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| Statement |
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| The starting X2 drone is getting terrific traction |
| I'm pleased to announce that we have just had a record quarter in 2023 on revenues of $2.138 million with product sales of $1.6 million and provision of services of just under $0.5 million |
| And I think we've started to see that now production flow of off of the benches and off of the line and we feel really good about how we're now going to be able to satisfy the order book and start to see scale |
| Every time I go to a show or I get to meet other folks in the Drone space, it’s just like, wow, where did you come up with that? And how did you think about that? Like really, really stuff that just like grab you is -- that is -- it's really impressive |
| And we're really excited about what these opportunities are |
| And our pipeline, though it's not represented yet in our order book, our pipeline is very, very robust in the corrections market |
| We have got incredible demand on this hybrid |
| So we're really excited about what was happening there |
| So I think Paul Mellon [ph] and team have done an excellent job in terms of the design of the product right from the ground up from a few years ago when we started working through our plan and around the design that we had to have so that we ensure that we weren't going to be in a situation where we were already dependent on supply chain that we didn't have some sort of management influence or swappable equipment for processes, too |
| So, almost regardless of the mass and the size of demand and large infrastructure air dominance that we've known or come to know in the defense field, if in a given area, you're putting up multiples of small UAVs you will have a strategic advantage and tactical dominance on your area of operation |
| Our advantage being is that we can customize drones and sensors in order to collect data for our customers that maybe others can't, right, which is really the strategic differentiator for our customer |
| And Joint A.I.R Center has become a real strategic differentiator for us, it's allowing us to bring in multiple groups and give them time on the stick, give them time with the software, run use case scenarios, do everything from land mine detection right through to hostile situation, right through to combat scenario, right through to the leasing scenarios, mapping survey, energy inspection |
| There is incredible, incredible creativity and great power in this space and I never want to profess very closest to the smartest folks out there |
| So incredibly important and incredibly tact and you need a very robust platform in order to house all of the additional equipment sensors, radio shields, antennas, et cetera, in order to operate in those environments, so really thrilled that we were selected in this regard and we are engaged at multiple levels with multiple militaries and divisions of – at our training center going through testing and preparing for the specs to on production |
| Revenue for the third quarter was up 14% to $2.1 million, up from $1.8 million in the third quarter of last year |
| So our loss this quarter was quite a bit better quarter-over-quarter primarily due to higher revenues and lower operating costs |
| And so because of our integrated approach and capabilities that is a major strategic differentiator for us going forward |
| Also exciting to report is our gross margin of just under 2% |
| So initially, we were quite focused on humanitarian efforts and very pleased to do that |
| This seems to be what we'll be pushing for -- on the agenda in the other theatres as well proven by data and proven by actually what we've seen happen in the Ukraine, where again, Draganfly’s had a fortunate opportunity to be very active |
| ISR work is something that we're very active within that market is absolutely growing |
| But a little around two years ago now as the Ukraine conflict broke out, the reality is that small UAVs have proven incredibly effective in the theater of conflict and defense, so much so that the entire strategy and tactics around air dominance has shifted |
| This is a significant win for us because as we prove that platform out with them over the course of this next six months or eight months |
| And a big part of why we were able to do that, I believe, without losing any operational efficiency is because we have very clear visibility with our order book now |
| Windfalls got an incredible platform that we're building on |
| So on an adjusted basis, gross margin would have been up 71.5% quarter-over-quarter |
| It is really a differentiator for us |
| In fact, I would say, led by Dragonfly that have the ability to field and deploy the type of equipment and do rapid innovation iteration and production in order to meet the demands of this market |
| And so I really want to stress it again, just how impressed I am with the team that have put the new plan together where we stand on them and the capacity that we're now able to meet |
| So we see huge opportunities now in that market as it relates to border security and small UAVs or the Southeast Asia theatre, including Taiwan and the potential challenges around territorial disputes and such with China it is absolutely being dominated by UAV discussions |
| Statement |
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| The issue is that the manufacturing base has still been so young and immature that it has not had been able to be at the point of where it can commit to and guarantee the demand signal that is coming |
| So I think Ukraine potentially in terms of the news factor has been overshadowed as of recent, because of the unfortunate events in the Middle East |
| The challenge for companies that generally not all, but generally haven't been around for a long time or gone through a bunch of the rigor that's required in order to sell into government-type customers military in particular, is that it doesn't matter if you've got the greatest whizbang |
| We went this time without taking the live questions as we got a bunch of feedback that it seemed quite distracting, actually |
| So if we excluded that, loss would have been 5.4% while in Q2, we had a write-down of inventory of $122,000 |
| We do build those off of our work benches, but off a production line, that's a pretty tough low-margin business to be in, unless you've got something really strategic |
| And again, we'll recall that there was a small non-cash write-down of inventory in Q3 and a write-down of not receivable |
| Walking the floor the last CUAV show, it seemed to be kind of like a reoccurring theme |
| And then on the next slide, looking at our balance sheet, you can see our total assets decreased from $14.6 million at the end of 2022 to $9.1 million, which was largely due to the use of cash |
| Gross margin percentage for Q3 was 41%, due to a small inventory write-down and otherwise would have been 42.2%, compared to 24.6% in Q2 of this year |
| Now we've kind of been preaching that this would happen for years but it took the unfortunate conflict in Ukraine for this to become completely understood |
| This quarter includes a non-cash change comprised of a small write-down of $8,600 of inventory and an impairment of note receivable of $105,000 and would otherwise be a comprehensive loss of $5.4 million |
| So I think we really -- over the last number of years, one could have argued five years or six years ago, that our drone capability was minimal |
| I think it's a very competitive market |
| You have to have met stringent testing requirements, cybersecurity requirements in order to demonstrate that you don't have the security breach and such |
| If you can't get the production, if you can't -- like I mean sizable production and all those types of things, it's just not a viable product for those types of customers |
| So if we excluded that, so it's a fair comp, Q2's loss would have been 6.8% |
| Total comprehensive loss for the quarter was $5.5 million, compared to a comprehensive loss of $5 million in the same quarter last year |
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