Draganfly Drones: How 27 Years of Innovation is Shaping the Future

Well, what Dragonfly does that's different is that we've been doing this for 27 years. Dragonfly was the first drone that was ever officially credited with saving a human life. Again, I'd be disappointed if, you know, we were sitting here, you know, 3 years from now, we didn't have a $5 billion market cap. If I were to predict a year and a half from now that the numbers would be staggering compared to, you know, what we thought they would be.

Yeah, thanks for much for having me.

Well, what Dragonfly does that's different compared to the other comps out there and they're great comps and there's going to be a lot of really successful drone companies, but what's different about Dragonfly is that we've been doing this for 27 years.

27. We sold

Yeah. Well, before they were called drones, they were called quadropopters or triccopters or flying cameras. In 1999, we sold a drone as a pilot to a federal policing agency that was using it to do traffic investigation, traffic, forensics. And it was just an idea. And so they bought a quadcopter from us, we handbuilt and delivered to them and experimented with. And,

It was battery, you know, it stayed up for probably 7 minutes, you know, and every minute was trepidacious. So and out of that, we learned how to put the first camera on a drone, the first stabilized video on a drone, the first thermals on a drone. The first LAR on a drone. You know, Dragonfly was the first drone that was ever officially credited with saving a human life. Okay. It was a Dragonfly drone.

Yeah. So, and so that drone sits on permanent display in the Smithsonian. We have our own display there. We're really proud of that. So, it was a situation where it was a snowstorm. Somebody didn't show up from a car accident. They didn't know it was a car accident. Somebody didn't show up after 8 hours. It's like -30 outside. Family went out looking. Found the car in a ditch on the side of the road. Door open. It's 8 hours later. Oh, wow. They called the police. So, now it's a 10 hours later. They formed a search party. So, now it's 12 hours later. Can't find the person. It's completely pitch black. And they called one of the officers happened to know this federal officer that had bought this quadcopter and said, 'You know, we heard about that thermal stuff you're doing. Would you mind giving this a shot?' And Doug, who's an incredible individual, totally always has service to people in mind. He pulled out his truck, put up the Dragon Flyer 4 it was called, and in 20 minutes he found a heat signature.

And we still had the video of the whole thing. And so I mean they found the person, he was unconscious, you know, definitely had hypothermia. They air ambulanced him out of there. Happened to save his life. And the news went big and all the rest of it. But it was the first recorded, you know, documented police involved search and rescue with a drone. And that really set the ethos of our company. And probably the second most proud event for us as a company was early in 22 during the invasion into Ukraine on our own cognition. You know, we put boots on the ground. I spent, you know, plenty of time in Ukraine myself over there, you know, because we felt it was the right thing to be doing. And we were providing overwatch for search and rescue missions. So providing thermal cameras as they were searching buildings, searching bombed out areas. That turned into providing overwatch for relief delivery. And then that turned into, and again you learn these things as you're in theater. That turned into the fact that the ambulances and relief couldn't get into besieged cities. So we were like, 'Dude, let's fly stuff in there.' So we started flying relief supplies in. It was kind of like the Berlin drop, you know, and so we're flying relief supplies in and then the primary supply we were bringing in was pharmaceuticals and in particular insulin. So we designed a thermal box that held temperature of pharmaceuticals at a constant kept them cool and we were flying missions and then we raised money to buy insulin and it was just a catalyzing event for us as a company and really just reinforced our ethos as to the importance of drones.

Yeah. So, I got to give you a bit of a narrative to kind of explain why we got to that spot. So if you look at every single North American drone manufacturer over the last let's call it close to 30 years other than the last let's call it 5 to 6 years where this new wave of drone companies has emerged, every single drone manufacturer in North America every single one. People argue with me on this and I'm like okay let's go through the list. Everyone has gone out of business.

Every single one.

The challenge is that there's some great companies out there now. So, I'm not taking away from any of the great companies that are in place now, but basically when these companies started, they started like, okay, we're going to build a drone. And the notion of a drone is something that's about this big and but what they failed to realize is that there wasn't a regulatory environment for a commercial operation to exist. So, you know, if the other people start to understand this now, but they didn't at the time that a drone's an aircraft. Heavy regulatory environment. You want to come out with a new drone line that's going to do commercial and or military work, you better be prepared to go through what you have to do to launch an aircraft. Crash these things. You got to go through all kinds of regulatory testing, all kinds of approvals, all kinds of, you know, compliance and audits and internal controls and liability protection, etc., etc. So most of those companies would then hey we want to be in the proumer market because it's you know we can actually build a product for that market and of course then they'll run into the Chinese manufacturing which is one very good and two just is at a cost level that we couldn't the North can't compete with.

So we never really you know we had the fortune of being drone people first and understanding that that's not where we would compete. So where we focused our market was being very specialized in understanding the use cases and the concepts of operation that public safety or military were looking for. So they came to us not just because we had a great drone because our drones are three times the price but they came to us because we had an expertise as to how to help run that operation and be successful.

That's right. And so

Well, it's certainly a different regulatory environment, but it's still heavily regulated, right? And also the requirements the reliability standards are much higher. So, it's a trade-off for sure. So, you know, we survived and that's all we did was survive. We didn't thrive the last 27 years.

That's exactly what it is. And you know, smart money, if I was a smarter entrepreneur, I would have been like, 'Hey, I should be doing something else.' But I had investors in, I had family in, and it was just desperation to hang on. I just had to make this work. So not and not just me, lots of other great team members, too, that were had family in and we're all kind of pulling together.

It's incredible. I mean, yeah. Now, what's unfolding, it's kind of like the internet where, you know, when the internet started, the real only use case was email. And, you know, people are like, well, why do I need a web page? I got the yellow pages. Yeah. Right. and you just couldn't really see it because you hadn't built through enough use cases and you know companies 20 years ago or whatever it was were like you know I'm an internet company right well nobody's an internet company anymore but there isn't a company that doesn't completely rely or build on top of the internet and the drones will be the exact same thing in 20 years you know kids being born today will ask the question you know what was it like before like before there were cell phones right it would be like what there was a world before drones. I mean that that is how pervasive they will be.

So, you know, to get back to your original question, you know, we survived because we were in the public safety market and we had a couple dozen police departments that believed our narrative around you know, the Chinese security and the requirement to buy US made drones. And the other thing was they were just like, 'Hey, we want to support US industry.' And so, they'd buy their Ford trucks and they'd buy their Dragonfly drones. and even though it was three times the price and the capabilities were the same but not outstandingly better or anything you know a couple dozen police departments you know kept us alive but it wasn't enough for us to really be making any money.

So we did a lot of NRE non-recurring engineering work for the military primes. So for years aero environment as an example they were our biggest client so we've built and worked on dozens of, you know, projects with them. You think about things today that are considered new innovations. You know, counter drone drones that shoot out nets, FPV drones that are one way, tethered drones that, you know, use machine vision to either target or make decisions. That's all 15 and 20 year old technology that we were building.

Yeah. Like an interesting fact about FPV drones. So the common notion out there is that the FPV drone, you know, the FPV. So first person viewer, drone, you know, goggles on, one way attributable, suicide drone, another nickname for it, was a Ukrainian invention. The reality is the US Marines introduced that into Ukraine in about early 23. They brought that tech and they said, 'Hey, this might be helpful.' Now, the Ukrainians have taken it to a whole new level, right? They're completely innovative, unbelievable, resilient society. But that was a US innovation. And you know all close to 20 years ago the Marines were training people on and experimenting with FPV drones and how they work. And in fact the two gentlemen that ran that program are Dragonfly folks.

And our numbers have never been really big because they've always they've been this NRE, you know, consulting solution-based. Okay. We do have a product line that we sell into some police departments, but that did allow us to survive.

Now and then where's the pivot point? Where do things change now? Cuz I see revenues up, you know, growing double digits quarter over quarter. Now you're starting to get some traction. What was the difference made? Yeah. So the difference was in about 20 early 23 you could really see that regulations were starting to you know accelerate and things like beyond visual line of sight operations of drones on the commercial side were going to become a reality. So we did raise a little bit of money then because we felt that was the pivot point and then of course Ukraine was huge and by about 23 people could see the importance of drones. So we felt that we hit the sweet spot at that point and we started to scale out our production. We had strong demand signals. we could see that you know the departments of war and national defense and ministries of defense from different militaries were going to get behind this thing and that really became the pivot point.

Yeah. So, one one of the interesting things is and again this is my version of the story. So, I'm sure some of our you know competitors or comps out there would disagree with this but in my opinion there's only two drone companies in the world that have fully integrated product lines. Okay. one of them is DJI which owns 90% of the market and is multi multi billion dollar company Chinese-backed you know national company and the other is Dragonfly now DJI has literally 10,000 engineers [laughter] Dragonfly has 12 engineers now but they're using AI so it's equal right yeah exactly well of those whatever 12 engineers a very large portion of those engineers have 25 years of experience right and so our bench strength is incredible and we're scaling that bench strength obviously but right now but the other part of that is when you had 25 years you have the ability to actually have a full product line. So if you're a five or six year old company, you probably have a product, right? Right. And you have variations that can do different things, but it's probably that small, you know, intelligent surveillance reconnaissance drone, you know, the SkyO X10 or something like that. But to have a product line that goes everywhere from a small little FPV, first person viewer drone, all the way up to a drone that has, you know, two diesel engines, can fly for up to 7 hours, can lift 100 pounds, and everything in between. And they're all integrated in terms of interoperable parts, you know, common operating systems, software, universal mounts, you know, dozens and dozens of different integrations with other payloads like, you know, cameras and LARs and AI systems, that just takes time. Yeah. And so that is a big big strategic differentiator for us. So when we have a customer that comes to us and says, 'Here's my use case. This is what I need to do.' And most of our growing customer base now is military. But whether it's military, public safety, or industrial, they're like, 'Hey, I need a drone that does this.' And they go look at a bunch of websites and then but okay, this kind of fits the time and duration and power requirements, but I need it to do this. What happens for us is, okay, we pull that off the production line and now we can build a drone system, you know, for them to a spec because you control the whole stack, the software, the integration. And what happens with that customer is, hey, great. This is a drone I needed to do for ISR, you know, for surveillance or reconnaissance. But now that I got surveillance and reconnaissance, I actually need to do forward operating base logistics. I need to deliver, you know, medical supplies or ammunition or, you know, whatever the case is to this location because I've got surveillance telling me that it's clear to do that. Yeah. And they're like, we're going to find a drone that does that. Well, wait a minute. We're already trained up on that Dragonfly system. They've already got a drone platform that can do this, you know. So it just lends itself to upgrades and upsells very very conveniently.

It's all like like I think one of the strengths we do have is that, you know, we iterate based on what the customer wants because that is what gives indication to what the future of the industry is going to be. So, we're honestly not smart enough or trying to predict what the future's going to be. We're not ignorant to it, but we are very customer-driven and as the customer discovers the use case, you know, then we're actually able to build into it.

So, if you don't mind, I'd like to give two and I'll try to keep it as I think that was plural developments. Okay. So, if you don't mind, I'll condense it as much as possible. So, southern border sheriffs, Cochise County in particular, southern border has a number of thousands of covert cameras along the southern border. And what happens is, they get an AI, they get a hit on the camera. AI determines it's either a cartel activity. It's not an animal walking through the desert or something like that. Or they can determine from that AI if it's human trafficking or if it's migration or whatever. So they get a hit they get the alert and they're like, but that might be an hour and a half away by truck, right? So by the time they get there, they're losing continuity of the situation. By that time, they've already hit a road. They got the pickup waiting. They got like I mean, these folks are smart. They know, they test, they send out people, they get caught on purpose, they learn the system, the pattern, they go. So what they wanted to do is experiment with drones to like, okay, we get a hit, we deploy a drone. That drone can give us real-time intel. Now, the challenge is all the drone options out there were like, okay, they got 30 minutes or 40 minutes, maybe it's really 30 minutes when they say 40. 30 minutes of flight time, right? So it might take 20 minutes to get there. You got 5 minutes to dwell and then you got to get back, right? So it gives you it helps but all it really does is kind of tell people that they know they're being watched. So their number one issue was we need a drone that can stay up for hours at a time and we need a drone that can actually get and hover in place. So you can get a drone that can stay up for hours at a time but it's a fixed wing drone and it's you know it can give you good surveillance. But they're very susceptible to weather. They can't carry a payload. And often what the seraps have to deal with is life and death situations where you might have to do a search and rescue. You might have a human trafficking situation where a family, a child, you know, somebody has been left behind and or they get into a situation where they need backup and the backup is still an hour away because they thought it was an individual, but it's really a group and it's hostile. So now you can drop in these drones and they are literally backup. So the drone that we designed, so we put our IT group, which is the integrated tactical services group that we have, which is former tier one operators. We spent three months at least with the sheriff's departments understanding where the dead zones on a communication are, what their concept of operations are, their use cases, you know, all of the different scenarios that they were in. And then we designed a drone system with them. So we pulled off the shelf our heavy lift drone knowing full well that they had to have more flight time than that. So, we designed a drone that's 9 ft across, two diesel engines. It can carry up to 100 pounds of payload, so it can act as a communication network. It can drop in supplies. It can do interdiction. So, literally, this thing looks like a Death Star. So, this sucker comes down and it can hold people in place. They throw rocks at it and they run for about 5 minutes and then they overheat and they lay out. They're like, 'Dude, this isn't going anywhere.' and then backup shows up and it's tied in with their AI cameras. It gives situational awareness to them and or border patrol or local police or search and rescue. They've all got the ability right from their cell phone to see real time.

What's going on?

And this is a market that nobody was looking at. And it's because nobody knew the market existed, right? the sheriff said we have a problem and as we investigated and build the solution around the problem well now there's a 20 million you know addressable market just along the southern border of sheriffs that and we've got the propri to really develop the product solution for that.

Yeah no that's why to do it.

So you know so there's the southern border opportunity there's the northern border opportunity there's the Canadian southern border opportunity because they're now integrated and looking at it and then there's a whole global management border opportunity around it. So that is a great, you know, in my opinion anyway, a great validation of what differentiates us and a market like none of that ever went out for, you know, RFPs from Homeland Security and it was just like a use case that developed into like, wow, this solves a big problem.

That's right. And these are commercial projects. So, you know, typically from a government procurement perspective, that would go under a one-year requirements document study and then it would go into a pilot test that would be 18 months long and then it would have to go through everything from probably Senate confirmation to, you know, whatever to get the budget for it and then there'd be human rights investigation, and eight years later you're coming up with the drone that today has to be developed in three months, right, to meet the requirements. So, that would be a great example. And I won't kill you with the other example because I know we want to be a little sensitive of time, but, from a military application, we've got the Department of War that's buying our first-person viewer drones. And, you know, I think it's a spectacular drone. Like I...

It's an initial order in a particular department that's really the leading edge of how this will be done in my opinion through the rest of the Department of War. But the fact that they selected our drone was fantastic. And fortunate for us, but the reason we really got selected is what they were really testing out is logistics. So you can build tens of thousands, hundreds of thousands of drones but how do you get them to location? How do you make sure they can iterate every 10 days? How do you make sure like there's all the actual logistics of winning a battle in a war that are so much more than the requirement of just the actual product. So in this particular order which is publicly announced, what we do is they actually build the Dragonfly FPV drone on their bases.

And we train them how to build them on their bases and we manage the supply line so they have the parts to build them on their bases. They build in the range of let's call it about 200 drones at a particular time. Now that's not enough drones to match an active situation. An active brigade in Ukraine will go through up to 180,000 drones per month.

A month.

Well, okay. The cost on the Ukrainian side is probably closer to 600 or 700 because they'll use any part from anywhere, but when you start putting in NDAA, National Defense Authorization Act requirements, cyber security requirements, proper logistics requirements, those types of things, you drive your costs up a little bit.