Draganfly Inc. (DPRO) on Q3 2021 Results - Earnings Call Transcript
Cameron Chell: Hi, everyone. How are you doing? It's Cameron Chell here, CEO and Chairman of Draganfly. I’d like you to welcome you to our Q3 Earnings Call. Joining me today, we have Scott Larson, our President; we have Paul Sun, our CFO; and also we've got a couple of facilitators and people that are helping us manage the questions, and such, including who handles our internal IR. So the format for today's call, if it's okay with everybody, is that basically we'll run through a short corporate presentation. And during that time, I’ll give some overview of how our earnings are unfolded for the two I'll have Paul Sun run through some of the details of that. And during that time, we really encourage you to participate in the Q&A session. And we'll do our best at the end facilitated by Scott Larson, our President, in order to answer all the questions that we possibly can. So on that note, I wanted to say thank you first and foremost to all of our staff and our team for the incredible commitment and work in this last quarter and all the quarters before. We continue to hit tremendous growth. We did see some delays in a number of shipments due to some supply chain stop. Nonetheless, we still had a record quarter and have an incredible backlog here going forward. Really, really proud of the team and our customers and partners as it relates to the initiatives that we have currently unfolding and the size of the business that we continue to scale on. So, on that note, I'll just mentioned quick that we're up over 30% year-over-year. So again, another record quarter at 1.896 million, notwithstanding of our supply chain issues and delivery challenges as it relates to some global events. And our gross profit was increased 212%, up almost 40% for the third quarter. I'm going to let Paul get into a bunch of the details, but what I'll do is I'll just give a quick company overview and highlight a bunch of the customer initiatives if we are in the midst of -- have completed or in the midst of and should give some pretty good insights how the business is tracking right now. So I’ll just do a quick share screen. So, just a very quick review, Draganfly is the oldest or certainly recognized within the industry in many other areas as the oldest commercial drone manufacturer and solution provider in the industry. We are rapidly growing as evidenced by our numbers. Our specialty really is in artificial intelligence, data acquisition and data analytics. So while we have both manufacturing capabilities, we really look at these capabilities in our unique ability to deliver on customer requirements and/or collect very specific pieces of customer data. Our overall thesis is that nothing, deliver probably as efficiently as a drone and nothing can collect data as efficiently as a drone. There really is no device that can collect more or better data and unique data as a drone, and in so doing, that's really where we focus our efforts, and Draganfly will always be known as a drone company and hopefully the number one or number two player in the North American market over the coming years. It wouldn't be surprising to us to have been one of the largest depositories of battery mining data, or one of the largest repositories of forestry data. So, it's our intense focus on collecting strategic information and helping to analyze that data for our customers that helps to differentiate us as a customer. Of course, we have very strong IP. We have over 30 patents and hundreds of pieces of IP that we do not publish, and we're constantly developing new products. Every quarter there is new products coming out that are really driven by our customer requests. Now, Draganfly has been a very technology engineering-focused company for the last 20 plus years. But a couple of years ago, when the FAA came out with very clear guidance about beyond visual line of sight, and how that will start to integrate into the infrastructure and into the economy and into the aerospace, it became very clear to us that, that was the time that this industry was going to scale. This is when we went from an organization that spent most of our time selling and educating with our customers to actually taking orders and designing product and just struggling to keep up. And so at that point that we really took a conservative effort to go and move from a contract manufacturing and engineering shop, to our own specializing brand and solution provider. The other big thing that happened in the last couple of years is a realization by both corporations and by government that drones collect data better than anything else, and security around that type of data is paramount. So as a 20-plus year-old company with people that have all the appropriate security clearances, with a track record of working with military contractors and public safety and U.S. media and agencies that we have a trusted name and track record in order to deliver on that security. And with that type of business, with that type of customer relationships that we've had for the last 20 years, it's really driving business and gives us another strategic advantage. While we're an organization that's been building hardware and software in the 90s and 2000s and even into the early be mid-2000s, we're focusing on autonomous and AI. As we go forward, these are the two key components that will differentiate the business. So while we do see competitors coming out with some pretty cool hardware innovations and new software features, at the end of the day, all of that stuff to be engineered and there is a race to the bottom, where the future of the drone industry is, is who can best deliver autonomous operations and AI insights. We have 4 general components to the business. We have contract engineering, which is the stalwart of our business. This is where we really hold our skills, our energy and developed incredibly strong engineering bench, both in software -- excuse me, in software, in AI and in our device and our hardware manufacturing. We also have now developed a full line of product sales and development. We do full product development, full sales, full warranty and it's a mature mind, that's fully commercialized. We've demonstrated that we have the ability to go from idea to commercialization in less than 9 months with some of the most complex engineering and AI driven solutions in the market today. We also do a full flight services. Now, a bit of the difference for us here is that our flight services are focused on particular verticals. So we don't generally go and do any flight service work, unless we have a strategic differentiator in that particular area, whether it's in forestry or mining or energy, whether that's software or AI-driven, again, it's all about what differentiation do we have that we can bring to our customers to make them more competitive. And then of course, there is data services. While this remains a small component of the overall business, we see this as like the most important part of the business going forward the most important part of the business going forward over the next 5 years. As mentioned, we have a full product lineup, whether it's multi rotor drones, whether it's ground robots, whether it's fixed wing aircraft, whether it's vertical takeoff and horizontal flight, we of course have our flight services in these four key areas that I mentioned, and we have an AI bench that's developed solutions that no other drone company has in the world. One of these solutions would include Vital intelligence. Vital Intelligence is a product that we develop this simply from a camera can read your heart rate, your respiratory rates, it can read your blood pressure, it can read your blood oxygen level. This was developed for a specific customer that needed drones to be able to take Vital Intelligence situations in multiple different scenarios. We've now ported this technology over to key off, security cameras, smartphones and telemedicine systems, this piece of business is will probably grow us 5 to -- maybe up to $20 million in business in the coming year. And again, it's this type of innovation that we see differentiates us. Our aero frames are great air frames, but it's what we do with our aero frames is the data that we capture, is the packages and how we deliver those packages in the certain way with these aero frames that really make us special. In terms of our Q3 2021 customer highlights. I wanted to start off talking quickly about digital dream labs. So digital dream labs as awarded as the contract is $9 million per year, and that's a 3-year contract. Now to put that in context, obvious, is that our entire revenues this year are coming in around that $7 million to $8 million range, which is up a 100% over last year and a 100% the year before. This one contract represents an entire year's revenue with just one customer. Now we're dealing with dozens, maybe not dozens, excuse me, we're dealing with a dozen scenarios like this right now, and these customer sizes and larger, and it speaks not just to the growth of Draganfly, but the growth to the entire industry. We're certainly thrilled and honored to be working with digital dream labs on this project with them for this particular drone. Also this quarter, we announced an innovation lab with the Drone Racing League, which is already garnered some incredible business development opportunities for us. We're using this lab to highlight the technologies, the very specific technologies that Draganfly can bring to the markets that others can't or don't currently have the capability to do. These innovations will be demonstrated on the racetrack and across NBC and across the sponsors and partners that Drone Racing League has, we able to clearly demonstrate how we can then port that into the commercial industry after it's been in one of the toughest environments in the world. We also signed a contract with Valkyrie. Valkyrie is a well-known drone delivery box. This is a box that receives drone delivery packages in different scenarios, whether it's suburbs or whether it's industrial facilities or whether it's medical facilities. We have a minimum order contract of $100,000 from them, that Valkyrie has hundreds of POs. And this is something that we look forward to being a very large piece of our business going forward over the coming years. Coldchain Delivery Systems is the work that we're doing in Texas with the emergency medical services. And this last six weeks alone, we did over 300 delivery test flights with Texas EMS. We've also now initiated nighttime test flying and we look forward next quarter to moving into beyond digital line site of flying and actually flying live niches. This piece of business for us is incredibly important, because it demonstrates not just our capabilities, but has us working with the right levels of governance to understand the budgeting and the approval process for this really, really important component of drones in the emergency medical service space. And this is being looked at by multiple states, very important project for us. And of course, at Alabama State University, we implemented a drone training program at a university level. So graduate pilots from Alabama State University, this is a fully paid curriculum. And in the coming quarters, we expect to roll it out to multiple universities. And this last quarter, from a product standpoint, we did release the Draganflyer 2 Commander, which we launched, which has additional expanded capabilities. This is our signature small light drone. We manufactured dozens of types of drones for different scenarios across multiple customers, but this is one of the base platforms is very popular with public safety. With the Vital Intelligence, we integrated into the Fobi Venue Management System. So, Fobi is deploying their venue management system into multiple venues across the United States, where the requirement for vaccination cards and health screening are required. And they now have integrated the Vital Intelligence technology to actually take the vital signs of people as they're coming into facilities. And we have also now deployed the new Vital Intelligence Kiosk, entire new product design and is being deployed into multiple customers as we speak. This has really given us scalability in this particular area, which we're excited about because we've got increased in incredible demand. So on that note, what I'd like to do at this point is I'd like to turn it over to Paul Sun, our CFO, and have him run through our key financial and operational highlights for Q3 2021. Paul?
Paul Sun: Thank you so much, Cam, I appreciate it. And thanks again for joining our call today. So just to take you through some of the highlights here, revenue for the third quarter was up 70.5% for $1.9 billion, up from $1.45 million in the third quarter of 2020. Third quarter revenue comprised of $1.35 million for product sales with 412,000 of that from drone services with the balance coming from engineering services. Gross profit increased by $213,000 or 38% this quarter over the same period last year. Gross margin as a percentage of revenues was 40.8% this quarter versus 38.5% in Q3 of last year. This was a result of more sales coming from engineering services this quarter versus Q3 last year, as these services tend to have higher gross margins than the other categories. Total comprehensive income for the quarter was $24 million compared to a loss of $2.5 million in the same quarter last year. The large increases from the accounting treatment of $30.6 million non-cash liability from USD warrants that were issued during the company's Regulation A offering earlier this year. So the year-over-year comprehensive increased as Q3 last year did not have the treatment of that USD warrants from the company's Reg A offering. The year-over-year increase was somewhere offset by increase in office and miscellaneous expenses and professional expenses. And our company's cash balance at the end of September 30, was $28 million compared to $2 million on December 31, 2020. On this Slide, looking at the table on the left, we somewhat just talked about this Q3 revenues increased $443,000 from the same period last year, and was driven predominantly by product sales coming from our tantrum division. The $1.9 million in sales just over 70% was for products while just over 20% from drone services and again the balance from engineering services. The gross profit from the quarter was $773,000, an increase of $212,000 over the same period last year, and again, as a percentage of revenue was 40.8% this quarter versus 38.5% last year. As touched on earlier, product mix changes every quarter, but in this case was actually pretty consistent year-over-year. The net income and comprehensive income for the 3 months ended September 30, 2021 includes a non-cash gain in fair value derivatives, which we just talked about of 30.6. So if you backed that out, the loss would have been $6.7 million and $6.6 million respectively, meeting a net loss on that comprehensive loss, which again, I think is quite reasonable, given we've recently have listed to the NASDAQ. Following that, loss per share would be approximately $0.20 versus the reported income per share of 75, again due to that USD derivative liability. If we look at the table in the middle, the balance sheet, you can see our total assets increased substantially from the end of this quarter to that of the end of last year, fiscal year 2020. We had $16 million versus $7.1 million, which is largely due to the closing of the Reg A financing and the NASDAQ financing that we just did earlier this year. Plus, we had the booking of the Vital Intelligence acquisition, which we spoke on our Q1 call. Working capital as at September 30, 2021, would have been a surplus of $37.4 million and shareholders' equity would be $58 million, if we excel that non-cash share value of derivative liability from the USD Reg A offering. And you can see we have minimal debt. And finally, on the right-hand table, since we already spoke about the year-over-year changes for the quarter, I'll focus on the quarter-over-quarter changes between Q3 2021 and Q2 2021. So again, revenue for Q3 2021 decreased by 4% to $1.9 million, compared to the $1.98 million we reported for Q2. Again that's just due to slightly lower product sales. Gross margin percentage for Q3 2021 improved to 40.8, up from the 36.82 in Q2 2021, increases due to the sales mixes of products sold and operating expenses for Q3 2021 increased 139.6% from Q2 of this year in part due to higher insurance, marketing, investor relations costs, professional fees and share-based payments. And total comprehensive income for Q3 2021 was $24 million, compared to a loss of $8 million in Q2 of this year. As mentioned Q3 includes a non-cash gain in fair value of derivative liability of $30.6 million, while Q2 includes a non-cash loss in fair value of derivative liability of $4.8 so if we excel out Q3 would have had a comprehensive loss of $6.6 million compared to a loss of 3.3 million in Q2. And with that I'll pass it back to you Cam. Thanks.
Cameron Chell: Thanks, Paul. So just quickly before I turn it over to Scott for Q&A. We really feel that the team has executed this last quarter, as it relates to product expectations, we have certainly executed in terms of contracts getting signed for this last quarter, and we are really excited about the upcoming opportunities that are in front of us. Overall, I think we've got that, we are in a market where we've got rapid financial growth rapid financial growth. We've got a really good market as it relates to the regulators. We've got customer demand is pent up and we've got an executive team that's built these types of companies before and is demonstrating their ability to get commercial products to market and to close on customers. So with that, we really wanted to take the time to thank you for this opportunity to work with us and to be shareholders. And we look forward to continuing to meeting and hopefully exceeding expectations. And with that, I'm going to turn it over to Scott to help facilitate some Q&A. Scott?
Q - Scott Larson: Thanks, Cam, and thanks everybody who has logged in here. Just a bit of a recap and just to kind of remind people how we've done this in the past. I will ask the questions, a bunch of questions have already come in. And so I'll just try to go through those more questions that come in actually going just the last 15, 20 minutes here. And so I'm going to try to do here is work our way through as many of the questions you can, some of is of course we can’t answer. They're looking for guidance in a few things like that, which we don't give. So don't want to be too awkward here, but we'll try to pick as many these questions that we can answer, and just give a little more color on some of these other ones. So I'm going to take a few of them, a few of the other ones I'll refer back to either Cam or Paul and we'll try to work our way through them. If there are more question off course -- we'll do our best to kind of get all the way through. So with that being said, first question here is to better understand the deal with DDL and the timeline. According to DDL, Draganfly is going to provide a couple of prototypes. The market launch is going to be at Christmas 2022. And so Cam give this to you -- can you give a little more color on DDL, what it looks like and when this is going to be backing up?
Cameron Chell : Sure. Sounds great. So as graciously asked us to produce a new companion drone to an existing stem-based science technology education and math education twice, and so this toy has a install base of about 5 million users currently, they're looking and growing. And they're looking for a companion drone to be a part of the product lineup that they have already and fill about 20% to 25% of the existing market for their Cozmo robots. They are launching some very assertive marketing. I'm not sure -- I got be careful, I'm not sure what they disclose, so there are some fantastic media properties that are being launched this year. And in doing so we’re currently in the process of tooling up and being in a spot to be able to meet their product demand. Now, there are a big portion of really won't be happening until Christmas of next year, but of course it takes us a little bit of time to get all the testing done and production going and need all the demand, but we're looking at a minimum of $9 million a year product based on the numbers that they've given us. So they've got demonstrated capabilities so much more than this. And so we're really excited about this product, this particular product, while it in some respects feels a bit like a consumer drone and it's priced under $1000. It really is -- it's not consumer technology that's in this drone is highly interactive with the existing product line that they have. It has significant AI built into it. And it has a lot of programming options that had to be worked around because it is a programmable device. So it would not be said, it's highly complex and we're doing it in a manner where certainly the brains of the operation, which is the AI, the way we were brought into the expertise. Certainly, the super cool drone design and the aeronautics and all of that kind of stuff is table stakes. And so, we're bringing that to the table as well. But we look forward to this partnership with them and actually growing on it in many, many ways, so I think it’s perfectly designed for Draganfly, even though -- it speaks a lot to the back of these drones you can build a $15 drone over in Asia or $50 drone over in Asia and maybe that’s a giveaway or graph or whatever it is. But when you want to get into sub it’s actually got some durability, is going to have some communication, is programmable is going to work with things in the future, interact with things like Siri, all the rest of them, not all that type of stuff really takes some foresight and some deep engineering work. And we're thrilled to be able to be a part of that.
Scott Larson: Another question is since the ways back in July, how's the cash on hand being deployed. Yes, I'll take a stab at this. We talked about this in our files we talked today of course, a couple of big things that came out of that would be just DNO insurance. The insurance market, these days is incredibly difficult. And we started to ramp up as a company bring in other layers of management and also chasing some of these other things that we're going after. So there has been an increase in employees’ kind of head count generally. We're starting to invest in what we think the next iteration of the drone industry is going to be with regards to drone deliveries, of course, can’t talk about that as well. And then just basically making us more just increasing our governance, our systems, our structures, building different levels of redundancy, more or less across the company to reduce overall risk, to make sure that we have the foundation for growth. Can’t talk about a few of the initiatives that we're chasing even if -- of course just making sure that we have the systems in place deliver on that. So, some of the cash to be is kind of one-off stuff, insurance being put down and so forth and others that this is just going to be as the company scales up and looks to take advantage of some of the opportunities that are coming to us. We'll go through here with couple more questions. Yes. Cam, I’ll put this out to you again. Cam, we talked a little more, what's the -- what kind of timeline, what's the update there? The deals been talked about for a while, what are we looking at in terms of deal finalization?
Cameron Chell : Yes, I'm hopeful for Q4, in terms of the finalization. The scope and nature of it has changed dramatically, as the whole industry is expanding and capabilities are expanding and then other partners are coming to the table for the initiatives around education and stem. And surprisingly to me, if you would've asked me a few years ago, was education is going to be a big push for driving, I would have said no. But you look at it today and we've got incredible things happening with BRL on the education front. We've got incredible things happening with DDL on the education front. Of course, we've just announced a whole program with Alabama State University, which we plan to expand through all the historical backed collages. And we have a university level course now, which includes Part 107 licensing and the whole education side of this is really, really expanding. So, I know, it's been a while since we've talked about, how to be quiet about it, but it's for all the right reasons and hopefully we'll have something an update to provide here in Q4, if not Q4, Q1. But, I expect in Q4 we will be able to make some announcements around that. And I think that'll paint a pretty good picture around the whole education initiative as a strategic vertical that Draganfly surrounding.
Scott Larson: Yes. Okay. Thank you. Another question has come in with regards to supply chain constraints and other impacts to revenue or top-line. Yes. I think supply chain is an issue across the -- globally, of course. And it's certainly has -- it's something that we think about given our focus more on solutions moving forward, more on things like drone deliveries, working with some of the things that Cam just talked about. I think -- and we put this of course into our risk assessment that we also just released today as well. I think from a supply chain issue, it is an issue. It is a constraint. It does impact, given the nature of what we're doing and the customer focus a little bit less than on actually building and selling drones and more on integration with other systems and data collection and the services side of it. The supply chain is mitigated in terms of the impact that has had on us. And of course, there is been supply chain issues for the last 12 months or more, and it hasn't had a negative impact really on our top-line revenues, continued increase and of course this is another record quarter. So, I think it is something that we look at. It is something that we talked about. It is something that we watch and we try to get ahead of in terms of lead orders and just be smarter with purchasing. It's not revealed, but we've done a pretty good job of managing it so far. And to be frank, we expect that to continue to move forward.
Cameron Chell : Scott, maybe a slight characterization there. I mean, I think it's certainly had impact on our current Q. It's certainly not had impact on sales, and we've been very fortunate. There is some great management on your part and Paul's part too to not have previous past impacts on . I think you've got a great plan going forward to help ensure that it doesn't materially affect us. But to speak to that point, but I do think, as you said, it's something that's real every day, and has had some effect for sure. But I think you've got a great plan in place.
Scott Larson: Another question here, Paul, maybe I'll -- Paul something I'll send this to you. Can we give any quick comments without kind of digging in too deep with regards to what the OpEx is going to look like moving forward? Is there a baseline in terms of quarterly OpEx on a go-forward basis that we are getting close to? Is this is a bunch of one-off stuff right now? How does it look like moving forward?
Paul Sun: Yes. I mean, obviously, people can go back and look at each quarter in terms of our operating expenses. They definitely have fluctuated, certainly since coming onto the NASDAQ, they have maybe trended a little bit higher, but you would expect that because as you just went through, we've raised capital, and as a result, we are trying to fill the business in terms of looking at a number of initiatives, including hires and what not. So I would say it's a bit too early to say that we've had kind of a steady state, quarterly operating expense threshold or number. I think certainly we don't give guidance, but I think it would be fair to say that for the next few quarters it will fluctuate up and down, but kind of using the last few quarters as a proxy I think would be would be fair.
Scott Larson: Cam, I’ll put this one back to you. Any challenges or pushbacks with any of the current programs with regards to FAA regulatory, how do we see the regulatory environment within the drone industry looking moving forward?
Cameron Chell: Yes. So overall the trade winds are at the industry's back and we have a very friendly regulator, who in my opinion has very strong favors for established companies, who are working with real use cases, real customers, solving real problems and such. Certainly within individual programs there are a number of delays and challenges and questions and research and stops, so while, somewhat of a surface level there are a couple of programs that are somewhat frustrating because they're just taking time, type certifications taking longer, that's been due to manpower, some the backlog of the organization, some to regulatory clarity, some of the politics, all the kind of stuff you would separately expect, but overall, the FAA I think has done a fantastic job. Now, they're really working hard with the industry. There's a strong mandate because the environmental impact, positive impact of drones, the congestion issues, the economic industry opportunities, the advanced security like just everything in the drone industry brings the regulators are behind. So as a bit of a surface answer without being able to go into a specific mentioned program or something, but overall very, very positive. But there's always challenges and it always takes a little bit longer, but I kind of view the whole regulatory environment is being the whole industry quite frankly is taking longer to mature, but it's going to be 10 times the size of what anybody expected.
Scott Larson: Yes. I think, just a little color on that from my standpoint of, I’ve been through conferences over the last quarter and obviously the regulatory environment is a key topic of conversation at any one of these conferences. And I think across the board, everybody's thankful that the changes are coming, that at least now there's a framework that companies like us can operate under. There's some, there's a bit of a framework that we can target getting approvals, getting certification, working our way through that is still takes a lot of time, but we're thankful now that and this is a process. And so we're -- companies like us and others of course can start to take the first steps. And we talked a little bit about already with what we've done with coal chain in Texas and drone deliveries and so forth. And so all that has been able because the regulations and the regulatory environment has been loosened over the last 9 months. And so I think we look forward to that continue to happen. There are other companies like large retailers that have started to put the pilot projects in place. So I think over the next 6 to 12 months, nothing moves particularly fast, but over the next 6 to 12 months, we can expect to see the same type of full momentum, solely we were seeing better definition with regards to what the regulations actually are within the industry. Couple other ones here that will certainly cognizant of time here. But, yes, quick question here. That's come in regarding as new board members. Particularly new member that came on within the last quarter. And the question is, are the government contracts -- what a new board members making? And it's a good question. We can say this before, we think all can say -- and say that we -- Draganfly is blessed with the type of board we have, particular some of the folks are in U.S. Andy Card, John and of course -- just came on recently. So from the board standpoint, we are thankful for the board we have. I don't think we want to get specifically into government contracts and just two point of that, but certainly, the board has been helpful, and the board has been able to introduce us to groups that we probably wouldn't have access to elsewhere. So, I hope that answers the question. Cam, if you want to give any more color?
Cameron Chell: No, I think the answer is the best we can without saying anything we can, but we have the board, we're very blessed to have the board, and the board that we have is very strategic. We certainly -- it's very strategic in terms of who's on our board, why they're on that board, what industry and what government background they have. Regulatory compliance and being a regulatory compliant and friendly well-positioned company in this industry will be key and having access or credibility within both circles will be key. And so, we're super grateful for a company like us to have the board that you do, and they've been very impactful already. And in quarters to come it will be very apparent in my opinion.
Scott Larson: Maybe talk a little, Cam, about Vital Intelligence, the telehealth COVID of course, all over the map here, it’s we generally kind of get our heads wrapped around what it means. What do you see happening with Vital Intelligence specifically with regards to COVID perhaps being under control, want to oversee things here, but what do you see that looking like moving forward?
Cameron Chell : Well, I think there's a couple of things. So even -- I mean, where do I even start. The whole health security industry, which is this brand new industry has growing up, and one of the -- in my opinion, preeminent technologies in that industry is simply being able to use a camera to measure vital signs. So whether you've got agencies that before delivering Ebola vaccines into villages, are using cameras on drones to look at the population, make sure that the contacts that are coming out to receive the vaccines are healthy, don't have infectious conditions, and or then to even deliver the vaccines in and/or provide population help over the course of the vaccine distribution. I mean, that's one use case that’s got massive potential across the world, whether it's a first responder drones that has there either coming in to accident scenes, or whether they're doing disaster relief are being able to treat survivors on the ground and provide vital information back to the trucks that are rolling in because they're providing that vital intelligence, that vital signs. For us, this is the type of sensors and AI that we put our drones that make us strategically different. This is the type of data that's critical in terms of like how quick responders are getting to scenes and how much quicker they able to respond to emergency situations and how better is their triage process? And those are the things that really make a difference with drones and with the technology that we provide. We focus on the solutions. We don't focus necessarily on the drone. And so just that alone differentiates Draganfly and is earning as kudos in business, in emergency response sectors that we never would have had and nobody else even having the opportunity to look at. But if we look in particular at health services in correctional facilities, where you've got national guard units are going in and taking vital signs of populations, and now you can see Kios there, and they are doing it, whether it's Kiosk or smartphones or whatever the case is. The fact that COVID is at least in some level of predictability right now, doesn't take away from the fact that, it's very prevalent. And now this is a core piece of health and safety that needs to be implemented in the manufacturing and schools and federal buildings in all kinds of different ways. So, I'm really excited about this business, even in -- and I think it's going to be -- it'll be a meaningful number for us going forward, over the course of the next year, $5 million to $20-ish million in business over the next year to 18 months and potentially growing much, much larger from there. Even in terms of our Drone Racing League partnership, I mean, you're going to see the Drone Racers, racing the courses, and you'll see their vital signs right on the side of the screen now. You'll see how they react to classes? How did they deal with stress? How did they deal with victory? How did they deal with defeat? I would even predict that you're going to see the betting lines, the drafting makes the Drone Racing League, people are paying attention to that data that's there. I mean, the input, you can just go on with the expectations. I mean, this is one piece of AI that we put into our drones.
Scott Larson: Yes. Thank you. So, we've worked our way through most of these here. A couple of them, with regards to guidance and so forth. I don't think we can ask, given where we are right now. Maybe we'll just take one more. And Paul Sun, I'll put this to you. Please discuss how -- to scale operations manufacturing and overall costs in order to service some of these contracts that are coming through? What do you think that's going to look like? How does that affect gross margin? Any thoughts on what scale increase might look like?
Paul Sun: Yes. Right now it's just to remind everybody, we have manufacturing facilities in Canada. We are building something out of the U.S. as well. So, really, depending on the contract and the skillset of the engineers at that facility, we might find ourselves meeting to scale up or expand the capacity of that facility, or in some cases we might look to outsource the non kind of IP centric soft to get a contract does for a later. So it really is on a case-by-case basis. Certainly, we are kind of at this balancing point between trying to put revenue on the board, as well as, trying to get to profitability. As Cam spoke through his presentation, I think there is this opportunity now where the closed phase is opening up. So, I think from my personal opinion, I feels like we're kind of going more for a land grab situation to really try to maximize the projects that we can get our hands on. So I would say we were probably more revenue focused right now versus total profitability focused, but obviously we do want to make certainly gross margin on all our projects. So we're not going to necessarily do something at a loss, but depending on the situation there is – there are going to be swings in gross margin, and you already see that in our business for a product sales our lower gross margin when we do engineering services, that's very high margin when we do software type integrations that has the highest margins. So it really does depend, so I think we're going to be thoughtful on as we roll things out. We're not going to build a huge facility and hope they come, but I think we're kind of boot strap and make sure we can keep up with the initiatives that come our way.
Cameron Chell : Yes. I just add to that. One of the things that Draganfly has always done is focused on doing as much as we can with the resources that we have. And in the past those resources have been limited, and we've been able to execute well in my opinion. And so I think we're going to keep that mentality moving forward which is we work with a bunch of outside partners. We keep our costs certainly as low as we can. We always scale up fixed OpEx and kind of baked in OpEx very, very slowly, and we've done that in the past and we'll continue to do it. One-off charges and costs and things like that, as Paul mentioned, of course those come through when they come through, but we have been diligent in the past about just really making as smart decisions as we can with regards to increasing our baseline OpEx and making sure that it flows in with real opportunities, real revenues, real customers, things that are really going to provide shareholder value over the longer term, and we’re certainly going to keep that mentality moving forward.
Scott Larson : So it's been 45 minutes and we're cognizant at a time here of course, we're a couple of minutes longer than we might have thought. I think the question standpoint, feel free to email those into our Investor Relations. One if you think haven’t been answered, we worked our way through most of them, there was some, obviously some duplication and overlap that I'm looking at here, but I got through most of them. If there's ones that you think we missed, feel free to email them in. We'll do our best to get back to you and follow up offline with those. So with that said, Cam, I’ll forward back to you just for a final farewell and then we can look to adjourn this call.
Cameron Chell : Scott and Paul, thank you very much for your partnership and the management that we get to do together, it's an honor to be with you. To our shareholders, we really, really thank you for the trust and the opportunity. We're always looking for your input. We're very shareholder focused organization both communication and shareholder value wise, but we do have a longer-term view. We definitely are focused on sustainability. And so keep that in mind as we continue to move forward. There's a reason, a lot of growing companies, haven't made it over the years, and we're still here for 20 some years and we're going to be here for another 20 some years. And we aim to be that number one, or maybe number two player in the market in the coming timeframes. To our partners and customers really thank you so much. You’re what make us fun, getting to create incredible things, working with you is really what gets us up in the morning and of course, to our employees and everybody that we get to work with, the only reason that we do this. And so thanks for your ongoing support. And we look forward to growing our business together.
