business is tracking right now. So I'll just do a quick share screen.

Great.

So just a very quick review. Dragonfly is the oldest or certainly recognized within the industry in many other areas as the oldest commercial drone manufacturer and solution provider in the industry. We are rapidly growing as evidenced by our numbers. Our specialty really is in artificial intelligence, data acquisition and data analytics. So while we have full manufacturing capabilities, we really look at these capabilities in our unique ability to deliver on customer requirements and or collect very specific pieces of customer data. Our overall thesis is that nothing can deliver probably as efficiently as a drone and nothing can collect data as efficiently as a drone. There really is no device that can collect more or better data and unique data as a drone. And in so doing, that's really where we focus our efforts. And Dragonfly will always be known as a drone company and hopefully the number one or number two player in the North American market over the coming years It wouldn't be surprising to us to have one of the largest repositories of battery mining data or one of the largest repositories of forestry data. So it's our intense focus on collecting strategic information and helping analyze that data for our customers. It helps differentiate us as a customer. Of course, we have very strong IP. We have over 30 patents and hundreds of pieces of IP that we do not publish. and we're constantly developing new products. Every quarter there's new products coming out that are really driven by our customer requests. Now Dragonfly has been a very technology engineering focused company for the last 20 plus years, but a couple of years ago when the FAA came out with very clear guidance about beyond visual line of sight and how that will start to integrate into the infrastructure and into the economy and into the airspace, They became very clear to us that that was the time that this industry was going to scale. This is when we went from an organization that spent most of our time selling and educating with our customers to actually taking orders and designing product and just struggling to keep up. And so it's at that point that we really took a concerted effort to go and move from a contract manufacturing and engineering shop to our own specializing brand and solution provider. The other big thing that happened in the last couple of years is a realization by both corporations and by government that drones collect data better than anything else. And the security around that type of data is paramount. So as a 20 plus year old company, with people that have all the appropriate security clearances with a track record of working with military contractors and public safety and U.S. and Canadian agencies that we have a trusted name and track record in order to deliver on that security. And it's that type of business, it's that type of customer relationships that we've had for the last 20 years that's really driving business and gives us another strategic advantage. Well, we're an organization that's been building hardware and software in the 90s and the 2000s. And even in through the early in the mid 2000s, we're focusing on autonomous and AI. As we go forward, these are the two key components that will differentiate the business. So while we do see competitors coming out with some pretty cool hardware innovations and new software features, at the end of the day, all of that stuff to be engineered is a race to the bottom. Where the future of the drone industry is, is who can best deliver autonomous operations and AI insights. We have four general components to the business. We have contract engineering, which is the stalwart of our business. This is where we really have honed our skills and our energy and developed an incredibly strong engineering bench, both in software, in AI, and in our device and our hardware manufacturing. We also have now developed a full line of product sales and development. We do full product development of Full sales, full warranty, and it's a mature line that's fully commercialized. We've demonstrated that we have the ability to go from idea to commercialization in less than nine months with some of the most complex engineering and AI driven solutions in the market today. We also do full flight services. Now a bit of a difference for us here is that our flight services are focused on particular verticals. So we don't generally go and do any flight service work unless we have a strategic differentiator in that particular area. whether it's in forestry or mining or energy, whether that's software or AI driven. Again, it's all about what differentiation do we have that we can bring to our customers to make them more competitive. And then of course, there's data services. While this remains a small component of the overall business, we see this as likely the most important part of the business going forward over the next five years. As mentioned, we have a full product lineup, whether it's multi-rotor drones, whether it's ground robots, whether it's fixed-wing aircraft, whether it's vertical takeoff and horizontal flight. We, of course, have our flight services in these four key areas that I mentioned, and we have an AI bench that's developed solutions that no other drone company has in the world. One of these solutions would include vital intelligence. Vital Intelligence is a product that we developed that's simply from a camera. It can read your heart rate, your respiratory rate. It can read your blood pressure. It can read your blood oxygen level. This was developed for a specific customer that needed drones to be able to take Vital Intelligence situations in multiple different scenarios. We've now ported this technology over to kiosks, security cameras, smartphones, and telemedicine systems. This piece of business alone will probably garner us five to maybe up to $20 million in business in the coming year. And again, it's this type of innovation that we see differentiates us. Our airframes are great airframes, but it's what we do with our airframes, it's the data that we capture, it's the packages and how we deliver those packages in a certain way with these airframes that really make us special. In terms of our Q3 2021 customer highlights, I wanted to start off talking quickly about Digital Dream Labs. So Digital Dream Labs has awarded us a contract. It's $9 million per year, and that's a three-year contract. Now to put that in context, though it's obvious, is that our entire revenues this year are coming in around that $7 to $8 million range, which is up 100% over last year and 100% the year before. This one contract represents an entire year's revenue with just one customer. Now we're dealing with dozens, maybe not dozens, excuse me, we're dealing with a dozen scenarios like this right now of these customer sizes and larger. and this speaks not just to the growth of Dragonfly but the growth of the entire industry. We're certainly thrilled and honoured to be working with Digital Dream Labs on this project with them for this particular drone. Also this quarter, we announced an innovation lab with the Drone Racing League, which has already garnered some incredible business development opportunities for us. We're using this lab to highlight the technologies, the very specific technologies that Dragonfly can bring to the market that others can't or don't currently have the capability to do. These innovations will be demonstrated on the racetrack and across NBC and across the sponsors and partners that drum racing the cast will be able to clearly demonstrate how we can then port that into the commercial industry after it's been in one of the toughest environments in the world. We also signed a contract with Valkyrie. Valkyrie is a well-known drone delivery box. This is a box that receives drone delivery packages in different scenarios, whether it's suburbs or whether it's industrial facilities or whether it's medical facilities. We have a minimum order contract of $400,000 from them, but Valkyrie has hundreds of POs, and this is something that we look forward to being a very large piece of our business going forward over the coming years. Coal Chain Delivery Systems is the work that we're doing in Texas with the emergency medical services. And this last six weeks alone, we did over 300 delivery test flights with Texas EMS. We've also now initiated nighttime test flying, and we look forward next quarter to moving into beyond visual line site applying and actually flying live missions. This piece of business for us is incredibly important because it demonstrates not just our capabilities, but it has us working with the right levels of government to understand the budgeting and the approval process for this really, really important component of drones in the emergency medical service space. And this is being looked at by multiple states. Very important project for us. and of course at Alabama State University we implemented a drone training program at a university level to graduate pilots from Alabama State University. This is a fully paid curriculum and in the coming quarters we expect to roll it out to multiple universities. In this last quarter, from a product standpoint, we did release the Dragonfire 2 Commander, which we launched, which has additional and expanded capabilities. This is our signature small light drone. Now, we manufacture dozens of types of drones for different scenarios across multiple customers. But this is one of the base platforms that's very popular with public safety. With Vital Intelligence, we integrated into the FOBI venue management system. So FOBI is deploying their venue management system into multiple venues across the United States where the requirement for vaccination cards and health screening are required. And they now have integrated the Vital Intelligence technology to actually take the vital signs of people as they're coming into facilities. and we have also now deployed the new Vital Intelligence kiosk. Entire new product design and it's being deployed into multiple customers as we speak. This has really given us scalability in this particular area, which we're excited about because we've got increased and incredible demand. So on that note, what I'd like to do at this point is I'd like to turn it over to Paul Sun, our CFO, and have him run through our key financial and operational highlights for Q3 2021. Paul?