DPRO Q4 2024 Earnings Report

Page 1

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report . . . . . . . . . . . . . . . For the transition period from ________________ to ___________ Commission file number: 001-40688 Draganfly Inc. (Exact name of Registrant as specified in its charter) N/A (Translation of Registrant’s name into English) British Columbia, Canada (Jurisdiction of Incorporation or Organization) 235 103rd St E., Saskatoon, SK, S7N 1Y8, Canada (Address of Principal Executive Offices) Paul Sun, Chief Financial Officer Telephone: 800.979.9794 E-mail: paul.sun@draganfly.com 235 103rd St E, Saskatoon, SK, S7N 1Y8, Canada (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Shares DPRO The Nasdaq Stock Market LLC Securities registered or to be registered pursuant to Section 12(g) of the Act None (Title of Class) Securities for which there is a reporting obligation pursuant to section 15(d) of the Act

Page 2

None (Title of Class) Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 5,427,795 Common Shares Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) ☒Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Emerging growth company ☒ If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐ †The term “new or revised financial accounting standard” refers to any updated issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. Indicate by check mark whether the registrant has filed a report on an attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ Other ☐ If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Page 3

☐ Yes ☒No (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court ☒Yes ☐ No

Page 4

TABLE OF CONTENTS Table of Contents General Matters ii CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS iii Part I 1 Item 1. Identity of Directors, Senior Management and Advisors 1 Item 2. Offer Statistics and Expected TimeTable 1 Item 3. Key Information 1 Item 4. Information on the Company 16 Item 4A. Unresolved Staff Comments 16 Item 5. Operating and Financial Review and Prospects 39 Item 6. Directors, Senior Management and Employees 40 Item 7. Major Shareholders and Related Party Transactions 53 Item 8. Financial Information 55 Item 9. The Offer and Listing. 55 Item 10. Additional Information 55 Item 11. Quantitative and Qualitative Disclosures About Market Risk 63 Item 12. Description of Securities Other than Equity Securities 64 PART II 64 Item 13. Defaults, Dividend Arrearages and Delinquencies 64 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 64 Item 15. Controls and Procedures 65 Item 16. [Reserved] 66 Item 16A. Audit Committee Financial Expert 66 Item 16B. Code of Ethics 66 Item 16C. Principal Accountant Fees and Services 67 Item 16D. Exemptions from the Listing Standards for Audit Committees 67 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 67 Item 16F. Change in Registrant’s Certifying Accountant 67 Item 16G. Corporate Governance 67 Item 16H. Mine Safety Disclosure 68 Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 68 Item 16J. Insider Trading Policies 68 Item 16K. Cybersecurity 68 PART III 69 Item 17: Financial Statements 69 Item 18: Financial Statements 69 Item 19. Exhibits 70 i

Page 5

GENERAL MATTERS Unless otherwise noted or the context indicates otherwise “we”, “us”, “our”, the “Company” or “Draganfly” refer to Draganfly Inc. and its subsidiaries. Unless otherwise indicated, financial information in this Annual Report on Form 20-F (this “Annual Report”) has been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Unless otherwise noted herein, all references to “$,” “C$,” “Canadian dollars,” or “dollars” are to the currency of Canada and “US$,” “United States dollars,” or “U.S. dollars” are to the currency of the United States. We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the Jumpstart Our Business Startups Act (the “JOBS Act”), and as such, we have elected to comply with certain reduced U.S. public company reporting requirements. The Company prepares and reports its consolidated financial statements in accordance with IFRS. However, this Annual Report may make reference to certain non-IFRS measures including key performance indicators used by management. These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. The Company uses non-IFRS measures including “gross profit,” “gross margin” and “working capital” which may be calculated differently by other companies. These non-IFRS measures and metrics are used to provide investors with supplemental measures of the Company’s operating performance and liquidity and thus highlight trends in the Company’s business that may not otherwise be apparent when relying solely on IFRS measures. Management believes that gross profit, defined as revenue less operating expenses, is a useful supplemental measure of operations. Gross profit helps provide an understanding on the level of costs needed to create revenue. Gross margin illustrates the gross profit as a percentage of revenue. Management believes that working capital, defined as current assets less current liabilities, is an indicator of the Company’s liquidity and its ability to meet its current obligations. The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of companies in similar industries. Management also uses non-IFRS measures and metrics in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of executive compensation. For reconciliations of these non-IFRS measures to the relevant reported measures, please see the “Results of Operations – Cost of Goods Sold / Gross Margin” for a discussion of gross profit and gross margin, and for a discussion of working capital, “Selected Financial Information” sections of the Company’s Management’s Discussion and Analysis for the year ended December 31, 2024, attached to this Annual Report on Form 20-F in Exhibit 15.1. Unless otherwise indicated, the Company has obtained the market and industry data contained in this Annual Report from its internal research, management’s estimates and third-party public information and other industry publications. While the Company believes such internal research, management’s estimates and third- party public information is reliable, such internal research and management’s estimates have not been verified by any independent sources and the Company has not verified any third party public information. While the Company is not aware of any misstatements regarding the market and industry data contained in this Annual Report, such data involves risks and uncertainties and are subject to change based on various factors, including those described under “Cautionary Statement Regarding Forward-Looking Information and Statements” and “Item 3.D. Risk Factors”. ii

Page 6

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report contains forward-looking statements that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. The statements we make regarding the following matters are forward-looking by their nature and are based on certain of the assumptions noted below: ● the intentions, plans and future actions of the Company; ● statements relating to the business and future activities of the Company; ● anticipated developments in operations of the Company; ● market position, ability to compete and future financial or operating performance of the Company; ● the timing and amount of funding required to execute the Company’s business plans; ● capital expenditures; ● the effect on the Company of any changes to existing or new legislation or policy or government regulation; ● the availability of labor; ● the Company’s ability to secure necessary regulatory approvals and permits ● requirements for additional capital; ● goals, strategies and future growth and the success of the Company’s products; ● the adequacy of financial resources; ● expectations regarding revenues, expenses and anticipated cash needs ; ● volatility in the Company’s securities and the continued listing of the Company’s securities on Nasdaq; and ● general market conditions and macroeconomic trends driven by pandemics and/or geopolitical conflicts, including supply chain disruptions, market volatility, inflation, interests rates, and labor challenges, among other factors. The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, those factors identified under the Risk Factors listed below in Item 3.D. of this Annual Report. Furthermore, unless otherwise stated, the forward- looking statements contained in this Annual Report are made as of the date hereof, and we have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes or otherwise, except as required by law. iii

Page 7

PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS Not required. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not required. ITEM 3. KEY INFORMATION 3.A. [Reserved] 3.B. Capitalization and Indebtedness Not required. 3.C. Reasons for the Offer and Use Of Proceeds Not required. 3.D. Risk Factors An investment in the Company’s common shares, without par value, (the “Common Shares”) is highly speculative and involves significant risks. In addition to the other information contained in this Annual Report and the documents incorporated by reference herein and therein, you should review and carefully consider the risks described herein. The risks described herein are not the only risk factors facing us and should not be considered exhaustive. Additional risks and uncertainties not currently known to us, or that we currently consider immaterial, may also materially and adversely affect our business, operations and condition, financial or otherwise. Risks Related to the Company, its Business and Industry The Company has a history of losses. The Company has incurred net losses since its inception. The Company cannot assure that it can become profitable or avoid net losses in the future or that there will be any earnings or revenues in any future quarterly or other periods. The Company expects that its operating expenses will increase as it grows its business, including expending substantial resources for research, development and marketing. As a result, any decrease or delay in generating revenues could result in material operating losses. A shareholder’s holding in the Company may be diluted if the Company issues additional Common Shares or other securities in the future. The Company may issue additional Common Shares or other securities in the future, which may dilute a shareholder’s holding in the Company. The Company’s articles permit the issuance of an unlimited number of Common Shares, and shareholders have no pre-emptive rights in connection with further issuances of any securities. The directors of the Company have the discretion to determine if an issuance of Common Shares or other securities is warranted, the price at which any such securities are issued and the other terms of issue of Common Shares or securities. In addition, the Company may issue additional Common Shares upon the exercise of incentive stock options to acquire Common Shares under its share compensation plan or upon the exercise or conversion of other outstanding convertible securities of the Company, which will result in further dilution to shareholders. In addition, the issuance of Common Shares or other securities in any potential future acquisitions, if any, may also result in further dilution to shareholder interests. 1

Page 8

The Company expects to incur substantial research and development costs and devote significant resources to identifying and commercializing new products and services, which could significantly reduce its profitability and may never result in revenue to the Company. The Company’s future growth depends on penetrating new markets, adapting existing products to new applications, and introducing new products and services that achieve market acceptance. The Company plans to incur substantial research and development costs as part of its efforts to design, develop and commercialize new products and services and enhance its existing products. The Company believes that there are significant opportunities in a number of business areas. Because the Company accounts for research and development costs as operating expenses, these expenditures will adversely affect its earnings in the future. Further, the Company’s research and development programs may not produce successful results, and its new products and services may not achieve market acceptance, create any additional revenue or become profitable, which could materially harm the Company’s business, prospects, financial results and liquidity. Shortfalls in available external research and development funding could adversely affect the Company. The Company depends on its research and development activities to develop the core technologies used in its unmanned aerial vehicles (“UAVs”) products and for the development of the Company’s future products. A portion of the Company’s research and development activities can depend on funding by commercial companies and the Canadian government. Canadian government and commercial spending levels can be impacted by a number of variables, including general economic conditions, specific companies’ financial performance and competition for Canadian government funding with other Canadian government-sponsored programs in the budget formulation and appropriation processes. Moreover, the Canadian, federal and provincial governments provide energy rebates and incentives to commercial companies, which directly impact the amount of research and development that companies appropriate for energy systems. To the extent that these energy rebates and incentives are reduced or eliminated, company funding for research and development could be reduced. Any reductions in available research and development funding could harm the Company’s business, financial condition and operating results. The Company’s adoption of new business models could fail to produce any financial returns. Forecasting the Company’s revenues and profitability for new business models is inherently uncertain and volatile. The Company’s actual revenues and profits for its business models may be significantly less than the Company’s forecasts. Additionally, the new business models could fail for one or more of the Company’s products and/or services, resulting in the loss of Company’s investment in the development and infrastructure needed to support the new business models, and the opportunity cost of diverting management and financial resources away from more successful businesses. The Company will be affected by operational risks and may not be adequately insured for certain risks. The Company will be affected by a number of operational risks and the Company may not be adequately insured for certain risks, including: labour disputes; catastrophic accidents; fires; blockades or other acts of social activism; changes in the regulatory environment; impact of non-compliance with laws and regulations; natural phenomena, such as inclement weather conditions, floods, earthquakes and ground movements. There is no assurance that the foregoing risks and hazards will not result in damage to, or destruction of, the Company’s technologies, personal injury or death, environmental damage, adverse impacts on the Company’s operation, costs, monetary losses, potential legal liability and adverse governmental action, any of which could have an adverse impact on the Company’s future cash flows, earnings and financial condition. Also, the Company may be subject to or affected by liability or sustain loss for certain risks and hazards against which the Company cannot insure or which the Company may elect not to insure because of the cost. This lack of insurance coverage could have an adverse impact on the Company’s future cash flows, earnings, results of operations and financial condition. 2

Page 9

The Company operates in evolving markets, which makes it difficult to evaluate the Company’s business and future prospects. The Company’s UAVs are sold in rapidly evolving markets. The commercial UAV market is in early stages of customer adoption. Accordingly, the Company’s business and future prospects may be difficult to evaluate. The Company cannot accurately predict the extent to which demand for its products and services will increase, if at all. The challenges, risks and uncertainties frequently encountered by companies in rapidly evolving markets could impact the Company’s ability to do the following: ● generate sufficient revenue to reach and maintain profitability; ● acquire and maintain market share; ● achieve or manage growth in operations; ● develop and renew contracts; ● attract and retain additional engineers and other highly-qualified personnel; ● successfully develop and commercially market new products; ● adapt to new or changing policies and spending priorities of governments and government agencies; and ● access additional capital when required and on reasonable terms. If the Company fails to address these and other challenges, risks and uncertainties successfully, its business, results of operations and financial condition would be materially harmed. The Company operates in a competitive market. The Company faces competition and new competitors will continue to emerge throughout the world. Services offered by the Company’s competitors may take a larger share of consumer spending than anticipated, which could cause revenue generated from the Company’s products and services to fall below expectations. It is expected that competition in these markets will intensify. If competitors of the Company develop and market more successful products or services, offer competitive products or services at lower price points, or if the Company does not produce consistently high-quality and well-received products and services, revenues, margins, and profitability of the Company will decline. The Company’s ability to compete effectively will depend on, among other things, the Company’s pricing of services and equipment, quality of customer service, development of new and enhanced products and services in response to customer demands and changing technology, reach and quality of sales and distribution channels and capital resources. Competition could lead to a reduction in the rate at which the Company adds new customers, a decrease in the size of the Company’s market share and a decline in its customers. Examples include but are not limited to competition from other companies in the UAV industry. In addition, the Company could face increased competition should there be an award of additional licenses in jurisdictions in which the Company operates in. The markets in which the Company competes are characterized by rapid technological change, which requires the Company to develop new products and product enhancements and could render the Company’s existing products obsolete. Continuing technological changes in the market for the Company’s products could make its products less competitive or obsolete, either generally or for particular applications. The Company’s future success will depend upon its ability to develop and introduce a variety of new capabilities and enhancements to its existing product and service offerings, as well as introduce a variety of new product offerings, to address the changing needs of the markets in which it offers products. Delays in introducing new products and enhancements, the failure to choose correctly among technical alternatives or the failure to offer innovative products or enhancements at competitive prices may cause existing and potential customers to purchase the Company’s competitors’ products. 3

Page 10

If the Company is unable to devote adequate resources to develop new products or cannot otherwise successfully develop new products or enhancements that meet customer requirements on a timely basis, its products could lose market share, its revenue and profits could decline, and the Company could experience operating losses. Failure to obtain necessary regulatory approvals from Transport Canada or other governmental agencies, or limitations put on the use of small UAV in response to public privacy concerns, may prevent the Company from expanding sales of its small UAV to non-military customers in Canada. Transport Canada is responsible for establishing, managing, and developing safety and security standards and regulations for civil aviation in Canada, and includes unmanned civil aviation (drones). Civil operations include law enforcement, scientific research, or use by private sector companies for commercial purposes. The Canadian Aviation Regulations (“CARs”) govern civil aviation safety and security in Canada, and by extension govern operation of drones in Canada to an acceptable level of safety. While Transport Canada has been a leader in the development of regulations for the commercial use of remotely piloted aircraft systems (“RPAS”) and continues to move forward rapidly with its regulatory development, it has acknowledged the challenge of regulations keeping pace with the rapid development in technology and the growing demand for commercial RPAS use, particularly in the beyond visual line-of-sight environment. In 2012, the Canadian Aviation Regulation Advisory Council UAS working group released its Phase 2 report which outlined a proposed set of revision to the CARs to permit beyond visual line of sight operations. This report was the basis for the recently released Notice of Proposed Amendment (“NPA”) by Transport Canada on lower risk beyond visual line-of-sight. Failure to obtain necessary regulatory approvals from Transport Canada or other governmental agencies, including the granting of certain Special Flight Operations Certificates (“SFOCs”), or limitations put on the use of RPAS in response to public safety concerns, may prevent the Company from testing or operating its aircraft and/or expanding its sales which could have an adverse impact on the Company’s business, prospects, results of operations and financial condition. There are risks associated with the regulatory regime and permitting requirements of the Company’s business. A significant portion of the Company’s business is based on the operation of RPAS. The operation of RPAS poses a risk or hazard to airspace users as well as personnel on the ground. As the RPAS industry is rapidly developing, the regulatory environment for RPAS is constantly evolving to keep pace. As such, whenever a policy change with respect to operating regulations occurs, there is a risk that the Company could find itself to be in non-compliance with these new regulations. While the Company endeavours to take all necessary action to reduce the risks associated with the operations of RPAS and to remain well-informed and up- to-date on any addendums and changes to the applicable regulations, there is no assurance that an incident involving an RPAS or the Company’s non-compliance would not create a significant current or future liability for the company. The regulation of RPAS operations within the Canadian Domestic Airspace (“CDA”) is still evolving and is expected to continue to change with the proliferation of RPAS, advancements in technology, and standardization within the industry. Changes to the regulatory regime may be disruptive and result in the Company needing to adopt significant changes in its operations and policies, which may be costly and time-consuming, and may materially adversely affect the Company’s ability to manufacture and make delivery of its products and services in a timely fashion. The Company’s business and research and development activities are subject to oversight by Transport Canada, the federal institution responsible for transportation policies and programs, including the rules in the CARs. Currently, Transport Canada requires that any non- recreational operators of RPAS have a SFOC. The Company’s ability to develop, test, demonstrate, and sell products and services depends on its ability to acquire and maintain a valid SFOC. In addition, there exists public concern regarding the privacy implications of Canadian commercial and law enforcement use of small UAV. This concern has included calls to develop explicit written policies and procedures establishing UAV usage limitations. There is no assurance that the response from regulatory agencies, customers and privacy advocates to these concerns will not delay or restrict the adoption of small UAV by prospective non-military customers . 4

Page 11

The Company may be subject to the risks associated with future acquisitions. As part of the Company’s overall business strategy, the Company may pursue select strategic acquisitions that would provide additional product or service offerings, additional industry expertise, and a stronger industry presence in both existing and new jurisdictions. Any such future acquisitions, if completed, may expose the Company to additional potential risks, including risks associated with: (a) the integration of new operations, services and personnel; (b) unforeseen or hidden liabilities; (c) the diversion of resources from the Company’s existing business and technology; (d) potential inability to generate sufficient revenue to offset new costs; (e) the expenses of acquisitions; or (f) the potential loss of or harm to relationships with both employees and existing users resulting from its integration of new businesses. In addition, any proposed acquisitions may be subject to regulatory approval. The Company’s inability to retain management and key employees could impair the future success of the Company. The Company’s future success depends substantially on the continued services of its executive officers and its key development personnel. If one or more of its executive officers or key development personnel were unable or unwilling to continue in their present positions, the Company might not be able to replace them easily or at all. In addition, if any of its executive officers or key employees joins a competitor or forms a competing company, the Company may lose experience, know-how, key professionals and staff members as well as business partners. These executive officers and key employees could develop drone technologies that could compete with and take customers and market share away from the Company. The Company faces uncertainty and adverse changes in the economy. Adverse changes in the economy could negatively impact the Company’s business. Future economic distress may result in a decrease in demand for the Company’s products, which could have a material adverse impact on the Company’s operating results and financial condition. Uncertainty and adverse changes in the economy could also increase costs associated with developing and publishing products, increase the cost and decrease the availability of sources of financing, and increase the Company’s exposure to material losses from bad debts, any of which could have a material adverse impact on the financial condition and operating results of the Company. The Company is subject to certain market-based financial risks associated with its operations. The Company could be subject to interest rate risks, which is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposure through its normal operating and financing activities, however market fluctuations could increase the costs at which the Company can access capital and its ability to obtain financing and the Company’s cash balances carry a floating rate of interest. In addition, the Company engages in transactions in currencies other than its functional currency. Depending on the timing of these transactions and the applicable currency exchange rates, conversions to the Company’s functional currency may positively or negatively impact the Company. Negative macroeconomic and geopolitical trends could affect demand for the Company’s products and its ability to access sources of capital. There can be no assurance that the Company’s business and corresponding financial performance will not be adversely affected by general negative economic or consumer trends or events, including pandemics, public health crises, weather catastrophes, acts of terrorism, war, and political instability. In particular, global economic markets have seen extensive volatility over the past few years owing to the outbreak of the COVID-19 pandemic, the war between Russia and Ukraine, and the war between Israel and Hamas, the closing of certain financial institutions by regulators in March 2023, and political instability. These events have created, and may continue to create, significant disruption of the global economy, supply chains and distribution channels, and financial and labor markets. If such conditions continue, recur or worsen, this may have a material adverse effect on the Company’s business, financial condition and results of operations as consumer demand and its ability to access capital on favorable terms, or at all, could be negatively impacted as a result of such conditions and consequences. Furthermore, such economic conditions have produced downward pressure on share prices and on the availability of credit for financial institutions and corporations while also driving up interest rates, further complicating borrowing and lending activities. If current levels of market disruption and volatility continue or increase, the Company might experience reductions in business activity, increases in funding costs, decreases in asset values, additional write-downs and impairment charges and lower profitability. 5

Page 12

The Company may be subject to the risks associated with foreign operations in other countries. The Company’s primary revenues are expected to be achieved in Canada and the US. However, the Company may expand to markets outside of North America and become subject to risks normally associated with conducting business in other countries. As a result of such expansion, the Company may be subject to the legal, political, social and regulatory requirements and economic conditions of foreign jurisdictions. The Company cannot predict government positions on such matters as foreign investment, intellectual property rights or taxation. A change in government positions on these issues could adversely affect the Company’s business. If the Company expands its business to foreign markets, it will need to respond to rapid changes in market conditions, including differing legal, regulatory, economic, social and political conditions in these countries. If the Company is not able to develop and implement policies and strategies that are effective in each location in which it does business, then the Company’s business, prospects, results of operations and financial condition could be materially and adversely affected. There are tax risks the Company may be subject to in carrying on business in Canada. The Company is a resident of Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”). Since the Company is operating in a new and developing industry there is a risk that foreign governments may look to increase their tax revenues or levy additional taxes to level the playing field for perceived disadvantages to traditional brick and mortar businesses. There is no guarantee that governments will not impose such additional adverse taxes in the future . If critical components or raw materials used to manufacture the Company’s products become scarce or unavailable, then the Company may incur delays in manufacturing and delivery of its products, which could damage its business. The Company obtains hardware components, various subsystems and systems from a limited group of suppliers. The Company does not have long-term agreements with any of these suppliers that obligate it to continue to sell components, subsystems, systems or products to the Company. The Company’s reliance on these suppliers involves significant risks and uncertainties, including whether its suppliers will provide an adequate supply of required components, subsystems, or systems of sufficient quality, will increase prices for the components, subsystems or systems and will perform their obligations on a timely basis. The global supply chain has experienced significant disruptions recently, caused by the COVID-19 pandemic and by geopolitical conflict, including the wars in Ukraine and Gaza, and the possibility of widening conflict in the Middle East. These disruptions have impacted a variety of products and goods and have had various downstream effects, making it more difficult to reliably and timely source and supply goods and has also resulted in shortages of labor and equipment. The macroeconomic impacts of the COVID-19 pandemic and global conflicts, including the disruption of global shipping lanes in the Middle East, have contributed to inflationary pressure, rising interest rates, and increased market volatility, adding additional pricing uncertainty. These conditions, if not mitigated or remedied in a timely manner, could delay or preclude delivery of raw materials needed to manufacture the Company’s products or delivery of its products to customers, particularly in international markets. If the Company is unable to obtain components from third-party suppliers in the quantities and of the quality that it requires, on a timely basis and at acceptable prices, then it may not be able to deliver its products on a timely or cost-effective basis to its customers, or at all, which could cause customers to terminate their contracts with the Company, increase the Company’s costs and seriously harm its business, results of operations and financial condition. Moreover, if any of the Company’s suppliers become financially unstable, then it may have to find new suppliers. It may take several months to locate alternative suppliers, if required, or to redesign the Company’s products to accommodate components from different suppliers. The Company may experience significant delays in manufacturing and shipping its products to customers and incur additional development, manufacturing and other costs to establish alternative sources of supply if the Company loses any of these sources or is required to redesign its products. The Company cannot predict if it will be able to obtain replacement components within the time frames that it requires at an affordable cost, if at all. 6

Page 13

Natural outdoor elements such as wind and precipitation may have a material adverse effect on the use and effectiveness of the Company’s products. The Company’s business will involve the operation and flying of UAVs, a technology-based product used outside. As such, the business is subject to various risks inherent in a technology-based businesses operated in outdoor conditions, including faulty parts, breakdowns and crashes. Although the Company anticipates the use of its UAVs in good climactic conditions and that adequate flying conditions will be monitored by trained personnel, there can be no assurance that unpredictable natural outdoor elements, which could be exacerbated due to risks associated with climate change, will not have a material adverse effect on the use and effectiveness of its products. The Company’s products may be subject to recall or return. Manufacturers and distributors of products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, safety concerns, packaging issues and inadequate or inaccurate labeling disclosure. If any of the Company’s equipment were to be recalled due to an alleged product defect, safety concern or for any other reason, the Company could be required to incur unexpected expenses of the recall and any legal proceedings that might arise in connection with the recall. The Company may lose a significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management time and attention. Additionally, product recalls may lead to increased scrutiny of the Company’s operations by Transport Canada or other regulatory agencies, requiring further management time and attention and potential legal fees, costs and other expenses. If the Company releases defective products or services, its operating results could suffer. Products and services designed and released by the Company involve extremely complex software programs and are difficult to develop and distribute. While the Company has quality controls in place to detect and prevent defects in its products and services before they are released, these quality controls are subject to human error, overriding, and reasonable resource constraints. Therefore, these quality controls and preventative measures may not be effective in detecting and preventing defects in the Company’s products and services before they have been released into the marketplace. In such an event, the Company could be required, or decide voluntarily, to suspend the availability of the product or services, which could significantly harm its business and operating results . The Company’s products and services are complex and could have unknown defects or errors, which may give rise to legal claims against the Company, diminish its brand or divert its resources from other purposes. The Company’s UAVs rely on complex avionics, sensors, user-friendly interfaces and tightly integrated, electromechanical designs to accomplish their missions. Despite testing, the Company’s products have contained defects and errors and may in the future contain defects, errors or performance problems when first introduced, when new versions or enhancements are released, or even after these products have been used by the Company’s customers for a period of time. These problems could result in expensive and time-consuming design modifications or warranty charges, delays in the introduction of new products or enhancements, significant increases in the Company’s service and maintenance costs, exposure to liability for damages, damaged customer relationships and harm to the Company’s reputation, any of which could materially harm the Company’s results of operations and ability to achieve market acceptance. In addition, increased development and warranty costs could be substantial and could significantly reduce the Company’s operating margins. The existence of any defects, errors, or failures in the Company’s products or the misuse of the Company’s products could also lead to product returns, recalls, or liability claims or lawsuits against it. A defect, error or failure in one of the Company’s UAV could result in injury, death or property damage and significantly damage the Company’s reputation and support for its UAV in general. The Company anticipates this risk will grow as its UAV begins to be used in Canadian domestic airspace and urban areas. The Company’s UAV test systems also have the potential to cause injury, death or property damage in the event that they are misused, malfunction or fail to operate properly due to unknown defects or errors. Although the Company maintains insurance policies, it cannot provide any assurance that this insurance will be adequate to protect the Company from all material judgments and expenses related to potential future claims or that these levels of insurance will be available in the future at economical prices or at all. A successful product liability claim could result in substantial cost to us. Even if the Company is fully insured as it relates to a particular claim, the claim could nevertheless diminish the Company’s brand and divert management’s attention and resources, which could have a negative impact on the Company’s business, financial condition and results of operations. 7

Page 14

The Company could be prohibited from shipping its products to certain countries if it is unable to obtain Canadian government authorization regarding the export of its products, or if current or future export laws limit or otherwise restrict the Company’s business. The Company must comply with Canadian federal and provincial laws regulating the export of its products. In some cases, explicit authorization from the Canadian government is needed to export its products. The export regulations and the governing policies applicable to the Company’s business are subject to change. The Company cannot provide assurance that such export authorizations will be available for its products in the future. Compliance with these laws has not significantly limited the Company’s operations or sales in the recent past, but could significantly limit them in the future. Non- compliance with applicable export regulations could potentially expose the Company to fines, penalties and sanctions. If the Company cannot obtain required government approvals under applicable regulations, the Company may not be able to sell its products in certain international jurisdictions, which could adversely affect the Company’s financial condition and results of operations. Negative consumer perception regarding the Company’s products could have a material adverse effect on the demand for the Company’s products and the business, results of operations, financial condition and cash flows of the Company. The Company believes the UAV industry is highly dependent upon consumer perception regarding the safety, efficacy, and quality of the UAV used. Consumer perception of these products can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention, and other publicity regarding the use of UAV. There can be no assurance that future scientific research, findings, regulatory proceedings, litigation, media attention, or other research findings or publicity will be favourable to the UAV market. Future research reports, findings, regulatory proceedings, litigation, media attention or other publicity that are perceived as less favourable than, or that question, earlier research reports, findings or publicity could have a material adverse effect on the demand for the Company’s products and the business, results of operations, financial condition and cash flows of the Company. The dependence upon consumer perceptions means that adverse scientific research reports, findings, regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, could have a material adverse effect on the Company, the demand for the Company’s products, and the business, results of operations, financial condition and cash flows of the Company. Further, adverse publicity reports or other media attention regarding the safety, the efficacy, and quality of UAV based surveys in general, or the Company’s products specifically, could have a material adverse effect. If the Company fails to successfully promote its product brand, this could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations . The Company believes that brand recognition is an important factor to its success. If the Company fails to promote its brands successfully, or if the expenses of doing so are disproportionate to any increased net sales it achieves, it would have a material adverse effect on the Company’s business, prospects, financial condition and results of operations. This will depend largely on the Company’s ability to maintain trust, be a technology leader, and continue to provide high-quality and secure technologies, products and services. Any negative publicity about the Company or its industry, the quality and reliability of the Company’s technologies, products and services, the Company’s risk management processes, changes to the Company’s technologies, products and services, its ability to effectively manage and resolve customer complaints, its privacy and security practices, litigation, regulatory activity, and the experience of sellers and buyers with the Company’s products or services, could adversely affect the Company’s reputation and the confidence in and use of the Company’s technologies, products and services. Harm to the Company’s brand can arise from many sources, including; failure by the Company or its partners to satisfy expectations of service and quality; inadequate protection of sensitive information; compliance failures and claims; litigation and other claims; employee misconduct; and misconduct by the Company’s partners, service providers, or other counterparties. If the Company does not successfully maintain a strong and trusted brand, its business could be materially and adversely affected. 8

Page 15

The Company may be subject to electronic communication security risks. A significant potential vulnerability of electronic communications is the security of transmission of confidential information over public networks. Cyberattacks could result in unauthorized access to the Company’s computer systems or its third-party IT service provider’s systems and, if successful, misappropriate personal or confidential information. Anyone who is able to circumvent the Company’s security measures could misappropriate proprietary information or cause interruptions in its operations. The Company may be required to expend capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches. The last few years have seen an increase in the volume and sophistication of targeted cyber-attacks. A failure of the Company’s IT infrastructure could severely limit the Company’s ability to conduct ordinary operations or expose the Company to liability. To date, the Company’s systems have functioned capably, and it has not experienced a material impact to its operations as a result of an IT infrastructure issue. Data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting new foreign, federal, provincial and state laws and legislative proposals addressing data privacy and security. As a result, the Company may become subject to more extensive requirements to protect the customer information that it processes in connection with the purchase of its products, resulting in increased compliance costs. While the Company has taken measures to protect against cyberattacks, even the most well-protected IT networks, systems and facilities remain potentially vulnerable because the techniques used in attempted security breaches are continually evolving and generally are not recognized until launched against a target or, in some cases, are designed not to be detected and, in fact, may not be detected. Any such compromise of the Company’s or its third party’s IT service providers’ data security and access, public disclosure, or loss of personal or confidential business information, could result in legal claims and proceedings, liability under laws to protect privacy of personal information, and regulatory penalties, and could disrupt the Company’s operations, require significant management attention and resources to remedy any damages that result, and damage its reputation and customers willingness to transact business with us, any of which could adversely affect our business. The Company’s business could be adversely affected if its consumer protection and data privacy practices are not perceived as adequate or there are breaches of its security measures or unintended disclosures of its consumer data. The rate of privacy law-making is accelerating globally and interpretation and application of consumer protection and data privacy laws in Canada, the United States, Europe and elsewhere are often uncertain, contradictory and in flux. As business practices are being challenged by regulators, private litigants, and consumer protection agencies around the world, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with the Company’s data and/or consumer protection practices. If so, this could result in increased litigation government or court-imposed fines, judgments or orders requiring that the Company change its practices, which could have an adverse effect on its business and reputation. Complying with these various laws could cause the Company to incur substantial costs or require it to change its business practices in a manner adverse to its business. The Company relies on its business partners, and they may be given access to sensitive and proprietary information in order to provide services and support to the Company’s teams. The Company relies on various business partners, including third-party service providers, vendors, licensing partners, development partners, and licensees, among others, in some areas of the Company’s business. In some cases, these third parties are given access to sensitive and proprietary information in order to provide services and support to the Company’s teams. These third parties may misappropriate the Company’s information and engage in unauthorized use of it. The failure of these third parties to provide adequate services and technologies, or the failure of the third parties to adequately maintain or update their services and technologies, could result in a disruption to the Company’s business operations. Further, disruptions in the financial markets and economic downturns may adversely affect the Company’s business partners and they may not be able to continue honoring their obligations to the Company. Alternative arrangements and services may not be available to the Company on commercially reasonable terms or the Company may experience business interruptions upon a transition to an alternative partner or vendor. If the Company loses one or more significant business partners, the Company’s business could be harmed. 9

Page 16

If the Company fails to protect, or incurs significant costs in defending, its intellectual property and other proprietary rights, the Company’s business, financial condition, and results of operations could be materially harmed. The Company’s success depends, in large part, on its ability to protect its intellectual property and other proprietary rights. The Company relies primarily on patents, trademarks, copyrights, trade secrets and unfair competition laws, as well as license agreements and other contractual provisions, to protect the Company’s intellectual property and other proprietary rights. However, a portion of the Company’s technology is not patented, and the Company may be unable or may not seek to obtain patent protection for this technology. Moreover, existing Canadian legal standards relating to the validity, enforceability and scope of protection of intellectual property rights offer only limited protection, may not provide the Company with any competitive advantages, and may be challenged by third parties. The laws of countries other than Canada may be even less protective of intellectual property rights. Accordingly, despite its efforts, the Company may be unable to prevent third parties from infringing upon or misappropriating its intellectual property or otherwise gaining access to the Company’s technology. Unauthorized third parties may try to copy or reverse engineer the Company’s products or portions of its products or otherwise obtain and use the Company’s intellectual property. Moreover, many of the Company’s employees have access to the Company’s trade secrets and other intellectual property. If one or more of these employees leave to work for one of the Company’s competitors, then they may disseminate this proprietary information, which may as a result damage the Company’s competitive position. If the Company fails to protect its intellectual property and other proprietary rights, then the Company’s business, results of operations or financial condition could be materially harmed. From time to time, the Company may have to initiate lawsuits to protect its intellectual property and other proprietary rights. Pursuing these claims is time consuming and expensive and could adversely impact the Company’s results of operations. In addition, affirmatively defending the Company’s intellectual property rights and investigating whether the Company is pursuing a product or service development that may violate the rights of others may entail significant expense. Any of the Company’s intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. If the Company resorts to legal proceedings to enforce its intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, then the proceedings could result in significant expense to the Company and divert the attention and efforts of the Company’s management and technical employees, even if the Company prevails. Obtaining and maintaining the Company’s patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by governmental patent agencies, and its patent protection could be reduced or eliminated for non-compliance with these requirements. The Canadian Intellectual Property Office (“CIPO”), the United States Patent and Trademark Office (“USPTO”) and various foreign national or international patent agencies require compliance with a number of procedural, documentary, fee payment, and other similar provisions during the patent application process. Periodic maintenance fees on any issued patent are due to be paid to the CIPO, the USPTO and various foreign national or international patent agencies in several stages over the lifetime of the patent. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of patent rights include, but are not limited to, failure to timely file national and regional stage patent applications based on the Company’s international patent application, failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. If the Company fails to maintain the patents and patent applications covering its product candidates, its competitors might be able to enter the market, which would have a material adverse effect on the Company’s business. While a patent may be granted by a national patent office, there is no guarantee that the granted patent is valid. Options exist to challenge the validity of a patent which, depending upon the jurisdiction, may include re- examination, opposition proceedings before the patent office, and/or invalidation proceedings before the relevant court. Patent validity may also be the subject of a counterclaim to an allegation of patent infringement. 10

Page 17

Pending patent applications may be challenged by third parties in protest or similar proceedings. Third parties can typically submit prior art material to patentability for review by the patent examiner. Regarding Patent Cooperation Treaty applications, a positive opinion regarding patentability issued by the International Searching Authority does not guarantee allowance of a national application derived from the Patent Cooperation Treaty application. The coverage claimed in a patent application can be significantly reduced before the patent is issued, and the patent’s scope can be modified after issuance. It is also possible that the scope of claims granted may vary from jurisdiction to jurisdiction. The grant of a patent does not have any bearing on whether the invention described in the patent application would infringe the rights of earlier filed patents. It is possible to both obtain patent protection for an invention and yet still infringe the rights of an earlier granted patent. The Company may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit the Company’s ability to use certain technologies in the future. The Company may become subject to claims that its technologies infringe upon the intellectual property or other proprietary rights of third parties. Any claims, with or without merit, could be time-consuming and expensive, and could divert the Company’s management’s attention away from the execution of its business plan. Moreover, any settlement or adverse judgment resulting from these claims could require the Company to pay substantial amounts or obtain a license to continue to use the disputed technology, or otherwise restrict or prohibit the Company’s use of the technology. The Company cannot assure that it would be able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that the Company would be able to develop alternative technology on a timely basis, if at all, or that the Company would be able to obtain a license to use a suitable alternative technology to permit the Company to continue offering, and the Company’s customers to continue using, the Company’s affected product. An adverse determination also could prevent the Company from offering its products to others. Infringement claims asserted against the Company may have a material adverse effect on its business, results of operations or financial condition. The Company may not be able to protect its intellectual property rights throughout the world. Filing, prosecuting, and defending patents on all of the Company’s product candidates throughout the world would be prohibitively expensive. Therefore, the Company has filed applications and/or obtained patents only in key markets including the United States and Canada. Competitors may use the Company’s technologies in jurisdictions where it has not obtained patent protection to develop their own products and their products may compete with products of the Company. If the Company is required to write down goodwill and other intangible assets, the Company’s financial condition and results could be negatively affected. Goodwill impairment arises when there is deterioration in the capabilities of acquired assets to generate cash flows, and the fair value of the goodwill dips below its book value. The Company is required to review its goodwill for impairment at least annually. Events that may trigger goodwill impairment include deterioration in economic conditions, increased competition, loss of key personnel, and regulatory action. Should any of these occur, an impairment of goodwill or other intangible assets relating to the acquisition of Dronelogics Systems Inc. could have a negative effect on the assets of the Company. From time to time, the Company may become involved in legal proceedings, which could adversely affect the Company. The Company may, from time to time in the future, become subject to legal proceedings, claims, litigation and government investigations or inquiries, which could be expensive, lengthy, and disruptive to normal business operations. In addition, the outcome of any legal proceedings, claims, litigation, investigations or inquiries may be difficult to predict and could have a material adverse effect on the Company’s business, operating results, or financial condition. 11

Page 18

The Company’s directors and officers may have conflicts of interest in conducting their duties. Because directors and officers of the Company are or may become directors or officers of other reporting companies or have significant shareholdings in other technology companies, the directors and officers of the Company may have conflicts of interest in conducting their duties. The Company and its directors and officers will attempt to minimize such conflicts. In the event that such a conflict of interest arises at a meeting of the directors of the Company, a director who has such a conflict will abstain from voting for or against a particular matter in which the director has the conflict. In appropriate cases, the Company will establish a special committee of independent directors to review a particular matter in which several directors, or officers, may have a conflict. In determining whether or not the Company will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to the Company, the degree of risk to which the Company may be exposed and its financial position at that time. Other than as indicated, the Company has no other procedures or mechanisms to deal with conflicts of interest. The Company’s Articles provide that the Company must indemnify a director or former director against all judgments, penalties or fines to which such person is or may be liable by reason of such person being or having been a director of the Company and the executive officers and directors may also have rights to indemnification from the Company, including pursuant to directors’ and officers’ liability insurance policies, that will survive termination of their agreements . Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect the Company’s reported financial results or financial condition. Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect the Company’s reported financial results or financial condition. Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to the Company’s business, including but not limited to revenue recognition, impairment of goodwill and intangible assets, inventory, income taxes and litigation, are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change the Company’s reported financial performance or financial condition in accordance with generally accepted accounting principles. Risks Related to the Company’s Common Shares The market price of the Common Shares is highly volatile. The market price of the Common Shares is highly volatile and has been subject to wide fluctuations in response to a number of factors that are beyond the Company’s control, including but not limited to ● revenue or results of operations in any quarter failing to meet the expectations, published or otherwise, of the investment community; ● actual or anticipated changes or fluctuations in its results of operations; ● announcements by us or the Company’s competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments; ● rumors and market speculation involving it or other companies in its industry; ● changes in its executive management team or the composition of the board of directors of the Company (the “Board”); ● fluctuations in the share prices of other companies in the technology and emerging growth sectors; ● general market conditions and macroeconomic trends driven by factors outside the Company’s control, such as pandemics, geopolitical conflicts, supply chain disruptions, market volatility, inflation, rising interest rates, political instability, and labor challenges, among other factors; ● actual or anticipated developments in its business or its competitors’ businesses or the competitive landscape generally; ● litigation involving us, the Company’s industry or both, or investigations by regulators into its operations or those of competitors; 12

Page 19

● announced or completed acquisitions of businesses or technologies by the Company or its competitors; ● new laws or regulations or new interpretations of existing laws or regulations applicable to its business; ● shareholder activism and related publicity; ● foreign exchange rates; and ● other risk factors as set out in this Annual Report and in the documents incorporated by reference into this Annual Report. If the market price of the Company’s Common Shares drops significantly, shareholders could institute securities class action lawsuits against it, regardless of the merits of such claims. Such a lawsuit could cause it to incur substantial costs and could divert the time and attention of management and other resources from the Company’s business, which could harm its business, results of operations and financial condition. There is no guarantee that an active trading market for the Company’s Common Shares will be maintained on the CSE and/or Nasdaq. Investors may not be able to sell their Common Shares quickly or at the latest market price if the trading in our Common Shares is not active. The Company’s Common Shares are currently listed on the Canadian Stock Exchange (“CSE”), the Nasdaq Stock Market, LLC (“Nasdaq”), and the Frankfurt Stock Exchange, however, it shareholders may be unable to sell significant quantities of Common Shares into the public trading markets without a significant reduction in the price of their Common Shares, or at all and there can be no guarantee that an active trading market for the Common Shares may be maintained. There can be no assurance that there will be sufficient liquidity of its Common Shares on the trading market, and that we will continue to meet the listing requirements of the CSE, Nasdaq or any other public listing exchange. Failure to meet Nasdaq’s continued listing requirements could result in the delisting of the Company’s Common Shares, negatively impact the price of the Company’s Common Shares and negatively impact its ability to raise additional capital. If the Company fails to satisfy the continued listing requirements of the Nasdaq, such as corporate governance requirements or the minimum closing bid price requirement, the exchange may take steps to delist the Company’s Common Shares. Such a delisting would likely have a negative effect on the price of the Company’s Common Shares and would impair shareholders’ ability to sell or purchase its Common Shares when they wish to do so. As previously disclosed, in September 2023 and March 2024, the Nasdaq informed the Company that it was not in compliance with the $1 bid price requirement in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”) and that, in March 2024, the Company’s Common Shares were subject to delisting from Nasdaq. The Company requested a hearing before a Nasdaq Hearings Panel (the “Nasdaq Panel”) with such request automatically staying any suspension or delisting action pending the hearing and the expiration of any additional extension period granted by the Nasdaq Panel following the hearing. In April 2024, the Company received notification that it failed to comply with the Minimum Stockholders’ Equity Requirement which served as an additional and separate basis for delisting. Following the May 21st hearing, the Nasdaq Panel granted an additional extension period with regard to the Bid Price Requirement that would expire on September 17, 2024. In addition, at the hearing, the Company presented a plan to regain compliance with the Minimum Stockholders’ Equity Requirement which plan the Company implemented on August 7, 2024 via amendments to warrants issued in October 2023 and in May 2024. On October 1, 2024, Nasdaq informed the Company that it had regained compliance with the Bid Price Requirement and the Minimum Stockholders’ Equity Requirement. The letter from Nasdaq further informed the Company that it is subject to a Mandatory Panel Monitor for a period of one year from October 1, 2024. If, within that one-year monitoring period, the Company is again out of compliance with the Minimum Stockholders’ Equity Requirement, the Company will not be afforded the opportunity to present a plan of compliance to Nasdaq with respect to that deficiency nor additional time to cure that deficiency. Instead, Nasdaq will issue a Delist Determination Letter and the Company will have the opportunity to request a hearing before a Nasdaq Panel to respond to such letter. 13

Page 20

Future issuances of equity securities by us or sales by the Company’s existing shareholders may cause the price of its Common Shares to fall. The market price of the Company’s Common Shares could decline as a result of issuances of securities or sales by its existing shareholders in the market, including by its directors, executive officers and significant shareholders, or the perception that these sales could occur. Sales of the Company’s Common Shares by shareholders might also make it more difficult for it to sell Common Shares at a time and price that it deems appropriate. The Company also expects to issue Common Shares in the future. Future issuances of Common Shares, or the perception that such issuances are likely to occur, could affect the prevailing trading prices of the Common Shares. We may never pay dividends over the foreseeable future. Investors should not rely on an investment in the Company’s Common Shares to provide dividend income. The Company does not anticipate that it will pay any cash dividends to holders of its Common Shares in the foreseeable future. Instead, the Company plans to retain any earnings to maintain and expand its operations. In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on its Common Shares. Accordingly, investors must rely on sales of their Common Shares after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase the Company’s Common Shares. United States investors may not be able to obtain enforcement of civil liabilities against us. The Company is incorporated under the laws of British Columbia, Canada, and its principal executive offices are located in Canada. Most of the Company’s directors and officers and most of the experts named in this Annual Report reside outside of the United States and all or a substantial portion of the Company’s assets and the assets of these persons are located outside the United States. Consequently, it may not be possible for an investor to effect service of process within the United States on the Company or those persons. Furthermore, it may not be possible for an investor to enforce judgments obtained in United States courts based upon the civil liability provisions of United States federal securities laws or other laws of the United States against those persons or the Company. There is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based upon United States federal securities laws and as to the enforceability in Canadian courts of judgments of United States courts obtained in actions based upon the civil liability provisions of the United States federal securities laws. Therefore, it may not be possible to enforce those actions against the Company, certain of the Company’s directors and officers or the experts named in this Annual Report. We are an emerging growth company and intend to take advantage of reduced disclosure requirements applicable to emerging growth companies, which could make the Company’s Common Shares less attractive to investors. We are an “emerging growth company” as defined in the JOBS Act. We will remain an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (ii) December 31, 2026 (the last day of the fiscal year ending after the fifth anniversary of the date of the completion of the first sales of its common equity pursuant to an effective registration statement under the Securities Act); (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three- year period; or (iv) the date we qualify as a “large accelerated filer” under the rules of the SEC, which means the market value of the Company’s Common Shares held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter after we have been a reporting company in the United States for at least 12 months. For so long as we remain an emerging growth company, we are permitted to and intend to rely upon exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 (“Section 404”) of the Sarbanes-Oxley Act (2002), as amended (the “Sarbanes-Oxley Act”). We may take advantage of some, but not all, of the available exemptions available to emerging growth companies. We cannot predict whether investors will find the Company’s Common Shares less attractive if it relies on these exemptions. If some investors find the Company’s Common Shares less attractive as a result, there may be a less active trading market for its Common Shares and the price of its Common Shares may be more volatile. 14

Page 21

We will incur increased costs as a result of operating as a public company in the United States and the Company’s management will be required to devote substantial time to new compliance initiatives. As a U.S. public company, particularly if or when we are no longer an “emerging growth company” as defined under the JOBS Act, we incur significant legal, accounting and other expenses, in addition to those we incur as a Canadian public company, that we did not incur prior to being listed on Nasdaq. In addition, the Sarbanes-Oxley Act, and rules implemented by the SEC and Nasdaq impose various other requirements on public companies, and the Company spends time and resources to ensure compliance with its reporting obligations in both Canada and the United States. For example, pursuant to Section 404, we are required to furnish a report by our management on our internal control over financial reporting (“ICFR”), which, if or when we are no longer an emerging growth company, must be accompanied by an attestation report on ICFR issued by our independent registered public accounting firm. To achieve compliance with Section 404, we must document and evaluate our ICFR, which is both costly and challenging. In this regard, we must dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our ICFR, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for ICFR. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will be able to conclude that our ICFR is effective as required by Section 404. This could result in a determination that there are one or more material weaknesses in our ICFR, which could cause an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements. In addition, becoming a public company in the United States has increased legal and financial compliance as well as regulatory costs, such as additional Nasdaq fees, and has made some of our public company obligations more time consuming. We invest resources to comply with evolving laws, regulations and standards in both Canada and the United States, and this investment results in increased general and administrative expenses and increased diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with public company laws, regulations and standards in the United States are insufficient, regulatory authorities may initiate legal proceedings against us and our business may be harmed. Being a public company in the United States and complying with applicable rules and regulations also makes it more expensive for us to obtain sufficient levels of director and officer liability insurance coverage. This factor may also make it more difficult for us to attract and retain qualified executive officers and members of our Board of Directors. The Company may lose its foreign private issuer status in the future. The Company may in the future lose its foreign private issuer status if a majority of the Common Shares are owned of record in the United States and the Company fails to meet the additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to the Company under U.S. federal securities laws as a U.S. domestic issuer may be significantly more than the costs the Company incurs as a Canadian foreign private issuer eligible to use a multi-jurisdictional disclosure system (the “MJDS”) adopted in the United States and Canada. If the Company is not a foreign private issuer, it would not be eligible to use the MJDS or other foreign issuer forms and would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic U.S. issuer, which may limit the information publicly available to the Company’s U.S. shareholders. We currently qualify as a “foreign private issuer” under applicable U.S. federal securities laws and, therefore, are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. As a result, we do not file the same reports that a U.S. domestic issuer would file with the SEC, although we are required to file with or furnish to the SEC the continuous disclosure documents that we are required to file in Canada under Canadian securities laws. In addition, the Company’s officers, directors and principal shareholders are exempt from the reporting and “short swing” profit recovery provisions of Section 16 of the Exchange Act. Therefore, the Company’s shareholders may not know on as timely a basis when its officers, directors and principal shareholders purchase or sell our securities as the reporting periods under the corresponding Canadian insider reporting requirements are longer. In addition, as a foreign private issuer, the Company is exempt from the proxy rules under the Exchange Act. The Company is also exempt from Regulation FD, which prohibits issuers from making selective disclosures of material non- public information. While the Company expects to comply with the corresponding requirements relating to proxy statements and disclosure of material non-public information under Canadian securities laws, these requirements differ from those under the Exchange Act and Regulation FD and shareholders should not expect to receive in every case the same information at the same time as such information is provided by U.S. domestic issuers. 15

Page 22

In addition, as a foreign private issuer, we have the option to follow certain Canadian corporate governance practices, except to the extent that such laws would be contrary to U.S. federal securities laws and Nasdaq listing rules and provided that we disclose the requirements we are not following and describe the Canadian practices we follow instead. We rely on this exemption in part. As a result, the Company’s shareholders may not have the same protections afforded to shareholders of U.S. domestic issuers that are subject to all U.S. corporate governance requirements. At some point in the future, we may cease to be a foreign private issuer. If we cease to qualify, we will be subject to the same reporting requirements and corporate governance requirements as a U.S. domestic issuer, which may increase the Company’s costs of being a public company in the United States. ITEM 4. INFORMATION ON THE COMPANY 4.A. History and Development of the Company Name, Address and Incorporation The Company was incorporated as Drone Acquisition Corp. (“DAC”) under the Business Corporations Act (British Columbia) (the “BCBCA”) on June 1, 2018 for the purpose of reorganizing and recapitalizing the business of Draganfly Innovations Inc. (“Former Draganfly”). Effective July 17, 2019, the Company amended its articles to remove various classes of authorized but unissued preferred shares and replace them with only one class of preferred shares (the “Preferred Shares”). Effective August 15, 2019, the Company changed its name to “Draganfly Inc.” On August 22, 2019, the Company amended its articles to re-designate its Class A Common Shares as Common Shares . The Company’s head office is located at 235 103rd St E, Saskatoon, SK, S7N 1Y8, Canada. The Company’s telephone number is (800) 979-9794. The Company’s registered office is located at Suite 2700, 1133 Melville Street, Vancouver, British Columbia V6E 4E5. The Company’s registered agent in the United States is C T Corporation System, 1015 15th Street N.W., Suite 1000, Washington, D.C., 20005 and its telephone number is (202) 572-3133. General Development of the Business of the Company Founded in 1998, we believe that Former Draganfly is recognized as one of the first commercial multi-rotor manufacturers and has a legacy for its innovation and superior customer service. Zenon Dragan is the founder of Former Draganfly and is a recognized leading expert on UAV. Former Draganfly introduced its first systems in 1999 and since evolved and shaped the UAV industry. The Company’s aircraft are widely used by public safety agencies worldwide and we believe that we were one of the first UAV to receive a FAA (Federal Aviation Administration) Certificate of Authorization in the fall of 2009 with the Mesa County Colorado Sheriff’s Office. In 2013, the Royal Canadian Mounted Police flew one of the Company’s drones to locate and save the life of an accident victim. We believe that Draganfly aircraft have achieved many industry firsts, including: ● one of the first public safety UAV to shoot aerial photos documenting a manned aircraft accident in an urban area; ● one of the first UAV operated by a public safety organization flown at night to locate and save a life; ● one of the first UAV helicopter to be granted a county wide U.S. FAA Certificate of Authorization; 16

Page 23

● named as a test platform at one of the U.S. FAA’s certified test sites; ● one of the first to have a drone included in the Smithsonian National Air and Space Museum; and ● four of the first six compliance certifications for its products issued by Transport Canada. Three Year History A detailed description on the significant developments of the business of the Company over the last three completed financial years is set out below. The Common Shares were consolidated on September 5, 2024. See “Information on the Company – History and Development of the Company – Three Year History – Financial year ended December 31, 2024”. Unless otherwise specified herein, all numbers and prices indicated in this section are presented on a pre-consolidation basis. Financial year ended December 31, 2022 On March 22, 2022, the Company announced that it had received an order for the Company’s Medical Response and Search and Rescue Drones from Coldchain for immediate deployment with Revived Soldiers Ukraine. Draganfly provided an immediate combined total of 10 North American-made Medical Response and Search and Rescue Drones. In addition, Draganfly donated three drone systems to Revived Soldiers Ukraine. The total initial order size (subject to conditions) is up to 200 units. On May 9, 2022, the Company announced that John M. Mitnick was appointed as Chairman of the Board, effective April 27, 2022. On May 9, 2022, the Company announced that Cameron Chell, Chief Executive Officer of the Company, was appointed as President of the Company, effective April 27, 2022. On May 9, 2022, the Company announced that Scott Larson would be stepping down as Interim President and appointed as Lead Director effective April 27, 2022. On May 9, 2022, the Company announced that Paul Mullen, Vice President of Draganfly’s Vital Intelligence Group, was appointed as Chief Operating Officer of the Company, effective March 1, 2022 . One June 1, 2022, the Company announced the launch of its new North American-made Heavy Lift and Commander 3 XL Drones. The Heavy Lift is capable of automated missions and manual flight operations with a payload capacity of 67 pounds. The Commander 3 XL is a high-endurance, weather-resistant, multirotor UAV that is designed for easy assemble and rapid deployment. One June 7, 2022, the Company announced the launch of its new North American-made Long-range Light Detection and Ranging (“LiDAR”) system. The LiDAR system provides accurate distance measurements and improved resolution over conventional photogrammetry methods. One June 21, 2022, the Company announced that Alabama State University (“ASU”) was offering the Draganfly Drone Technology Course through ASU’s Division of Continuing Education. The program provides an introduction to UAVs and explores advanced topics including regulations, airspace operations, and navigation. On August 1, 2022, the Company announced that Deborah R. Greenberg, was appointed as Chief Legal Officer of the Company, effective July 4, 2022. Her role was subsequently expanded to include the Human Resources and Information Technology functions as the Chief Legal and Corporate Services Officer, effective December 1, 2022. On November 17, 2022, the Company announced DEF-C, a Ukrainian company involved in the civil and defense sectors, had selected the Company as an exclusive provider of drones and related services. 17

Page 24

On November 18, 2022, the Company announced the fulfillment of an additional order of 30 reconnaissance drones through its channel partner DEF-C, along with continued support from DroneAid. Draganfly’s drone technology is being deployed to provide valuable intelligence, surveillance, and reconnaissance information. On December 7, 2022, the Company announced the launch of the Draganfly UAS A.I.R. Space flight facility dedicated to the advancement of Unmanned Aircraft Systems program Adoption, Innovation & Research. The facility will provide a control site for the design, validation and optimization of standard operating procedures, sensor selection and data collection techniques. Financial year ended December 31, 2023 On January 31, 2023, the Company announced Remote Sensing Instruments, a Geospatial Technology company in India working in the field of Remote Sensing and Geographic Information System, entered into a strategic agreement with the Company for the development of manufacturing, distribution, and sales of Draganfly products in India. On January 31, 2023, the Company entered into an equity distribution agreement with Maxim Group LLC (“Maxim”) dated January 31, 2023, pursuant to which the Company could, from time to time, distribute in an ”at-the- market offering” up to US$15 million in Common Shares (the “ ATM Shares”) in the United States only, on Nasdaq. The Company distributed 650,729 ATM Shares under the Offering at an average price of $2.69 per share for net proceeds of $1,526,810. On February 23, 2023, the Company announced that it entered into a distribution agreement with AeroCine Ventures, Inc. d/b/a Vermeer. Pursuant to the distribution agreement, Vermeer will distribute Draganfly’s products that incude the Vermeer VPS (visual positioning system) payload with Draganfly’s Commander 3XL. On March 7, 2023, Draganfly announced that it entered into a business development and partnership agreement with SkyeBrowse Inc. (“SkyeBrowse”), whereby SkyeBrowse will integrate its reality capture platform with Draganfly public safety drones. As per the agreement, the Company will provide consulting and marketing services to SkyeBrowse for two years. On March 31, 2023, the Company announced the closing of a firm commitment underwritten public offering with gross proceeds to the Company expected to be US$8.0 million, before deducting underwriting discounts and other estimated expenses payable by the Company. The offering consisted of 8,000,000 Common Shares at a price to the public of US$1.00 per Common Share. On April 11, 2023, the Company announced that it entered into a strategic cooperation and product integration agreement with CODAN Communications (“CODAN”), to supply its UAV platform for integration with CODAN’s technology and communications solutions. Under the terms of the agreement, CODAN and the Company agree to combine their respective capabilities in a joint effort to integrate their product and services capabilities in order to submit joint proposals and enter into contracts with potential customers. On April 19, 2023, Draganfly announced it entered into a referral agreement with AgileMesh, Inc. (“AgileMesh”) whereby AgileMesh will add the Company’s UAV Platform to its wireless surveillance product line and refer potential customers to Draganfly. As per the agreement, AgileMesh will receive commissions based on the aggregate amount of revenue recognized by the Company from customers that are introduced to Draganfly by AgileMesh. On June 21, 2023, the Company announced it had entered into an agreement with HEAL-Corp, a Non-Government Organization, and the Ukrainian National Academy of Internal Affairs (the “National Academy”) regarding the development of a training program on the use of drones and their countermeasure systems. Working in conjunction with the National Academy, Draganfly will implement a designed curriculum to be used within the training program. Recently, HEAL-Corp delivered Trauma Resuscitation and Evacuation Casualty Care training to the Ministry of Internal Affairs. On August 3, 2023, Draganfly announced its new manufacturing facility in Saskatoon, Saskatchewan is scheduled to come online in Q3. This expansion is part of Draganfly’s commitment to meeting the increasing market potential for products and solutions. The Saskatoon facility is specifically designed to accommodate a growing demand for UAV systems and components, including those engineered for the Heavy Lift, Commander 3 XL, and the Company’s newest product, the Precision Delivery System. 18

Page 25

On August 23, 2023, the Company announced it will be providing drone pilot crews and drone technology to a Canadian Provincial Government to assist with firefighting mitigation, preparedness, response, and recovery efforts. Draganfly’s advanced drone technology and highly trained personnel will aid emergency services in their mission to protect lives, property, infrastructure, and ecosystems. On September 7, 2023, Draganfly announced that Tim Dunnigan was appointed to Draganfly’s Advisory Board to help lead Company’s initiatives for the new Pentagon Replicator program, a U.S. Department of Defense initiative announced in August 2023. The program aims to rapidly expand domestic sUAS production & innovation for military applications. On September 12, 2023, the Company announced it was awarded a contract to provide its Vital Intelligence technology to a state corrections agency to its facilities enhance security and efficiency for the benefit of the community, the staff, and the inmates. On September 14, 2023, the Company announced it had secured its first defense orders for its Commander 3 XL with the U.S. military. On September 22, 2023, the Nasdaq notified the Company that the closing price of its Common Shares for the 30 consecutive business day period from August 10, 2023 to September 21, 2023 did not meet the Minimum Bid Price Requirement of Nasdaq’s rules. The notice has no immediate effect on the listing of the Common Shares, and the Common Shares continued trade on the Nasdaq under the symbol “DPRO”. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company was given 180 calendar days (or until March 20, 2024) to regain compliance with the Minimum Bid Price Requirement, unless Nasdaq were to grant the Company, upon request, an additional 180 calendar day extension to meet such requirements. To regain compliance, the Common Shares must have a closing bid price of US$1.00 for a minimum of 10 consecutive business days. If the Company does not regain compliance with the Minimum Bid Price Requirement (including through the implementation of a reverse share split or another means) by March 20, 2024, the Common Shares may subject to delisting. On September 27, 2023, the Company announced its new manufacturing and production facility in Saskatoon, Saskatchewan, had officially opened. On October 30, 2023, Draganfly announced that it had closed its underwritten offering for gross proceeds of approximately US$3.5 million, before deducting underwriting discounts and offering expenses. Pursuant to the Offering, the Company issued: (i) 4,800,000 units of the Company at a price of US$0.55 per unit, with each such unit comprising of one Common Share and one Common Share purchase warrant (the “October 2023 Warrants”). Each October 2023 Warrant entitles the holder thereof to purchase one Common Share at an exercise price of US$0.6123, subject to adjustment, until October 30, 2028; and (ii) 1,600,000 pre-funded units of the Company the at a price of US$0.5499 per unit, with each such unit comprising of one pre- funded Common Share purchase warrant (the “October 2023 Pre-Funded Warrants”) and one October 2023 Warrant. Each October 2023 Pre-Funded Warrant entitled the holder thereof to purchase one Common Share at an exercise price of US$0.0001, subject to adjustment, until the October 2023 Pre-Funded Warrants are exercised in full. The October 2023 Pre- Funded Warrants were exercised in full prior to the Company’s 2024 financial year end. On November 28, 2023, Draganfly announced it has received a Transport Canada Special Flight Operations Certificate for its Heavy Lift Drone to support advanced flight testing above 55lbs/25KG MTOW. This will allow highly specialized development of advanced delivery, industrial and defense 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, enabling the Company to initiate direct application and use-case testing. This development also allows Draganfly to enhance and optimize highly specialized operational and maintenance manuals and Standard Operating Procedures for a variety of conditions and scenarios. 19

Page 26

Financial year ended December 31, 2024 On January 16, 2024, the Company announced an agreement with Mass General Brigham to provide drone delivery and solutions for the healthcare system’s Home Hospital patients. The Company’s technology aims to enhance the quality of care and support for Mass General Brigham’s Home Hospital patients by reducing traffic-related delays around its geographic catchment of the greater Boston metro area, eliminating challenges associated with traditional transportation methods, and enabling the swift and efficient delivery of essential supplies. The medical drone pick-up and deliveries facilitated by the Company’s technology can include critical medicines, technical equipment, and laboratory work. On January 23, 2024, the Company announced that it was selected as a solutions provider of choice by Arabian Aero Investment LLC, a Dubai-based company backed by a member of the Dubai Royal Family, which had announced the launch of a groundbreaking solar- powered charging platform in the UAE. The Company is to develop solutions for integrating UAVs with the UAE’s inaugural end-to-end electric mobility platform that combines solar charging points with last-mile delivery, ushering in a new era of sustainable delivery systems. This initiative signifies the start of an ambitious plan to decarbonize the UAE’s transportation landscape over the next three years. On January 25, 2024, the Company announced enrollment of the Commander 3XL platform in the Green UAS program, a new program administered by the Association for Uncrewed Vehicle Systems. In this initiative, coupled with the associated Trusted Cyber program, Draganfly aims to achieve certification for the Commander 3XL platform, ensuring it meets the most stringent cybersecurity and supply chain standards specified in the National Defense Authorization Act (“NDAA”). The Company’s engagement in the Green UAS program is geared towards fast-tracking the endorsement of the Commander 3XL platform among commercial entities and state and federal government agencies, including the Departments of Defense and Homeland Security. On January 30, 2024, the Company announced that it was selected by MMS Products, Inc. to develop a drone-based tactical multi-drop payload system. This drone payload system is designed explicitly for tactical multi-drop and ISR operations. The highlight of this development is the integration with MMS Products’ Mjolnir, a highly configurable delivery device renowned for its versatility and effectiveness in various operational scenarios. The tactical multi-drop system boasts universal mount capabilities that can be easily adapted or attached to a wide range of drone models, and will be optimized for use with the Company’s Commander 3XL. This optimization with the Commander 3XL drone will enhance the performance and efficiency of both technologies, resulting in a robust turnkey tactical solution. On February 7, 2024, the Company announced that its Commander 3 XL Drone was voted Best Enterprise Drone, Best Search and Rescue Drone and Best Delivery Drone at The Droning Company’s Annual Droning Awards. On February 13, 2024, the Company announced that it was selected by the Ulkatcho Group of Companies to provide and expand UAV solutions and capabilities within the Ulkatcho First Nation’s Traditional Territory which will include, but are not limited to Commercial UAV services for Mapping & Survey, Resource & Wildlife Management, Training, Emergency Response & Wildfire Monitoring. The Ulkatcho First Nation is one of Canada’s largest landowners, encompassing a vast expanse from the west coast to the interior of British Columbia, rich in natural resources. Pursuant to the Company’s prospectus supplement dated February 21, 2024, the Company completed an underwritten public offering in the United States, with Maxim acting as sole book running manager, and issued 13,400,000 units on February 26, 2024 for gross proceeds of approximately US$3.6 million (the “February 2024 Public Offering”), comprising the following: (i) 11,200,000 units at a price of US$0.27 per unit, with each unit consisting of one Common Share and one Common Share purchase warrant (the “February 2024 Warrant”). Each February 2024 Warrant entitles the holder thereof to purchase one Common Share at an exercise price of US$0.36, subject to adjustment, until February 26, 2029; and 20

Page 27

(ii) 2,200,000 pre-funded units at a price of US$0.2699 per unit, with each unit consisting of one pre-funded Common Share purchase warrant (the “February 2024 Pre-Funded Warrant”) and one February 2024 Warrant. Each February 2024 Pre- Funded Warrant entitles the holder thereof to purchase one Common Share at an exercise price of US$0.0001, subject to adjustment, until the February 2024 Pre-Funded Warrants are exercised in full. The February 2024 Pre-Funded Warrants were exercised in full prior to the Company’s 2024 financial year end. In connection with the February 2024 Public Offering, the Company issued 670,000 underwriter’s warrants (the “February 2024 Underwriter’s Warrants”), with each February 2024 Underwriter’s Warrant entitling the holder thereof to purchase one Common Share at an exercise price of US$0.3375, subject to adjustment, until February 26, 2027. On March 13, 2024, the Company announced that Knightscope, Inc. had selected Draganfly to jointly develop an autonomous security solution that combines Draganfly drones with Knightscope Autonomous Security Robots, emergency communications devices & Knightscope Security Operations Center user interface & remote monitoring platform. As previously disclosed, on September 22, 2023, the Company received a letter from the Listing Qualifications Department of Nasdaq notifying the Company of its noncompliance with Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”) by failing to maintain a minimum bid price for the Common Shares of at least $1.00 per share for 30 consecutive business days. The Company was allowed an initial 180-day grace period, or until March 20, 2024, (the “Bid Price Compliance Period”), to regain compliance with the Bid Price Rule. To regain compliance with the Bid Price Rule the closing bid price of the Common Shares needed to be at least $1.00 per share for a minimum of ten consecutive business days during the Bid Price Compliance Period. On March 21, 2024, the Company received notification that it had failed to regain compliance with the Bid Price 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 September 30, 2023. The Company timely requested a hearing before the Nasdaq Panel. The hearing request automatically stayed any suspension or delisting action pending the hearing and the expiration of any additional extension period granted by the Nasdaq Panel following the hearing. In April 2024, the Company received notification that it failed to comply with the minimum stockholders’ equity requirement which served as an additional and separate basis for delisting. Following the May 21st hearing, the Nasdaq Panel granted an additional extension period with regard to the Bid Price Rule that would expire on September 17, 2024. In addition, at the hearing, the Company presented a plan to regain compliance with the minimum stockholders’ equity requirement which plan the Company implemented on August 7, 2024 via amendments to warrants issued in October 2023 and in May 2024. On October 1, 2024, Nasdaq informed the Company that it had regained compliance with the Bid Price Requirement (via the 25:1 share consolidation) and the minimum stockholders’ equity requirement. The letter from Nasdaq further informed the Company that it is subject to a Mandatory Panel Monitor for a period of one year from October 1, 2024. If, within that one-year monitoring period, the Company is again out of compliance with the minimum stockholders’ equity requirement, the Company will not be afforded the opportunity to present a plan of compliance to Nasdaq with respect to that deficiency nor additional time to cure that deficiency. Instead, Nasdaq will issue a Delist Determination Letter and the Company will have the opportunity to request a hearing before a Nasdaq Panel to respond to such letter. On April 22, 2024, the Company announced a collaboration with communication experts Doodle Labs, and control systems specialists UXV Technologies. This collaborative effort is set to redefine operational capabilities for law enforcement, first responders, and military specialists. The collaboration combines the Company’s Commander 3XL UAV, Doodle Labs’ Helix Mesh Rider®Radio, and UXV Technologies Soldier Robotic Controller ground control station, together offering a secure, robust, and ruggedized solution for demanding missions. 21

Page 28

On April 24, 2024, the Company announced a memorandum of understanding with Squamish Search and Rescue (“SSAR”), pursuant to which Draganfly will serve as SSAR’s UAV solutions partner. SSAR and Draganfly will explore integrated continuous testing of equipment and operation procedures to meet the ever-demanding specialized SSAR operations. This work will enhance the Commander 3XL’s utility in various search and rescue training scenarios, further expanding its operational capabilities. On April 25, 2024, the Company announced a strategic collaboration with ParaZero Technologies Ltd., a pioneer in drone safety systems aimed at enhancing the safety and efficacy of UAVs in medical and emergency response operations. Pursuant to the Company’s prospectus supplement dated April 29, 2024, the Company completed an underwritten public offering in the United States, with Maxim acting as sole placement agent, and issued 13,513,514 units on May 1, 2024 for gross proceeds of approximately US$3.5 million (the “May 2024 Public Offering”), comprising the following: (i) 7,063,514 units at a price of US$0.259 per unit, with each unit comprising of one Common Share and one Common Share purchase warrant (the “May 2024 Warrants”). Each May 2024 Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $0.3540 (Canadian equivalent of US$0.259), subject to adjustment, until May 1, 2029; and (ii) 6,450,000 pre-funded units at a price of $0.2589 per unit, with each unit consisting of one pre-funded Common Share purchase warrant (the “May 2024 Pre-Funded Warrants”) and one May 2024 Warrant. Each May 2024 Pre-Funded Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $0.00014 (the Canadian dollar equivalent of US$0.0001), subject to adjustment, until the May 2024 Pre-Funded Warrants were exercised in full prior to the Company’s 2024 financial year end. The May 2024 Pre-Funded Warrants were exercised in full prior to the Company’s 2024 financial year end. In connection with the May 2024 Public Offering, the Company issued 675,676 placement agent’s warrants (the “May 2024 Agent’s Warrants”), with each May 2024 Agent’s Warrants entitling the holder thereof to purchase one Common Shares at $0.4425 (the Canadian dollar equivalent of US$0.3236), subject to adjustment, until May 1, 2027. On May 7, 2024, the Company announced the launch of its newest product, the FlexForce Modular FPV UAV System, available exclusively to Government & Military buyers following a FPV UAV Demonstration and Training. The NDAA-Compliant FlexForce FPV System features a set of quick-exchange assemblies, available in four-, seven- and ten-inch configurations. On June 13, 2024, the Company announced that it was selected by First Atlantic Nickel Corp. to utilize its proprietary survey technologies and services to help explore for what could be the first awaruite and district scale nickel project in Atlantic Canada. Andrew Hill Card and John M. Mitnick did not run for re-election as directors of the Company at the annual general meeting of the shareholders held on July 18, 2024. On July 19, 2024, the Company announced results of its annual general meeting of shareholders held on July 18, 2024. In addition, the Company also announced the appointment of Kim G.C. Moody to the Board. Scott Larson was appointed the Interim Chair of the Company. On July 25, 2024, the Company announced the appointment of Thomas B. Modly and Tim Dunnigan to the Board. 22

Page 29

On August 6, 2024, the Company announced the delivery of its newest Advanced First Responder assets to SSAR, inclusive of the Commander 3XL drone and modular payloads. In addition, the Company also announced that to enable each of the October 2023 Warrants and May 2024 Warrants to be treated as shareholders’ equity, and not a derivative liability on the Company’s balance sheet, holder of these warrants and the Company entered into an amendment agreements to amend certain provisions related to determining the value of underlying Common Shares on completion of fundamental transactions in exchange for the exercise price of each of the October 2023 Warrants and May 2024 Warrants being reduced by: (i) warrant amendment agreement dated May 1, 2024 entered between the Company and holder of the October 2023 Warrants, certain amendments to the terms of the October 2023 Warrants were amended including revising the exercise price to $0.3583, being US$0.259, removing the cashless exercise procedure, and changing the currency of the originally issued October 2023 Warrants to Canadian dollars; and (ii) warrant amendment agreement dated August 7, 2024 entered between the Company and holder of the October 2023 Warrants and May 2024 Warrants, the exercise price of the October 2023 Warrants was reduced to $0.2277 (Canadian equivalent of US$0.1646) and the exercise price of the May 2024 Warrants was reduced to $0.2250 (Canadian equivalent of US$0.1646). On August 12, 2024, the Company announced a strategic partnership with The Institute for Drone Technology, a leading drone solution provider for the Australian government and enterprise sectors. This agreement appoints The Institute for Drone Technology as a value- added distributor of the Company’s cutting-edge drone technology in Australia. Pursuant to the Company’s prospectus supplement dated August 19, 2024, the Company completed an underwritten public offering in the United States, with Maxim acting as sole placement agent, and issued 16,666,666 units for gross proceeds of approximately US$2 million (the “August 2024 Public Offering”), comprising the following: (i) 8,666,666 units at a price of US$0.12 per unit, with each unit consisting of one Common Share and one Common Share purchase warrant (the “August 2024 Warrant”). Each August 2024 Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $0.2048 (the Canadian dollar equivalent of US$0.15), subject to adjustment, until August 21, 2029; and (ii) 8,000,000 units at a price of US$0.12 per unit minus $0.00014 (the Canadian dollar equivalent of US$0.0001), with each unit consisting of one pre-funded Common Share purchase warrant (the “August 2024 Pre-Funded Warrant”) and one August 2024 Warrant. Each August 2024 Pre-Funded Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $0.00014 (the Canadian dollar equivalent of US$0.0001), subject to adjustment, until the August 2024 Pre- Funded Warrants are exercised in full. The August 2024 Pre-Funded Warrants were fully exercised in full prior to the Company’s 2024 financial year end. In connection with the August 2024 Public Offering, the Company issued 833,333 placement agent’s warrants (the “August 2024 Agent’s Warrants”), with each August 2024 Agent’s Warrant entitling the holder thereof to purchase one Common Share at $0.2048 (the Canadian dollar equivalent of US$0.15), subject to adjustment, until August 21, 2027. On September 5, 2024, the Company completed a consolidation of its issued and outstanding Common Shares on the basis of one post- consolidated Common Share for every 25 pre-consolidated Common shares (the “Consolidation”) which was given effect on September 5, 2024. On September 10, 2024, the Company announced launch of its newest product, the APEX Drone, designed specifically to meet the demanding needs of military and law enforcement surveillance operations. On September 17, 2024, the Company along with Nightingale Security, a leader in robotic aerial security, were selected by a major oil and gas company to develop a fully automated UAS solution for infrastructure monitoring. This project marks a significant step in leveraging advanced UAS remote sensing technology to enhance operational efficiency and safety in the oil and gas sector. On September 24, 2024, the Company announced receipt of a purchase order from TB2 Aerospace (“TB2”) for Commander 3XL Drones to be deployed with TB2 Drone Recharging Operational Payload System Pods (“DROPS”) within the U.S. Department of Defense for various mission types. This order represents the beginning of the deployment and scaling of the DROPs system in conjunction with the Draganfly line of drones. 23

Page 30

On October 8, 2024, the Company announced Olen Aasen’s stepping down from the Board. In addition, Kim G.C. Moody was appointed as the new Audit Chair, Tim Dunnigan joined the Audit Committee, and Andrew Hill Card joined the advisory board of the Company. Pursuant to the Company’s prospectus supplement dated November 18, 2024, the Company completed an underwritten public offering in the United States, with Maxim acting as sole placement agent, and issued 1,600,000 units for gross proceeds of approximately US$3.76 million (the “November 2024 Public Offering”), comprising the following: (i) 400,000 units at a price of US$2.35 per unit on the post-Consolidation basis, with each unit consisting of one Common Share and one Common Share purchase warrant (the “November 2024 Warrant”). Each November 2024 Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $3.3086 (the Canadian dollar equivalent of US$2.35), subject to adjustment, until November 19, 2029; and (ii) 1,200,000 units at a price of US$2.3499 per unit on the post-Consolidation basis, with each unit consisting of one pre-funded Common Share warrant (the “November 2024 Pre-Funded Warrant”) and one November 2024 Warrant. Each August 2024 Pre-Funded Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $0.00014 (the Canadian dollar equivalent of US$0.0001), subject to adjustment, until the November 2024 Pre-Funded Warrants are exercised in full. The August 2024 Pre-Funded Warrants were fully exercised in full prior to the Company’s 2024 financial year end. In connection with the November 2024 Public Offering, the Company issued 80,000 placement agent’s warrants on the post-Consolidation basis (the “November 2024 Agent’s Warrants”), with each November 2024 Agent’s Warrant entitling the holder thereof to purchase one Common Share at $4.1357 (the Canadian dollar equivalent of US$2.9375), subject to adjustment, until November 19, 2027. To enable each of the October 2023 Warrants, May 2024 Warrants and August 2024 Warrants to be treated as shareholders’ equity, and not a derivative liability on the Company’s balance sheet, the holders of these warrants and the Company entered into amendment agreements to amend certain provisions related to determining the value of underlying Common Shares on completion of fundamental transactions in exchange for the exercise price of each of the October 2023 Warrants, May 2024 Warrants and August 2024 Warrants in such number on a post-Consolidation basis being reduced to $3.3086 (Canadian equivalent to US$2.35) on a post-Consolidation basis. On December 18, 2024, the Company announced the successful completion of initial flights as part of a proof-of-concept, research-and- development drone delivery project for Mass General Brigham Home Hospital. January 1, 2025 to the Effective Date On January 16, 2025, the Company announced a strategic collaboration with Volatus Aerospace Inc. (“Volatus”), a global provider of aerial solutions. This collaboration will address the growing demand for precision data acquisition in energy markets by integrating Volatus’ advanced Bathymetric sensor technology with the Company’s Heavy Lift Drone. Under the terms of the agreement, Volatus Aerospace will operate as an OEM approved dealer of the Company’s robust portfolio of multi-use UAV platforms, including the Heavy Lift Drone, Commander 3XL, and Apex Drones. These NDAA compliant drones will enrich Volatus’ current offerings, enabling more selection for its clients. On January 23, 2025, the Company announced that it secured a Federal Aviation Administration waiver enabling its small unmanned aircraft to conduct operations over human beings and moving vehicles. This waiver marks a significant milestone for the Company and highlights its commitment to advancing the capabilities of UAV operations in complex urban environments. These regulatory exemptions reinforce the Company’s position as an innovator in the UAV space and showcase its readiness to meet the evolving needs of its defense, government, and commercial partners. 24

Page 31

On February 5, 2025, the Company confirmed through recent sales activities its positioning and preparedness to support the enhancement of border security amid evolving global trade and security uncertainties and shifting geopolitical dynamics. On March 3, 2025, the Company announced an expansion of the strategic collaboration with Volatus, to address rapidly growing global demand for the automation and digitization of geospatial data collection and analysis solutions for Utility Infrastructure. This teaming agreement builds on the prior collaboration agreement, harnessing Volatus’ operational and regulatory capabilities, advanced sensor technology and Draganfly’s advanced product, engineering, and integration capabilities. This expanded collaboration will engage high- profile global power and infrastructure providers to enhance efficiency and safety in power utility solutions. On March 10, 2025, the Company announced the establishment of its new U.S. location in Tampa, Florida. Strategically positioned near key military and government clients, this expansion includes a demonstration and live fire testing facility, reinforcing Draganfly’s commitment to delivering cutting-edge drone solutions to its U.S. customers. On March 20, 2025, the Company announced the appointment of Christopher Miller to the Board. Significant Acquisitions During 2024 Draganfly did not complete any significant acquisitions during its most recently completed financial year for which disclosure is required under Part 8 of National Instrument 51-102 — Continuous Disclosure Obligations of the Canadian Securities Administrators. Market for Securities Trading Price and Volume of Common Shares The Common Shares are listed and posted for trading on the CSE and Nasdaq under the symbol “DPRO”. The following table sets forth the price range (high and low prices) in Canadian dollars of the Common Shares and volume traded on the CSE, for the periods indicated (as reported by the CSE) . Period High (C$) Low (C$) Volume 2024 January* 0.690 0.465 612,188 February* 0.640 0.185 4,550,499 March* 0.290 0.200 1,871,072 April* 0.425 0.260 2,400,602 May* 0.480 0.270 1,356,569 June* 0.390 0.275 469,942 July* 0.325 0.220 505,402 August* 0.300 0.135 2,621,665 September 4.000 2.240 130,231 October 5.340 3.220 75,705 November 6.450 2.970 129,539 December 7.800 4.360 253,114 2025 January 6.740 4.110 166,676 February 5.480 3.400 77,338 March 1 – 26 4,770 2,680 61,908 * The information reflects prices and volumes on the pre-Consolidation basis. 25

Page 32

The following table sets forth the price range (high and low prices) in United States dollars of the Common Shares and volume traded on the Nasdaq, on a post-Consolidation basis, for the periods indicated (as reported by the Nasdaq) . Period High ($) Low ($) Volume 2024 January* 0.50 0.34 4,562,100 February* 0.47 0.13 36,962,400 March* 0.20 0.15 23,200,000 April* 0.31 0.20 25,079,900 May* 0.37 0.20 28,903,600 June* 0.28 0.21 9,226,800 July* 0.24 0.16 16,180,800 August 2.40 2.74 10,813,137 September 2.83 1.55 3,833,931 October 3.99 2.305 2,029,737 November 4.63 2.05 7,556,033 December 5.57 3.10 12,134,210 2025 January 4.69 2.68 4,936,794 February 3.84 2.30 1,821,396 March 1 - 26 3.32 1.84 1,945,642 * The information reflects prices and volumes on the pre-Consolidation basis. Prior Sales The following tables summarize the issuances of unlisted securities for the year ended December 31, 2024 and issuances subsequent to December 31, 2024 and as of the date of this report. Unless otherwise specified, the numbers and prices contained in the table below are presented on the pre-Consolidation basis. Warrants Date of Issuance Number of Warrants Issued Exercise Price February 26, 2024 13,400,000(1) US$ 0.36 February 26, 2024 2,200,000(1) US$ 0.0001 February 26, 2024 670,000(1) US$ 0.3375 May 1, 2024 13,513,514(2) (4) C$ 0.354(4) (US$ 0.259)(4) May 1, 2024 6,450,000(2) C$ 0.00014 (US$ 0.0001) May 1, 2024 675,676(2) C$ 0.4425 (US$ 0.3236) August 21, 2024 16,666,666(3) (6) C$ 0.2048(6) (US$ 0.15)(6) August 21, 2024 8,000,000(3) C$ 0.00014 (US$ 0.0001) August 21, 2024 833,333(3) C$ 0.2048 (US$ 0.15) November 19, 2024 1,600,000(5) C$ 3.3086(5) (US$ 2.35)(5) November 19, 2024 1,200,000(5) C$ 0.00014(5) (US$ 0.0001)(5) November 19, 2024 80,000(5) C$ 4.1357(5) (US$ 2.9375)(5) Notes: (1) Representing 13,400,000 February 2024 Warrants, 2,200,000 February 2024 Pre-Funded Warrants and 670,000 February 2024 Underwriter’s Warrants issued pursuant to the February 2024 Public Offering on a pre-Consolidation basis. The exercise prices corresponding to these warrants are also presented on a pre-Consolidation basis.

Page 33

Page 34

(2) Representing 13,513,514 May 2024 Warrants, 6,450,000 May 2024 Pre-Funded Warrants and 675,676 May 2024 Agent’s Warrants issued pursuant to the May 2024 Public Offering on a pre-Consolidation basis. The exercise prices corresponding to these warrants are also presented on a pre-Consolidation basis. (3) Representing 16,666,666 August 2024 Warrants, 8,000,000 August 2024 Pre-Funded Warrants and 833,333 August 2024 Agent’s Warrants issued pursuant to the August 2024 Public Offering on a pre-Consolidation basis. The exercise prices corresponding to these warrants are also presented on a pre-Consolidation basis. (4) The Company and the holder of these May 2024 Warrants entered into an amendment agreement on November 19, 2024, whereby the exercise price of each warrant in such number converted on the post-Consolidation basis was reduced to $3.3086 (or US$2.35) per share on a post-Consolidation basis. As a result, each of the 540,541 May 2024 Warrants (calculated on a post-Consolidation basis based on the original number of 13,513,514 May 2024 Warrants) have now a reduced price of $3.3086. (5) Representing 1,600,000 November 2024 Warrants, 1,200,000 November 2024 Pre-Funded Warrants and 80,000 November 2024 Agent’s Warrants issued pursuant to the November 2024 Public Offering on a post-Consolidation basis. The exercise prices corresponding to these warrants are also presented on a post-Consolidation basis. (6) The Company and the holder of these August 2024 Warrants entered into an amendment agreement on November 19, 2024, whereby the exercise price of each warrant in such number converted on the post-Consolidation basis was reduced to $3.3086 (or US$2.35) per share on a post-Consolidation basis. As a result, each of the 666,667 August 2024 Warrants (calculated on a post-Consolidation basis based on the original number of 16,666,666 August 2024 Warrants) have now a reduced price of $3.3086. Stock Options No stock options were granted during the Company’s financial year ended 2024. Restricted Share Units During the Company’s financial year ended December 31, 2024, the Company awarded restricted share units (“RSUs”) pursuant to its share compensation plan exercisable for an aggregate of 4,630,443 Common Shares on a pre-Consolidation basis or approximately 185,218 Common Shares on a post-Consolidation basis. Date of Award Number of RSUs Awarded Award Date Fair Value May 20, 2024 4,658,320 C$ 0.36 The award date is not a trade day. The fair value indicated above represents the closing price of the Common Share on May 17, 2024, the last trade day before the award. Escrowed Securities The following table summarizes the Company’s securities that remain in escrow or subject to restrictions on transfer as of the date hereof: Designation of Class Number of securities held in escrow or that are subject to contractual restriction on transfer Percentage of Class November 2024 Agent’s Warrants 80,000(1) 100% Notes: (1) The November 2024 Agent’s Warrants were issued and are subject to a contractual restriction on exercising such that these warrants may only be exercised after May 19, 2025, and may not be transferred, other than pursuant to exceptions under FINRA Rule 5110(e) (2) for a period of 180 days from the commencement of sales made under the November 2024 Public Offering. 27

Page 35

Dividends The Company has not declared or paid a dividend. Other than the requirements of the BCBCA, there are no restrictions on the Company that would prevent it from paying a dividend. However, as of March 27, 2025, the Board intends to retain any future earnings (when available) for reinvestment in the Company’s business, and therefore, it has no current intention to declare or pay dividends on the Common Shares in the foreseeable future. Any future determination to pay dividends on the Common Shares will be at the sole discretion of the Board of Directors after considering a variety of factors and conditions existing from time to time including its earnings, financial condition and other relevant factors. Legal Proceedings and Regulatory Actions Draganfly is not, and has not been at any time within the most recently completed financial year, a party to any legal proceedings, nor is or was Draganfly’s property the subject of any legal proceedings, known or contemplated, that involves a claim for damages exclusive of interest and costs that met or exceeded 10% of the Company’s current assets. Further, there have not been any (a) penalties or sanctions imposed against the Company by a court relating to securities legislation or by a securities regulatory authority during the year ended December 31, 2024, (b) any other penalties or sanctions imposed by a court or regulatory body against the Company that would likely be considered important to a reasonable investor in making an investment decision, or (c) settlement agreements entered into by the Company before a court relating to securities legislation or with a securities regulatory authority during the year ended December 31, 2024 . Interests of Management and Others in Material Transactions Other than as set forth herein, or as previously disclosed, the Company is not aware of any material interests, direct or indirect, by way of beneficial ownership of securities or otherwise, of any director or executive officer or any shareholder holding more than 10% of the Common Shares or any associate or affiliate of any of the foregoing in any transaction within the three most recently completed financial years or during the current financial year or any proposed or ongoing transaction of the Company which has or will materially affect the Company. Auditor, Transfer Agent and Registrar The auditors of the Company are Dale Matheson Carr-Hilton Labonte LLP, Chartered Professional Accountants, 1500-1700, 1140 W Pender Street, Vancouver, BC V6E 4G1. Endeavor Trust Corporation is the transfer agent and registrar for the Common Shares at its principal office in Vancouver, British Columbia . Interests of Experts There is no person or company whose profession or business gives authority to a statement made by such person or company and who is named as having prepared or certified a statement, report or valuation described or included in a filing, or referred to in a filing, made under NI 51-102 by the Company during, or related to, the Company’s most recently completed financial year other than Dale Matheson Carr-Hilton Labonte LLP, the Company’s auditors. Dale Matheson Carr-Hilton Labonte LLP are the auditors of the Company and have confirmed that they are independent with respect to the Company within the meaning of the relevant rules and related interpretations prescribed by the relevant bodies in Canada and any applicable legislation or regulations. 28

Page 36

Denis Silva, a director of the Company, is a lawyer at DLA Piper (Canada) LLP, which law firm provides legal services to the Company. As of the date hereof, the associates and partners of DLA Piper (Canada) LLP, as a group, beneficially own, directly or indirectly, less than 1% of the outstanding Common Shares. Additional Information Additional information about the Company is available on SEDAR+ at www.sedarplus.ca and on our website at www.draganfly.com. We do not incorporate the contents of our website or of www.sedarplus.ca into this Annual Report. Information on our website does not constitute part of this Annual Report. In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC which can be viewed as www.sec.gov. Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of Draganfly’s securities and securities authorized for issuance under equity compensation plans, where applicable, will be contained in Draganfly’s information circular for the next annual meeting of shareholders that involves the election of directors and additional information as provided in Draganfly’s comparative financial statements for its most recently completed financial year. Draganfly will provide this information to any person, upon request made to the Chief Financial Officer of Draganfly at 235 103rd St E, Saskatoon, SK, S7N 1Y8, Canada. The documents will also be located on SEDAR+ at www.sedarplus.ca. Additional financial information is provided in the Company’s comparative financial statements and management’s discussion and analysis for the period ended December 31, 2024, which are also available on SEDAR+. 4.B. Business Overview General The Company is an award-winning, manufacturer, contract engineering, and product development company within the UAV space, serving the public safety, agriculture, industrial inspections, and mapping and surveying markets. The Company is 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. The business of the Company is conducted through three wholly-owned subsidiaries: (a) Draganfly Innovations Inc.; (b) Draganfly Innovations USA Inc.; and (c) Dronelogics Systems Inc. The business of Draganfly Innovations and Draganfly Innovations USA is the provision of engineering services and manufacture of commercial UAV, RPAS, and UVS (unmanned vehicle system) and software, serving the public safety, agriculture, industrial inspections, and mapping and surveying markets. Dronelogics is a solutions integrator for custom robotics, hardware and software that provides a wide scope of services including sales, training, rentals, maintenance, flying and data processing services. Drone Industry Overview Drones or UAV have rapidly evolved from a military origin to commercial and civil government applications from security to farming. The increased automation of drones provides additional value to existing workflows, triggering more widespread adoption. A global shift to sustainable and eco-friendly options has further increased demand for drone usage. Drone applications are being utilized in multiple industries on a global basis. The Company believes that defense will remain the largest market over the foreseeable future. However, the mobile phone industry created an affordable technology stack for drones. The ability to carry a camera enabled many people to utilize the platforms for media production and beyond. That demand initiated in the consumer market and has migrated along with technological advancements into the growth of commercial drone industry. 29

Page 37

The major segments of the drone market are drone hardware, software and services. Drone hardware are the physical goods, including drone platforms, aerial mobility platforms and components and systems. The software segment includes flight planning, navigation and computer vision, unmanned traffic management (“UTM”), fleet operations, ecosystems, networks and software development kits (“SDKs”). Drone services include the provision of flight operations, data analysis and hardware repair and mainte nance. Drone service providers (“DSPs”) include system integrators, pilot training providers, retailers and marketplaces, coalitions and organizations, drone test sites, insurance providers and universi ty/educational facilities. The commercial drone industry has been growing rapidly in recent years, with drones becoming increasingly popular for a wide range of applications. From capturing aerial footage to conducting inspections of infrastructure, drones offer a cost-effective and efficient solution to a range of tasks. According to Teal Group, the global market for commercial drones is expected to reach $18.88 billion by 2030, with strong demand coming from industries such as agriculture, construction, and logis tics. One of the biggest drivers of growth in the commercial drone industry is the availability of advanced technologies such as Artificial Intelligence (“AI”), machine learning, and computer vision. These technolo gies enable drones to perform a wide range of tasks that were previously difficult or impossible, such as automated inspections and precision agriculture. Additionally, the development of high-quality, light- weight sensors and cameras has made it possible to capture high-resolution images and video footage, in challenging environments. Drone application methods are being used by a variety of industries today. There are approximately eight methods that are garnering the most attention: mapping, surveying, inspection, filming/photography, dispensing/spraying, warehousing, monitoring/detection, and delivery. These applications are being used today by the civil government, educational facilities, agricultural, construction, health care, real estate, energy, transportation, insurance, security, and scientific industries. Products and Services The Company can provide its customers with an entire suite of products and services that include: quad- copters, fixed wing aircrafts, ground based robots, handheld controllers, flight training, and software used for tracking, live streaming, and data collection. In addition, Draganfly has a health/telehealth platform that is a set of technologies that remotely detects a number of biometrics such as heart rate, oxygen saturation and blood pressure. The Company is also offering sanitary spraying services to indoor and outdoor public gathering spaces such as sport stadiums and fields to provide additional protection against the spread of contagions, such as COVID- 19. The Company generates revenues across the following categories Revenues Fiscal year ended December 31, Category of Activity 2024 2023 2022 Product Sales $ 5,426,313 $ 5,287,093 $ 5,550,432 Provision of Services $ 1,196,803 $ 1,267,749 $ 2,054,627 The Company did not derive significant revenue from any customers that exceed 10% of total revenues for the year ended December 31, 2024, or December 31, 2023. Draganfly Products Manufactured Solutions The Company is among the longest-running manufacturers of multirotor drones in the world. Draganfly’s drones include the following: ● Draganfly Commander 3XL - The Commander 3 XL Drone is a modular platform capable of carrying payloads of more than 20 pounds making it the ideal choice for industry leaders across a variety of major markets including public safety and agriculture. The Commander 3 XL Drone’s fuselage consists of a simple rectangular tube. Each component of the drone has been specifically designed to ensure the airframe can pack down into a transportable case. 30

Page 38

● Draganfly Heavy Lift Drone - The Draganfly Heavy Lift Drone is a versatile, multi-rotor UAV, designed to enhance deliveries and flight times. Compatible with a variety of interchangeable payloads, this heavy-duty drone can carry more and fly longer. The DHL Drone can be configured to carry up to 67 pounds. ● Draganflyer Commander2 – The Draganflyer Commander2 is a multi-mission, high-endurance, electric sUAS that combines the signature design elements of our past Draganflyer systems with the most advanced features to date. The Commander2 can be used for numerous applications across many industries including agriculture, public safety, and aerial 3D modeling. Paired with powerful MAVLink-based flight planning software, the Draganflyer Commander2 supports both fully- and semi-automated missions, as well as manual flight operations with a pilot in the loop for a high level of system control to handle any operational task . ● Draganfly Medical Response – The Draganfly Medical Response Drone is an integrated solution that features a Draganfy Drone combined with a cold-chain logistics enclosure. This solution is able to provide first responders with visual oversight of a scene and ensures the timely delivery of temperature-sensitive medical supplies including blood, vaccines and test samples to dangerous or hard- to-reach areas. ● Draganfly Long Range LiDAR - Draganfly’s Long Range LiDAR (DLR- LiDAR) system provides accurate distance measurements and improved resolution over conventional photogrammetry methods. The cutting-edge sensor technology can be mounted on UAV, airplanes, and helicopters for those professionals requiring precision imagery. ● Tango2 – a high endurance, dual battery, sUAS capable of carrying a wide array of payload systems. The aircraft utilizes the Draganfly intelligent power management system to extend flight time while increasing safety. This sUAS is ideal for agricultural monitoring and research, mapping, surveying, environmental monitoring, and search and rescue. Universal Control System The Draganfly Universal Control System is a complete, handheld ground control system that is built to integrate with other software and hardware systems. The Draganfly Universal Control System is designed to provide precise control over sUAS helicopters, fixed-wing, and ground-based robots. Draganfly software provides sophisticated flight planning, automated takeoff, grid following, waypoints, landing, data collection, and video downlink. Software The Draganfly Surveyor drone flight planning software is an intuitive, easy to use, application that enables customers to quickly plan, fly, and process meaningful data. Based on the project, camera type, optics, and altitude, the drone software determines the appropriate camera shutter interval, aircraft speed, and flight plan to capture the optimum required photo overlap to generate 2D and 3D maps and models. The Draganfly Surveyor directly integrates with Pix4Dmapper for survey-grade results and can be used alongside other third-party photogrammetry programs. Vital Intelligence The Draganfly Vital Intelligence platform is a touchless health assessment system that leverages proprietary machine-vision methods to measure biometrics such as heart rate, oxygen saturation and blood pressure. Vital Intelligence is a data platform that turns an existing camera into a touchless detection system. Draganfly integrates this technology into a variety of platforms and camera systems – both on the ground and in the air – to support use cases such as visitor intake and other general health and wellness applications. 31

Page 39

Draganfly Services Custom Engineering Draganfly is a contract engineering partner for government agencies, enterprise organizations, academic institutions, and businesses of all sizes. The Draganfly team’s truest capabilities are actualized during the engineering process as hardware designers, software designers, engineers, project managers, and vertical-specific experts come together to build custom drone solutions for its partners. Draganfly’s end- to-end engineering services include : ● Hardware design: Component, product, and system design; ● Software design: Custom software and interface design; ● Development: Including integration with third party platforms, PixX4D, Pixhawk, Ardupilot, DJI and more ; ● Modeling: 3D design and modeling of mechanical components; ● ITAR (International Traffic in Arms Regulations) equipment management: Approved handling and integration of ITAR, and Controlled Goods technologies ; and ● Support: Testing, training, documentation, and repairs. Training Draganfly offers custom-designed training packages that are tailored to specific operations and use cases. The Company also offers basic training for new UAV owners, and advanced classes for users who understand the fundamentals and are looking for new ways to increase flight efficiency or comply with federal regulations . Flight Services Draganfly has a team of qualified pilots that conduct flights on behalf of its customers. The team specializes in working with emergency services including police, fire, and search and rescue personnel. Draganfly also supports industrial applications, utility and power companies, environmental and agricultural entities and others . Geographic Information Systems (GIS) Data Services Draganfly has a team of qualified GIS Data Specialists and Surveyors that support the delivery of services to clients in various markets. These services include the creation and maintenance of data sets of spatial analysis. Spraying Services Draganfly operates, in partnership with a leader in natural and organic disinfectants, to administer a sanitization spraying service in large public venues by misting a surface spray across the entire venue in four to six hours. Principal Markets Draganfly has more than 20 years of experience designing and manufacturing professional drones for military, public safety, energy, agriculture, and insurance. Draganfly has sold products and services to a number of countries but predominantly focuses on the North American market given its geographical location. Military and Government Military and government contractors have partnered with Draganfly to improve personnel and infrastructure safety. Draganfly works with partners to design and manufacture custom airframes, design and develop payloads, and manage complex flight operations. Draganfly team members hold advanced pilot certificates and are approved to fly in controlled airspace and at airports. Since the Company’s development team is cleared by Canada’s Controlled Goods Program, the team is permitted to handle ITAR equipment and technologies, and the Company’s facilities are built to protect those technologies and ensure they are only handled by approved personnel. 32

Page 40

Public Safety In 2013, the Royal Canadian Mounted Police flew one of the Company’s drones to locate and save the life of an accident victim, which we believe was one of the first times a public safety organization used a UAV to save a life. Years later, the Company is still using drone technology to keep the public safe. Draganfly works with its partners to identify unknowns, such as substances, spills, packages, and chemicals while not putting human lives at risk . Draganfly builds aerial and ground systems with custom payloads and sensors to scan scenes, survey public events, locate objects, and clear debris faster and more safely than on-the-ground manpower. The Company also empowers its partners to maximize existing infrastructures via custom application programming interface integrations that ensure Draganfly’s technology enhances their safety systems . Environmental and Energy Draganfly offers a suite of commercial UAV solutions for energy companies and those servicing the energy market, like surveyors and consultants. Draganfly equips energy companies with the hardware and software they need to optimize existing operations, improve safety, and respond after a natural disaster. Partners can use Draganfly hardware and 3D modeling software to remotely inspect sites that would put human lives at risk. They also conduct environmental monitoring with Draganfly’s sample collection solutions, assessing water and ground pollution, gas composition, infrastructure, and other environments. Agriculture Draganfly works with its partners to collect high-quality data, using multi- and hyper-spectral imaging, 3D modeling, and a suite of sophisticated sensor technology that assesses environmental factors. Seed companies use Draganfly technology to optimize growth season, measuring seed trial results throughout the research and development process. Farmers can use Draganfly flight and data collection services to monitor hectares of land year-round, assessing factors like fertilizer efficiency, weed production, and more. Operations Canadian Operations Draganfly Innovation Inc.’s products are manufactured at its machine shop within its leased head office based in Saskatoon, Saskatchewan, Canada. Draganfly Innovations Inc. operates the fully operational leased facility located at 235 103rd St E, Saskatoon, SK, S7N 1Y8, Canada. This facility is to be used only for the purposes of Draganfly Innovations Inc. operating its business of design, development, production, distribution, sale and/or licensing of drones or robots, or such other use as permitted by the landlord from time to time. Dronelogics Systems Inc.’s products and services are provided through its leased space located at Unit 319, 2999 Underhill Avenue, Burnaby, British Columbia . United States Operations The Company, through its wholly-owned subsidiary, Draganfly Innovations USA Inc., has a storage facility in Hoschton, Georgia that currently stores some inventory for operations in the United States . The Company has derived its revenues across the following primary geographic market segments for the last three fiscal years: Revenues Fiscal year ended December 31, Region 2024 2023 2022 Canada $ 6,585,402 $ 6,162,672 $ 6,919,038 United States $ 37,714 $ 392,170 $ 686,021 33

Page 41

Competitive Conditions Although Draganfly is acknowledged as a drone industry pioneer that we believe was the first to develop the commercial multi rotor helicopter, there are now many drone hardware companies in the world. As technology has improved and costs for hardware and software have come down, the line between consumer and commercial drones has blurred, enabling the rise of Prosumer drones. A Prosumer drone is a drone is designed to satisfy elements of professional and consumer segments, often featuring integrated sensors designed to deliver a combination of performance and value with little ability to customize the drone for the required use-case. Historically, Draganfly has serviced early adopters in the public safety industry. At this stage of the commercial drone adoption curve, the average public safety organization (local, regional, and even federal law enforcement, for example), has been introduced to drones through the adoption of Consumer and Prosumer platforms. Hence, these organizations tend to use lower cost drones that have become quite sophisticated that can accomplish most of their use cases. The dominant companies in the industry are Chinese drone manufacturers that are reputed to comprise a substantial portion of the consumer and now commercial drone market. The majority of foreign manufactured drones are geared towards broad applications involving the masses. Draganfly has moved away from competing directly with these companies and in some cases sells these products through its subsidiary, Dronelogics Systems Inc., or has chosen to serve niche markets outside of where the foreign manufactured drones tends to be. There are also some organizations that tend to be US based that either prefer or are mandated to not use foreign drones such as those produced by China. Some of these organizations are sensitive to their work being exposed to that of overseas governments which has at least for the time being, created a niche market for players such as Draganfly. The combined shift away from foreign made drones (national security issues) and regulatory improvements by the FAA in respect of drone usage is driving industry demand. As Draganfly has evolved to move with the industry trends, the Company now uses some third party hardware and software as part of some of its customization and engineering services work. Draganfly has also moved into innovative engineering procurement which is very specialized. As the drone industry matures, this may bring more competitors to this space or the Company’s customers may choose to develop the in-house expertise to do the work that they currently outsource to Draganfly. However, it is the Company’s view that there will be a growing customer base that will require specialized drone hardware, software and service solutions outside of the capabilities of the consumer & prosumer drone platforms that only a handful of companies can do. The market remains highly competitive. Private equity continues to actively capitalize drone start-ups . Regulatory Framework A new regulatory framework relating to the use of drones in Canada was published by Transport Canada in January 2019 and came into effect on June 1, 2019. The changes, published in the Canadian Aviation Regulations (“CARs”), Part IX, introduce new rules based on the weight of the RPA and the intended operation. This framework creates three broad categories of RPAS: (i) small RPAS in limited (low risk) operations (“Small RPAS Basic”); (ii) small RPAS in advanced (complex) operations (“Small RPAS Advanced”); and (iii) all other RPA operations that fall outside (i) and (ii) above. These regulations focus on foundational issues such as aircraft marking and registration, pilot knowledge and certification, airworthiness of the aircraft, and flight rules. Small RPAS Basic are defined as RPAS weighing between 250 grams and 25 kilograms and operated in rural and unpopulated areas. These RPAS will require identification markings, including name, address and contact information of the owner and pilot of the RPA. Pilots must be at least 14 years of age and must hold a valid Basic RPA licence that is specific to small drones. Additional restrictions are imposed that include that the RPA cannot operate: (i) within approximately 30 meters of people or open-air assemblies of people, (ii) above 400 feet, (iii) within approximately 1.85 kilometers of heliports or (iv) within approximately 5.5 kilometers of airports. These regulations require the RPA to always be operated within visual line-of-sight. The RPA will be assigned a unique identification/registration number issued by Transport Canada. Pilots must be at least 16 years of age and must hold a valid Advanced RPAS license that is specific to small drones. Approval for operation must be granted by Air Traffic Control when operating in controlled airspace or near controlled aerodromes. A set of flight rules must be followed at all times for these more complex operations. Restrictions, including distances from people, are determined based on the safety certification of the RPA being operated. The current legislation utilizes a similar Special Flight Operations Certificate (“SFOC”) application process, as the previous regulations, to approve any operations that do not fit within the regulatory regime set out above, such as operating beyond visual-line-of-sight. For those wishing to operate outside of the regulatory framework set out in CARs, part IX, there will be a variety of SFOC application processes tailored to the nature and use of the RPA. The more complex and riskier the proposed operation, the more thorough and detailed the SFOC application process. 34

Page 42

Those operators requiring an SFOC must apply to the Transport Canada Civil Aviation Regional Office at least 30 working days prior to the date of the proposed RPAS operation. Transport Canada has wide discretion in reviewing and approving SFOC applications; however, to date the Company has never been refused an SFOC for which it has applied. The purpose of the SFOC application review is to ensure that the proposed operation is safe and associated risks have been adequately mitigated by the Company. Draganfly operates in accordance with Part IX - Remotely Piloted Aircraft Systems, of Transport Canada’s Canadian Aviation Regulations and Standards, which is periodically updated and governs the safety assurance and operations of Remotely Piloted Aircraft Systems with Canada. The Company is currently fully compliant with all current regulatory requirements and has applied for, and received Transport Canada approval for several SFOCs. Seasonality In terms of financial performance, the fourth quarter tends to be the weakest quarter for the Company due to the Company’s customers closing down for a few weeks for the holiday season coupled with poorer weather conditions for flying drones and performing drone services. Components The Company obtains hardware components, various subsystems and systems, and raw materials from a limited group of suppliers. The Company does not have long-term agreements with any of these suppliers that obligate such suppliers to continue to sell components, subsystems, systems or products to the Company. The Company’s reliance on these suppliers involves significant risks and uncertainties, including whether suppliers will provide an adequate supply of required raw materials, components, subsystems, or systems of sufficient quality, will increase prices for the raw materials, components, subsystems or systems, and will perform their obligations on a timely basis. See “ Item 3.D. Risk Factors”. Intangible Properties Intangibles such as patents, software, specific technology know-how, and applications expertise all have a significant effect on the Company’s business. At present, drone delivery technology cannot be purchased as an off-the-shelf solution; therefore, the Company has been focused on developing proprietary technology which meets or exceeds anticipated Canadian government requirements. By virtue of being the first commercial UAV company in the industry, the Company’s subsidiary, Draganfly Innovations, holds commercial patents. 35

Page 43

As at the Effective Date, the Company has the following patents and patents pending in the application stage in its portfolio and intends to continue to expand and grow its intellectual property portfolio: Title Country Application No. Issue Date Patent No. Status Multi Rotor UAV With Compact Folding Rotor Arms Canada 2,917,434 4/23/2019 2,917,434 Issued Vehicle with Aerial and Ground Mobility Canada 2,787,279 10/22/2013 2,787,279 Issued Vertical Takeoff and Landing Unmanned Aircraft System Canada 2,935,793 1/15/2021 2,935,793 Issued Wheel with Folding Segments Canada 2,787,075 10/29/2013 2,787,075 Issued Action Camera System for Unmanned Aerial Vehicle United States 15/707,752 1/22/2019 10,187,580 Issued Action Camera System for Unmanned Aerial Vehicle United States 14/533,995 9/19/2017 9,769,387 Issued Cascade Recognition for Personal Tracking via Unmanned Aerial Vehicle (UAV) United States 14/642,370 7/18/2017 9,710,709 Issued Cascade Recognition for Personal Tracking via Unmanned Aerial Vehicle (UAV) United States 15/651,672 2/13/2018 9,892,322 Issued Cascade Recognition for Personal Tracking via Unmanned Aerial Vehicle (UAV) United States 15/894,292 10/8/2019 10,438,062 Issued Dual Rotor Helicopter with Tilted Rotational Axes United States 12/458,608 11/8/2011 8,052,081 Issued Helicopter with Folding Rotor Arms United States 13/200,825 10/23/2012 8,292,215 Issued Multi Rotor UAV With Compact Folding Rotor Arms United States 14/994,080 7/31/2018 10,035,581 Issued Pixel Based Image Tracking System For Unmanned Aerial Vehicle (UAV) Action Camera System United States 15/256,193 10/10/2017 9,785,147 Issued Pixel Based Image Tracking System for Unmanned Aerial Vehicle (UAV) Action Camera System United States 14/825,956 9/13/2016 9,442,485 Issued Real Time Noise Reduction System for Dynamic Motor Frequencies Aboard an Unmanned Aerial Vehicle (UAV) United States 14/642,496 11/8/2016 9,489,937 Issued System and Method for Adaptive Y Axis Power Usage and Non Linear Battery Usage for Unmanned Aerial Vehicle Equipped with Action Camera System United States 14/825,914 12/6/2016 9,511,878 Issued Tandem Wing Aircraft System with Shrouded Propeller United States 15/584,815 8/13/2019 10,377,488 Issued Vehicle with Aerial and Ground Mobility United States 14/641,468 3/21/2017 9,598,171 Issued Vehicle with Aerial and Ground Mobility United States 13/846,074 3/31/2015 8,991,740 Issued Vertical Take Off And Landing (VTOL) Aircraft Having Variable Center Of Gravity United States 15/706,158 10/20/2020 10,807,707 Issued Vertical Takeoff and Landing Unmanned Aircraft System United States 15/164,718 8/28/2018 10,059,442 Issued Visually Intelligent Camera Device with Peripheral Control Outputs United States 14/939,369 8/6/2019 10,375,359 Issued Wheel with Folding Segments United States 13/739,419 6/17/2014 8,753,155 Issued 36

Page 44

The Company also has the following registered trademarks and pending applications : Description Name/Title Official No. Governmental Entity Trademark Application DRAGANFLY TMA1,242,120 CIPO Registered Trademark DRAGANFLYER EXPLORE TMA1,025,742 CIPO Registered Trademark DRAGANFLYER APEX TMA1,025,624 CIPO Registered Trademark DRAGANFLYER COMMANDER TMA1,008,809 CIPO Registered Trademark DRAGANFUEL TMA997,118 CIPO Registered Trademark DRAGANFLY INNOVATIONS TMA908,564 CIPO Registered Trademark DRAGANFLYER TMA906,939 CIPO Registered Trademark DRAGANFLY & DESIGN TMA905,935 CIPO Registered Trademark DRAGANFLY TMA1,071,582 CIPO Registered Trademark DRAGANFLY TMA1,069,670 CIPO Registered Trademark DRAGANFLYER GUARDIAN TMA904,883 CIPO Registered Trademark DRAGANVIEW TMA886,217 CIPO Registered Trademark DRAGANFLYER APEX 6248237 USPTO Registered Trademark DRAGANFLY 6373176 USPTO Registered Trademark DRAGANFLYER COMMANDER 5760146 USPTO Registered Trademark DRAGANFUEL 5563360 USPTO Registered Trademark DRAGANFLY INNOVATIONS 5130969 USPTO Registered Trademark DRAGANFLYER 4920316 USPTO Registered Trademark DRAGANFLY & Design 5130970 USPTO Registered Trademark DRAGANFLYER GUARDIAN 4995725 USPTO Registered Trademark DRAGANVIEW 4920317 USPTO Trademark Application(1) DRAGANFLY 88488410 USPTO Note (1) The US application is suspended pending registration of the Canadian mark. Market Opportunity Drones have rapidly evolved from their military origin to commercial and civil government applications from security to farming. The Company believes that an increased automation of drones provides additional value to existing workflows, triggering more widespread adoption, while a global shift to sustainable and eco-friendly options has further increased demand for drone usage. According to Drone Industry Insights, the commercial and private drone market could grow from $22.5 billion in 2020 to $42.8 billion in 2025, representing compound annual growth rate (“CAGR”) of 13.8%.1 Drone application methods are being used by a variety of industries today. The most active segments are mapping, surveying, inspection, filming/photography, dispensing/spraying, warehousing, monitoring/detection, and delivery. These applications are being used today by the civil government, educational facilities, agricultural, construction, health care, real estate, energy, transportation, insurance, security, and scientific industries for public safety, data collection and profit. According to the Drone Industry Insights, the fastest growing drone application method will be delivery and is forecasted at 28.6% CAGR over the next five years and it is widely believed over 100,000 new jobs will be created in the drone market by 2025.2 However, regulatory hurdles and intense industry scrutiny need to be addressed. 1 See Global Drone Market Report 2020-2025. 2 See Global Drone Market Report 2020-2025. 37

Page 45

Our existing products are configured to meet the needs of multiple industries. We continue to add new customers in different market verticals. We are actively designing and developing new products and services to meet increased customer demands. Growth Strategy Draganfly markets its products and services as a drone solution platform that enables customer to do things not easily done before and to collect data not easily available before. Draganfly provides solutions to our customers utilizing drones and adjunct technologies. Sensors, software, AI and more all make up this ability to provide solutions that only a company with end-to-end capabilities can provide. Draganfly grows by dealing with the decision makers in organizations who generally have budget control and/or profit and loss responsibility. Draganfly will continue to develop specific solutions and IP for industry verticals by working directly with customers. Draganfly will also pursue an acquisition strategy focused on adding additional capabilities to its platform that strengthen its value proposition of being able to provide new and total solutions that other drone companies cannot. Draganfly is focused on growth through developing new products, expanding its customer base, and pursuing accretive acquisition opportunities, both within and outside North America, in new markets that complement its existing portfolio. Sales and Marketing Draganfly plans to expand it sales and market capabilities in three key areas. First, Draganfly intends to implement a sales force that has the ability to build relationships and sell specifically designed solutions into industry verticals. This sales force will be specialized into segments that sell either direct or into a channel dependent on the specific product or service solution being provided. Draganfly plans to expand business development personnel that can work with specific industries to envision and develop new product lines and services not yet contemplated by our customers. Second, Draganfly plans to drive greater market awareness of the Draganfly brand via public relations Third, Draganfly plans targeted marketing and advertising via tradeshows/conferences which are virtual or physical as well as target digital advertising campaigns used to generate inbound inquires for specific products, services or solution opportunities. Customers Key customers are customers looking to gain strategic advantage in particular markets via the use of drones and drone technology. These are often large organizations with a specific problem that they are currently solving in an expensive manner which usually means the use of teams of people or expensive personnel. By designing solution and providing everything from design to manufacturing to sensor development and even giving recognition on patents of IP development (not with commercial interest) to providing the services and housing the data we develop customer relationships that are very “sticky”. Specialized Skill and Knowledge There is a specialized skill required for the development, operations, maintenance, sales and marketing of the Company’s technology. The Company’s current staff possesses the necessary skills and knowledge required for the Company’s business; however, additional employees may be added to staff as needed. All operational staff hold the appropriate licenses and certificate as mandated by Transport Canada. Changes to Contracts No aspect of Draganfly’s business is anticipated to be affected in the current financial year by renegotiation or termination of any contract. 38

Page 46

Capital Expenditures During the years ended December 31, 2024, 2023 and 2022, we did not undertake any material capital expenditures. 4.C. Organizational Structure We have three wholly-owned subsidiaries. The following chart shows the Company’s subsidiaries: 4.D. Property, Plant and Equipment Draganfly Innovation Inc.’s products are manufactured at its machine shop within its leased head office located at 235 103rd St E, Saskatoon, SK, S7N 1Y8, Canada (approximately 6,631 square feet in size). Dronelogics Services Inc.’s services are provided through its leased space located at Unit 319, 2999 Underhill Avenue, Burnaby, British Columbia (approximately 2,752 square feet in size). The Company, through its wholly-owned subsidiary, Draganfly Innovations USA Inc., has a storage space at 24 Pearl Industrial Avenue, Hoschton, Georgia where inventory is stored (approximately 300 square feet in size). The Company, through its wholly-owned subsidiary, Draganfly Innovations USA Inc., has the right to use the Duette Training Facility and Aerial Range located at 1375 Duette Road, Duette, Florida for training events, demos, courses and extended storage. See also “ Item 4.B. Business Overview Operations – Operations”. ITEM 4A. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The management’s discussion and analysis of the Company for the year ended December 31, 2024 is included in this Annual Report in Exhibit 15.1, which is incorporated herein by reference. 39

Page 47

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 6.A Directors and Senior Management The following table sets forth the name, office held, age, and functions and areas of experience in the Company of each of our directors and senior management: Name and Municipality of Residence Age Position Held and Date Appointed Principal Occupation within the past five years Cameron Chell Bowen Island, British Columbia, Canada 56 President (May 9, 2022) and Chief Executive Officer (August 14, 2019) and a Director (August 14, 2019) President and Chief Executive Officer of the Company since May, 2022, Before this Cameron was Chairman and CEO of the Company; President, Chairman and co-founder of CurrencyWorks Inc. from November 2017 to December 2024; Chief Executive Officer and co-founder of Business Instincts Group Inc . from 2009 to 2021; Executive Chairman of WEconnect Health as of September 2024; from 2009 to 2021; Co-founder of BitRail, LLC from May 2019 to May 2020; co- creator and Chairman of KODAKOne from May 2017 to May 2020; Director of Health Outcomes Worldwide from June 2017 to February 2021; and Chairman of TruTrace Technologies Inc. from April 2017 to September 2020 . . Scott Larson(2)(4) Burnaby, British Columbia, Canada 52 Interim Chair (July 18, 2024) and a Director (August 14, 2019) President of the Company from July 3, 2020 to May 9, 2022; currently CEO of CO2 Lock Corp, a climate tech startup focusing on permanent CO2 storage through mineralization; currently CEO of SpaceAlpha Technologies, an Earth observation company building out space-based synthetic aperture radar; former Chief Executive Officer of Kater Technologies, a Vancouver-based mobility as a service (MaaS) company building out an integrated intermodal transportation platform incorporating public transportation, buses, taxis and ride hailing vehicles into a single service, from January 2019 to March 2020; former Chief Executive Officer of Helios Wire, a satellite company building out a space-enabled IoT/M2M network , from 2016 to 2019; and former Chief Executive Officer and founder of UrtheCast Corp. from 2010 to 2015. Denis Silva(2)(3) Vancouver, British Columbia, Canada 45 Director (August 14, 2019) Corporate and securities partner with the law firm DLA Piper (Canada) LLP since July 2020; and partner at the law firm Gowling WLG (Canada) LLP from 2015 to 2020. Julie Myers Wood(1)(3)(4) McLean, Virginia, United States 55 Director (September 9, 2021) Chief Executive Officer of Guidepost Solutions LLC since May 2014; and has held several high level positions within the U.S. government including at the Departments of Justice, Homeland Security, Treasury, and Commerce, as well as at the White House. Kim G.C. Moody(1)(3) Calgary, Alberta, Canada 57 Director (July 18, 2024) Chartered Accountant, Registered Trust and Estate Practitioner and a tax specialist practicing in Calgary as the CEO / Director Canadian Tax Advisory with Moodys Private Client Law LLP / Moodys Private Client LLP and Moodys Tax (a division of Moodys Private Client Law LLP); Former Chair and Former Deputy Chair of the Board, Former Treasurer, as well as Former Chair of the Technical Committee for the Society of Trust and Estate Practitioners of Canada. 40

Page 48

Thomas B. Modly(1) Sarasota, Florida, United States 64 Director (July 25, 2024) Independent consultant and author; former Acting Secretary of the Navy and the 33rd Under Secretary of the Navy. Tim Dunnigan(2) Tampa, Florida, United States 57 Director (July 25, 2024) CEO and President of MMS Products, Inc.; founder of CaptureTec, LLC, co-founder of Talon Aerolytics, Inc. Christopher Miller Virginia, United States 59 Director (March 19, 2025) Executive at DZYNE Technologies, a private autonomous flight company, since 2022. Former consultant (2021-2022); former acting U.S. Secretary of Defense (2020-2021); former Director of the National Counterterrorism Center (2020); former Assistant Secretary of Defense for Special Operations and Low-Intensity Conflict (2020). Paul Sun Oakville, Ontario, Canada 53 Chief Financial Officer (August 14, 2019) Chief Financial Officer of the Company since August 2019; Chief Financial Officer of Former Draganfly since July 2015; and Managing Director, Institutional Equity Sales at Beacon Securities Limited from January 2013 to December 2014. Paul Mullen Burnaby, British Columbia, Canada 42 Chief Operating Officer (March 1, 2022) Chief Operating Officer of the company since March 1, 2022; Vice President since April 13, 2021. Vice President (2019- 2021) Monark Ventures. Various Roles including Manager Sales, Technical Service Delivery & Operations at Shaw Cablesystems G.P. from 2001-2018. Deborah Greenberg Hampstead, Quebec, Canada 58 Chief Legal and Corporate Services Officer and Corporate Secretary (July 4, 2022) Chief Legal Officer of the Company since July 4, 2022; Chief Legal and Corporate Services Officer of the Company since December 1, 2022; Chief Legal Officer (2017-2019) and Chief Information Officer (2019- 2021) at Canada Mortgage and Housing Corporation; Various roles including General Counsel at Aimia from 2007-2017. Notes: (1) Member of the Audit Committee. (2) Member of the Nominating and Corporate Governance Committee. (3) Member of the Compensation Committee. (4) Member of the ATM Committee. The directors listed above will hold office until the next annual meeting of the Company or until their successors are elected or appointed. There are no family relationships among our directors and executive officers. There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any of our directors or executive officers was selected. As at March 27, 2025, the directors and senior officers of Draganfly, as a group, beneficially own or control, directly or indirectly, 37,221 Common Shares on a post-Consolidation basis or 0.686% of the issued and outstanding Common Shares. 41

Page 49

Corporate Cease Trade Orders, Bankruptcies, Penalties or Sanctions To the knowledge of management, no director or executive officer as at the date hereof, is or was within 10 years before the date hereof, a director, chief executive officer or chief financial officer of any company (including Draganfly), that (a) was subject to an order that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer, or (b) was subject to an order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer. For the purposes hereof, “order” means (a) a cease trade order, (b) an order similar to a cease trade order, or (c) an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days. To the knowledge of management, other than as disclosed herein, no director or executive officer of Draganfly, or a shareholder holding a sufficient number of securities of Draganfly to affect materially the control of the company (a) is, as at the date hereof, or has been within the 10 years before the date hereof, a director or executive officer of any company (including Draganfly) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets, or (b) has, within the 10 years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder. To the knowledge of management, no director, executive officer or shareholder holding a sufficient number of securities of Draganfly to materially affect the control of the Company has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision. Conflicts of Interest There are potential conflicts of interest to which the directors and officers of Draganfly will be subject to in connection with the operations of Draganfly. In particular, certain of the directors and officers of Draganfly are involved in managerial or director positions with other companies whose operations may, from time to time, be in direct competition with those of Draganfly or with entities which may, from time to time, provide financing to, or make equity investments in, competitors of Draganfly. In accordance with the applicable corporate and securities legislation, directors who have a material interest or any person who is a party to a material contract or a proposed material contract with Draganfly are required, subject to certain exceptions, to disclose that interest and generally abstain from voting on any resolution to approve the contract. In addition, the directors are required to act honestly and in good faith with a view to the best interests of Draganfly. Certain of the directors and each of the executive officers of Draganfly have either other employment or other business or time restrictions placed on them and accordingly, these directors of Draganfly will only be able to devote part of their time to the affairs of Draganfly. To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the provisions of the applicable corporate law. 42

Page 50

6.B. Compensation Summary Compensation Table For the year ended December 31, 2024 our directors and executive officers received compensation for services, as follows: Non-Equity Incentive Plan Compensation (C$) Name and Principal Position Year Salary ($) Share- Based Awards ($)(1)(2) Option- Based Awards ($)(3)(4) Annual Incentive Plans(5) Long- Term Incentive Plans Pension Value ($) All Other Compen- sation ($)(6) Total Compen- sation ($) Cameron Chell(8) Chairman, CEO and Director 2024 $437,750 $259,001 Nil $ 53,125 Nil Nil Nil $749,876 Paul Sun CFO 2024 $273.006 $162,713 Nil $ 46,725 Nil Nil Nil $484,448 Scott Larson(9) Interim Chair and Director 2024 $116,266 $ 53,915 Nil Nil Nil Nil $ 93,369(7) $263,550 Denis Silva Director 2024 Nil $ 53,915 Nil Nil Nil Nil $ 74,560(7) $128,475 Julie Myers Wood Director 2024 Nil $ 53,915 Nil Nil Nil Nil $ 76,738(7) $130,653 Kim Moody Director 2024 Nil Nil Nil Nil Nil Nil $ 37,512 $ 37,512 Tim Dunnigan Director 2024 Nil Nil Nil Nil Nil Nil $ 31,748 $ 31,748 Thomas B. Modly Director 2024 Nil Nil Nil Nil Nil Nil $ 31,748 $ 31,748 Christopher Miller Director 2024 Nil Nil Nil Nil Nil Nil Nil Nil Paul Mullen COO 2024 $255,625 $152,353 Nil $ 43,750 Nil Nil Nil $453,603 Deborah Greenberg Chief Legal and Corporate Services Officer 2024 $306,750 $182,824 Nil $ 63,750 Nil Nil Nil $553,324 Olen Aasen Former Director 2024 Nil $ 53,915 Nil Nil Nil Nil $ 66,499(7) $120,414 Andrew Hill Card, Jr Former Director 2024 Nil $ 53,915 Nil Nil Nil Nil $ 38,976(7) $ 92,891 John M. Mitnick Former Director 2024 Nil $ 53,915(10) Nil Nil Nil Nil $ 59,963(7) $113,878 Notes: (1) ”Share-Based Award” means an award under an equity incentive plan of equity-based instruments that do not have option-like features, including, for greater certainty, common shares, restricted shares, restricted share units, deferred share units, phantom shares, phantom share units, common share equivalent units and stock. (2) Based on the number of restricted share units (“RSUs”) granted multiplied by the market price of the underlying Common Shares on the grant date. This methodology was chosen in order to be consistent with industry. 43

Page 51

(3) ”Option-Based Award” means an award under an equity incentive plan of options, including, for greater certainty, share options, share appreciation rights and similar instruments that have option-like features. See also “Item 6.E. Share Ownership”. (4) This does not represent cash paid to the individual. This figure is based on the grant date fair value of such stock options of the Company (“Options”). The grant date fair value was determined in accordance with IFRS. This methodology was chosen in order to be consistent with the accounting fair value used by the Company in its financial statements and since the Black-Scholes option pricing model is a commonly used methodology for valuing options which provides an objective and reasonable estimate of fair value. The key assumptions of this valuation include current market price of the stock, exercise price of the option, option term, risk-free interest rate, dividend yield of stock and volatility of stock return. Calculating the value of stock options using the Black-Scholes option pricing model is very different from a simple “in-the-money” value calculation. In fact, stock options that are well out-of-the- money can still have a significant “grant date fair value” based on a Black-Scholes option pricing model, especially where, as in the case of the Company, the price of the share underlying the option is highly volatile. Accordingly, caution must be exercised in comparing grant date fair value amounts with cash compensation or an in-the-money option value calculation. (5) Represents annual cash bonus awards that are declared and paid annually. The Company does not have a formal bonus plan and the amount of bonuses paid is not set in relation to any formula or specific criteria but is a result of a subjective determination by the Compensation Committee and the Board. As of March 27, 2025, the annual cash bonus awards for the executive officers of the Company for the year ended December 31, 2024 have not been determined or approved by the Board. (6) This amount represents the aggregate amount of perquisites paid to the individual. (7) This amount represents director’s fees paid to such director. (8) Mr. Chell did not receive any additional compensation for serving as director of the Company. Mr. Chell did receive consulting fees in connection with his role as an Officer of the Company, included above in the Salary amount. Mr. Chell did receive consulting fees for services provided to the Company. (9) Mr. Larson did receive consulting fees for services provided to the Company, included above in the Salary amount. (10)The share-based awards granted to Mr. Mitnick were cancelled after Mr. Mitnick’s stepped down from the Board on July 18, 2024. 6.C. Board Practices All of our directors are elected at the annual general meeting of our shareholders and each holds such office until his or her successor is elected or appointed, unless his or her office is earlier vacated by way of the director’s resignation or death or under any of the relevant provisions of our Articles or the BCBCA. Employment, Consulting and Directors’ Service Contracts The Company is not a party to any contract, agreement, plan or arrangement that provides for payments to a director or executive officer at, following or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement, a change in control of the Company, its subsidiaries or affiliates or a change in a director or executive officer responsibilities, other than as described below. The Company’s consulting agreement, as amended, (the “Chell Consulting Agreement”) with 1502372 Alberta Ltd. (the “Consultant”) and Cameron Chell requires the Company to pay monthly fees of C$35,416.67 (amounting to C$425,000 annually) for the provision by of executive services by the Consultant to the Company, and in this regard, has Cameron Chell hold the position of President and Chief Executive Officer of the Company and contains the following provisions: (a) where termination notice is given by the Company, other than for certain specified reasons as set out in the Chell Consulting Agreement, the Company shall give the Consultant at least 60 days’ advance notice in writing; and (b) where termination is given by the Consultant, the Consultant shall give the Company 60 days’ advance notice in writing. If the Chell Consulting Agreement is terminated pursuant to either (a) or (b) above, then the Consultant will be entitled to the fees earned to the effective date of termination and any expenses incurred on behalf of the Company prior to the effective date of termination which are otherwise reimbursable by the Company pursuant to the terms of the Chell Consulting Agreement. The Consultant is also entitled a bonus as determined by the Compensation Committee equal to 100% of the Consultant annual fees. The Consultant is a private company controlled by Cameron Chell. During the year ended December 31, 2021, the Company and the Consultant entered into an amending agreement to the Chell Consulting Agreement to increase the monthly fees from US$14,166.67 (amounting to US$170,000 annually) to C$35,416.67 (amounting to C$425,000 annually). During the year ended December 31, 2022 the Company and the Consultant entered into an additional amending agreement appointing Mr. Chell as President of the Company and expanding the scope of the services to reflect this new role. 44

Page 52

The Company’s consulting agreement, (the “Larson Consulting Agreement”) with Scott Larson, for his services to the Company as a consultant, and not as a director, which supersedes and replaces all previous agreements between Mr. Larson and the Company, requires the Company pay (a) an hourly fee of $350, plus applicable taxes, and (b) as determined by the Company, an annual success fee, for corporate development, operational and financial related services. The Larson Consulting Agreement may be terminated by Mr. Larson upon giving the Company sixty (60) days advance notice in writing, or by the Company by giving Mr. Larson four (4) months advance notice in writing or pay in lieu thereof. The Company’s employment agreement, as amended, (the “Sun Agreement”) with Paul Sun requires the Company pay (a) an annual base salary of C$275,010 and (b) as determined by the Company’s Compensation Committee, an annual bonus of up to the base salary, for the provision of executive services as Chief Financial Officer to the Company. If the Sun Agreement is terminated by the Company without just cause, Mr. Sun will be entitled to remuneration in the amount equal the base salary and Mr. Sun’s last bonus earned divided by 12 and multiplied by six. Mr. Sun is also entitled to receive a lump sum payment equal to 18 months of his base salary and average bonus upon a change of control of the Company. The Company’s employment agreement, as amended, (the “Mullen Agreement”) with Paul Mullen requires the Company to pay (a) an annual base salary of C$257,500 and (b) as determined by the Company’s Compensation Committee, an annual bonus, for the provision of executive services as Chief Operating Officer to the Company. If the Company terminates the Mullen Agreement without cause, Mr. Mullen is entitled to severance equaling to the his annual salary earned to the date of cessation of employment, all earned but unpaid bonus payment, any outstanding vacation and reimbursement of final expenses, and an additional lump sum payment equaling to three (3) months salary. If Mr. Mullen is terminated without cause within twelve (12) months of a change of control, then Mr. Mullen is entitled to a lump sum payment equal to twelve (12) months of his annual salary and average performance bonus. The Company’s employment agreement, as amended, (the “Greenberg Agreement”) with Deborah Greenberg requires the Company to pay (a) an annual base salary of C$309,000 and (b) as determined by the Company’s Compensation Committee, an annual bonus, for the provision of executive services as Chief Legal and Corporate Services Officer to the Company. If the Greenberg Agreement is terminated by the Company without just cause, Ms. Greenberg will be entitled to remuneration in the amount equal the base salary and Ms. Greenberg’s last bonus payable on a pro-rata basis. Mrs. Greenberg is also entitled to receive a lump sum payment equal to 18 months of her base salary and the greater of her targeted annual performance bonus multiplied by a factor of 1.5 or the average performance bonus paid to her over the two year period to the change of control of the Company. 45

Page 53

Audit Committee The Audit Committee is a committee of the Board to which the Board delegates its responsibility for oversight of the financial reporting process. The Audit Committee is also responsible for managing, on behalf of our shareholders, the relationship between the Company and the external auditor. Pursuant to National Instrument 52-110 – Audit Committees of the Canadian Securities Administrators (“NI 52-110”), the Company is required to disclose certain information with respect to its Audit Committee, as summarized below. Audit Committee Terms of Reference The Company must, pursuant to NI 52-110, have a written charter which sets out the duties and responsibilities of its Audit Committee. The terms of reference of the Audit Committee are attached hereto as Exhibit 15.2. Audit Committee Composition The following are the members of the Audit Committee: Kim Moody(1) Independent(2) Financially Literate(2) Thomas B. Modly Independent(2) Financially Literate(2) Julie Myers Wood Independent(2) Financially Literate(2) Notes: (1) Chairman of the Audit Committee. (2) As defined by NI 52-110. Relevant Education and Experience All members of the Audit Committee have been either directly involved in the preparation of the financial statements, filing of quarterly and annual financial statements, dealing with auditors, or as a member of the Audit Committee. All members have the ability to read, analyze and understand the complexities surrounding the issuance of financial statements. Kim Moody Kim Moody is a Chartered Accountant, Registered Trust and Estate Practitioner and a tax specialist practicing in Calgary as the CEO / Director Canadian Tax Advisory with Moodys Private Client Law LLP / Moodys Private Client LLP and Moodys Tax (a division of Moodys Private Client Law LLP). Mr. Moody is also recently branched out through his professional corporation to put more energy into some of his “passion projects” involving public speaking, coaching, leadership studies, taxation policy and economics / public policy. Mr. Moody obtained his Bachelor of Management degree from The University of Lethbridge in 1992 and his CA designation from The Institute of Chartered Accountants of Alberta in 1994. Mr. Moody Kim is a past Chair and past Deputy Chair of the Board, past Treasurer, as well as past Chair of the Technical Committee for the Society of Trust and Estate Practitioners of Canada. Thomas B. Modly Thomas Modly, who served as the Acting Secretary of the Navy and the 33rd Under Secretary of the Navy, brings unparalleled expertise in leadership and business operations within the Department of the Navy, along with decades of prior business, government, and strategy experience. Throughout his tenure in government, Mr. Modly focused on increasing the agility and accountability of the Department of Defense, with a particular emphasis on advanced education and the installation of a culture of continuous learning across Navy and Marine Corps forces. 46

Page 54

Julie Myers Wood Julie Myers Wood has more than 25 years of experience in the public and private sector working on regulatory and enforcement issues from many perspectives, including as federal prosecutor, defense counsel, government investigator and compliance consultant. Ms. Wood is currently the Chief Executive Officer at Guidepost Solutions, a leading investigations, compliance, monitoring, and security firm with offices throughout the United States, as well as England, Mexico, Colombia, and Singapore. During her government service, Ms. Wood was appointed by President Bush to serve as Assistant Secretary of Homeland Security for Immigration and Customs Enforcement (ICE). Additionally, she worked for the Office of Independent Counsel under Kenneth Starr and was appointed Assistant Secretary for Export Enforcement at the Department of Commerce. Ms. Wood began her legal career at the law firm of Mayer, Brown & Platt in Chicago, Illinois. She is a graduate of Baylor University and Cornell Law School. Reliance on Certain Exemptions At no time since the commencement of the Company’s financial year ended December 31, 2024, has the Company relied on any exemption from NI 52-110, including Section 2.4 of NI 52-110 (De Minimis Non- Audit Services), or an exemption granted under Part 8 of NI 52-110. The Company has relied upon the exemption provided by section 6.1 of NI 52-110 which exempts venture issuers from the requirement to comply with the restrictions on the composition of its Audit Committee . Audit Committee Oversight At no time since the commencement of the Company’s most recently completed financial year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board. Pre-Approval Policies and Procedures The Audit Committee is authorized by the Board to review the performance of the Company’s external auditors and approve in advance provision of services other than auditing and to consider the independence of the external auditors, including reviewing the range of services provided in the context of all consulting services bought by the Company. The Audit Committee is authorized to approve any non- audit services or additional work which the Chairman of the Audit Committee deems as necessary who will notify the other members of the Audit Committee of such non-audit or additional work . External Auditor Service Fees See “Item 16C. Principal Accountant Fees and Services” . Compensation Committee The Compensation Committee is responsible for ensuring that the Company has appropriate procedures for reviewing executive compensation and making recommendations to the Board with respect to the compensation of the Company’s executive officers. The Compensation Committee seeks to ensure that total compensation paid to all executive officers is fair and reasonable and is consistent with the Company’s compensation philosophy. The Compensation Committee is also responsible for recommending compensation for the directors, as well as stock option (“Option”) grants, and restricted share unit (“RSU”) grants to the directors, officers, employees and consultants pursuant to the Company’s share compensation plans. The Share Compensation Plan (as defined below) assists the Company in employee retention and cash preservation, while encouraging Common Share ownership and entrepreneurship on the part of the Company’s NEOs. The Compensation Committee consists of Julie Myers Wood (Chair), Kim Moody and Denis Silva, all of whom were affirmatively determined by the Board to be independent (outside, non-management) directors. The Board is satisfied that the composition of the Compensation Committee ensures an objective process for determining compensation. Each member of the Committee has direct experience relevant to their responsibilities on the Committee, including acting as officers and directors of other publicly traded companies so that they are familiar with remuneration for companies within the Company’s peer group. 47

Page 55

6.D. Employees As at December 31, 2024, the Company had fifty four employees (fifty employees located in Canada and four employees located in the U.S.) where fifty one are full- time and three are part-time employees. There is one full time and one part-time consultant whose services were, and continue to be, used on a regular basis for day- to-day operations. 6.E. Share Ownership The following table sets out the number of Common Shares, Options and RSUs owned or over which control or direction is exercised by each our directors and executive officers and, where known after reasonable enquiry, by their respective associates or affiliates as at March 27, 2025. Unless otherwise indicated, the numbers contained in the table below are post-Consolidation numbers. Name and position Number and Percentage of Common Shares(1) Type of compensation security Number of compensation securities Date of issue or grant Issue, conversion or exercise price ($) Expiry Date(2) Cameron Chell Chairman, CEO and Director 8,830 (0.1627%) Options 2,000 October 30, 2019 62.50 October 30, 2029 RSUs 3,387 May 29, 2023 N/A March 20, 2025 RSUs 28,824 May 20, 2024 N/A May 20, 2027 Scott Larson President and Director 3,125 (0.0576%) Options 2,000 October 30, 2019 62.50 October 30, 2029 Options 4,000 July 3, 2020 80 July 3, 2025 RSUs 587 May 29, 2023 N/A March 20, 2025 RSUs 6,000 May 20, 2024 N/A May 20, 2027 Denis Silva Director 730 (0.0134%) Options 666 October 30, 2019 62.50 October 30, 2029 RSUs 587 May 29, 2023 N/A March 20, 2025 RSUs 6,000 May 20, 2024 N/A May 20, 2027 Julie Myers Wood Director 4,609 (0.0849%) Options 1,200 April 30, 2020 96.25 April 30, 2030 Options 1,034 September 9, 2021 121 September 9, 2026 RSUs 587 May 29, 2023 N/A March 20, 2025 RSUs 6,000 May 20, 2024 N/A May 20, 2027 Kim G.C. Moody Director Nil Options Nil N/A N/A N/A RSUs Nil N/A N/A N/A Thomas B. Modly Director Nil Options Nil N/A N/A N/A RSUs Nil N/A N/A N/A Tim Dunnigan Director Nil Options 1,200 November 9, 2023 15.65 November 9, 2033 RSUs Nil N/A N/A N/A Christopher Miller Director Nil Options Nil N/A N/A N/A RSUs Nil N/A N/A N/A Paul Sun CFO 10,549 (0.1944%) Options 1,333 October 30, 2019 62.50 October 30, 2029 RSUs 1,707 May 29, 2023 N/A March 20, 2025 RSUs 18,108 May 20, 2024 N/A May 20, 2027 Paul Mullen Chief Operating Officer 4,024 (0.0741%) Options 400 April 27, 2021 253.75 April 31, 2031 RSUs 1,600 May 29, 2023 N/A March 20, 2025 RSUs 16,955 May 20, 2024 N/A May 20, 2027 Deborah Greenberg Chief Legal and Corporate Services Officer and Corporate Secretary 5,354 (0.0986%) Options Nil N/A N/A N/A RSUs 1,920 May 29, 2023 N/A March 20, 2025 RSUs 20,346 May 20, 2024 N/A May 20, 2027

Page 56

Notes: (1) Percentages based on 5,427,795 Common Shares issued and outstanding as of March 27, 2025. The numbers of Common Shares in this column are derived from Canada’s System for Electronic Disclosure by Insiders (“SEDI”). (2) In connection with the RSUs, the expiry dates represent the last vesting dates. 48

Page 57

Share Compensation Plan The Board has previously adopted the Share Compensation Plan that provides for the granting of Options and RSUs on such terms and conditions as prescribed by the Share Compensation Plan. The Share Compensation Plan is a “rolling” plan, pursuant to which the maximum number of Common Shares issuable under the Share Compensation Plan and any other share compensation arrangement of the Company including the RSUs that may be awarded under the Share Compensation Plan, is 15% of the Common Shares then issued and outstanding. The Share Compensation Plan was adopted effective August 19, 2019 and amended effective April 14, 2021. The Share Compensation Plan provides participants (each, a “Participant”), who may include participants who are citizens or residents of the United States (each, a “US Participant”), with the opportunity, through RSUs and Options, to acquire an ownership interest in the Company. The RSUs will rise and fall in value based on the value of the Common Shares. Unlike the Options, the RSUs will not require the payment of any monetary consideration to the Company. Instead, each RSU represents a right to receive one Common Share following the attainment of vesting criteria determined at the time of the award. See “Restricted Share Units – Vesting Provisions” below. The Options, on the other hand, are rights to acquire Common Shares upon payment of monetary consideration (i.e., the exercise price), subject also to vesting criteria determined at the time of the grant. See “Options – Vesting Provisions” below. Purpose of the Share Compensation Plan The stated purpose of the Share Compensation Plan is to advance the interests of the Company and its subsidiaries, and its shareholders by: (a) ensuring that the interests of Participants are aligned with the success of the Company and its subsidiaries; (b) encouraging stock ownership by such persons; and (c) providing compensation opportunities to attract, retain and motivate such persons. Eligible Persons The following people are eligible to participate in the Share Compensation Plan: any officer or employee of the Company or any officer or employee of any subsidiary of the Company and, solely for purposes of the grant of Options, any director of the Company or any director of any subsidiary of the Company, and any Consultant (defined under the Share Compensation Plan as an individual (other than an employee or a director of the Company) or a corporation that is not a U.S. Person that: (a) is engaged to provide on an ongoing bona fide basis, consulting, technical, management or other services to the Company or to an affiliate of the Company, other than services provided in relation to an offer or sale of securities of the Company in a capital raising transaction, or services that promote or maintain a market for the Company’s securities; (b) provides the services under a written contract between the Company or the affiliate and the individual or the Company, as the case may be; (c) in the reasonable opinion of the Company, spends or will spend a significant amount of time and attention on the affairs and business of the Company or an affiliate of the Company; and (d) has a relationship with the Company or an affiliate of the Company that enables the individual to be knowledgeable about the business and affairs of the Company. Administration of the Share Compensation Plan The Share Compensation Plan is administered by the Board or such other persons as may be designated by the Board (the “Administrators”) based on the recommendation of the Board or the compensation committee of the Board, if applicable. The Administrators determine the eligibility of persons to participate in the Share Compensation Plan, when RSUs and Options will be awarded or granted, the number of RSUs and Options to be awarded or granted, the vesting criteria for each award of RSUs and grant of Options and all other terms and conditions of each award and grant, in each case in accordance with applicable securities laws and the requirements of the CSE and the Nasdaq. Restrictions on the Award of RSUs and Grant of Options The awards of RSUs and grants of Options under the Share Compensation Plan is subject to a number of restrictions: (a) the total number of Common Shares issuable to insiders under the Share Compensation Plan and any other share compensation arrangements of the Company cannot exceed 15% of the Common Shares then outstanding; and 49

Page 58

(b) the aggregate sales price (meaning the sum of all cash, property, notes, cancellation of debt, or other consideration received or to be received by the Company for the sale of the securities) or amount of Common Shares issued during any consecutive 12 month period will not exceed the greatest of the following: (i) US$1,000,000; (ii) 15% of the total assets of the Company, measured at the Company’s most recent balance sheet date; or (iii) 15% of the outstanding amount of the Common Shares, measured at the Company’s most recent balance sheet date. In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of the Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may in their sole discretion make such changes or adjustments, if any, as the Administrators consider fair or equitable to reflect such change or event including, without limitation, adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto. Restricted Share Units The total number of Common Shares that may be issued on exercise of Options and RSUs, together with any other share compensation arrangements of the Company, shall not exceed 15% of the number of issued and outstanding Common Shares from time to time. Mechanics for RSUs RSUs awarded to Participants under the Share Compensation Plan are credited to an account that is established on their behalf and maintained in accordance with the Share Compensation Plan. After the relevant date of vesting of any RSUs awarded under the Share Compensation Plan, a Participant shall be entitled to receive and the Company shall issue or pay (at its discretion): (i) a lump sum payment in cash equal to the number of vested RSUs recorded in the Participant’s account multiplied by the volume weighted average price of the Common Shares traded on the CSE for the five (5) consecutive trading days prior to the payout date; (ii) the number of Common Shares required to be issued to a Participant upon the vesting of such Participant’s RSUs in the Participant’s account will be, duly issued as fully paid and non-assessable shares and such Participant shall be registered on the books of the Company as the holder of the appropriate number of Common Shares; or (iii) any combination of thereof. Vesting Provisions The Share Compensation Plan provides that: (i) at the time of the award of RSUs, the Administrators will determine the vesting criteria applicable to the awarded RSUs; (ii) vesting of RSUs may include criteria such as performance vesting; (iii) each RSU shall be subject to vesting in accordance with the terms set out in an agreement evidencing the award of the RSU attached as Exhibit A to the Share Compensation Plan (or in such form as the Administrators may approve from time to time) (each an “RSU Agreement”); and (iv) all vesting and issuances or payments in respect of an RSU shall be completed no later than December 15 of the third calendar year commencing after the award date for such RSU. It is the current intention that RSUs may be awarded with both time-based vesting provisions as a component of the Company’s annual incentive compensation program, and performance based vesting provisions as a component of the Company’s long term incentive compensation program. Under the Share Compensation Plan, should the date of vesting of an RSU fall within a blackout period or within nine business days following the expiration of a blackout period, the date of vesting will be automatically extended to the tenth business day after the end of the blackout period. 50

Page 59

Termination, Retirement and Other Cessation of Employment in connection with RSUs A person participating in the Share Compensation Plan will cease to be eligible to participate in the following circumstances: (i) receipt of any notice of termination of employment or service (whether voluntary or involuntary and whether with or without cause); (ii) retirement; and (iii) any cessation of employment or service for any reason whatsoever, including disability and death (an “Event of Termination”). In such circumstances, any vested RSUs will be issued (and with respect to each RSU of a US Participant, such RSU will be settled and shares issued as soon as practicable following the date of vesting of such RSU as set forth in the applicable RSU Agreement, but in all cases within 60 days following such date of vesting; and unless otherwise determined by the Administrators in their discretion, any unvested RSUs will be automatically forfeited and cancelled (and with respect to any RSU of a US Participant, if the Administrators determine, in their discretion, to waive vesting conditions applicable to an RSU that is unvested at the time of an Event of Termination, such RSU shall not be forfeited or cancelled, but instead will be deemed to be vested and settled and shares delivered following the date of vesting date of such RSU as set forth in the applicable RSU Agreement). Notwithstanding the above, if a person retires in accordance with the Company’s retirement policy at such time, the pro rata portion of any unvested performance based RSUs will not be forfeited or cancelled and instead shall be eligible to become vested in accordance with the vesting conditions set forth in the applicable RSU Agreement after such retirement (as if retirement had not occurred), but only if the performance vesting criteria, if any, have been met on the applicable date. For greater certainty, if a person is terminated for just cause, all unvested RSUs will be forfeited and cancelled. Options The total number of Common Shares that may be issued on exercise of Options and RSUs, together with any other share compensation arrangements of the Company, shall not exceed 15% of the number of issued and outstanding Common Shares from time to time. Mechanics for Options Each Option granted pursuant to the Share Compensation Plan will entitle the holder thereof to the issuance of one Common Share upon achievement of the vesting criteria and payment of the applicable exercise price. Options granted under the Share Compensation Plan will be exercisable for Common Shares issued from treasury once the vesting criteria established by the Administrators at the time of the grant have been satisfied. However, the Company will continue to retain the flexibility through the amendment provisions in the Share Compensation Plan to satisfy its obligation to issue Common Shares by making a lump sum cash payment of equivalent value (i.e., pursuant to a cashless exercise), provided there is a full deduction of the number of underlying Common Shares from the Share Compensation Plan’s reserve. Vesting Provisions The Share Compensation Plan provides that the Administrators may determine when any Option will become exercisable and may determine that Options shall be exercisable in instalments or pursuant to a vesting schedule. The Option agreement will disclose any vesting conditions prescribed by the Administrators. Termination, Retirement and Other Cessation of Employment in connection with Options A person participating in the Share Compensation Plan will cease to be eligible to participate where there is an Event of Termination. In such circumstances, unless otherwise determined by the Administrators in their discretion, any unvested Options will be automatically cancelled, terminated and not available for exercise and any vested Options may be exercised only before the earlier of: (i) the termination of the Option; and (ii) six months after the date of the Event of Termination. If a person is terminated for just cause, all Options (whether or not then exercisable) will be automatically cancelled. 51

Page 60

Other Terms The Administrators will determine the exercise price and term/expiration date of each Option, provided that the exercise price in respect of that Option shall not be less than the Market Price on the date of grant. “Market Price” is defined in the Share Compensation Plan, as of any date, the closing price of the Common Shares on the CSE for the last market trading day prior to the date of grant of the Option or if the Common Shares are not listed on a stock exchange, the Market Price shall be determined in good faith by the Administrators. No Option shall be exercisable after ten years from the date the Option is granted. Under the Share Compensation Plan, should the term of an Option expire on a date that falls within a blackout period or within nine business days following the expiration of a blackout period, such expiration date will be automatically extended to the tenth business day after the end of the blackout period. Unless otherwise determined by the Board, in the event of a change of control, any surviving or acquiring corporation shall assume any Option outstanding under the Share Compensation Plan on substantially the same economic terms and conditions or substitute or replace similar options for those Options outstanding under the Share Compensation Plan on substantially the same economic terms and conditions. Transferability RSUs awarded and Options granted under the Share Compensation Plan or any rights of a Participant cannot be transferred, assigned, charged, pledged or hypothecated, or otherwise alienated, whether by operation of law or otherwise. Reorganization and Change of Control Adjustments In the event of any declaration by the Company of any stock dividend payable in securities (other than a dividend which may be paid in cash or in securities at the option of the holder of Common Shares), or any subdivision or consolidation of Common Shares, reclassification or conversion of the Common Shares, or any combination or exchange of securities, merger, consolidation, recapitalization, amalgamation, plan of arrangement, reorganization, spin off involving the Company, distribution (other than normal course cash dividends) of Company assets to holders of Common Shares, or any other corporate transaction or event involving the Company or the Common Shares, the Administrators may make such changes or adjustments, if any, as they consider fair or equitable, to reflect such change or event including adjusting the number of Options and RSUs outstanding under the Share Compensation Plan, the type and number of securities or other property to be received upon exercise or redemption thereof, and the exercise price of Options outstanding under the Share Compensation Plan, provided that the value of any Option or RSU immediately after such an adjustment shall not exceed the value of such Option or RSU prior thereto. Amendment Provisions in the Share Compensation Plan The Board may amend the Share Compensation Plan or any RSU or Option at any time without the consent of any Participant provided that such amendment shall: (a) not adversely alter or impair any RSU previously awarded or any Option previously granted, except as permitted by the adjustment provisions of the Share Compensation Plan and with respect to RSUs and Options of US Participants; (b) be subject to any regulatory approvals including, where required, the approval of the CSE or the Nasdaq; and (c) be subject to shareholder approval, where required, by the requirements of the CSE or the Nasdaq, provided that shareholder approval shall not be required for the following amendments: (i) amendments of a “housekeeping nature”, including any amendment to the Share Compensation Plan or a RSU or Option that is necessary to comply with applicable laws, tax or accounting provisions or the requirements of any regulatory authority or Exchange and any amendment to the Share Compensation Plan or a RSU or Option to correct or rectify any ambiguity, defective provision, error or omission therein, including any amendment to any definitions therein; 52

Page 61

(ii) amendments that are necessary or desirable for RUS or Options to qualify for favourable treatment under any applicable tax law; (iii) a change to the vesting provisions of any RSU or any Option (including any alteration, extension or acceleration thereof); (iv) a change to the termination provisions of any Option or RSU (for example, relating to termination of employment, resignation, retirement or death) that does not entail an extension beyond the original expiration date; (v) the introduction of features to the Share Compensation Plan that would permit the Company to, instead of issuing Common Shares from treasury upon the vesting of the RSUs, retain a broker and make payments for the benefit of Participants to such broker who would purchase Common Shares in the open market for such Participants; (vi) the amendment of the Share Compensation Plan as it relates to making lump sum payments to Participants upon the vesting of the RSUs; and (vii)the amendment of the cashless exercise feature set out in the Share Compensation Plan. (d) be subject to disinterested shareholder approval in the event of any reduction in the exercise price of any Option granted under the Share Compensation Plan to an insider Participant . For greater certainty, shareholder approval will be required in circumstances where an amendment to the Share Compensation Plan would: (a) increase the fixed maximum percentage of issued and outstanding Common Shares issuable under the Share Compensation Plan, other than by virtue of the adjustment provisions in the Share Compensation Plan, or change from a fixed maximum percentage of issued and outstanding Common Shares to a fixed maximum number of Common Shares; (b) increase the limits referred to above under “Restrictions on the Award of RSUs and Grant of Options”; (c) reduce the exercise price of any Option (including any cancellation of an Option for the purpose of reissuance of a new Option at a lower exercise price to the same person); (d) extend the term of any Option beyond the original term (except if such period is being extend by virtue of a blackout period); or (e) amend the amendment provisions in Section 6.4 of the Share Compensation Plan. 6.F. Action to Recover Erroneously Awarded Compensation Not Applicable. ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 7.A. Major Shareholders To the knowledge of the Board and executive officers of the Company, other than as disclosed below, as at March 27, 2025 no persons or companies beneficially own, directly or indirectly or exercise control or direction over shares carrying 5% or more of the voting rights attached to all outstanding shares of the Company . No holder of Common Shares has different voting rights from any other holders of Common Shares. Armistice Capital, LLC and Steven Boyd (collectively “Armistice”) reported on a Schedule 13-G, filed with the SEC on February 14, 2024, that they were the beneficial owner of 4,938,978 Common Shares (on a pre-Consolidation basis). Post-Consolidation of the Common Shares, Armistice beneficially holds 480,794 shares, representing 8.86% of the Company’s common shares. 53

Page 62

7.B. Related Party Transactions Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of members of the Company’s Board of Directors and corporate officers. On August 1, 2019, the Company entered in a business services agreement (the “Agreement”) with Business Instincts Group, 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 at fees set out in the Agreement. For the year ended December 31, 2024, the company incurred fees of $273,475 (December 31, 2023 - $429,766) which are included in professional fees. As at December 31, 2024, the Company was indebted to this company in the amount of $Nil (December 31, 2023 - $3,780). 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 and all fees are set in the Consultant Agreement. For the year ended December 31, 2024, the Company incurred fees of $487,688 (December 31, 2023 - $592,500) included in professional fees. As at December 31, 2024, the Company was indebted to this company in the amount of $55,781 (December 31, 2023 - $35,417). 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 year ended December 31, 2024, the Company incurred fees of $116,266 (December 31, 2023 - $215,019) included in professional fees. As at December 31, 2024, the Company was indebted to this company in the amount of $18,000 (December 31, 2023 - $9,287). Trade payables and accrued liabilities As at December 31, 2024, the Company had $185,032 (December 31, 2023 - $190,664) payable to related parties that was included in accounts payable. The balances outstanding are unsecured, non-interest bearing and due on demand. Key management compensation Key management includes the Company’s directors and members of the executive management team. Compensation awarded to key management for the years ended December 31, 2024, 2023, and 2022 included: For the year ended December 31 2024 ($) 2023 ($) 2022 ($) Director fees 504,619 600,933 522,349 Management fees paid to a company controlled by CEO and director 487,688 592,500 566,487 Management fees paid to a company controlled by a director 116,266 - - Management fees paid to a company that the CEO holds an economic interest in 273,475 429,766 442,485 Management fees paid to a company controlled by a director Nil 215,019 383,288 Salaries 998,951 979,154 843,917 Share-based payments 701,820 1,109,232 2,106,906 Totals 3,082,819 3,926,604 4,865,432 54

Page 63

7.C. Interests of Experts and Counsel Not applicable. ITEM 8. FINANCIAL INFORMATION The audited consolidated financial statements for the years ended December 31, 2024 and 2023 can be found under “Item 18. Financial Statements”. 8.B. Significant Changes We are not aware of any significant change that has occurred since December 31, 2024, the date of the audited consolidated financial statements included in this Annual Report, and that has not been disclosed elsewhere in this Annual Report. ITEM 9. THE OFFER AND LISTING. 9.A. Offer and Listing Details The Common Shares are listed and posted for trading on the CSE under the trading symbol “DPRO”, on the Nasdaq under the symbol “DPRO”, and on the Frankfurt Stock Exchange under the trading symbol “3U8A”. 9.B. Plan of Distribution Not applicable. 9.C. Markets A discussion of all stock exchanges and other regulated markets on which our securities are listed is provided under “Item 9.A. Offer and Listing Details.” 9.D. Selling Shareholders Not applicable. 9.E. Dilution Not applicable. 9.F. Expenses of the Issue Not applicable. ITEM 10. ADDITIONAL INFORMATION 10.A. Share Capital Not applicable. 10.B. Memorandum and Articles of Association The Company was incorporated under the laws of the Province of British Columbia, Canada, and was assigned the number BC1166724. The Company is governed by the BCBCA. Our Articles do not contain a description of our objects and purposes. 55

Page 64

Our Articles do not restrict a director’s power to vote on a proposal, arrangement or contract in which the director is materially interested, vote compensation to themselves or any other members of their body in the absence of an independent quorum or exercise borrowing powers. There is no mandatory retirement age for our directors and our directors are not required to own securities of the Company in order to serve as directors. Our authorized share capital consists of an unlimited number of Common Shares of which 5,427,795 were issued and outstanding as of March 27, 2025 and an unlimited number of Preferred Shares, issuable in series, none of which were issued and outstanding as of March 27, 2025. Each Common Share entitles the holder to receive notice of and attend all meetings of the shareholders. Each Common Share carries the right to one vote. The holders of Common Shares are entitled to receive any dividends declared by the Company in respect of the Common Shares at such time and in such amount as may be determined by the Board, in its discretion. In the event of the liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, holders of Common Shares are also entitled to participate, rateably, in the distribution of the assets of the Company, subject to the rights of the holders of any other class of shares ranking in priority to the Common Shares. The Preferred Shares may be issuable in series and the directors may, from time to time before the issue of any Preferred Shares of any particular series, define and attach special rights, privileges, restrictions, and conditions to the Preferred Shares of any series, including voting rights, entitlement to dividends, and redemption, conversion, and exchange rights. In the event of the liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, holders of Preferred Shares will rank on a parity with holders of the Preferred Shares of every other series and be entitled to preference over the Common Shares and over any other shares of the Company ranking junior to the Preferred Shares. The provisions in our Articles attaching to the Common Shares may be altered, amended, repealed, suspended or changed by the affirmative vote of the holders of not less than two-thirds of the Common Shares present in person or by proxy at any such meeting of holders. Our Articles provide for our directors to hold office until the expiry of his or her term (which is stipulated to be immediately before the next election or appointment of directors at an annual general meeting of our shareholders) or until his or her successor is elected or appointed, unless their respective office is earlier vacated in accordance with our Articles or with the provisions of the BCBCA. A director appointed or elected to fill a vacancy on the Board holds office for the unexpired term of their predecessor. An annual meeting of shareholders must be held at such time in each year that is not later than 15 months after the last preceding annual meeting and at such place as the Board may from time to time determine. The holders of not less than five percent of the issued Common Shares that carry the right to vote at a meeting may requisition our Board to call a meeting of shareholders for the purposes stated in the requisition. The quorum for the transaction of business at any meeting of shareholders is two persons who are, or represented by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to vote at the meeting. In addition to those persons who are entitled to vote at a meeting of shareholders, the only other persons entitled to be present at the meeting are the directors, the president (if any), the secretary (if any), the assistant secretary (if any), any lawyer for the Company, the auditor of the Company and any other persons invited to be present at the meeting by the directors or by the chair of the meeting and any persons entitled or required under the BCBCA or our Articles to be present at the meeting; but if any of those persons does attend the meeting, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting. Except as provided in the Investment Canada Act, there are no limitations specific to the rights of non-Canadians to hold or vote the Common Shares under the laws of Canada or the Province of British Columbia, or in our charter documents. Our Articles do not contain provisions that would have an effect of delaying, deferring or preventing a change in control of the Company. Our Articles do not contain any provisions that would operate only with respect to a merger, acquisition or corporate restructuring of our company. 56

Page 65

Our Articles do not contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed. Our Articles are not significantly different from the requirements of the BCBCA and the conditions imposed by our Articles governing changes in capital are not more stringent than what is required by the BCBCA. 10.C. Material Contracts There are no material contracts entered into by Draganfly within the two most recently completed financial years, or before the two most recently completed financial years but which are still in effect, other than contracts entered into in the ordinary course of business. 10.D. Exchange Controls There are currently no government laws, decrees, regulations or other legislation of Canada or the United States that restrict the export or import of capital (including the availability of cash and cash equivalents) or that affect the remittance of dividends, distributions, interest or other payments to non-residents of Canada or the United States holding our Common Shares. Any remittances of dividends to United States residents and to other non-residents are, however, subject to withholding tax. See “Taxation” below. 10.E. Taxation Certain U.S. Federal Income Tax Considerations The following discussion describes the material U.S. federal income tax consequences relating to the ownership and disposition of Common Shares by U.S. Holders (as defined below). This discussion applies to U.S. Holders that hold Common Shares as capital assets (generally, property held for investment). This discussion is based on the Code, U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as certain financial institutions, banks, insurance companies, broker-dealers and traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities or government organizations, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, persons who hold Common Shares as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or integrated investment, persons required to accelerate the recognition of any item of gross income with respect to the Common Shares as a result of such income being recognized on an applicable financial statement, persons that have a “functional currency” other than the U.S. dollar, persons that own directly, indirectly or through attribution 10% or more of the voting power or value of our shares, corporations that accumulate earnings to avoid U.S. federal income tax, partnerships and other pass-through entities (or arrangements treated as a partnership for U.S. federal income tax purposes), and investors in such pass-through entities). This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative minimum tax consequences. As used in this discussion, the term “U.S. Holder” means a beneficial owner of Common Shares that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the United States, (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate the income of which is subject to U.S. federal income tax regardless of its source or (4) a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes. If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences relating to an investment in the Common Shares will depend in part upon the status and activities of such entity or arrangement and the particular partner. Any such entity or arrangement should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of the purchase, ownership and disposition of Common Shares. U.S. Holders should consult their own tax advisors as to the particular tax consequences applicable to them relating to the purchase, ownership and disposition of Common Shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws. 57

Page 66

Passive Foreign Investment Company Consequences In general, a corporation organized outside the United States will be treated as a PFIC, for any taxable year in which either (1) at least 75% of its gross income is “passive income”, or (2) on average at least 50% of its assets, determined on a quarterly basis, are assets that produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from the sale or exchange of property that gives rise to passive income. Assets that produce or are held for the production of passive income generally include cash, even if held as working capital or raised in a public offering, marketable securities, and other assets that may produce passive income. Generally, in determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. Based on the current and expected composition of our income and the value of our assets, we believe that we were not a PFIC United States federal income tax purposes for the for the taxable year ended December 31, 2024 and we expect that we will not be a PFIC for the current taxable year. Nevertheless, because our PFIC status must be determined annually with respect to each taxable year and will depend on the composition and character of our assets and income, including our use of proceeds from an offering of Common Shares, and the value of our assets (which may be determined, in part, by reference to the market value of Common Shares, which may be volatile) over the course of such taxable year, we may be a PFIC in any taxable year. The determination of whether we will be or become a PFIC may also depend, in part, on how, and how quickly, we use our liquid assets and the cash raised in an offering of Common Shares. If we determine not to deploy significant amounts of cash for active purposes, our risk of being a PFIC may substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for any future taxable year. In addition, it is possible that the U.S. Internal Revenue Service may challenge our classification of certain income and assets as non-passive, which may result in us being or becoming a PFIC in the current or subsequent years. If we are a PFIC in any taxable year during which a U.S. Holder owns Common Shares, the U.S. Holder could be liable for additional taxes and interest charges under the “PFIC excess distribution regime” upon (1) a distribution paid during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period for the Common Shares, and (2) any gain recognized on a sale, exchange or other disposition, including a pledge, of the Common Shares, whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or gain would be determined by allocating the distribution or gain ratably over the U.S. Holder’s holding period for Common Shares. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable, to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to the tax. If we are a PFIC for any year during which a U.S. Holder holds Common Shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years during which the U.S. Holder holds the Common Shares, unless (i) we cease to meet the requirements for PFIC status and the U.S. Holder makes a “deemed sale” election with respect to the Common Shares or for the period immediately preceding our cessation in meeting the tests described above the Common Shares were subject to a mark-to-market election or (ii) the U.S. Holder makes a timely and effective “qualified electing fund” election (“QEF Election”) with respect to all taxable years during such U.S. Holder’s holding period in which the we are a PFIC. If the election is made, the U.S. Holder will be deemed to sell the Common Shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder’s Common Shares would not be treated as shares of a PFIC unless we subsequently become a PFIC. 58

Page 67

If we are a PFIC for any taxable year during which a U.S. Holder holds Common Shares and one of our non-U.S. corporate subsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to our non-U.S. subsidiaries. If we are a PFIC, a U.S. Holder will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on Common Shares if such U.S. Holder makes a valid “mark-to-market” election for our Common Shares. A mark-to-market election is available to a U.S. Holder only for “marketable stock”. Our Common Shares will be marketable stock as long as they remain listed on the Nasdaq and are regularly traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. If a mark-to-market election is in effect, a U.S. Holder generally would take into account, as ordinary income each year, the excess of the fair market value of Common Shares held at the end of such taxable year over the adjusted tax basis of such Common Shares. The U.S. Holder would also take into account, as an ordinary loss each year, the excess of the adjusted tax basis of such Common Shares over their fair market value at the end of the taxable year, but only to the extent of the excess of amounts previously included in income over ordinary losses deducted as a result of the mark-to-market election. The U.S. Holder’s tax basis in Common Shares would be adjusted to reflect any income or loss recognized as a result of the mark-to-market election. Any gain from a sale, exchange or other disposition of Common Shares in any taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss. A mark-to-market election will not apply to Common Shares for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any non-U.S. subsidiaries that we may organize or acquire in the future. Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs that we may organize or acquire in the future notwithstanding the U.S. Holder’s mark-to-market election for the Common Shares. A U.S. Holder who makes a QEF Election generally must report on a current basis its share of our net capital gain and ordinary earnings for any year in which were are a PFIC, whether or not we distribute any amounts to our shareholders. However, U.S. holders should be aware that there can be no assurance that we will satisfy the record keeping requirements that apply to a QEF, or that we will supply U.S. holders with information that such U.S. holders require to report under the QEF election rules, in the event that the Company is a PFIC and a U.S. holder wishes to make a QEF election. Each U.S. person that is an investor of a PFIC is generally required to file an annual information return on IRS Form 8621 containing such information as the U.S. Treasury Department may require. The failure to file IRS Form 8621 could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax. The U.S. federal income tax rules relating to PFICs are very complex. U.S. Holders are strongly urged to consult their own tax advisors with respect to the impact of PFIC status on the purchase, ownership and disposition of Common Shares, the consequences to them of an investment in a PFIC, any elections available with respect to the Common Shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition of Common Shares of a PFIC. 59

Page 68

Distributions on the Common Shares Subject to the discussion above under “— Passive Foreign Investment Company Consequences,” a U.S. Holder that receives a distribution with respect to Common Shares generally will be required to include the gross amount of such distribution (before reduction for any Canadian withholding taxes withheld therefrom) in gross income as a dividend when actually or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s Common Shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder’s Common Shares, the remainder will be taxed as capital gain. Because we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all distributions to be reported to them as dividends. Distributions on Common Shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes and generally will constitute passive category income. Such dividends will not be eligible for the “dividends received” deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations. Dividends paid by a “qualified foreign corporation” are eligible for taxation in the case of non-corporate U.S. Holders at a reduced long- term capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain requirements are met. Each non-corporate U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances. A non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on Common Shares that are readily tradable on an established securities market in the United States. We believe that we qualify as a resident of Canada for purposes of, and are eligible for the benefits of, the U.S.-Canada Treaty, which the IRS has determined is satisfactory for purposes of the qualified dividend rules and that it includes an exchange of information provision, although there can be no assurance in this regard. Further, our Common Shares will generally be considered to be readily tradable on an established securities market in the United States if they remain listed on the Nasdaq, as we intend the Common Shares to be. Therefore, subject to the discussion above under “—Passive Foreign Investment Company Consequences”, if the U.S. Treaty is applicable, or if the Common Shares are readily tradable on an established securities market in the United States, dividends paid on Common Shares will generally be “qualified dividend income” in the hands of non-corporate U.S. Holders, provided that certain conditions are met, including conditions relating to holding period and the absence of certain risk reduction transactions. Sale, Exchange or Other Disposition of Common Shares Subject to the discussion above under “— Passive Foreign Investment Company Consequences,” a U.S. Holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of Common Shares in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on the sale, exchange or other disposition and such U.S. Holder’s adjusted tax basis in the Common Shares. Such capital gain or loss generally will be long-term capital gain taxable at a reduced rate for non-corporate U.S. Holders or long-term capital loss if, on the date of sale, exchange or other disposition, the Common Shares were held by the U.S. Holder for more than one year. Any capital gain of a non- corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a U.S. Holder from the sale or other disposition of Common Shares will generally be gain or loss from sources within the United States for U.S. foreign tax credit purposes. Medicare Tax Certain U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% Medicare tax on all or a portion of their net investment income, which may include their gross dividend income and net gains from the disposition of Common Shares. If you are a U.S. person that is an individual, estate or trust, you are encouraged to consult your tax advisors regarding the applicability of this Medicare tax to your income and gains in respect of your investment in Common Shares. 60

Page 69

Information Reporting and Backup Withholding U.S. Holders may be required to file certain U.S. information reporting returns with the IRS with respect to an investment in Common Shares, including, among others, IRS Form 8938 (Statement of Specified Foreign Financial Assets). As described above under “Passive Foreign Investment Company Consequences”, each U.S. Holder who is a shareholder of a PFIC must file an annual report containing certain information. U.S. Holders paying more than US$100,000 for Common Shares may be required to file IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) reporting this payment. Substantial penalties may be imposed upon a U.S. Holder that fails to comply with the required information reporting. Dividends on and proceeds from the sale or other disposition of Common Shares may be reported to the IRS unless the U.S. Holder establishes a basis for exemption. Backup withholding may apply to amounts subject to reporting if the holder (1) fails to provide an accurate U.S. taxpayer identification number or otherwise establish a basis for exemption, or (2) is described in certain other categories of persons. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS. U.S. Holders should consult their own tax advisors regarding the backup withholding tax and information reporting rules. THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF THE COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES. Certain Canadian Federal Income Tax Considerations for United States Residents The following is, at the date of this Annual Report, a summary of certain Canadian federal income tax considerations generally applicable to the holding and disposition of Common Shares acquired by a holder who, at all relevant times, (a) for the purposes of the Tax Act (i) is not resident, or deemed to be resident, in Canada, (ii) deals at “arm’s length” with the Company, and is not “affiliated” with the Company (each as defined in the Tax Act), (iii) acquires and holds Common Shares as capital property, (iv) does not use or hold Common Shares in the course of carrying on, or otherwise in connection with, a business carried on or deemed to be carried on in Canada, and (v) is not an insurer that carries on an insurance business in Canada and elsewhere or “authorized foreign bank” (as defined in the Tax Act), or other holder of special status, and (b) for the purposes of the Canada-U.S. Tax Convention (1980) (the “Tax Treaty”), is a resident of the United States, has never been a resident of Canada, does not have and has not had, at any time, a “permanent establishment” (as defined in the Tax Treaty) of any kind in Canada, and otherwise qualifies for the full benefits of the Tax Treaty. Holders who meet all the criteria in clauses (a) and (b) above are referred to herein as “United States Holders”, and this summary only addresses such United States Holders. This summary does not deal with special situations, such as the particular circumstances of traders or dealers, tax exempt entities, insurers or financial institutions, or other holders of special status or in special circumstances. Such holders, and all other holders who do not meet the criteria in clauses (a) and (b) above, should consult their own tax advisors. This summary is based on the current provisions of the Tax Act, the regulations promulgated thereunder (the “Regulations”), the current provisions of the Tax Treaty (each as in force as of the date of this Annual Report) and the Company’s understanding of the administrative policies and assessing practices of the Canada Revenue Agency (the “CRA”) published in writing prior to the date hereof. This summary takes into account all specific proposals to amend the Tax Act and Regulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”) and assumes that such Proposed Amendments will be enacted in the form proposed. However, such Proposed Amendments might not be enacted in the form proposed, or at all. This summary does not otherwise take into account or anticipate any changes in law or administrative policies or assessing practices, whether by legislative, governmental or judicial decision or action, nor does it take into account tax laws of any province or territory of Canada or of any other jurisdiction outside Canada, which may differ significantly from those discussed in this summary. 61

Page 70

For the purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of Common Shares must generally be expressed in Canadian dollars. Amounts denominated in United States currency generally must be converted into Canadian dollars using a rate of exchange that is acceptable to the CRA. This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular United States Holder, and no representation with respect to the Canadian federal income tax consequences to any particular United States Holder or prospective United States Holder is made. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, all United States Holders should consult with their own tax advisors for advice with respect to their own particular circumstances. Withholding Tax on Dividends Amounts paid or credited or deemed to be paid or credited as, on account or in lieu of payment of, or in satisfaction of, dividends on Common Shares to a United States Holder will be subject to Canadian withholding tax. Under the Tax Act, the rate of withholding is 25% of the gross amount of the dividend. Under the Tax Treaty, the rate of withholding on any such dividend beneficially owned by a United States Holder is generally reduced to 15%, and may further be reduced to 5% if the United States Holder is a company entitled to full benefits under the Tax Treaty that owns, directly or indirectly, at least 10% of the voting stock of the Company. Dispositions of Common Shares A United States Holder generally will not be subject to tax under the Tax Act in respect of a capital gain realized on the disposition or deemed disposition of a Common Share, nor will a capital loss arising therefrom be recognized under the Tax Act, unless such Common Share constitutes “taxable Canadian property” (as defined in the Tax Act) of the United States Holder at the time of disposition and the United States Holder is not entitled to relief under the Tax Treaty. Provided the Common Shares are listed on a “designated stock exchange” (as defined in the Tax Act) (which currently includes the Nasdaq and CSE) and are so listed at the time of disposition, the Common Shares generally will not constitute “taxable Canadian property” of a United States Holder at that time unless, at any time during the 60-month period immediately preceding the disposition, the following two conditions are met concurrently: (i) 25% or more of the issued shares of any class or series of shares of the Company were owned by or belonged to one or any combination of (a) the United States Holder, (b) persons with whom the United States Holder did not deal at “arm’s length” (within the meaning of the Tax Act), or (c) partnerships in which the United States Holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships; and (ii) more than 50% of the fair market value of the Common Shares was derived directly or indirectly from one or any combination of (a) real or immovable property situated in Canada, (b) “Canadian resource properties” (as defined in the Tax Act), (c) “timber resource properties” (as defined in the Tax Act), or (d) options in respect of, interests in, or, for civil law purposes, a right in, the foregoing property, whether or not such property exists. Notwithstanding the foregoing, a Common Share may be deemed to be “taxable Canadian property” in certain other circumstances. United States Holders should consult their own tax advisors as to whether their Common Shares will constitute “taxable Canadian property”. United States Holders who may hold Common Shares as “taxable Canadian property” should consult their own tax advisors with respect to the application of Canadian capital gains taxation, any potential relief under the Tax Treaty, and special compliance procedures under the Tax Act, none of which are described in this summary. 62

Page 71

SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE CANADIAN OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY NON-U.S., STATE OR LOCAL TAXES. 10.F. Dividends and Paying Agents Not applicable. 10.G. Statement by Experts Not applicable. 10.H. Documents on Display Documents concerning our company referred to in this Annual Report may be viewed by appointment during normal business hours at our registered and records office at Suite 2700, 1133 Melville Street, Vancouver, British Columbia V6E 4E5. 10.I. Subsidiary Information Not applicable. 10.J. Annual Report to Security Holders The Company will prove this Annual Report to securityholders, as applicable, in electronic format in accordance with the EDGAR Filer Manual. ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed in varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management processes, inclusive of 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 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. Receivables are shown net of any provision made for impairment of the receivables. Due to this factor, the Company believes that no additional credit risk, beyond amounts provided for collection loss, is inherent in receivables. Credit and liquidity risk associated with cash and the marketable security is managed by ensuring assets are placed with major financial institutions with strong investment grade ratings. Credit risk on trade and other receivables reflects the risk that the Company may be unable to recover them. Trade and other receivables that are greater than 30 days are considered past due. The table below sets out the status of trade and other receivables, allowance for doubtful accounts of $140,011 has been recorded as at December 31, 2024 and $216,238 December 31, 2023. December 31, 2024 December 31, 2023 0 – 30 days $ 346,979 $ 271,622 31 – 60 days 150,575 109,928 61 – 90 days 32,002 64,259 91 + days 197,153 203,803 $ 726,709 $ 649,612 63

Page 72

Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents. Historically, the Company’s sole source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding. Interest Rate Risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposure through its normal operating and financing activities. The Company is exposed to minimal interest rate risk on its cash balances as they carry a floating rate of interest. We do not currently hedge our interest rate risk. Foreign Currency Risk We are also exposed to market risk related to change in foreign currency exchange rates. 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 engage in significant transactions and activities in currencies other than its functional currency, the Canadian dollar. Such transactions are primarily denominated in the U.S. dollar. Transactions in foreign currencies are translated into Canadian dollars at rates of exchange at the time of such transactions Depending on the timing of the transactions and the applicable currency exchange rates such conversions may positively or negatively impact the Company. We do not currently hedge our foreign exchange rate risk. ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 12.A. Debt Securities Not applicable. 12.B. Warrants and Rights Not applicable. 12.C. Other Securities Not applicable. 12.D. American Depositary Shares Not applicable. PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES Not applicable. ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Not applicable. 64

Page 73

14.E. Use of Proceeds The effective date of the registration statement on Form F-10 (File No. 333-258074) for the Company’s initial underwritten public offering of securities in the United States was July 29, 2021 (defined herein as the “US Offering”). The offering of 5,000,000 Common Shares at a price of U.S.$4.00 per share closed on August 3, 2021 for gross proceeds of U.S.$20,000,000, before deducting underwriting discounts and offering expenses of approximately U.S.$2,400,000 for total net proceeds to the Company from the offering of U.S.$17,600,000. ThinkEquity, a division of Fordham Financial Management, Inc. (“ThinkEquity”), was the sole book-running manager for the offering. In addition, ThinkEquity was granted a 45-day over-allotment option following the closing date to purchase up to an additional 750,000 shares. On September 15, 2021, the Company announced the exercise of 95,966 of the over-allotment shares at a price of U.S.$4.00 per share for additional gross proceeds of U.S.$383,864, bringing the aggregate gross proceeds of the US Offering to U.S.$20,383,864 before deducting underwriting discounts and offering expenses. After deducting underwriting discounts and offering expenses of U.S.$2,400,000, the total net proceeds to the Company from the US Offering were approximately U.S.$17,983,864. None of the net proceeds of the US Offering were paid directly or indirectly to any director or officer of ours or to their associates, persons owning 10% or more of any class of our equity securities, or to any of our affiliates. The Company has fully used the net proceeds of the US Offering. The proceeds that the Company has used have been used for general corporate purposes, including funding ongoing operations, growth initiatives, and working capital. There has been no material change in the use of proceeds from our initial public offering from that described in our prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on July 30, 2021 (the “Supplement”). The Company used the net proceeds of the offering, together with existing cash, for general corporate purposes, including to fund ongoing operations, to fund growth initiatives and/or for working capital requirements including the continuing development and marketing of the Company’s core products, potential acquisitions and research and development, as set out in the Supplement. ITEM 15. CONTROLS AND PROCEDURES Disclosure Controls and Procedures At the end of the period covered by this Annual Report, an evaluation of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and Rule 15d-15(e) under the Exchange Act) was carried out by the Company’s principal executive officer (the “CEO”) and principal financial officer (the “CFO”). Based upon that evaluation, the Company’s CEO and CFO have concluded that, as of the end of the period covered by this Annual Report, the design and operation of the Company’s disclosure controls and procedures are effective to ensure that (i) information required to be disclosed in reports that the Company files or submits to regulatory authorities is recorded, processed, summarized and reported within the time periods specified by regulation, and (ii) is accumulated and communicated to management, including the Company’s CEO and CFO, to allow timely decisions regarding required disclosure. It should be noted that while the Company’s CEO and CFO believe that the Company’s disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that the Company’s disclosure controls and procedures will prevent all errors and fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Management Report on Internal Control Over Financial Reporting & Auditor Attestation Management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Securities Exchange Act of 1934, as amended) and has designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. 65

Page 74

In designing and evaluating the Company’s internal control over financial reporting, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its reasonable judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2024. Attestation Report of Independent Auditor In accordance with the JOBS Act enacted on April 5, 2012, the Company qualifies as an “emerging growth company,” which entitles the Company to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. Specifically, the JOBS Act defers the requirement to have the Company’s independent auditor assess the Company’s internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act. As such, the Company is exempted from the requirement to include an auditor attestation report in this Annual Report for so long as the Company remains an EGC, which may be for as long as five years following its initial registration in the United States. Changes in Internal Control over Financial Reporting During the year ended December 31, 2024, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 16. [RESERVED] ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT The Company’s Audit Committee, which consists exclusively of independent directors within the meaning of NI 52-110 and the Nasdaq listing requirements, is comprised of Kim Moody, Julie Myers and Thomas B. Modly. Kim Moody is the Chair of the Audit Committee. The Board of Directors has determined that Kim Moody, Julie Myers and Thomas B. Modly each meet the independence requirements for directors, including the heightened independence standards for members of the audit committee under Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and NI 52-110. The Board has determined that Kim Moody is “financially literate” within the meaning of NI 52-110 and the Nasdaq listing requirements and an “audit committee financial expert” as defined by Rule 10A-3 under the Exchange Act. For a description of the education and experience of each member of the Audit Committee, see “Item 6A. Directors, Senior Management and Employees.” ITEM 16B. CODE OF ETHICS The Company has adopted a Code of Business Conduct and Ethics applicable to all of its directors, officers and employees, including its CEO and CFO, which is a “code of ethics” as defined in section 406(c) of the Sarbanes-Oxley Act. The Code of Business Conduct and Ethics sets out the fundamental values and standards of behavior that the Company expects from our directors, officers and employees with respect to all aspects of its business. If the Company grants any waiver of the Code of Business Conduct and Ethics, whether explicit or implicit, to a director or executive officer, it will disclose the nature of such waiver on its website to the extent required by, and in accordance with, the rules and regulations of the SEC. The full text of the Code of Business Conduct and Ethics is posted on the Company’s website at www.draganfly.com and the System for Electronic Document Analysis and Retrieval+ (SEDAR+) profile at www.sedarplus.ca. The information on or accessible through the website is not part of and is not incorporated by reference into this Annual Report, and the inclusion of the website address in this Annual Report is only for reference. 66

Page 75

The Audit Committee is responsible for reviewing and evaluating the Code of Business Conduct and Ethics periodically and will recommend any necessary or appropriate changes thereto to the Board for consideration. The Audit Committee will also assist the Board of Directors with the monitoring of compliance with the Code of Business Conduct and Ethics. ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES The following table sets forth information regarding the amount billed and accrued to the Company by Dale Matheson Carr-Hilton Labonte LLP, for the fiscal years ended December 31, 2024 and 2023: Year Ended December 31, Services 2024 2023 Audit Fees(1) $ 235,000 $ 235,000 Audit-Related Fees(2) $ 114,000 $ 83,000 Tax Fees(3) $ 15,000 $ 12,600 Other Fees(4) $ - $ - Notes: (1) “Audit fees” means the aggregate fees billed for professional services rendered by our principal accounting firm for the audit of the Company’s annual financial statements and the review of its comparative interim financial statements. (2) “Audit-related fees” means the aggregate fees billed for professional services rendered by the Company’s principal accounting firm for the assurance and related services, which mainly included the audit and review of financial statements and are not reported under “Audit fees” above. (3) “Tax fees” means the aggregate fees billed for professional services rendered by the Company’s principal accounting firm for tax compliance, tax advice and tax planning. (4) “Other fees” means the aggregate fees incurred in each of the fiscal years listed for the professional tax services rendered by the Company’s principal accounting firm other than services reported under “Audit fees,” “Audit-related fees” and “Tax fees.” The policy of the Company’s Audit Committee is to pre-approve all audit and non-audit services provided by Dale Matheson Carr-Hilton Labonte LLP, its independent registered public accounting firm, including audit services, audit-related services, tax services, and other services as described above. ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not Applicable. ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS Not Applicable. ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT Not applicable. ITEM 16G. CORPORATE GOVERNANCE The Company is a foreign private issuer and its Common Shares are listed on the Nasdaq Capital Market. Rule 5615(a)(3) of the rules of the Nasdaq Stock Market LLC Rules (the “Nasdaq Rules”) permits a foreign private issuer to follow its home country practices in lieu of certain requirements of the 5600 Series of the Nasdaq Rules, which set forth corporate governance requirements. In order to claim such an exemption, the Company must disclose the significant differences between its corporate governance practices and those required to be followed by U.S. domestic issuers under the Nasdaq Rules. Set forth below is a brief summary of such differences. 67

Page 76

Quorum Requirement Nasdaq Rule 5620(c) requires that each company that is not a limited partnership shall provide for a quorum as specified in its by-laws for any meeting of holders of common stock; provided, however, that in no case shall such quorum be less than 33 1/3% of the outstanding shares of the company’s common voting stock. The Company does not presently follow this Nasdaq Rule. Instead, and in accordance with the Nasdaq exemption, the Company complies with the BCBCA which does not require a quorum of no less than 33 1/3% of the outstanding shares of the Company’s common voting shares and provides that the quorum for the transaction of business at a meeting of shareholders is the quorum established by the Company’s Articles, which is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least 5% of the issued shares entitled to be voted at the meeting. Independent Compensation Committee Nasdaq Rule 5605(d)(2) requires that listed companies have a compensation committee comprised entirely of independent directors. The Company does not have a compensation committee comprised entirely of independent directors. Under Canadian securities laws, National Policy 58-201 only recommends that a compensation committee be composed entirely of independent directors. The rules of the CSE likewise do not require an entirely independent compensation committee. ITEM 16H. MINE SAFETY DISCLOSURE Not applicable. ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. ITEM 16J. INSIDER TRADING POLICIES Not Applicable. ITEM 16K. CYBERSECURITY Draganfly conducts annual IT general controls (ITGC) audits through a third-party firm to evaluate internal risks to key business systems. Any significant deficiencies identified are promptly addressed and documented. Additionally, to mitigate external risks, Draganfly has enlisted the services of an Extended Detection and Response (XDR) provider for continuous 24/7 monitoring, threat hunting, incident response, and vulnerability management. The XDR platform aggregates data from various sources including network scanners, endpoint agents, and cloud APIs. This data undergoes rigorous analysis leveraging machine-learning-powered threat intelligence and human expertise to swiftly identify and address cybersecurity threats in real-time. Any unusual findings are promptly communicated to the Systems Administrator via ticketing. In instances of critical alerts posing a material risk to the company, affected systems are immediately quarantined at the kernel level, isolating them from network communication until remedial actions can be taken. Furthermore, Draganfly conducts quarterly reviews of the XDR provider services overseen by the Systems Administrator. To mitigate the risk of the XDR provider compromising Draganfly’s systems, an air-gap approach is implemented, ensuring that the provider cannot directly intervene in Draganfly’s systems except to quarantine systems, a capability that can be terminated by the Systems Administrator at any time. In addition to our robust cybersecurity measures, Draganfly prioritizes employee awareness and readiness to counter emerging threats. Regular cybersecurity training is conducted to educate our staff on recognizing and mitigating social engineering attacks. These sessions emphasize the importance of vigilance and critical thinking when encountering suspicious emails, phone calls, or other forms of communication aimed at deceiving individuals into divulging sensitive information or compromising security protocols. 68

Page 77

As of the current reporting period, Draganfly has not experienced any cybersecurity incidents. However, we recognize that social engineering attacks pose a significant threat to our business operations and financial condition. While we remain vigilant and have implemented robust security measures to mitigate such risks, we acknowledge that social engineering attacks have the potential to compromise our systems and disrupt our operations. The full Board receives a quarterly report and dashboard which sets out our security stance (whether there have been any incidents), and our phish-prone percentage as we believe that is our highest risk factor. Management receives the same quarterly report and as the team meets weekly, any concerns or decisions relating to security are brought forward by the Chief Legal and Corporate Services Officer. Should there be any specific issues or incidents, the Chief Legal and Corporate Services Officer would report them immediately to the Chair of the Board and the chair of the Audit Committee. PART III ITEM 17: FINANCIAL STATEMENTS Refer to Item 18. Financial Statements. ITEM 18: FINANCIAL STATEMENTS Financial Statements Filed as Part of this Annual Report: Independent Auditor’s Report of Dale Matheson Carr-Hilton Labonte LLP , dated March 27, 2025; F-2 Consolidated Statements of Financial Position for the years ended December 31, 2024 and 2023; F-3 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024 and 2023; F-4 Consolidated Statements of Changes in Shareholder Equity (Deficiency) for the years ended December 31, 2024 and 2023; F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023; F-6 Notes to the Consolidated Financial Statements F-7 69

Page 78

ITEM 19. EXHIBITS The following Exhibits are being filed as part of this Annual Report, or are incorporated by reference where indicated: Exhibit Number Description 1.1 Certificate of Incorporation dated June 1, 2018 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001-40688) filed with the SEC on April 4, 2022) 1.2 Articles dated June 1, 2018 (incorporated herein by reference to the Company’s Registration Statement on Form S-8 (Registration Number 333-259459) filed with the SEC on September 10, 2021) 1.3 Certificate of Change of Name dated August 15, 2019 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 1.4 Notice of Articles dated June 1, 2018 (incorporated herein by reference to the Company’s Registration Statement on Form S-8 (Registration Number 333-259459) filed with the SEC on September 10, 2021) 2.1 Specimen Option Agreement of the Company (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 2.2 Specimen Restricted Share Unit Agreement of the Company (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 2.3 Specimen Warrant Certificate of the Company (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 2.4 Specimen Warrant Certificate of the Company (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 2.5 Specimen Warrant Certificate of the Company (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 4.1 Business Services Agreement between the Company and Business Instincts Group Inc. dated August 1, 2019 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 4.2# Share Compensation Plan dated August 9, 2019, as amended April 14, 2021 (incorporated herein by reference to the Company’s Registration Statement on Form S-8 (Registration Number 333-259459) filed with the SEC on September 10, 2021) 4.3# Consultant Agreement with 1502372 Alberta Ltd., dated October 1, 2019 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 4.4# Independent Consultant Agreement Amending Agreement with 1502372 Alberta Ltd. dated April 1, 2022 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 4.5# Independent Consulting Agreement with Scott Larson dated April 1, 2022 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 4.6# Employment Agreement with Paul Sun dated November, 2020 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 4.7# Amending Agreement with Paul Sun, dated September 3, 2021 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 4.8# Employment Agreement Amending Agreement with Paul Sun dated April 1, 2022 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 4.9# Employment Agreement Amendment with Paul Sun dated April 21, 2023 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 4.10# Employment Agreement with Paul Mullen dated April 12, 2021 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 4.11# Employment Agreement Amending Agreement with Paul Mullen dated April 1, 2022 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 4.12# Employment Agreement Amendment with Paul Mullen dated April 1, 2023 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 4.13# Employment Agreement with Deborah Greenberg dated June 3, 2022 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 4.14# Employment Agreement Amendment with Deborah Greenberg dated April 1, 2023 (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 4.15* Common Share Purchase Warrant Issued August 21, 2024 4.16* Pre-Funded Common Share Purchase Warrant Issued August 21, 2024 4.17* Common Share Purchase Warrant Issued November 19, 2024 70

Page 79

4.18* Pre-Funded Common Share Purchase Warrant Issued November 19, 2024 8.1* Subsidiaries of the Company 11.1 Code of Business Conduct and Ethics (incorporated herein by reference to the Company’s Annual Report on Form 20- F (File No. 001- 40688) filed with the SEC on April 4, 2022) 12.1* Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer 12.2* Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer 13.1† Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 13.2† Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 15.1* Management’s Discussion and Analysis for the fiscal year ended December 31, 2024 15.2 Audit Committee Charter (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on April 4, 2022) 15.3* Consent of independent registered public accounting firm (Dale Matheson Carr-Hilton Labonte LLP) 97 Compensation Clawback Policy (incorporated herein by reference to the Company’s Annual Report on Form 20-F (File No. 001- 40688) filed with the SEC on March 27, 2024) 101* The following materials from the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2024, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets as of December 31, 2024 and 2023; (ii) Consolidated Statements of Operations for the years ended December 31, 2024 and 2023; (iii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2024 and 2023; (iv) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024 and 2023; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023; and (vi) Notes to Consolidated Financial Statements 104* Cover Page Interactive Data File (formatted as Inline eXtensible Business Reporting Language (iXBRL) and contained in Exhibit 101) * Filed herewith. † Furnished herewith # Indicates management contract or compensatory plan. SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. DRAGANFLY INC. /s/ Paul Sun By: Paul Sun Title: Chief Financial Officer Date: March 27, 2025 71

Page 80

Draganfly Inc. Consolidated Financial Statements Years Ended December 31, 2024 and 2023 (Expressed in Canadian Dollars) F-1

Page 81

Report of Independent Registered Public Accounting Firm To the shareholders and the board of directors of Draganfly Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial position of Draganfly Inc. (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive loss, changes in shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and its financial performance and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses in developing its business, and further losses are anticipated. The Company requires additional funds to meet its obligations and the costs of its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ DMCL DALE MATHESON CARR-HILTON LABONTE LLP CHARTERED PROFESSIONAL ACCOUNTANTS We have served as the Company’s auditor since 2018 Vancouver, Canada (PCAOB ID 1173) March 27, 2025

Page 82

F-2

Page 83

Draganfly Inc. Consolidated Statements of Financial Position Expressed in Canadian Dollars December 31, December 31, As at Notes 2024 2023 ASSETS Current Assets Cash and cash equivalents $ 6,252,409 $ 3,093,612 Receivables 4 573,390 649,612 Inventory 5 1,532,263 1,596,536 Prepaids and deposits 6 724,513 1,342,215 9,082,575 6,681,975 Non-current Assets Equipment 8 529,542 680,801 Intangible assets 9 45,141 56,426 Investments 7 14,286 189,403 Receivable 4 156,200 - Right of use assets 10 372,344 721,687 TOTAL ASSETS $ 10,200,088 $ 8,330,292 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Trade payables and accrued liabilities 12,19 $ 2,399,187 $ 2,638,981 Customer deposits 466,295 104,715 Deferred income 13 18,542 12,112 Loans payable 14 - 85,058 Derivative liability 15 2,198,121 4,196,125 Lease liabilities 11 154,147 362,001 5,236,292 7,398,992 Non-current Liabilities Deferred income 13 68,139 95,562 Lease liabilities 11 273,874 428,022 TOTAL LIABILITIES 5,578,305 7,922,576 SHAREHOLDERS’ EQUITY Share capital 15 110,742,984 97,070,976 Reserves – share-based payments 15 7,698,304 6,870,139 Reserves - Warrants 15 3,776,428 - Accumulated deficit (117,465,829) (103,588,356) Accumulated other comprehensive income (loss) (130,104) 54,957 TOTAL SHAREHOLDERS’ EQUITY 4,621,783 407,716 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 10,200,088 $ 8,330,292 Nature and Continuance of Operations and Going Concern (Note 1) Approved and authorized for issuance by the Board of Directors on March 27, 2025. “Scott Larson” “Cameron Chell” The accompanying notes are an integral part of these consolidated financial statements. F-3

Page 84

Draganfly Inc. Consolidated Statements of Comprehensive Loss Expressed in Canadian Dollars For the years ended December 31, Notes 2024 2023 2022 REVENUE Sales of goods 16 $ 5,368,476 $ 5,287,093 $ 5,550,432 Provision of services 16 1,192,579 1,267,749 2,054,627 TOTAL REVENUE 6,561,055 6,554,842 7,605,059 COST OF SALES 5 (5,162,851) (4,490,728) (6,814,384) GROSS PROFIT 1,398,204 2,064,114 790,675 OPERATING EXPENSES Amortization 9 11,285 35,960 179,482 Depreciation 8,10 565,806 510,677 593,277 Director fees 19 504,620 600,933 522,349 Insurance 1,111,052 1,825,137 3,722,237 Office and miscellaneous 17 1,853,578 6,303,879 5,397,961 Professional fees 19 3,016,594 4,145,586 6,821,583 Research and development 927,412 1,554,823 651,302 Share-based payments 15,19 1,182,618 2,021,664 3,311,024 Travel 231,432 704,994 396,388 Wages and salaries 19 6,733,303 6,976,792 6,105,020 (16,137,700) (24,680,445) (27,700,623) OTHER INCOME (EXPENSE) Change in fair value of derivative liability 15 1,842,618 211,110 5,502,688 Finance and other costs 107,225 83,280 44,345 Foreign exchange gain 268,537 (249,563) 745,102 Gain (loss) on disposal of assets 11,432 (944) (10,755) Gain (loss) on write-off of notes receivable 40,020 (101,351) (309,385) Government income - 5,232 2,446 Write down of deposit - - (228,572) Loss on impairment of goodwill and intangibles - - (6,454,914) Other income (expense) 18 (1,407,809) (943,243) (35,371) NET LOSS FOR THE YEAR (13,877,473) (23,611,810) (27,654,364) OTHER COMPREHENSIVE INCOME (LOSS) Items that may be reclassified to profit or loss Foreign exchange translation (9,944) (94,861) 447,542 Items that will not be reclassified to profit or loss Change in fair value of equity investments at FVOCI 7 (175,117) (3,180) (98,483) COMPREHENSIVE LOSS FOR THE YEAR (14,062,534) (23,709,851) (27,305,305) Net loss per share Basic & diluted $ (4.40) $ (14.58) $ (20.34) Weighted average number of common shares outstanding - basic & diluted 3,156,891 1,619,343 1,342,279 The accompanying notes are an integral part of these consolidated financial statements. F-4

Page 85

Draganfly Inc. Consolidated Statements of Changes in Shareholders’ Equity Expressed in Canadian Dollars Accumulated Other Comprehensive Income (Loss) Number of Shares Share Capital Reserves – 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, 2021 1,326,938 $ 81,038,365 $ 6,406,117 $ - $ (52,322,182) $ (332,640) $ 136,579 $ 34,926,239 Shares issued for the exercise of stock options 500 51,875 (25,000) - - - - 26,875 Shares issued for the exercise of warrants 662 87,170 - - - - - 87,170 Shares issued for the exercise of RSUs 43,104 2,427,801 (2,427,801) - - - - - Shares issue costs - (5,122) - - - - - (5,122) Share-based payments - - 3,311,024 - - - - 3,311,024 Net loss - - - - (27,654,364) - - (27,654,364) Change in fair value of equity investments at FVOCI - - - - - (98,483) - (98,483) Translation of foreign operations - - - - - - 447,542 447,542 Balance at December 31, 2022 1,371,204 $ 83,600,089 $ 7,264,340 $ - $ (79,976,546) $ (431,123) $ 584,121 $ 11,040,881 Shares issued for financing – ATM (“At-the-market”) 26,030 1,748,946 - - - - - 1,748,946 Share issue costs - (222,136) - - - - - (222,136) Shares issued for financing 512,000 11,376,230 - - - - - 11,376,230 Share issue costs - (2,072,886) 224,868 - - - - (1,848,018) Shares issued for the exercise of RSUs 60,332 2,640,733 (2,640,733) - - - - - Share-based payments - - 2,021,664 2,021,664 Net loss - - - - (23,611,810) - - (23,611,810) Change in fair value of equity investments at FVOCI - - - - - (3,180) - (3,180) Translation of foreign operations - - - - - - (94,861) (94,861) Balance at December 31, 2023 1,969,566 $ 97,070,976 $ 6,870,139 $ - $(103,588,356) $ (434,303) $ 489,260 $ 407,716 Shares issued for financing 1,477,208 10,384,145 - - - - - 10,384,145 Share issue costs - (1,632,871) 509,454 - - - - (1,123,417)

Page 86

Shares issued for the exercise of warrants 1,991,668 4,056,827 - - - - - 4,056,827 Shares returned to treasury (36,000) - - - - - - - Shares issued for the exercise of RSUs 25,353 863,907 (863,907) - - - - - Warrants – equity treatment - - - 3,776,428 3,776,428 Share-based payments - - 1,182,618 - - - - 1,182,618 Net loss - - - - (13,877,473) - - (13,877,473) Change in fair value of equity investments at FVOCI - - - - - (175,117) - (175,117) Translation of foreign operations - - - - - - (9,944) (9,944) Balance as of December 31, 2024 5,427,795 $110,742,984 $ 7,698,304 $3,776,428 $(117,465,829) $ (609,420) $ 479,316 $ 4,621,783 The accompanying notes are an integral part of these consolidated financial statements. F-5

Page 87

Draganfly Inc. Statement of Cash Flows Expressed in Canadian Dollars For the years ended December 31, 2024 2023 2022 OPERATING ACTIVITIES Net loss for the year $ (13,877,473) $ (23,611,810) $ (27,654,364) Adjustments for: Amortization 11,285 35,960 179,482 Depreciation 565,806 510,677 593,277 Bad debt 186,627 216,238 - Change in fair value of derivative liability (1,842,618) (211,110) (5,502,688) Write down of inventory 627,106 331,671 1,976,514 (Recovery) impairment of notes receivable (40,020) 101,351 309,385 Impairment of goodwill and intangibles - 87,415 6,454,914 Write down of deposit - - 228,572 Finance and other costs 1,443,740 920,008 (34,427) (Gain) loss on sale of assets 11,432 18,426 - Share-based payments 1,182,618 2,021,664 3,311,024 (11,731,497) (19,579,510) (20,138,311) Net changes in non-cash working capital items: Receivables (266,418) 1,223,112 (681,838) Inventory (562,833) (872,265) (150,241) Prepaids 617,702 965,509 2,958,581 Trade payables and accrued liabilities (231,812) (464,441) 1,661,697 Customer deposits 361,580 (90,043) 22,624 Deferred income (20,993) 43,984 (21,543) Cash used in operating activities (11,834,271) (18,773,654) (16,349,031) INVESTING ACTIVITIES Purchase of equipment (167,257) (490,391) (79,713) Disposal of equipment 103,923 46,976 10,755 Purchase of intangible assets - - (4,684) Repayment (Issuance) of notes receivable 40,020 63,838 842,297 Cash provided by (used in) investing activities (23,314) (379,577) 768,655 FINANCING ACTIVITIES Proceeds from issuance of common shares for financing 17,751,927 17,474,107 - Share issue costs (2,656,180) (2,690,278) (5,122) Proceeds from issuance of common shares for warrants exercised 373,415 - 87,170 Proceeds from issuance of common shares for stock options exercised - - 26,875 Repayment of loans (85,058) (6,747) (6,746) Repayment of lease liabilities (357,778) (330,159) (150,275) Cash provided by (used in) financing activities 15,026,326 14,446,923 (48,098) Effects of exchange rate changes on cash (9,944) (94,861) 447,542 Change in cash 3,168,741 (4,706,308) (15,628,474) Cash and cash equivalents, beginning of year 3,093,612 7,894,781 23,075,713 Cash and cash equivalents, end of year $ 6,252,409 $ 3,093,612 $ 7,894,781 The following are included in cash flow from operating activities: Interest paid in cash $ 67,856 $ 57,041 $ 51,338 Share issue costs in accounts payable 25,695 293,661 - The accompanying notes are an integral part of these consolidated financial statements. F-6

Page 88

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 1. NATURE AND CONTINUANCE OF OPERATIONS AND GOING CONCERN Draganfly Inc. (the “Company”) was incorporated on June 1, 2018 under the Business Corporations Act (British Columbia). The Company creates quality, cutting-edge 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 Canadian Securities Exchange (the “CSE”), on the Nasdaq Capital Market (the “Nasdaq”) under the symbol “DPRO” and on the Frankfurt Stock Exchange under the symbol “3U8A”. 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. These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. To date, the Company has not been profitable and has an accumulated deficit of $117,465,829. The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional financing and or achieve profitable operations in the future. These factors raise substantial doubt over the Company’s ability to continue as a going concern. These consolidated financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. These adjustments could be material. 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION Statement of Compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Reporting Interpretation Committee (“IFRIC”). The material accounting policy information set out below was consistently applied to all years presented unless otherwise noted. These consolidated financial statements were authorized for issue by the Board of Directors on March 27, 2025. 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 consolidated 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 Draganfly Innovations Inc. (“DII”) Canada 100% Draganfly Innovations USA, Inc. (“DI USA”) US 100% Dronelogics Systems Inc. (“Dronelogics”) Canada 100% All intercompany balances and transactions were eliminated on consolidation. F-7

Page 89

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION (CONT’D) Adoption of new policy The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units for equity treatment warrants, whereby the carrying amount of the warrants is determined based on any difference between gross proceeds and the estimated fair market value of the common shares. If the proceeds from the offering are less than or equal to the estimated fair market value of common shares issued, no value is assigned to the warrants. Warrants that are issued as payment to a finder or other transaction costs are accounted for as share-based payments. Foreign currency translation Transactions in foreign currencies are translated into the functional currency at rates of exchange at the time of such transactions. Monetary assets and liabilities are translated at the reporting period rate of exchange. Non-monetary assets and liabilities are translated at historical exchange rates. Gains and losses resulting from foreign exchange adjustments are included in profit or loss. The functional currencies of the parent company and each subsidiary are as follows: Draganfly Inc. Canadian Dollar Draganfly Innovations Inc. Canadian Dollar Draganfly Innovations USA, Inc. US Dollar Dronelogics Systems Inc. Canadian Dollar Financial statements of subsidiaries for which the functional currency is not the Canadian dollar are translated into Canadian dollars as follows: all asset and liability accounts are translated at the year-end exchange rate and all revenue and expense accounts and cash flow statement items are translated at average exchange rates for the year. The resulting translation gains and losses are recorded as exchange differences on translation of foreign operations in other comprehensive loss. Share-based payments The Company may grant stock options or restricted share units (“RSU’s”) to its directors, officers, employees and consultants. The Company records share-based compensation related to stock options using the Black-Scholes Option Pricing Model. The RSU’s granted entitle an employee, director or officer to either the issuance of common shares or cash payments payable upon vesting with terms determined by the Company’s Board of Directors at the time of the grant. If on the grant date it is determined there is an obligation to settle in cash, the RSU’s are accounted for as liabilities, with the fair value remeasured at the end of each reporting period and on the settlement date. Changes in fair value are recognized in profit and loss. Expense is recognized over the vesting period. The Company has a present obligation to settle in cash if the choice of settlement in shares has no commercial substance, or the Company has a past practice or a stated policy of setting in cash, or generally settles in cash whenever the counterparty asks for cash settlement. If no such obligation exists, RSUs are accounted for as equity settled share-based payments and are valued using the share price on grant date. Upon settlement: a) If the Company elects to settle in cash, the cash payment is accounted for as the repurchase of an equity interest (i.e. as a deduction from equity), except as noted in (c) below. b) If the Company elects to settle by issuing shares, the value of RSUs initially recognized in reserves is reclassified to share capital, except as noted in (c) below. F-8

Page 90

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION (CONT’D) c) If the Company elects the settlement alternative with the higher fair value, as at the date of settlement, the Company recognizes an additional expense for the excess value given (i.e. the difference between the cash paid and the fair value of shares that would otherwise have been issued, or the difference between the fair value of the shares and the amount of cash that would otherwise have been paid, whichever is applicable). The aggregate sales price or amount of common shares issued during any consecutive 12-month period will not exceed the greatest of the following: (i) USD $1,000,000; (ii) 15% of the total assets of the Company, measured at the Company’s most recent balance sheet date; or (iii) 15% of the outstanding amount of the common shares of the Company, measured at the Company’s most recent balance sheet date. At the election of the Board of Directors, upon each vesting date, participants receive (a) the issuance of common shares from treasury equal to the number of RSUs vesting, or (b) a cash payment equal to the number of vested RSUs multiplied by the fair market value of a common share, calculated as the closing price of the common shares on the CSE for the trading day immediately preceding such payment date; or (c) a combination of (a) and (b). In conjunction with private placements or brokered financings, the Company may issue compensatory warrants to agents as consideration for services provided. Awards of grants are accounted for in accordance with the fair value method of accounting and result in an increase in share issue costs and a credit to warrants within shareholders’ equity when warrants are issued. Loss per share Basic loss per share is calculated by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding in the year. Diluted income per share is calculated by dividing the profit attributable to common shareholders of the parent by the weighted average number of common shares outstanding during the year plus the weighted average number of common shares that would be issued on the conversion of all the dilutive potential common shares into common shares. The Company had 3,717,502 warrants, 31,204 options and 188,100 RSU’s that would be potentially dilutive if the Company were not in a loss position and were to calculate diluted income per share. Financial Instruments Financial instruments are accounted for in accordance with IFRS 9 Financial Instruments: Classification and Measurement. A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets/liabilities Classification Cash and cash equivalents Fair value through profit or loss Receivables Amortized cost Notes receivable Fair value through profit or loss Investments Fair value through other comprehensive income Trade payables Amortized cost Customer deposits Amortized cost Loans payable Amortized cost Derivative liability Fair value through profit or loss F-9

Page 91

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION (CONT’D) a) Financial assets Classification and measurement The Company classifies its financial assets in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (“FVTOCI”) or at amortized cost. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. The classification of debt instruments is driven by the business model for managing the financial assets and their contractual cash flow characteristics. Debt instruments are measured at amortized cost if the business model is to hold the instrument for collection of contractual cash flows and those cash flows are solely principal and interest. If the cash flows are not solely principal and interest, it is classified as FVTPL. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payments of principal and interest. Equity instruments that are held for trading (including all equity derivative instruments) are classified as FVTPL, for other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument by-instrument basis) to designate them as at FVTOCI. Financial assets at FVTPL Financial assets carried at FVTPL are initially recorded at fair value and transaction costs are recorded to profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of financial assets held at FVTPL are included in the profit or loss in the period in which they arise. Derivatives are also categorized as FVTPL unless they are designated as hedges. Financial assets at FVTOCI Financial assets carried at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income. There is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Financial assets at amortized cost Financial assets at amortized cost are initially recognized at fair value and subsequently carried at amortized cost less any impairment. They are classified as current assets or non-current assets based on their maturity date. Impairment of financial assets at amortized cost The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the loss allowance for the financial asset is measured at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the loss allowance is measured for the financial asset at an amount equal to twelve month expected credit losses. For trade receivables the Company applies the simplified approach to providing for expected credit losses, which allows the use of a lifetime expected loss provision. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an event occurring after the impairment was recognized. Derecognition of financial assets Financial assets are derecognized when the risks and rewards of ownership have been transferred. Gains and losses on derecognition of financial assets classified as FVTPL or amortized cost are recorded to profit or loss. Gains or losses on financial assets classified as FVTOCI remain within accumulated other comprehensive loss. F-10

Page 92

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION (CONT’D) b) Financial liabilities The Company classifies its financial liabilities into one of two categories as follows: FVTPL - This category comprises derivatives and financial liabilities incurred principally for the purpose of selling or repurchasing in the near term. They are carried at fair value with changes in fair value recognized in profit or loss. Other financial liabilities - This category consists of liabilities carried at amortized cost using the effective interest method. Trade payables, customer deposits and loans payable are included in this category. Derecognition of financial liabilities Financial liabilities are derecognized when its contractual obligations are discharged, cancelled, or expire. The Company also derecognizes a financial liability when the terms of the liability are modified such that the terms and/or cash flows of the modified instrument are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. Gains and losses on derecognition are recognized in profit or loss. Impairment of non-financial assets The carrying amounts of the non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If indicators exist, then the asset’s recoverable amount is estimated. The recoverable amounts of the following types of intangible assets are measured annually, whether or not there is any indication that it may be impaired: ● an intangible asset with an indefinite useful life; and ● an intangible asset not yet available for use; The recoverable amount of an asset or cash-generating unit (“CGU”) is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If there is an indication that a corporate asset may be impaired, then the recoverable amount is determined for the CGU to which the corporate asset belongs. An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis. In respect of assets other than goodwill and intangible assets that have indefinite useful lives, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed in a subsequent period when there has been an increase in the recoverable amount of a previously impaired asset or CGU. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. F-11

Page 93

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION (CONT’D) Income taxes Current income tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income. Current income taxes relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred income tax Deferred income tax is recognized, using the asset and liability method, on temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting. The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. Inventory Inventory consists of raw materials and finished goods for manufacturing of multi-rotor helicopters, industrial areal video systems, civilian small unmanned aerial systems or vehicles, health monitoring equipment, and wireless video systems. Inventory is initially valued at cost and subsequently at the lower of cost and net realizable value. Cost is determined using the first-in-first-out method. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of purchase include the purchase price, import duties and non-recoverable taxes and transport, handling and other costs directly attributable to the acquisition of finished goods, materials or services. The costs of conversion include direct materials and labour costs and a systematic allocation of fixed and variable overheads incurred in converting materials into finished goods. The Company reviews inventory for obsolete and slow-moving goods and any such inventory is written-down to net realizable value. Revenue recognition Revenue comprises the fair value of consideration received or receivable for the sale of goods and consulting services in the ordinary course of the Company’s business. Revenue is shown net of return allowances and discounts. Sales of goods The Company manufactures and sells a range of multi-rotor helicopters, industrial aerial video systems, and civilian small unmanned aerial systems or vehicles. Sales are recognized at a point-in-time when control of the products has transferred. The control transfer occurs in proximity to shipping. Revenue is recognized when the transfer of control has occurred. Revenue from these sales is recognized based on the price specified in the contract, net of the estimated discounts and returns. Accumulated experience is used to estimate and provide for the discounts and returns, using the expected value method, and revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur. To date, returns have not been significant. No element of financing is deemed present as the sales are made with a credit term of 30 to 60 days, which is consistent with market practice. F-12

Page 94

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION (CONT’D) Some contracts include multiple performance obligations, such as the sale of hardware and support or maintenance. Where support or maintenance is performed by another party and does not include an integration service it is accounted for as a separate performance obligation. In this case, the transaction price will be allocated to each performance obligation based on stand-alone selling price. Where the stand-alone selling price is not directly observable, the price is estimated based on expect cost plus margin. Where the support or maintenance is provided by the Company, the contract is analyzed to identify the performance obligations and transaction price. The price is then allocated across the obligations identified in the contract. Revenue is recognized when the Company satisfies a performance obligation. Services The Company provides consulting, custom engineering, drones as a service, and investigating and solving on a project-by-project basis under fixed-price and variable price contracts. Revenue from providing services is recognized over time as the services are rendered. The Company provides rental of equipment which is measured based on rates through contracts or other written agreements with customers. Revenue is recognized in the period when services are performed and only when there is reasonable assurance that the revenue will be collected. Deferred Income A payment received is included as deferred revenue when products have yet be shipped to the customers as of the period end or there are unfulfilled obligations related to the revenue received. The amount to be recognized within twelve months following the year-end date is classified as current. Cost of Goods Sold Cost of sales includes the expenses incurred to acquire and produce inventory for sale, including product costs, freight costs, as well as provisions for reserves related to product shrinkage, or lower of cost and net realizable value adjustments as required. Intangible Assets An intangible asset is an identifiable asset without physical substance. An asset is identifiable if it is separable, or arises from contractual or legal rights, regardless of whether those rights are transferrable or separable from the Company or from other rights and obligations. Intangible assets include intellectual property, which consists of patent and trademark applications, brands and software. Intangible assets acquired externally are measured at cost less accumulated amortization and impairment losses. The cost of a group of intangible assets acquired is allocated to the individual intangible assets based on their relative fair values. The cost of intangible assets acquired externally comprises its purchase price and any directly attributable cost of preparing the asset for its intended use. Research and development costs incurred subsequent to the acquisition of externally acquired intangible assets and on internally generated intangible assets are accounted for as research and development costs. Intangible assets with finite useful lives are amortized on a straight-line basis over the expected life of each intellectual property to write off the cost of the assets from the date they are available for use. F-13

Page 95

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION (CONT’D) Class of intangible asset Useful live Customer relationships 5 years Software 5 years Patents 5 years Goodwill represents the excess of the value of the consideration transferred over the fair value of the net identifiable assets and liabilities acquired in a business combination. Goodwill is allocated to the cash generating unit to which it relates. Equipment On January 1, 2024, there was change in estimate related to the useful lives of computer equipment and furniture and equipment with the depreciation changing from 30% declining balance to 3 year straight line for computer equipment and from 20% declining balance to 5 year straight line for furniture and equipment. The impact of this change in estimate in 2024 resulted in an increase in depreciation of $54,220. It is not practical to quantify the impact on future years, but the change in estimate will result in the assets currently on the books related to this change in estimate depreciating faster over a shorter time frame. Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the consolidated statement of comprehensive loss during the financial period in which they are incurred. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the consolidated statement of comprehensive loss. Depreciation is generally calculated on a straight-line balance method with the exception of vehicles that are on a declining balance method to write off the cost of the assets to their residual values over their estimated useful lives. Depreciation for leasehold improvements is fully expensed over the expected term of the lease. The depreciation rates applicable to each category of equipment are as follows: Class of equipment Depreciation rate Computer equipment 3 years – straight line Furniture and equipment 5 years – straight line Leasehold improvements Expected lease term Vehicles 30% - declining balance F-14

Page 96

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION (CONT’D) Research and development expenditures Expenditures on research are expensed as incurred. Research activities include formulation, design, evaluation and final selection of possible alternatives, products, processes, systems or services. Development expenditures are expensed as incurred unless the Company can demonstrate all of the following: (i) the technical feasibility of completing the intangible asset so that it will be available for use or sale; (ii) its intention to complete the intangible asset and use or sell it; (iii) its ability to use or sell the intangible asset; (iv) how the intangible asset will generate probable future economic benefits. The Company can also demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; (v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and (vi) its ability to measure reliably the expenditure attributable to the intangible asset during its development. Leases A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the commencement date, the lease liability is recognized at the present value of the future lease payments and discounted using the interest rate implicit in the lease or the Company’s incremental borrowing rate. A corresponding right-of-use (“ROU”) asset is recognized at the amount of the lease liability, adjusted for any lease incentives received and initial direct costs incurred. Over the term of the lease, financing expense is recognized on the lease liability using the effective interest rate method and charged to net income, lease payments are applied against the lease liability and depreciation on the ROU asset is recorded by class of underlying asset. The lease term is the non-cancellable period of a lease plus periods covered by an optional lease extension option if it is reasonably certain that the Company will exercise the option to extend. Conversely, periods covered by an option to terminate are included if the Company does not expect to end the lease during that time frame. Leases with a term of less than twelve months or leases for underlying low value assets are recognized as an expense in net income on a straight-line basis over the lease term. A lease modification is accounted for as a separate lease if it materially changes the scope of the lease. For a modification that is not a separate lease, on the effective date of the lease modification, the Company will remeasure the lease liability and corresponding ROU asset using the interest rate implicit in the lease or the Company’s incremental borrowing rate. Any variance between the remeasured ROU asset and lease liability will be recognized as a gain or loss in net income to reflect the change in scope. Newly adopted accounting standards On January 1, 2024 the Company adopted amendments to IAS 1, Presentation of Financial Statements, issued by IASB. The amendment is to clarify the classification of a liability as either current or non-current based on the Company’s right at the end of the reporting period. There is no material impact on the disclosures or amounts reported in the consolidated financial statements. F-15

Page 97

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 2. MATERIAL ACCOUNTING POLICY INFORMATION AND BASIS OF PREPARATION (CONT’D) New accounting standards issued not yet effective In April 2024, the IASB issued IFRS 18, Presentation and Disclosures in Financial Statements, to replace IAS 1, Presentation of Financial Statements, effective January 1, 2027, with early adoption permitted. The new standard is aimed to set out overall requirements for presentation and disclosures in the financial statements. Management is reviewing the impact the standard will have on the consolidated financial statements. In May 2024, the IASB issued amendments to IFRS 9, Financial Instruments, and IFRS 7, Financial Instruments: Disclosures to address the classification and measurement of financial instruments, with an emphasis to clarify the date of recognition and derecognition of financial asset and liabilities, effective January 1, 2026, with early adoption permitted. Management is reviewing the impact of these amendments, but they are not expected to have a material impact on the consolidated financial statements. 3. MANAGEMENT JUDGEMENT AND ASSUMPTIONS Significant estimates and assumptions The preparation of consolidated financial statements in accordance with IFRS requires the Company to make estimates and assumptions about reported amounts at the date of the consolidated financial statements and in the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised. Share-based payments The cost of share-based payment transactions with directors, officers and employees are measured by reference to the fair value of the equity instruments. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining and making assumptions about the most appropriate inputs to the valuation model including the expected life, volatility, risk-free interest rate, expected forfeiture rate and dividend yield. Income taxes Provisions for income taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these income tax provisions at the end of each reporting period. However, it is possible that at some future date an additional liability could result from audits by tax authorities. Where the final outcome of these tax- related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. Deferred tax assets are recognized when it is determined that the Company is likely to recognize their recovery from the generation of taxable income. Inventory Inventory is valued at the lower of cost and net realizable value. Net realizable value is determined with reference to the estimated selling price less costs to sell. The Company estimates selling price based upon assumptions about future demand and current and anticipated retail market conditions. The future realization of these inventories may be affected by future technology or other market- driven changes that may reduce future selling prices. F-16

Page 98

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 3. MANAGEMENT JUDGEMENT AND ASSUMPTIONS (CONT’D) Investments in Private companies Where the fair value of investments in private companies recorded on the consolidated statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data is not available, judgment is required to establish fair value and this value may not be indicative of the eventual recoverable value. Expected credit losses on trade receivables and notes receivable When determining expected credit losses (“ECLs”), the Company considers the historic credit losses observed by the Company, customer- specific payment history and economic conditions. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL’s, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience, informed credit assessment and forward-looking information. Useful lives of equipment and intangible assets Estimates of the useful lives of equipment and intangible assets are based on the period over which the assets are expected to be available for use. The estimated useful lives are reviewed annually and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence, and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of the relevant assets may be based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the equipment would increase the recorded expenses and decrease the non- current assets. Significant judgments The preparation of consolidated financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments applied to the Company’s consolidated financial statements include: − The assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty; − the classification of financial instruments; − the assessment of revenue recognition using the five-step approach under IFRS 15; and − the determination of the functional currency of each entity in the group. 4. RECEIVABLES As at December 31, 2024 December 31, 2023 Trade accounts receivable $ 674,998 $ 610,443 Sales tax receivable 54,592 39,169 $ 729,590 $ 649,612 Current portion $ 573,390 $ 649,612 Long term portion 156,200 - $ 729,590 $ 649,612 Provision for doubtful accounts Balance at December 31, 2022 73,257 Increase during the year 216,238 Balance at December 31, 2023 289,495 Increase during the year 140,011 Balance at December 31, 2024 $ 429,506 During the year ended December 31, 2024 the Company recorded a provision for doubtful accounts of $140,011 (2023 - $216,238).

Page 99

The long-term receivable represents a refundable deposit that the Company has asked to have returned. The agreement allows for a two- year repayment term once the request has been made. Funds were requested in April of 2024. The Company applies a direct customer analysis approach to measure expected credit losses. The Company assesses collectability of receivables of each customer on an individual basis using quantitative and qualitative information available to management. The historical loss rates are adjusted to reflect the current and forward-looking information on economic factors affecting the ability of the customers to make regular monthly payments on the receivables. Receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include business closure and/or the failure to make monthly contractual payments. F-17

Page 100

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 5. INVENTORY December 31, 2024 December 31, 2023 Finished goods $ 954,453 $ 904,858 Parts 577,810 691,678 $ 1,532,263 $ 1,596,536 During the year ended December 31, 2024, $4,529,655 (2023 - $3,738,980; 2022 – $6,048,348) of inventory was recognized in cost of sales including an allowance for obsolete and slow-moving inventory of $627,106 (2023 - $331,671; 2022 - $1,976,514). Cost of sales consist of the following: December 31, 2024 December 31, 2023 December 31, 2022 Inventory $ 4,529,655 $ 3,738,980 $ 6,048,348 Consulting and services 451,984 549,448 730,170 Other 181,212 202,300 35,866 $ 5,162,851 $ 4,490,728 $ 6,814,384 6. PREPAIDS AND DEPOSITS December 31, 2024 December 31, 2023 Insurance $ 370,609 $ 838,445 Prepaid other 112,439 142,124 Deposits 241,465 361,646 $ 724,513 $ 1,342,215 7. INVESTMENTS Balance at December 31, 2022 192,583 Change in fair value (3,180) Balance at December 31, 2023 189,403 Change in fair value (175,117) Balance at December 31, 2024 $ 14,286 Fair value of investments is comprised of: Public company shares $ 14,286 Private company shares - Balance at December 31, 2024 $ 14,286 Public company shares $ 57,143 Private company shares 132,260 Balance at December 31, 2023 $ 189,403 F-18

Page 101

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 7. INVESTMENTS (CONT’D) The Company holds 1,428,571 common shares (2023 – 1,428,571) and nil (2023 – 1,428,571) warrants of Windfall Geotek Inc. a publicly traded company. At December 31, 2024 the fair value of the shares was based on the quoted price of $0.01 (2023 - $0.04). As of the issue date of these consolidated financial statements the quoted price of the shares was $0.015. The warrants expired on March 17, 2023. The fair values of the warrants as of December 31, 2022 were estimated using the Black-Scholes Option Pricing Model with the following assumptions: December 31, 2022 Risk free interest rate 4.07% Expected volatility 116.00% Expected life 0.21 years Expected dividend yield 0% Patents Customer Relationships Software Total Cost Balance at December 31, 2022 $ 41,931 $ 197,000 $ 123,683 $ 362,614 Impairment - (87,415) - (87,415) Balance at December 31, 2023 $ 41,931 $ 109,585 $ 123,683 $ 275,199 Impairment - - - - Balance at December 31, 2024 $ 41,931 $ 109,585 $ 123,683 $ 275,199 Accumulated amortization Balance at December 31, 2022 $ 41,931 $ 87,731 $ 53,151 $ 182,813 Charge for the year - 21,854 14,106 35,960 Balance at December 31, 2023 $ 41,931 $ 109,585 $ 67,257 $ 218,773 Charge for the year - - 11,285 11,285 Balance at December 31, 2024 $ 41,931 $ 109,585 $ 78,542 $ 230,058 Net book value: December 31, 2023 $ - $ - $ 56,426 $ 56,426 December 31, 2024 $ - $ - $ 45,141 $ 45,141 On October 27, 2021, the Company purchased 50,000 common shares of a private company for USD$100,000. In determining the fair value of the investment (classified at level 3 in the fair value hierarchy), the Company considers if observable market data exists on a quarterly basis to value the investment. In September 2024 the state of Pennsylvania filed a law suit against this private company for non- performance at a value that would bring into question any future value of the investment. The Company determined the fair value of the investment was $nil at December 31, 2024. 8. EQUIPMENT Computer Equipment Furniture and Equipment Leasehold Improvements Software Vehicles Total Cost Balance at December 31, 2022 $ 95,662 $ 834,453 $ - $ - $ 36,033 $ 966,148 Additions 58,611 320,943 86,530 - 24,310 490,394 Disposals (21,000) (115,204) - - - (136,204) Balance at December 31, 2023 $ 133,273 $1,040,192 $ 86,530 $ - $ 60,343 $1,320,338 Additions 6,876 137,562 2,359 - - 146,797 Disposals (9,821) (180,338) - - - (190,159) Balance at December 31, 2024 $ 130,328 $ 997,416 $ 88,889 $ - $ 60,343 $1,276,976 Accumulated depreciation Balance at December 31, 2022 $ 41,998 $ 502,790 $ - $ - $ 16,669 $ 561,457 Charge for the year 22,762 112,361 6,790 - 12,497 154,410 Disposals (6,582) (69,748) - - - (76,330) Balance at December 31, 2023 $ 58,178 $ 545,403 $ 6,790 $ - $ 29,166 $ 639,537

Page 102

Charge for the year 37,881 143,885 17,845 - 9,354 208,965 Disposals (3,383) (97,685) - - (101,068) Balance at December 31, 2024 $ 92,676 $ 591,603 $ 24,635 $ - $ 38,520 $ 747,434 Net book value: December 31, 2023 $ 75,095 $ 494,789 $ 79,740 $ - $ 31,177 $ 680,801 December 31, 2024 $ 37,652 $ 405,813 $ 64,254 $ - $ 21,823 $ 529,542 F-19

Page 103

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 9. INTANGIBLE ASSETS 10. RIGHT OF USE ASSETS Total Cost Balance at 2022 $ 683,117 Additions 740,355 Balance at December 31, 2023 $ 1,423,472 Foreign exchange 31,567 Balance at December 31, 2024 $ 1,455,039 Accumulated depreciation Balance at December 31, 2022 $ 338,371 Charge for the year 363,086 Foreign exchange 328 Balance at December 31, 2023 $ 701,785 Charge for the year 356,841 Foreign exchange 24,069 Balance at December 31, 2024 $ 1,082,695 Net book value: December 31, 2023 $ 721,687 December 31, 2024 $ 372,344 F-20

Page 104

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 10. RIGHT OF USE ASSETS (CONT’D) The consolidated statement of financial position shows the following amounts related to leases: December 31, 2024 December 31, 2023 Buildings $ 372,344 $ 721,687 Additions to the right of the assets during the 2024 financial year were $nil (2023 - $740,355). 11. 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 11.7% to 13.3%. Total Balance at December 31, 2022 $ 378,643 Additions 734,903 Interest expense 96,423 Lease payments (423,410) Foreign exchange 3,464 Balance at December 31, 2023 $ 790,023 Interest expense 65,378 Lease payments (423,157) Foreign exchange (4,223) Balance at December 31, 2024 $ 428,021 Which consists of: December 31, 2024 December 31, 2023 Current lease liability $ 154,147 $ 362,001 Non-current lease liability 273,874 428,022 Ending balance $ 428,021 $ 790,023 Maturity analysis December 31, 2024 December 31, 2023 Less than one year $ 190,856 $ 429,948 One to three years 282,419 355,879 Four to five years 71,836 141,519 Total undiscounted lease liabilities 545,111 927,346 Amount representing interest (117,090) (137,323) $ 428,021 $ 790,023 Variable lease payments of $77,626 (2023 - $43,542) have been recognized in profit and loss. F-21

Page 105

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 12. TRADE PAYABLES AND ACCRUED LIABILITIES December 31, 2024 December 31, 2023 Trade accounts payable $ 609,869 $ 1,259,623 Accrued liabilities 1,789,318 1,345,649 Government grant payable - 33,709 $ 2,399,187 $ 2,638,981 13. DEFERRED INCOME At times, the Company may take payment in advance for services to be rendered. These amounts are held and recognized as the services are rendered. December 31, 2024 December 31, 2023 Deferred, revenue beginning $ 107,674 $ 63,690 Revenue recognized (21,852) (64,816) Unearned revenues received 1,744 108,800 Foreign exchange (885) - $ 86,681 $ 107,674 Current portion $ 18,542 $ 12,112 Long term portion 68,139 95,562 $ 86,681 $ 107,674 Deferred revenue of $18,542 as of December 31, 2024 is expected to be recognized as revenue within one year. The remaining is related to a long-term support and maintenance arrangement and will be recognized according to the terms of that arrangement over the next 5 years. 14. LOANS PAYABLE December 31, 2024 December 31, 2023 Opening balance $ 85,058 $ 86,571 Repayment of loans payable (85,058) (6,747) Accretion expense - 5,234 Ending balance $ - $ 85,058 Start Date Maturity Date Rate Carrying Value December 31, 2024 Carrying Value December 31, 2023 CEBA 2020-05-19 2024-03-28 0% $ - $ 40,000 CEBA 2021-04-23 2024-03-28 0% - 40,000 Vehicle loan 2019-08-30 2024-09-11 6.99% - 5,058 Total $ - $ 85,058 F-22

Page 106

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 14. LOANS PAYABLE (CONT’D) On May 19, 2020, Dronelogics received a $40,000 CEBA loan. This loan was interest-free and 25% of the loan, up to $10,000, was forgivable if the loan was repaid on or before January 18, 2024. The repayment date was extended by the Government of Canada to March 28, 2024 and was fully repaid by the due date. On April 23, 2021, Draganfly Innovations Inc. received a $60,000 CEBA loan. This loan is currently interest free and up to $20,000 is forgivable if the loan is repaid on or before January 18, 2024. The repayment date was extended by the Government of Canada to March 28, 2024 and was fully repaid by the due date. The CEBA loans were unsecured, and the vehicle loan was secured by the vehicle. 15. SHARE CAPITAL Authorized share capital Unlimited number of common shares without par value. Issued share capital During the year ended December 31, 2024, ● The Company issued 25,353 common shares for the vesting of restricted share units. ● The Company issued 1,991,668 common shares for the exercise of warrants ● On February 26, 2024, the Company issued 448,000 units consisting of one common share and one warrant and 88,000 units consisting of one prefunded warrant and one warrant in a financing for $4,877,475 with share issuance costs of $752,498 for net proceeds of $4,124,977. Of the total share issuance costs $441,166 was expensed in other income (expense). The value of the issuance was allocated $2,017,966 to the shares, and $2,859,509 to the warrants, including $431,084 allocated to prefunded warrants. The prefunded warrants were exercised on the date of issue. On March 27, 2024, the exercise price of the warrants was amended to US$0.1761 from the original exercise price of USD $0.36 due to a one time exercise price reset Post share consolidation, the new exercise price is US$4.4025. ● 36,000 shares were returned to treasury that were held in escrow related to the Vital Intelligence Inc. acquisition for failure to meet required milestones. The shares had a carrying value of $nil on cancellation. ● On April 29, 2024, the Company issued 282,541 units consisting of one common share and one warrant and 258,000 units consisting of one prefunded warrant and one warrant in a financing for $4,882,168 with share issuance costs of $779,615 for net proceeds of $4,102,553. Of the total share issuance costs $671,747 was expensed in other income (expense). The value of the issuance was allocated $396,137 to the shares, and $4,422,815 to the warrants, including $1,248,343 allocated to prefunded warrants. ● On August 21, 2024, the Company issued 346,667 units consisting of one common share and one warrant, and 320,000 units consisting of one prefunded warrant and one warrant in a financing for $2,720,050 with share issue costs of $343,676 for net proceeds of $2,376,374. The value of the issuance was allocated $160,076 to the shares, and $2,559,974 to the warrants including $591,265 allocated to prefunded warrants. ● On November 19, 2024 the Company issued 400,000 units consisting of one common share and one warrant and 1,200,000 units consisting of one prefunded warrant and one warrant in a financing for $5,272,234 with share issue costs of $755,387 for net proceeds of $4,516,837. The value of the issuance was allocated $329,515 to the shares and $4,942,719 to the warrants including $1,977,088 allocated to the prefunded warrants. F-23

Page 107

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 15. SHARE CAPITAL (CONT’D) During the year ended December 31, 2023, ● The Company issued 60,332 common shares for the vesting of restricted share units. ● The Company issued 320,000 common shares in a financing for $10,856,166 with share issuance costs of $1,953,032 for net proceeds of $8,903,134. ● The Company issued 26,030 common shares in an ATM (“At – the - market”) financing for $1,748,946 with share issuance costs of $222,136 for net proceeds of $1,526,810. ● The Company issued 192,000 common shares in a financing for proceeds of $4,858,995 with share issuance costs of $913,833 for net proceeds of $3,945,162. Of the total share issuance costs $793,979 were expensed in other income (expense). Value of the issuance was allocated $520,064 to the shares and $4,338,931 to derivative liability Share consolidation On September 5, 2024 the Company effected a 25:1 share consolidation. All share, warrant, option and RSU numbers in these financial statements are shown post consolidation, including exercise prices, unless otherwise noted. 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. As at December 31, 2024, 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 $ 62.50 4.82 11,130 11,130 November 19, 2019 November 19, 2029 $ 62.50 4.87 2,000 2,000 April 30, 2020 April 30, 2030 $ 62.50 5.32 320 320 April 30, 2020 April 30, 2030 $ 96.25 5.32 4,400 4,400 July 3, 2020 July 3, 2025 $ 80.00 0.50 4,000 4,000 November 24, 2020 November 24, 2030 $ 62.50 5.89 1,280 1,280 February 2, 2021 February 2, 2031 $ 330.00 6.08 1,200 1,200 March 8, 2021 March 8, 2026 $ 347.50 1.18 400 400 April 27, 2021 April 27, 2031 $ 253.75 6.31 4,640 4,640 September 9, 2021 September 9, 2026 $ 121.00 1.69 1,034 1,034 November 9, 2023 November 9, 2033 $ 15.75 8.84 1,200 800 31,604 31,204 F-24

Page 108

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 15. SHARE CAPITAL (CONT’D) Number of Options Weighted Average Exercise Price Outstanding, December 31, 2022 35,154 $ 115.00 Exercised (400) 53.75 Issued 1,200 15.65 Outstanding, December 31, 2023 35,954 $ 112.00 Forfeited (4,350) 106.83 Outstanding, December 31, 2024 31,604 $ 112.05 No options were granted by the Company for the year ended December 31, 2024. During the year ended December 31, 2023, ● The Company granted 1,200 options to an advisor to the board. Each option is exercisable at $15.75 per share for 10 years. During the year ended December 31, 2024, the Company recorded $60,803 (2023- $151,174) in stock-based compensation in relation to the vesting of stock options. The fair values of stock options granted were estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions: Year ended December 31, December 31, 2024 December 31, 2023 Risk free interest rate - 4.58% Expected volatility - 115.1% Expected life - 10 Expected dividend yield - 0% Exercise price $ - $ 15.75 Restricted Share Units The Company has adopted an incentive share compensation plan, which provides that the Board of Directors of the Company 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). 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, 2024, the Company had the following RSUs outstanding: Number of RSU’s Outstanding, December 31, 2022 47,982 Vested (60,331) Issued 67,413 Forfeited (10,519) Outstanding, December 31, 2023 44,545 Vested (25,353) Issued 185,240 Forfeited (16,332) Outstanding, December 31, 2024 188,100 F-25

Page 109

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 15. SHARE CAPITAL (CONT’D) During the year ended December 31, 2024, 25,353 RSU’s fully vested according to the terms and the Company granted 185,240 RSUs to employees and consultants of the Company with each RSU 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. In addition, 16,326 RSU’s were forfeited by employees who have left the Company. During the year ended December 31, 2023, 60,331 RSU’s fully vested according to the terms and the Company granted 72,839 RSUs to employees and consultants of the Company with each RSU exercisable into one common share of the Company upon the vesting conditions being met for a period of eighteen months from the grant date. In addition, 10,519 RSU’s were forfeited by employees who have left the Company. During the year ended December 31, 2024, the Company recorded share-based payment expense of $1,121,815 (2023: $1,866,490) for RSU’s, based on the fair values of RSU’s granted which are calculated using the closing price of the Company’s stock on the day prior to grant. Warrants During the year ended December 31, 2024 and the year ended December 31, 2023, 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 part of these same issuances, shares with warrants attached were issued. Being in a foreign currency that is not the Company’s functional currency and these pre-funded warrants 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 warrants issued with the shares are also in USD so are also accounted for as a liability. In addition, the Company also issued pre-funded warrants with an exercise price in Canadian dollars (“Pre-funded Warrants”). These are also treated as a liability as the agreement contains clauses that do not meet the fixed for fixed test. As a financial liability, the portion of the 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 warrants issued with the shares are also accounted for as a liability as these also contain clauses that do not meet the fixed for fixed test. On August 7, 2024, the exercise price of the April 29, 2024 warrants were amended to CAD $0.2250 or CAD $5.625 on a post share consolidation basis. The exercise price of the October Warrants was reduced twice and converted to Canadian dollars for a new exercise price of CAD $5.6925. For the October 2023 issuance and the April 2024 issuance, the warrant agreements were further amended as of August 7, 2024 to remove the cashless exercise feature and any anti-dilution clauses that would lead to variability in settlement so they now meet the requirement for equity classification. The warrants were fair valued on August 7, 2024 and transferred to equity. On November 19, 2024 the exercise prices of the April 2024 warrants and the October 2023 warrants were amended to CAD$3.3086 from CAD$5.625 and CAD$5.6925 respectively. The warrants issued as part of the August 2024 issuance and the November 2024 issuance were issued with a CAD exercise price, no cashless exercise feature and no anti-dilution clauses that would lead to variability in settlement. To determine the a fair value of the warrants, a Black Scholes calculation is used, calculated in USD for those with a USD exercise price and in CAD for those with a Canadian exercise price. The Black Scholes value per warrant is then multiplied by the number of outstanding warrants and then multiplied by the foreign exchange rate at the end of the period for those denominated in USD. F-26

Page 110

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 15. SHARE CAPITAL (CONT’D) February Issuance April Issuance August Issuance November Issuance Warrants Broker Warrants Broker Broker Broker Volatility 119.23% 107.8% 119.80% 108.67% 118.87% 115.27% Risk free rate 4.33% 4.48% 4.65% 4.62% 3.74% 4.24% Expected life 5 years 3 years 5 years 3 years 3 years 3 years Expected dividend yield 0% 0% 0% 0% 0% 0% Warrant Derivative Liability Balance at December 31, 2022 $ - Warrants issued 3,985,015 Change in fair value of warrants outstanding 211,110 Balance at December 31, 2023 $ 4,196,125 Warrants issued 7,282,325 Exercised (3,661,283) Change in fair value of warrants outstanding (1,842,618) Reclassify to equity (3,776,428) Balance at December 31, 2024 $ 2,198,121 Details of liability warrants and their fair values are as follows: Issue Date Exercise Price Number of Warrants Outstanding at December 31, 2024 Fair Value at December 31, 2024 Number of Warrants Outstanding at December 31, 2023 Fair Value at December 31, 2023 Derivative Liability February 26, 2024 (1) US$ 4.4025 474,332 $ 2,198,121 - $ - October 30, 2023 (2) CAD$ 5.6925 - - 256,000 3,180,543 October 30, 2023 (3) US$ 0.003 - - 64,000 1,015,582 474,332 $ 2,198,121 320,000 $ 4,196,125 1) The warrants expire February 26, 2029. 2) The warrant terms were amended and warrants were reclassified to equity August 7,2024 3) The warrants have no expiry date. They were exercised January 5, 2024. F-27

Page 111

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 15. SHARE CAPITAL (CONT’D) Warrants Exercise Price Number of Warrants Outstanding at December 31, 2024 Number of Warrants Outstanding at December 31, 2023 October 30, 2023 (1) CAD$ 3.3086 256,000 - April 29, 2024 (2) CAD$ 3.3086 540,541 - August 21, 2024 (3) CAD$ 5.12 666,667 - November 19, 2024 (4) CAD$ 3.3086 1,600,000 - 3,063,208 - 1) The warrants expire October 30, 2028. These were moved from derivative liability August 7, 2024. 2) The warrants expire April 29, 2029. These were moved from derivative liability August 7, 2024. 3) The warrants expire August 21, 2029. 4) The warrants expire November 19, 2029 The fair values of the derivative warrants were estimated using the Black-Scholes Option Pricing Model with the following weighted average assumptions: December 31, 2024 December 31, 2023 Risk free interest rate 4.38% 3.84% Expected volatility 124.06% 113.78% Expected life 4.16 years 4.8 years Expected dividend yield 0% 0% Number of Warrants Weighted Average Exercise Price Outstanding, December 31, 2022 316,672 $ 147.53 Exercised (306,480) 20.66 Issued 332,800 153.52 Outstanding, December 31, 2023 342,992 $ 15.75 Issued 5,376,370 3.35 Exercised (1,991,668) 0.9596 Expired (10,192) 125.00 Outstanding December 31, 2024 3,717,502 $ 5.16 F-28

Page 112

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 15. SHARE CAPITAL (CONT’D) As at December 31, 2024, the Company had the following warrants outstanding: Date issued Expiry date Exercise price Number of warrants outstanding October 30, 2023 October 30, 2026 CAD$ 23.20 12,800 October 30, 2023 October 30, 2028 CAD$ 3.3086 256,000 February 26, 2024 February 26, 2027 US$ 8.44 26,800 February 26, 2024 February 26, 2029 US$ 4.4025 474,332 April 29, 2024 April 29, 2029 CAD$ 3.3086 540,541 April 29, 2024 April 29, 2024 CAD$ 11.06 27,028 August 21, 2024 August 21, 2027 CAD$ 5.12 33,334 August 21, 2024 August 21, 2029 CAD$ 5.12 666,667 November 19, 2024 November 19, 2029 CAD$ 3.3086 1,600,000 November 19, 2024 November 19, 2027 CAD$ 4.1357 80,000 3,717,502 The weighted average remaining contractual life of warrants outstanding as of December 31, 2024, was 4.50 years (December 31, 2023 – 4.63 years). 16. SEGMENTED INFORMATION As at and for the year ended December 31, 2024 the Company operates in 2 reportable segments (as at and for the year ended December 21, 2023 – 3). The Company organizes its two segments based on its product line as well as a corporate segment. The two segments are Drones and Corporate. The Drones segment derives its revenue from products and services related to the sale of unmanned aerial vehicles (UAV) while the Corporate segment includes all costs not directly associated with the Drone segment. The Company aggregates the information for the segments by analyzing the revenue stream and allocating direct costs to that respective segment. The Corporate segment is aggregated by relying on the entity that includes corporate costs (Draganfly Inc.). The Vital segment derived its revenue from the sale of products that measure vitals to help detect symptoms from large groups of people from a distance and will no longer be an operating segment going forward. The Vital product was developed to address COVID-19 during the pandemic which has since waned and as a result, is no longer a core focus of the Company. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. 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. F-29

Page 113

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 16. SEGMENTED INFORMATION (CONT’D) December 31, 2024 Drones Vital Corporate Total Sales of goods $ 5,368,476 $ - $ - $ 5,368,476 Provision of services 1,171,861 20,718 - 1,192,579 Total revenue $ 6,540,337 $ 20,718 $ - $ 6,561,055 Segment loss $ 5,975,503 $ (20,718) $ 4,728,628 $ 10,683,413 Finance and other costs 107,225 - - 107,225 Depreciation 551,117 - 14,689 565,806 Amortization 11,285 - - 11,285 Change in fair value of derivative liability - - 1,842,618 1,842,618 Loss (recovery) on write-off of notes receivable - - 40,020 40,020 Loss on write down of inventory 627,106 - - 627,106 Net loss for the year $ 7,272,236 $ (20,718) $ 6,625,955 $ 13,877,473 December 31, 2023 Drones Vital Corporate Total Sales of goods $ 4,905,417 $ 381,676 $ - $ 5,287,093 Provision of services 1,267,749 - - 1,267,749 Total revenue $ 6,173,166 $ 381,676 $ - $ 6,554,842 Segment loss $ 14,743,176 $ (140,366) $ 8,323,731 $ 22,926,541 Finance and other costs (80,211) - (3,069) (83,280) Depreciation 499,530 - 11,147 510,677 Amortization 35,960 - - 35,960 Change in fair value of derivative liability - - (211,110) (211,110) Loss on write-off of notes receivable - - 101,351 101,351 Loss on write down of inventory 331,671 - - 331,671 Net loss for the year $ 15,530,126 $ (140,366) $ 8,222,050 $ 23,611,810 December 31, 2022 Drones Vital Corporate Total Sales of goods $ 5,388,262 $ 162,170 $ - $ 5,550,432 Provision of services 2,054,627 - - 2,054,627 Total revenue $ 7,442,889 $ 162,170 $ - $ 7,605,059 Segment loss $ 9,929,789 $ 602,580 $ 12,926,884 $ 23,459,253 Finance and other costs (3,529) - (40,816) (44,345) Depreciation 586,185 - 7,092 593,277 Amortization 179,482 - - 179,482 Impairment of goodwill and intangibles 2,166,563 4,288,351 - 6,454,914 Change in fair value of derivative liability - - (5,502,688) (5,502,688) Loss on write-off of notes receivable 1,080,645 - (771,260) 309,385 Loss on write down of inventory 251,754 1,724,760 - 1,976,514 Write down of deposit - 228,572 - 228,572 Net loss for the year $ 14,190,889 $ 6,844,263 $ 6,619,212 $ 27,654,364 F-30

Page 114

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 16. SEGMENTED INFORMATION (CONT’D) Geographic segmentation is as follows: For the years ended December 31, 2024 2023 2022 Non-current assets Canada $ 1,117,513 $ 1,441,701 $ 1,121,821 United States - 206,616 - $ 1,117,513 $ 1,648,317 $ 1,121,821 Revenue Canada $ 6,523,341 $ 6,162,672 $ 6,919,038 United States 37,714 392,170 686,021 $ 6,561,055 $ 6,554,842 $ 7,605,059 Geographic revenue is measured by aggregating sales based on the country and the entity where the sale was made. 17. OFFICE AND MISCELLANEOUS For the years ended December 31, 2024 2023 2022 Advertising, Marketing, and Investor Relations $ 710,821 $ 4,243,432 $ 4,431,818 Compliance fees 286,472 193,250 152,826 Contract Work - 772,003 441,798 Other 856,285 1,095,194 371,519 $ 1,853,578 $ 6,303,879 $ 5,397,961 18. OTHER EXPENSE For the years ended December 31, 2024 2023 2022 Share issue costs $ 1,254,629 $ 793,979 $ - Write off of accounts receivable 140,011 187,942 - Gain on settlement of debt - (33,004) Other 13,169 (5,674) 35,371 $ 1,407,809 $ 943,243 $ 35,371 19. 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 at fees set out in the Agreement. For the year ended December 31, 2024, the Company incurred fees of $273,475 (December 31, 2023 - $429,766) which are included in professional fees. As at December 31, 2024, the Company was indebted to this company in the amount of $nil (December 31, 2023 - $3,780). 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 and all fees are set in the Consultant Agreement. For the year ended December 31, 2024, the Company incurred fees of $487,688 (December 31, 2023 - $592,500) included in professional fees. As at December 31, 2024, the Company was indebted to this company in the amount of $nil (December 31, 2023 - $35,417). F-31

Page 115

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 19. RELATED PARTY TRANSACTIONS (CONT’D) 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 year ended December 31, 2024, the Company incurred fees of $116,266 (December 31, 2023 - $215,019) included in professional fees. As at December 31, 2024, the Company was indebted to this company in the amount of $23,931 (December 31, 2023 - $9,287). Trade receivables/payables and accrued receivables/payables: As at December 31, 2024, the Company had $208,963 (December 31, 2023 - $190,664) payable to related parties that was included in accounts payable. The balances outstanding are unsecured, non-interest bearing and due on demand. 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 year ended December 31, 2024 and 2023 included: For the years ended December 31, 2024 2023 2022 Director fees $ 504,619 $ 600,933 $ 522,349 Salaries 998,951 979,154 843,917 Share-based payments 768,228 1,109,232 2,106,906 $ 2,271,798 $ 2,689,319 $ 3,473,172 Other related party transactions For the years ended December 31, 2024 2023 2022 Management fees paid to a company controlled by CEO and director $ 487,688 $ 592,500 $ 566,487 Management fees paid to a company that the CEO holds an economic interest in 273,475 429,766 442,485 Management fees paid to a company controlled by a director 116,266 215,019 383,288 $ 877,429 $ 1,237,285 $ 1,392,260 20. 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 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. F-32

Page 116

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 20. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONT’D) Receivables Receivables primarily consist of trade receivables, accrued receivables and taxes receivable. The Company provides credit in the normal course of business in the form of payment terms and has an established process for determining terms to offer customers to mitigate credit risk. Receivables are shown net of any provision made for impairment of the receivables. Due to this factor, the Company believes that no additional credit risk, beyond amounts provided for collection loss, is inherent in receivables. Expected credit loss (“ECL”) analysis is performed at each reporting date using an objective approach to measure expected credit losses. The provision amounts are based on direct management interface with the customer. The calculations reflect the probability-weighted outcome, the time value of money and reasonable supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Receivables are written off when there is no reasonable expectation 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. The Company’s aging of receivables was as follows: December 31, 2024 December 31, 2023 0 – 30 days $ 346,979 $ 271,622 31 – 60 days 150,575 109,928 61 – 90 days 32,002 64,259 91 + days 197,153 203,803 $ 726,709 $ 649,612 Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents. Historically, the Company’s sole source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding. The following is an analysis of the contractual maturities of the Company’s financial liabilities at December 31, 2024: 1 year 1 – 5 years Total Trade payables and accrued liabilities $ 2,399,187 $ - $ 2,399,187 Customer deposits 466,295 - 466,295 Deferred income 18,542 68,139 86,681 Derivative liability 2,198,121 - 2,198,121 Lease liability 154,147 273,874 428,021 $ 5,236,292 $ 342,013 $ 5,578,305 F-33

Page 117

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 20. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONT’D) 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: December 31, 2024 December 31, 2023 Effect of a 10% change in USD $ 429,160 $ 530,758 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. 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 consolidated statements of financial position. These financial assets are measured at fair value through profit and loss. December 31, 2024 Level 1 Level 2 Level 3 Total Equity securities in investee companies $ 14,286 $ - $ - $ 14,286 Derivative liability - - (2,198,121) (2,198,121) Total $ 14,286 $ - $ (2,198,121) $ (2,183,835) December 31, 2023 Level 1 Level 2 Level 3 Total Equity securities in investee companies $ 57,143 $ - $ 132,260 $ 189,403 Derivative liability - - (4,196,125) (4,196,125) Total $ 57,143 $ - $ (4,063,865) $ (4,006,722) 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) F-34

Page 118

Draganfly Inc. Notes to the Consolidated Financial Statements For the Year Ended December 31, 2024 Expressed in Canadian Dollars 20. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONT’D) 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: Unobservable Inputs Change Impact on comprehensive loss Year ended December 31, 2024 Year ended December 31, 2023 Volatility 20% $ 201,109 $ 291,149 Capital Management The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of shareholders’ equity. The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its board of directors, will balance its overall capital structure through new equity issuances or by undertaking other activities as deemed appropriate under the specific circumstances. The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2023. 21. INCOME TAXES The following table reconciles the expected income taxes at the Canadian statutory income tax rates to the amounts recognized in the consolidated statements of comprehensive loss for the years ended December 31, 2024, 2023 and 2021: December 31, 2024 December 31, 2023 December 31, 2022 Loss before income taxes $ 13,877,473 $ 23,611,810 $ 27,654,364 Canadian statutory rates 27% 27% 27% Expected income tax recovery 3,725,300 6,330,400 7,338,900 Impact of different foreign statutory tax rates - - - Non-deductible items (99,400) (509,800) (1,214,400) Share issue costs 779,600 773,400 1,400 Adjustments to prior years provision versus statutory tax returns 258,200 (87,600) (742,400) Differences between prior year provision and final tax return - (153,400) 867,500 Change in deferred tax asset not recognized (4,663,700) (6,353,000) (6,251,000) Income tax $ - $ - $ - The Company’s unrecognized deductible temporary differences and unused tax losses for which no deferred tax asset is recognized consist of the following amounts: December 31, 2024 December 31, 2023 December 31, 2022 Deferred income tax assets (liabilities): Share issuance costs $ 1,736,000 $ 995,000 $ 568,000 Non-capital losses 24,055,000 20,377,000 14,602,000 Property and equipment 457,000 1,115,000 962,000 Capital gain reserve - - - Scientific Research and Experimental Development 377,000 365,000 367,000 Total deferred income tax assets $ 26,625,000 $ 22,852,000 16,499,000 Deferred income tax not recognized (26,625,000) (22,852,000) (16,499,000) Net deferred tax assets $ - $ - $ - The Company has non-capital loss carry forward of approximately $80,922,670 which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the years 2030 to 2044. The Company has non-capital loss carry forward of $8,662,723 CAD ($6,468,141 USD) which may be carried forward to apply against future year income tax for tax purposes in the United States, subject to the final determination by the tax authorities, expiring in the years 2040 to 2044.

Page 119

F-35

Annual report