Nice little Order to Start the Day

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02863551-2A1554233&v=fc9bdb61fe50ea61f8225e24ce041a0e155a9400

Hold IRL & SM

Oleg's 20 minute presentation at the recent ASX Small and Mid-Cap Conference September 2024 is now available on Youtube

ASX Small and Mid-Cap Conference September 2024 | DroneShield Limited (ASX:DRO)

A nice little repeat $3.1 million order from the US government following a period of silence.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02851231-2A1547737&v=fc9bdb61fe50ea61f8225e24ce041a0e155a9400

hold IRL and SM

Chart Update - 3rd Sep24

According to the technical we could be in for a drop.

It will be interesting to see with how much vigor or if they can keep it propped up allowing the 1D and eventually the 3D charts to reset.

In todays AFR: DroneShield: a capital markets plaything or the real deal?

For those not inside the paywall ...

DroneShield: a capital markets plaything or the real deal?

Even as sceptics question its valuation, the drone detection and jamming group has a near $1 billion market capitalisation.

DroneShield, the drone detection and jamming technology group, seems to have it all: a rocketing share price (even after it halved), an impressive ability to raise equity and a whiff of geopolitical intrigue.

That alone has garnered it an enthusiastic investor following.

“It’s captured the zeitgeist perfectly,” says one small cap analyst, explaining how this near $1 billion company in market capitalisation terms (first-half revenue: $24.1 million) has attracted investor interest with products that stop drones flying over war zones, airports and stadiums.

It’s why an analyst call with chief executive Oleg Vornik, a former banker, spends as much time ruminating on global conflicts as the push to lock in recurring revenues. In one such call, Vornik covered Chinese drone surveillance, as well as Ukraine and US military spending cycles.

There’s secrecy too. Vornik told investors on the same call that competition risk was minimal, as many of their government contracts were too sensitive to be put out to tender.

DroneShield in technical language owns and sells the technology to stop unmanned aerial vehicles (drones) from communicating with their controllers. The products use sensors to detect drones and radio frequencies to stop them flying or transmitting images. The most popular product is its DroneGun, which can “fire” signals at drones, rather than be mounted on buildings and vehicles.

But scrutiny on the stock has kicked up another notch after last week’s surprise equity raising at $1.15 a share, well below the company’s $2.60 a share high in July.

And it was the group’s second trip to the equity market in just four months; the company raised $115 million back in April at 80¢ a share. DroneShield closed the week at $1.14.

Driving the debate in the sharemarket is this question: is DroneShield turning into another capital markets plaything, or is it setting itself up to be the real deal?

Even with the share price fall, DroneShield investors have had an incredible run. Shares in the micro-cap have increased more than six times since the start of the year, and then, even quicker, have halved in value.

The combined equity raises along the way put the company among the top 20 equity issuers on the ASX this year.

It is the second raising that has thrown some believers, fearful this may be another serial capital raiser.

The company said $20 million or so had been earmarked for acquisitions, while $90 million is for developing technology “due to anticipated increase in AI [software as a service] offerings and higher sales pricing for the underlying hardware”.

Hefty multiple

The SaaS offering is a key part of the group’s plans to generate recurring revenue, and the technology spend is aiming to use that for drone jamming equipment. Right now, the SaaS offering only applies to detection.

The existing tech sells well, and will continue to sell for the next several years, Vornik has said, but he wants to “skate where the puck is going”.

Whatever the pipeline, for detractors it’s hard to look beyond the top line: according to Capital IQ, consensus is for revenue in 2024 of $95.5 million. That’s expected to grow to $129.8 million in 2025.

The stock is trading at high multiples – 13.6 times forward revenue, 53 times forward EBITDA, according to Capital IQ.

But there may be another game afoot: index rebalancing.

The next index inclusions are due in the September quarterly rebalance. Often, investors try to front-run the potential promotions, knowing that index buying will inevitably follow any index entrant.

There’s another side, too – shorts often move in just as quickly, partly because more institutional investors means more stock is available to borrow and bet against. Investing wisdom also suggests many new entrants propelled into the big indices by retail enthusiasm flame out when faced with institutional scrutiny.

DroneShield is a possible contender for inclusion in the S&P/ASX 300. According to Wilsons, it’s the third pick to get into the 300 following coal miner Yancoal and biotech favourite Clarity Pharmaceuticals, which also just raised capital.

The broker anticipates there are at least 13 “strong removal candidates”, which include TerraCom, Renascor Resources and Grange Resources, boosting the case for new entrants.

Even if the valuation debate wasn’t a factor, the group’s rapid growth has put governance questions front and centre.

Like many other fast-growing companies, there is concern that the group isn’t moving quickly enough to accommodate its enlarged scale.

For starters, its board has just three members – Vornik, Jethro Marks, the co-founder of retailer Nile Group, and chairman Peter James.

Directors sell shareholdings

Vornik said in an email the company is looking for another director and several candidates were being considered. “We would be looking for experience in fast-moving technology environments and the ability to scale up; a good cultural fit, potentially with global experience,” he said.

All three board members were selling their shareholdings in late February, when DroneShield was trading closer to 70¢. Vornik sold 10.5 million shares over the following week, netting him $7.2 million. Almost half were loan-funded shares, with Vornik paying $1.6 million back to DroneShield.

Marks sold 1.3 million shares, also partly loan-funded, while chairman James sold 5.6 million, repaid a loan and banked $2.8 million.

Insider selling is always a market obsession, particularly if all board members act together.

But neutral observers point out that of even more concern from a governance perspective was the issue of options at the June 3 annual meeting at 80¢. The holders of those shares are sitting on instant paper profits of around $23 million based on the last traded price.

The 3 amigos running this outfit are: Oleg, Jethro and Pete.

Director talk:

“DRO’s market leading software, hardware and engineering capabilities provide the platform opportunity to entrench its market leadership and facilitate future growth.”

Director actions:

19/1/24

Jethro Marks awards himself 1,500,000 zero cost options expiring Jan 2029

Peter James awards himself 3,000,000 zero cost options expiring Jan 2029

Oleg awards himself 15,000,000 zero cost options expiring Jan 2029

6/3/24:

Oleg cashes all his 10,456,000 shares for $7.2m

Peter James cashes 5,612,000 of his 6,532,000 shares for $3.8m

Jethro Marks cashes all his 1,292,901 shares for a miserable $889k.

(I can only think that poor little Jethro during the financial orgy must have been sent out to get the grapes and so missed out of most of the fun)

Why does Droneshield need to spend tens of millions to hunt down baddies when they have so much work to do inside their own boardroom?

You couldn’t make this stuff up. 

In the AFR Street Talk yesterday morning:

https://www.afr.com/street-talk/droneshield-readies-120m-equity-raise-bells-shaws-on-ticket-20240731-p5jxuy

Divisive small cap DroneShield, which plunged 43 per cent within a week after having its valuation questioned in a news interview, was out rattling the tin on Wednesday morning.

Street Talk understands Bell Potter, Macquarie Capital and Shaw and Partners were shopping a $120 million placement at $1.15 per share, which was a 17.3 per cent discount to the last close and 18.9 per cent lower than the five-day volume-weighted average price. It represented 13.7 per cent of shares on issue.

Term sheets sent to fund managers said DroneShield would spend $90 million on its technology development plan and $20 million on strategic bolt-on acquisitions. It has said it has a $1.1 billion pipeline, and is capitalised at $1 billion on the ASX – but only made $55.1 million revenue and $9.3 million profit last year. Bids were due 5pm Wednesday.

The raise would take DroneShield’s cash balance from $146 million to $266 million. Shares in the drone detection and defence company last traded at $1.39 apiece to be up 266 per cent this year.

It last raised $100 million at 80¢ a share, which was a 28 per cent discount to the last close and 19 per cent lower than the five-day volume-weighted average price. That raise, done in April, was used to accelerate delivery of its counter-drone systems to meet customer demand.

Chart update Fri26th July 24

Ooo Ooo Ooo look at this. Im loving the setup coming up (lets hope).

Look at all those ABC's down to get to that great support zone I mentioned a week or 2 ago. The next ABC (orange) has just started its C wave down. Its also in a decline wedge (a pattern known for preceding an impulsive move up) & has the ABCDE (3 wave move each wave) although I'm still trying to master this ABCDE pattern. Its will also hitting the 100sma on the daily & a fibonnaci Level of 76.4% retrace of W3 ( its a lot deeper than normal however we all epected that. I just like to see what I beleive is a bottom, happen on a Fibonacci level).

So there are loads of reasons for me to take a position some where after it leaves what I think is the bottom. If I was cautious I would wit for the 1st 1/2 up, however I'm also feeling that the 1st wave up might have some stregth behind it after the market was all on board recently. They will certainly still be waiting and seeing the same as I am.

The Play - So for that reason I might take a 2.5k - 5k token position see how that first 1/2 plays out. If its nice like I'm thinking then after the 1/2 Ill load up. The way I think is I determine the size of holding I dbe happy to end up with, Lets Say 100K -150K. So at the start I will layer in small positions as it proves itself, and then increase proportionally to maintain the 15% profit margin. Obviously the profit will get larger and larger as the overall amount increases till I hit my maximum spent amount of 100K-150K. This all needs to happen in first 3rd of what I work out to be its over all taget of its next large wave up (being W5). This should take quite some time as I have mentioned before, wave 4 down is usually a long one especially in the BIG wave 4 down. To climb to W5 without any Big news could take a long time if DRO keeps winning contracts @ 3-5 million at a time.

Please let me know how you think and would play this out (how you enter, size and techniques). Would love to hear how other think, for or against. Keep it nice though.

Some strong numbers from Droneshield today -- but not strong enough for the market, which has already priced a lot of growth in.

Contrasting Q1 and Q2, we saw $16.4 million vs $7.4 million, respectively, in terms of revenue. This could be due to timing of large orders or contracts.

Cash receipts were a lot stronger ($7.1m vs $14.2), reflecting the lift in Q1 sales.

From a SaaS perspective, we saw Q1 $561k vs Q2 $721k, showing continued growth in recurring revenue.

Cash Balance up massively, due to the >$100m cap raise in the quarter.

Inventory was up 75% as the company prepares future sales.

Likewise, we saw significant team expansion: In March we had 120 team members (95+ engineers), now 151 team members (114 engineers)

As well as more manufacturing capacity: going from $400m pa to $500m pa.

Sales Pipeline growth was massive -- pretty much doubled to $1.1 billion. The contracted backlog was about the same though suggesting steady order intake and delivery rates.

The operating cash outflow (going from -$10.7 million to -$18.9 million) seems to reflect the inventory build-up and team expansion.

You can see the full preso here.

My take remains the same -- the company seems to be enjoying incredible growth and the future looks bright -- but that (and more) is already captured in the price.

Chart Update 18th July 24

Sorry I know Dro has been a bit much on SM especially for those who weren’t part of it, however your opportunity may be on the horizon. See after such exuberance and the a super fast large fall, it tends to take some time for the market to level out at a value thats reasonable. What Im trying to say is that there can be an over reaction to the down side (as people bail out) after the over reaction to the upside. The charts have now given the next ABC down indicator while its still finishing of the original one. You can get overlapping ABC's down which just says "it aint finished yet baby". Not only only has it given the next ABC down set up, its also shown up on the K value of the stochastic indicator. Its way ahead of where it should be and needs to drop back to a reasonable level. To add onto those signals you can see there is good support down just below the aqua C @1.245. There is a support level (pink line),a Blue trend line & the Yellow trend line. For all of the above reasons I feel we will see $1.20 - $1.08 over the next week (maybe even sooner). So now all you fundamentalists can help me with what your thoughts are to: 1) what a fair value for DRO would be 2) Is 1.20 - 1.08 Cheaps. Im seriously considering loading up at those values. Keep in mind it may not bounce back so quick. It should zig zag sideways for quiet a whileas we are now in the W4. This wave is USUALLY slow and protracted.

Oh quick edit: those price points I mention are also in the 76.4% retrace zone (that horizontal white dashed line) of the large W3 we just had, so it will probably stop there also. Just adds another reason for the $ to stop falling.

Good it be that our highly-esteemed leader and overlord of this forum (aka @Strawman ) yesterday called "peak $DRO"?

What say you, @Saiton ? (Is this the start of a "down wave" or is there another term, like "down Niagara Falls")

Another chart update Wed 17th July 24

So you need to drill down to the 10min chart to see how the drop is forming, and now you can see the usual ABC with C wave being 5 waves down. That takes it real close to the Blue Trend line I mentioned yesterday and the 61.8% before fib before we will see it start a bounce of some sought (i believe ).

01:53pm AEST

Security Code: DRO

Pause in Trading

Trading in the securities of the entity will be temporarily paused pending a further announcement.

CHart Update thues 16th July 24

Ok well there it is, about time. I actually gave up posting about it. Now whats going to be interesting is how it now works with my Fib levels. So the rule here is what ever the wave before pushed higher by (wave 3 in this case) so to will the retrace wave (wave 4) lift by. Also another rule is wave 4 usually retaces by 38.2% of wave 3. Well Guess what, we are here. Oh no wait its on the move again as I write. I would like to see it hit that first blue Trend Line first ( so about 1.60) and then have a retrace back up for a bit. Lets see how it goes.

DRO up another 11% today! Sold out at 1.54?! Why is it when I sell - an investor's lament

Possible disruptor? Article on ABC. In short: South Korea has announced plans to deploy lasers to shoot down drones sent by North Korea.

Officials say the technology is invisible, noise-free, runs on electricity alone and costs $AU2.15 per shot.

What's next? The"Block-I" system technology is set to be rolled out this year.

Laser Anti-Aircraft Weapon

This is a high-energy laser weapon system capable of providing protection against small unmanned aerial vehicles and multicopters at key facilities. The application of a mobile platform and increased power/precision will help better deal with more advanced threats.

Small Laser Weapon

As a small, lightweight high-energy laser weapon system capable of providing various laser output levels through modular design, this is available for infantry and mounted on mobile platforms.

The technology has successfully achieved a 100 per cent shoot-down rate in previous tests, and with future improvements, it could become a "game-changing" weapons system capable of countering aircraft and ballistic missiles in the future, DAPA said.

But some analysts like Senior Researcher at the Korea Institute for Military Affairs, Hong Sung-pyo, said it was too early to be sure about the weapon's capabilities.

"Laser weapons have not yet been put to practical use worldwide, and further verification and more time are needed to determine whether they can be utilised as a practical weapon system," he said.

Chart Update Thurs 11th july 23

Ha well, even though DRO keeps on proving me wrong, I'm really enjoying tracking it. So as I mentioned many times, the charts have provided me with signals that the drop is imminent and then it just keeps on keeping on. Well It has now added 2 more signals to the stack that says it needs to drop like a No.2. I now have divergences on the daily and 3d charts. You can see the small target box I had recently. Thats where it should have stopped for a W3 @ the 161.8% Fib (instead it paused, so they thought about it) then it pushed to the next level up 176.4% and paused again before continuing. Now at the 200% which is usually a w5 level not w3. Will it stop here and act out the 2 divergences. As you also now know if it pushes up a level etc on a Target $ then the retracement that follows also lifts by the same amount of levels. That brings w4 down to the target shown by the big box.

Just another thought also, we have all seen good news released to the market for the share $ to fall instead. I believe thats because the $ had already been pump up in anticipation of the good news and then market realised it to be over price. We may see the same here (unless the news is a win on an extraordinarily large contract). This next retrace will certainly be interesting to watch

not directly impacting this company but strikes me as a terrible decision hugely expensive ($100k) single use drones vs FPV commercial drones for $ 200

Goes against all data and real life use evidence

https://www.abc.net.au/news/2024-07-08/australian-military-to-buy-small-american-made-lethal-drones/104069310?utm_source=abc_news_app&utm_medium=content_shared&utm_campaign=abc_news_app&utm_content=link

Fri 28th June Chart update

I have been holding off writing for DRO as it has proved my wrong a couple of times now. Tricky one. There have been many signals telling a story for a drop over the past couple of weeks however not enpough for me to post on. Today though im seeing some big signals for the drop. To prove me wrong, it would have to blast off again. Take it all with a grain of salt, but I think the drop has arrived.

https://www.shephardmedia.com/news/landwarfareintl/droneshield-to-boost-production-in-the-face-of-demand/

Details Soon at 10:45am

Tues 18.06.2024

Up dated Technical Analysis. New price target 1.15. to 1.23

It bee some time since I have done any analysis on DRO as it blew past my targets and left me confussed as to what rules it was working within. Well turns out it is still working to the same rules I follow, just not applied to daily charts, weekly charts.

Keep in mind it could still climb to 1.64 as its still in the wave 3 zone, however all the indicators are pretty topped out and its due for another draw down into wave 4. At least thats what im going for hence posting it to keep myself accountable. Do as you please with this info. I myself am curious to see if im correct.

I’m getting a bit bearish over the amount of revenue being captured by DRO for the Drone Guns (https://www.droneshield.com/c-uas-products/dronegun-mk4). Looks like > 50% of total revenue from the latest investor presentation

From what I can understand, these guns effectively work to interfere with the signal between the Drone and its operator making it either land safely or better still return to its operator (so you can then counter with your own killer drone or artillery strike). Eg. https://forum.dji.com/thread-281795-1-1.html

The DRO guns are basically little portable/personal versions of the Russian Krasukha Electronic Warfare trucks https://en.wikipedia.org/wiki/Krasukha which disrupt all manner of communications including GPS signals. https://www.popsci.com/technology/russian-electronic-warfare-equipment-ukraine/ 

Where I am a bit bearish about the future efficacy of these guns is where the Drones start to adopt some AI (as is already happening in the Ukraine conflict) effectively allowing them a level of autonomy if they are subjected to electronic warfare such as the DroneShield DroneGun. Effectively the AI might allow them to continue flying to a target, identify a target (such as a the nearest tank with a Z on the side) and kamikaze into it. Alternatively, cheap drones working in a swarm may also be able to overwhelm the effectiveness of drone guns.

Here's a smattering of articles on the topic:

• https://edition.cnn.com/2024/04/01/energy/ukrainian-drones-disrupting-russian-energy-industry-intl-cmd/index.html
• https://www.livescience.com/technology/engineering/ai-drone-that-could-hunt-and-kill-people-built-in-just-hours-by-scientist-for-a-game
• https://consortiq.com/uas-resources/drone-ai-technology-how-it-works-why-it-matters
• https://shield.ai/
• https://www.dji.com/au/ai-module -
• https://www.nationaldefensemagazine.org/articles/2023/12/13/industry-perspective-autonomous-swarm-drones-new-face-of--warfare
• https://mwi.westpoint.edu/swarm-clouds-on-the-horizon-exploring-the-future-of-drone-swarm-proliferation/
• https://www.axios.com/2024/03/15/drone-swarms-ai-military-war

Has anyone else looked into this in their investment thesis?

Or do you think the bigger risk at the moment is the amount of hype on the DRO share price?

DISC: Held IRL and SM

I know you're supposed to let your winners run, however looking at Droneshield over the last month you've got to start asking the question when will this madness end?

Commsec shows a huge buy side in stark contrast to the sell side as below.

How much is priced in for future revenue, expected growth etc.

I can no longer attach a value to this.

Hold IRL and SM

Nice repeat government contract win, additional material contracts expected to follow.

Drone Shield Awarded $5.7 Million U.S. Government Contract

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02809245-2A1524494

Hold IRL & SM

What do you make of this ASX : C. Listing Rule 3.1, which requires a listed entity to immediately give ASX any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities.

Thinking...Closing the SPP early not good for ones missing out and the offering, was over subscribed anyway so extra 3 to4 days open would not matter. Then do the scale-back on the over subcription.

Peter James Number acquired: 15,323 (via SPP)

NOW Holds 935.3Mill units / shares ..Solid Holding.

Investor Relations — DroneShield Ltd (ASX:DRO) — Droneshield

Chart: left to right direction, Good

SPP substantially exceeded the maximum capped raising amount of $15 million set by the Company, with DroneShield receiving total applications for fully paid ordinary shares (Shares) for $40 million

DRONESHIELD LIMITED (ASX:DRO) - Ann: Strong Shareholder Support for Share Purchase Plan, page-1 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

The initial Plan: (The capital Raising has exceeded DOR wildest expectations)

DRONESHIELD LIMITED (ASX:DRO) - Ann: $70m Fully Underwritten Placement and up to $5m SPP, page-1 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

18 April 2024 ASX RELEASE $70m Fully Underwritten Placement and up to $5m SPP

Net proceeds raised from the Placement and SPP will be used to build up inventory to support DroneShield’s strong pipeline of high-quality customer opportunities as well as the scaling of the engineering team to accelerate development of in-house artificial intelligence (AI) and machine learning (ML) engines and capabilities for enhanced detection, identification and response of drone threats

• Net Profit Margin expected to be Strong

The Good

• Quarterly revenue of $16.5m which has been on a solid upward trend over the last 18 months. What is also positive is that this revenue is only made up of one significant contract announcement ($4.3m in March) which highlights that there is an increasing volume of smaller orders being received. This annualises out to $66m which is dangerous with the type of order flow that droneshield experiences, but is indicative that they are on the right track to exceed FY23.

• Relocation to the new facility has been completed. The new capacity hasn’t been fully realised as can be seen by the drop in product cost spend on last quarter. This has also contributed to the increase in staff (120 up from 105) and administration costs. With the recent capital raise for a further $70m to support build up of inventory. Based on this should expect a ramp up of product and staff costs over the coming quarters.

• Pipeline now up to $519m with an increase in the number of projetcs since February. However, also looking at from where they are preferred or better, it looks like it is for smaller value orders (based on average value)
• 
  

The Not So Good

• SaaS revenue has improved marginally, but still only a small fraction of overall revenue and still looks like 50% of revenue will need some significant changes or a massive increase in install base to get close to this target.

• Operating cash outflows of $10.7m. Management mostly attributed this to timing of payments on the recent US contract, however overall operating costs are rising as well.

• Management are still prone to be overly promotional. $100k difference in QoQ cash receipt. Highest Ever!!

Watch Status: No Change

Valuation Status: No Change

What To Watch

• Targeting the release on additional SaaS based solutions over the next 12 months.
• Planned US Federal roll-out of body worn devices (No Update - Carried Over x 2)
• Air Service Australia C-UAS rollout ( No Update Carried Over x 2) - Looks to have closed at the end of October 23.

https://www.unmannedairspace.info/uncategorized/airservices-australia-publishes-tender-for-drone-surveillance-network-covering-29-airports/

• European framework agreement for 24/25 rollout ($30m+) (No Update - Carried Over)
• Start of JCO US DoD rollout (Carried Over x 2). https://www.c4isrnet.com/unmanned/2023/11/15/pentagon-counter-drone-office-makes-headway-as-services-adopt-new-tech/
• Lockheed Martin - Australian DoD Agile Shield Integration (Carried Over)

What might be a bull case for Droneshield's business prospects is also likely a bear case for broader humanity. Depressing, huh? For those that haven't seen, tension in the middle east continues to escalate, with the latest conflict between Iran and Israel raising eyebrows globally.

Why is this relevant? Drone warfare once again appears to be at the forefront of the conflict. While I haven't been able to locate confirmation, reading between the lines, the Israeli's employ Droneshield's counter drone defence solutions. Supporting this is this article, with the Israeli's being a close ally of the five-eye alliance / coalition and highly likely the referred to party.

While the conflict in Gaza is controversial and blurred for many, any conflict with Iran (or Iraq) is likely more straightforward. The broader coalition are almost certain to a) support their close ally in Israel and b) look to curtail any Iranian aggression. This might lead to further interest in Dronshield's defence solutions by not just Israel but others in the coalition. Whatever the case, as one of few market leaders -- arguably the market leader -- Droneshield stands to benefit from continued use of drones in conflict.

Recent reporting by Droneshield themselves indicated "By simply being on the NSPA (NATO) framework, additional end-users are likely to place orders with Droneshield". Major non-NATO allies include Japan, South Korea and - you guessed it - Israel.

Nice quarterly Activities report.

Great uptake in QonQ.

I just hope this momentum continuesDisc Held

So Dro is still pushing ahead, which was contrary to my last update, however Im still seeing the setup for the decent pull back I was expecting. The signs are now even stronger, favourable to the down leg Im waiting on. I still hold my target zone below as shown where I have set an alert for me to revisit the technicals (on no positive news). 2 Items on the charts are swaying me to resist taking any position still.

1) The incline wedge it is working within. (look up incline wedge pattern for stocks)

2) The ongoing divergence on the rsi/stochastic indicator (Indicator dropping showing weakness while stock keeps rising)

I also noted an article on Market Index written by a Dr. David Allen from Plato Investment Management on insdier buying and selling showing that last big draw down had an element of DRO management selling. That $11.9m works out to be approx 2.5% of the total approx market cap. It is good to see the ivestors eating it up though with it rising back up (says they are very bullish on the stock). However even the DRO inside sellers thought it was a little too preemptive, hence there partial sell out.

Im also tracking AD8 & TPW waiting for there lows.

Good luck everyone

MMM so whats Drone Shield up to?

Well here's my charts and what I think will happen without any meaningful news. You probably read my last post on the FOMO effect for its last rise to the moon. Its certainly had the top chipped off and the way its shaping I believe its got further to go. My chart shows my plan however the stock is certainly a golden child ATM and as we all feel it probably has a good ways to go over the coming years so long as its run well.

So Im thinking I will run this one with alerts at my targets and if any news comes in Ill certainly be alerted when it pushes through one. I will update this one if anything needs to be revised

Good luck

Just trawling through the recently release 2023 Full Year report to review my valuation. I'm wondering if anyone wiser than me is able to help interpret the taxation & R&D credit situation as it makes quite an impact on overall profitability.

Looks like Earnings before tax is actually only around 3.166m on about 55m of Revenue (so < 6%) but the headline numbers DRO are throwing around are after tax profit of 9.3m (about 3x) which seem to mostly be constituted from Deferred Tax Benefits and R&D Tax incentives. This makes a pretty major difference in future valuations as they are material to the models and it seems difficult to predict what these amounts will be in future years.

They seem to be chewing through their accumulated losses pretty quickly (going from 26.6m in FY22 to 11.34m in FY23)

Additionally there is mention of a 9.9m R&D contract received from Australian DOD which presumably will be treated as revenue.

Management Selling Summary Mar 24

Oleg Vornik 

·      29 February to 5 March 2024 10,456,038 Shares price average $0.6877 per share ($7,190,731)

Peter James

·      29 February to 5 March 2024 5,612,008 Shares price average $0.6877 per share ($3,859,404) 

Jethro Marks

·      29 February to 5 March 2024 1,292,901 Shares price average $0.6877 per share ($889,152) 

Holdings after Sale

Peter James 920,022 (3,000,000 unlisted and invested Performance Options)

Jethro Marks (3,000,000 unlisted and invested Performance Options)

Oleg Vornik (15,000,000 unlisted and invested Performance Options)

I suspected something like this might be up 7 days ago

https://strawman.com/forums/topic/8514

Looks like these managers continue to act as a selling block (while they continue to issue themselves more options with lowball targets).

This looks like its really becoming a recurring pattern.

DISC: Held IRL and SM (but looking for a possible exit as I'm losing faith in management's behaviour ... maybe I'll top up my BTC investment with the proceeds)

The buyers side is not dropping away and investors are lining up to get in.

The market was possibly waiting for evidence of what the company could achieve. Its latest results show / suggest they are no longer just talking about potential sales but actually making sales and demand is increasing.

I can’t help but think this has more to run considering the industry tail winds and evidence of execution. Of course for traders opportunities may present as it’s only wishful thinking this is going up in a straight line…though it would be nice…ha ha.

With a target of 300-500m in revenue within 5 years I would think this 400m MC will be much higher come years end. Let’s see.

As a holder it’s nice to see a stock run on actual fundamentals. I think it’s a great example of those stocks that Andrew mentions have a price miss-match. So when the market does take notice (wakes up) they can run.

In saying all of this it definitely seems to be one of the “it’s hot to own stocks” so I am sure there is some FOMO also backed in, but then again how many of us said that about Promedicus? Just look at it now!!

The Good

• Significant positive cash flow of $21.8m for the quarter. This leaves a solid cash balance of $57.9m. Given the lumpy nature of contracts, this can’t be extrapolated out for every quarter, but it gives an indication of what the business can look like as it continues to deliver.

• Full year revenue of $55.1m with earnings (EBITDA?) of $4m.

• There was only a minor increase in staff costs in Q4. Given staffing sits at 105 with a medium term target of 150, this will likely continue to increase, but now makes up a much smaller portion of the operating costs. Advertising has now jumped to the largest cost behind product costs due to sales commissions.

• Pipeline remains at $400m. Of this there are 7 “high probability” near term contracts to the value of $200m

• Order backlog reduced from $51m to $30m. This is likely able to be delivered in Q1 if the relocation to the new facility doesn’t impact production.

The Not So Good

• Previous updates had the move to the new facility being completed by December 23. This is now revised to the end of January 24. Only a minor slip, especially over the holiday period and when they have been obviously delivering on orders as a priority.
• SaaS revenue which has a medium term target of 50% of the revenue base only increased from 2% to 2.5% of revenue share from FY22 to FY23. This is expected to be slow as hardware is distributed to the market, however current growth is marginal.

Watch Status: 

Valuation Status: 

What To Watch

• $4m of EBIT reported for FY23. Review the full year report for how this is reported in accounts.
• Completion of move to new facility and how this impacts the speed of order fulfillment.(Carried Over)
• Planned US Federal roll-out of body worn devices (No Update - Carried Over)
• Air Service Australia C-UAS rollout (Carried Over) - Looks to have closed at the end of October 23.

https://www.unmannedairspace.info/uncategorized/airservices-australia-publishes-tender-for-drone-surveillance-network-covering-29-airports/

• European framework agreement for 24/25 rollout ($30m+)
• Start of JCO US DoD rollout (Carried Over). Potential updates to this program around March 24?

https://www.c4isrnet.com/unmanned/2023/11/15/pentagon-counter-drone-office-makes-headway-as-services-adopt-new-tech/

• Lockheed Martin - Australian DoD Agile Shield Integration
• As the company starts to generate more cash, how this is deployed will be an important indicator for the medium term future of the company. Recent options have a $200m revenue target. Management may start eyeing off potential acquisitions or adjacent technologies. My preference would be to stay focussed on their primary business and continue to grow with the rapidly evolving and expanding market.

At the recent AGM, a new round of performance options were approved. These performance options are tied solely to revenue. It is a quite black and white, all or nothing incentive:

"the Company achieves $200 000 000 of revenue or cash receipts in any rolling 12 month period, within 60 months of the date of issue".

This equates to a revenue CAGR of 29% if the goal is achieved in year 5.

The problem with this incentive structure is that it can be gamed. If management is unable to achieve the stated target organically, then they can choose to acquire the revenue, which may go against shareholder interests.

There also is no incentive to ensure the revenue growth of profitable, other than in the valuation of the shares management will subsequently freely acquire.

Going by past incentive schemes, the goal is one that management are confident in achieving, and is well below high level guidance of $300-500 M in revenue by 2029. Interestingly, they guide for 600% revenue growth, and only 50% headcount growth.

Given the enormous impact drones are having on the battlefield, in an increasingly unstable world in this 4th turning era, they unfortunately have strong tailwinds. Droneshield CEO, Oleg Vornik, said today:

"We are ready to deliver a strong 2024, after a record 2023. We are seeing continuing peak demand from our customer base globally,...."

DISC - HELD

Listened to a great economist podcast (money talks: a shot in the arm). Its subscription only, I'm afraid.

The discussion was around the changing defence industry, in particular how the "cost plus" model that has existed for the last 50 years is no longer fit for purpose. This industry has been dominated by a small number of "primes" that are perversely incentivised to spend as much as possible on developing weapon systems (the more they spend the more they earn (cost of development plus a margin). Much like the NASA development and procurement model has been shown to be no longer effective by the like of SpaceX, so the defence Primes are likely to suffer significant erosion of their market share by nimble start-ups that are predicting what customers will need and building it with their own capital to sell on for a larger margin if/when they have been proven successful.

The example they used was Anduril a US defence company specialising in electronic and drone/counter drone technologies. It takes no special knowledge to predict that warfare will increasingly be heading in this direction as evidenced by any conflict currently under way in the world (Ukraine, Gaza, Houthis etc)

Clearly, the Primes will not enjoy this erosion of their revenue, and will have two options: build in house, or acquire small, specialist companies and throw money at their projects. I think it is very likely that Droneshield will get taken over before too long; it may well attract a significant premium.

I've been watching the progress that Droneshield have been making and I think I now have the confidence that are going to be a success. There are significant challenges that a small defence contractor faces: a poor negotiating position, delayed payments, capital intensive, need to manufacture in bulk before sales so slow capital recycling, difficulty competing with bigger better resourced competitors - there are probably more.

But on balance, I think the likelihood of success is now much better than it was a year ago. They have executed well: revenue is increasing rapidly, they have now got a US military contract that could lead to much bigger things (and make them a more juicy takeover target) and the are cashed up and about to tip into profitability. This might be delayed by the increased cost of new facilities and increased headcount etc.

P/S is not cheap but on a forward looking basis is not onerous (if they continue to execute as they have indicated).

The additional thing that has attracted me is the increasing percentage of revenue that is predicted to come from the recurring SaaS stream.

The thesis is rounded out by the likelihood of a takeover, but not solely built on it. Additionally, we may see small caps become re-rated as inflation eases and the rate cycle turns.

Not held yet but will do so in the next week or so. As always would like to hear the counter argument.

Nerd fact: Anduril - "Very bright was that sword when it was made whole again; the light of the sun shone redly in it, and the light of the moon shone cold, and its edge was hard and keen. And Aragorn gave it a new name and called it Andúril, Flame of the West."

—J.R.R. Tolkien^[2]

I noticed today that Bell Potter had placed a buy rating on DroneShield with a 50c price target, i don't have a subscription so i could only attach a screenshot below and a link to their last buy rating 12 months ago for comparison.

https://onlineresearch.bellpotter.com.au/fileGet.aspx?guid=9d85a6bd-abf7-4b82-9015-28551956ebc5

Also; I remain supportive of the company and very much look forward to whats to come, however i have voted NO to the Incentives at the upcoming AGM.

Not that i am against Incentives, i just feel that $200 million for the dilution is not enough; especially after the recent cap raise and dilution.

remain a holder in RL and SM

Yesterday, I had the incredible opportunity to attend the Dubai Airshow, where Droneshield showcased its cutting-edge technology at the Australian pavilion. The presence of CEO Oleg Vornik and Business Development Manager Louis Gamarra added a personal touch to the event as they openly interacted with the enthusiastic crowd. As a shareholder, I had the privilege of engaging in a detailed conversation with Louis for nearly an hour, gaining valuable insights into the business.

The exhibition featured the impressive DroneGun Mk4 and RFPatrol Mk2, both meticulously manufactured in Australia. It was emphasized that every component is sourced locally to comply with regulations for sales to Five Eyes countries and others. Their commitment to security was evident, with a keen interest in understanding the background of those exploring their products, particularly if they appeared to be Chinese nationals. This vigilance took on added significance when later in the day, I discovered another company, Skyfend (https://www.skyfend.com), with a seemingly identical product line to Droneshield. Interestingly, this Chinese company exhibited products strikingly similar to those of Droneshield. Below Pictures I took of SkyFend Pavilion at 2023 Dubai Airshow

In my inquiry about the differences between the two, the only response from the Skyfend representatives, who were Chinese nationals, was a claim that their product was superior. This raises intriguing questions that warrant further investigation. However, it's worth noting that Droneshield's strategic advantage lies in its accessibility to Five Eyes countries, and given the current global environment, Western countries may be hesitant to embrace Chinese technology in this sector. The competitive landscape promises to be a compelling area for future exploration.

To further underscore Droneshield's commitment to innovation, I learned that the company currently boasts a team of 85 full-time engineers. According to Louis, Droneshield is deeply entrenched in the realm of hardcore engineering, a testament to their dedication to pushing technological boundaries. During our conversation, he provided valuable insights into the intricacies of their technology. Notably, he mentioned that due to stringent regulations in Australia, they conduct their new tech testing exclusively in Virginia, USA.

One prevailing theme that emerged from our discussion was the apparent reluctance of many Western countries to swiftly acknowledge or address the evolving threat posed by drones. This hesitation underscores a substantial opportunity, particularly in safeguarding critical infrastructures such as airports. As the world grapples with the increasing sophistication of drone technology, Droneshield's expertise and forward-thinking approach position them as a key player in mitigating these emerging threats. The company's emphasis on rigorous engineering and global testing reflects a commitment to staying at the forefront of this rapidly evolving landscape.

Shares in Droneshield catching a bit of a bid this morning after they announced the release of their latest product -- DroneSentry-X Mk2

No indication of what this means financially -- they'll just have to wait and see what the take up is like. But good to see some output from all the R&D and the timing of the release ahead of the AUSA 2023 expo can't hurt.

Not sure the news warrants a 10% jump in the share price? But I've long given up trying to find reason in daily share price movements.

ASX announcement here

As expected, the first half results are pretty strong for Droneshield. This slide highlight the key numbers well:

Small point: It's interesting that for a business that is now firmly commercialised and growing, well funded and at the breakeven inflection point, the results preso puts a lot of emphasis on the technology use case and Total Addressable Market. More what you tend to see when there aren't any good financial numbers to do the talking for you! Hard to miss the emphasis on AI too -- they're not blind to what the market is excited about at present.

Anyway, as Oleg said to us recently (see here) the second half is positioned to deliver further growth and the 5 year target of $300-500m in revenue. During our meeting he seemed to suggest around $70m in revenue for the full year (they report on a calendar basis). So that puts shares on a 2.6x sales multiple.

Maybe not that high if they can sustain their growth and hit aspirational targets. I'll try a rough-cut valuation in a moment.

ASX presentation here.

We'll have the recording with Oleg up soon, but just wanted to add a few small notes while they are fresh.

• He strongly hinted that revenue would be around the circa $70m this year (just based off things that have already been announced) -- compared to about $17m last year. Also, that the business would be "easily" profitable.
• Manufacturing capacity at present could support $100m in sales, and up to $300m in sales within the next 6 months
• They've already announced a $200m sales pipeline, but said that they are working on several large opportunities. I'd guess these would be akin to the $33m deal with the US announced in July.
• Gross margins for hardware are not disclosed, but well north of 40%
• They genuinely seem to be one of the key market leaders in this fast growing space, and well ingratiated with key customers.
• Expect staff numbers to ramp up considerable in the coming years to support top line growth, of which they are targeting $300-500m in 5 years (already announced). Half of that will be SaaS and R&D revenue.

I wonder if this is what is driving the share price? 22% Increase today

https://www.reuters.com/world/europe/us-announce-13-bln-military-aid-ukraine-sources-2023-07-18/

Good volume today, the next order could be more than the current cap.

Disc Hold IRL & SM

Another Strawman favourite also made the AFR Fast Global List with an article included in todays AFR

https://www.afr.com/technology/why-the-ceo-of-droneshield-is-studying-flight-paths-20230523-p5danz

Oleg Vornik, the chief executive of DroneShield, is extra careful about which airlines he chooses to fly with after his name appeared on Vladimir Putin’s naughty list for supplying counter-drone technology to Ukraine.

Speaking to The Australian Financial Review from Turkey, the chief executive says he chose not to fly with a particular airline on his most recent trip abroad because the route skirted Russia’s southern border.

The chief executive, whose family migrated from Russia to New Zealand when he was 15, was wary after a Belarusian activist was detained in 2021 when his flight was forced down while passing Belarussian airspace.

“I don’t want the same thing repeating [for] me. So, I was like, all right, I guess I’m flying with Singapore Airlines instead to make sure I’m not flying over Russian space,” Vornik says.

The rise in geopolitical tensions complicating Vornik’s travel plans has also provided a serious boost to the drone detection and security software group’s international revenue, which has grown from $3.8 million in international revenue in FY20 to $14.4 million in FY22, according to The Australian Financial Review’s Fast Global list.

DroneShield has been providing its counter-drone technology to Ukraine since the start of the war with Russia and in December 2022 and January 2023, the business won two separate $11 million contracts with US and European government agencies.

Its share price is up almost 26 per cent so far this year and while not yet profitable, the $175 million company is forecasting a strong result in fiscal year 2023 with $22.5 million of orders under contract so far this financial year.

DroneShield was founded in Virginia by two US scientists in 2014 and moved its headquarters to Sydney to coincide with its ASX listing in 2016.

Back in those days, Vornik says DroneShield’s biggest challenge was convincing potential customers that drones would cause a threat that would justify investing in the hardware and software solutions that detect and disable drones used for nefarious purposes.

Its first big customer came from Saudi Arabia, who wanted a way to stop Houthi rebels in Yemen from deliberately crashing small drones into their oil facilities, Vornik says.

The South Korean army’s drones fly during South Korea-US joint military drills earlier this year. 

The chief executive says the extensive use of drones by both sides in the Ukraine war has “opened the eyes of defence customers around the world” that both drone and counter-drone equipment will be necessary in future conflicts.

“In military thinking, you have to fight the next war, not the last war,” he says.

“We see the US in particular, but also dozens of other countries around the world, continuing to stock up on both drones and counter-drone kit.”

That kit includes the DroneGun Mk3s, a two-kilogram pistol that neutralises an attacking drone by sending a powerful signal to the drone which forces it to land on the ground, at which point it can be captured and forensics extracted from it.

The ASX-listed company raised $40 million from shareholders this year to secure the inventory and staff needed to make sure it can deliver big contracts to customers quickly.

“When customers come to us asking for counter-drone equipment, they have a pressing, urgent problem that they cannot wait for six months to receive delivery,” Vornik says.

@GazD in response to your post about CEO selling shares.

I did a bit more digging and a couple of counter points. If I'm reading the FY21 annual report (to Dec 2021), it looks like CEO exercised 12.4m options and Chairman 6.6m during that year. Given they were zero price options and probably deemed to be worth in the 20 to 25c each range (i.e. $2.4m for CEO and $1.3m for Chairman) then the reasoning for the disposal is in the 16 Jan filing sounds like it is plausible.

https://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_DRO_2021.pdf page 42

Interestingly, the SPP prospectus issued on 6 Feb explicitly calls out that both the CEO and Chairman are going for the maximum $30,000 purchases as part of the raise. Perhaps token amount but better than them not participating.

On the subject of the raise:

I understand that a big part of the capital raise is to build more inventory. In the October 2022 announcement they said they have $15m inventory built up (at sale price) but I'm guessing that the two 11m orders 21 Dec and 9 Jan have probably drained their inventory backlog. I hope their supply chain is scaling up appropriately.

I found and interesting quote in the e-mail from Peleton who is running the SPP the following: "DroneShield has a number of unique differentiators and is able to pass on cost increases and retain its high margins (65-70% gross margins on hardware and close to 100% on SaaS subscriptions)." I think that's probably a factor of the way they are accounting for their staff costs, corporate costs etc. separately. I'm hoping 2023 is the year they round the corner and can move towards profitability in 2024.

Disclosure: Held IRL

Droneshield has been added to a MSCI index.

Doesn't really change the business, but probably provides a bit of support short term (even if the weighting is likely quite small within the index).

offer is 30 cents/share up to a maximum of 30,000 dollars…

in two minds, share @Noddy74 concerns regarding management communication but feel bullish about the business…

 DRONESHIELD LIMITED ACN 608 915 859

SHARE PURCHASE PLAN OFFER

The Offer closes at 7.00pm (AEDT) on 2 March 2023 (unless extended before that time)

 This is an important document and should be read in its entirety.

This document has been prepared by DroneShield Limited. The Offer is an initiative that provides Eligible Shareholders with the opportunity to purchase additional Shares at a discount without brokerage and transaction costs.

The Offer does not take into account the individual investment objectives, financial situation or particular needs of each Eligible Shareholder. Accordingly, before making a decision whether or not to accept the Offer, you should consult your financial or other professional adviser.

This document is not a prospectus or other disclosure document under the Corporations Act.

 Dear Shareholder,

Invitation to Participate in Share Purchase Plan

On 6 February 2023, DroneShield Limited (ACN 608 915 859) (DroneShield or the Company) announced that it had received firm commitments for a placement of 36,266,666 fully paid ordinary shares (Shares) at a price of $0.30 per Share to sophisticated, institutional and professional investors, to raise approximately $10,880,000 (Placement).

In order to provide Eligible Shareholders (defined below) with the ability to participate in the Company’s capital raising activities, the Company is pleased to provide details of a Share Purchase Plan (Plan).

Under the Plan, Eligible Shareholders will have the opportunity to purchase Shares up to the value of $30,000 at the same price as the Placement, irrespective of the size of their shareholding, without incurring brokerage or transaction costs.

The offer under the Plan (Offer) is intending to raise a maximum of $3,000,000 on the terms and conditions (Terms and Conditions) contained in this document. The Company may elect to accept additional subscriptions or alternatively close the Offer early and/or scale back applications.

Shareholders Eligible to Participate in the Plan

Participation under the Plan is optional and is available exclusively to shareholders of the Company who are registered as holders of Shares at 7.00pm (AEDT) on 3 February 2023 (Record Date) and whose registered address is in either Australia, New Zealand, Hong Kong or Singapore (Eligible Shareholders).

Share Purchase Plan

The Plan entitles Eligible Shareholders, irrespective of the size of their shareholding, to purchase Shares up to the value of $30,000 at an issue price of $0.30 (Price) being the same price as the Shares offered under the Placement. The Price represents a discount of 19.9% to $0.374 (being the volume weighted average market price (VWAP) of the Shares over the last five trading days on which sales in the Shares were recorded before the day on which the Plan was announced.

Whilst the Company intends to raise $3,000,000 under the Plan, the Company reserves the right to accept additional applications subject to shareholder demand and compliance with the ASX Listing Rules. In accordance with the ASX Listing Rules, the maximum number of Shares that can be issued under a share purchase plan is that amount equal to 30% of the Company’s existing issued share capital. Accordingly, as at the date of this document the maximum number of Shares which will be issued under this Plan will be 135,312,595 Shares.

Depending on applications received, the Company may, in its absolute discretion, undertake a scale back so that not more than $3,000,000 is raised under the Plan. Scale back decisions are made by the Board and are final.

9 February 2023

The Plan will not be underwritten. Directors Peter James and Oleg Vornik, who are Eligible Shareholders, intend to participate under the Plan and purchase Shares up to the maximum value of $30,000 each. An application form for the Plan (Application Form) is included in this package.

Current Activities

Details of the Company’s current activities are set out in the announcements made by the Company to the ASX and are available from the ASX platform (ASX: DRO), or the Company’s website at https://www.droneshield.com/.

Use of Funds

The proceeds raised under the Plan and the Placement are intended to be utilised for building up inventory in response to recent and anticipated contract wins, scaling up the Company’s engineering, manufacturing and sales teams, paying the expenses of the Offer and for general working capital purposes.

How much can you invest?

Eligible Shareholders may each apply for Shares with a maximum value of $30,000 and a minimum value of $2,000 under the Plan.

How to accept this Offer

To apply for Shares under the Plan, please follow the instructions on the enclosed personalised Application Form.

Eligible Shareholders may participate by selecting only one of the following offers to purchase Shares under the Plan:

   Total amount payable

  Number of Shares which may be purchased

 Offer A Offer B Offer C Offer D Offer E Offer F Offer G

$30,000 100,000 $25,000 83,333 $20,000 66,666 $15,000 50,000 $10,000 33,333

$5,000 16,666 $2,000 6,666

           The number of Shares to which you are entitled will be calculated by dividing the subscription amount you have selected by the Price, rounded down.

All payments in accordance with the options set out in your Application Form (Application) must be received by the Closing Date of 2 March 2023. If the exact amount of money is not tendered with your Application, the Company reserves the right to either:

(a) return your application monies and not issue any Shares to you; or

(b) issue to you the number of Shares that would have been issued had you applied for the highest designated amount that is less than the amount of your payment and refund the excess application money to you by cheque as soon as possible, without interest.

The Company confirms that if the amount to be refunded is less than the issue price of one Share, being $0.30, it will not be refunded and will be retained by the Company. Once an Application has been made it cannot be revoked.

Multiple Holdings

The maximum investment any Eligible Shareholder may apply for will remain $30,000 even if an Eligible Shareholder receives more than one Offer (whether in respect of a joint holding or because the Eligible Shareholder has more than one holding under a separate account). It is the responsibility of the applicant to ensure that the aggregate of the application amount paid for the Shares the subject of the Application and any other shares and interests in the class applied for by you under the Plan or any similar arrangement in the 12 months prior to the date of submission does not exceed $30,000.

Custodians and Nominees

Eligible Shareholders who hold Shares as Custodian or Nominee (Custodian) for one or more persons on the Record Date (Beneficiary) may apply for Shares up to a maximum amount of $30,000 in respect of each Beneficiary who is resident in either Australia, New Zealand, Hong Kong or Singapore as described in the Terms and Conditions enclosed with this document. Please refer to the Terms and Conditions for more details.

Relationship of Issue Price with Market Price

On the last trading day immediately prior to the announcement date of the Offer, the closing price of the Shares traded on ASX was $0.37. The market price of Shares in the Company may rise and fall between the date of the Offer and the date that any Shares are issued to you as a result of your Application under this Offer.

By making an Application under this Offer and applying for Shares under the Plan, each Eligible Shareholder will be acknowledging that although the Price is at a discount, Shares are a speculative investment and the price of Shares on ASX may change between the date of the Company announcing its intention to make an Offer and the date of issue of Shares under that Offer and that the value of the Shares received under the Plan may rise or fall accordingly.

The Board recommends that you obtain your own financial and taxation advice in relation to the Offer and consider price movements of Shares in the Company prior to making an Application under this Offer.

Additional Information and Important Dates

The offer of Shares under the Plan is made in accordance with ASIC Corporations (Share and Interest Purchase Plans) Instrument 2019/547 and therefore does not require a prospectus for the purposes of Chapter 6D of the Corporations Act 2001 (Cth) (Corporations Act).

The Offer cannot be transferred, and the Directors of the Company reserve the right in their absolute discretion to reject, or scale back, on an equitable basis, any Application. Shares issued under the Plan will be issued no more than five business days after the Closing Date of the Offer. Application for quotation on ASX of the new Shares will be made immediately following the issue of those Shares.

The maximum amount proposed to be raised under the Offer is $3,000,000. The Company, however, reserves absolute discretion regarding the final amount raised under the Offer, subject to the ASX Listing Rules.

In the event of oversubscription by the Closing Date the Directors may, in their absolute discretion, scale-back applications on an equitable basis. Scale-back for Shares held by Custodians will be applied at the level of the underlying Beneficiary. Directors may also, in their absolute discretion, decide to increase acceptances in the event of oversubscriptions.

If the Company rejects or scales-back an Application or purported application, the Company will promptly return to the shareholder the relevant Application monies, without interest.

Foreign offer restrictions

This document may not be released or distributed in any country other than Australia, New Zealand, Hong Kong and Singapore (Permitted Jurisdictions). This document does not constitute an offer to sell, or a solicitation of an offer to buy, securities in any other country. In particular, any securities described in this document have not been, and will not be, registered under the US Securities Act of 1933 (as amended) and may not be offered or sold in the United States except in transactions exempt from, or not subject to, registration under the US Securities Act and applicable US state securities laws.

New Zealand Shareholders

The Shares offered under the Plan are not being offered or sold to the public within New Zealand other than to existing shareholders of the Company with registered addresses in New Zealand to whom the Offer is being made in reliance on the Financial Markets Conduct (Incidental Offers) Exemption Notice 2021 (as amended) (New Zealand).

This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Financial Markets Conduct Act 2013 (New Zealand). This document is not a product disclosure statement under New Zealand law and is not required to, and may not, contain all the information that a product disclosure statement under New Zealand law is required to contain.

Hong Kong Shareholders

WARNING: This document may be distributed in Hong Kong only to existing shareholders of the Company. This document may not be distributed, published, reproduced or disclosed (in whole or in part) to any other person in Hong Kong or used for any purpose in Hong Kong other than in connection with the recipient's consideration of the Offer.

You are advised to exercise caution in relation to the Offer. If you are in doubt about any contents of this document, you should obtain independent professional advice.

This document has not been reviewed by any Hong Kong regulatory authority. In particular, this document has not been, and will not be, registered as a prospectus under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of the Laws of Hong Kong, nor has it been authorised by the Securities and Futures Commission in Hong Kong under the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong.

Singapore Shareholders

This document and any other materials relating to the Shares offered under the Plan have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this document and any other document relating to the Shares may not be issued, circulated or distributed, nor may the Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore except pursuant to and in

accordance with exemptions in Subdivision (4) Division 1, Part 13 of the Securities and Futures Act 2001 of Singapore (the SFA), or as otherwise pursuant to, and in accordance with the conditions of any other applicable provisions of the SFA.

This document has been given to you on the basis that you are an existing holder of the Company's shares. In the event that you are not such a shareholder, please return this document immediately. You may not forward or circulate this document to any other person in Singapore.

Any offer is not made to you with a view to the Shares being subsequently offered for sale to any other party in Singapore. There are on-sale restrictions in Singapore that may be applicable to investors who acquire Shares. As such, investors are advised to acquaint themselves with the SFA provisions relating to resale restrictions in Singapore and comply accordingly.

Shortfall Placement

In the event that less than $3,000,000 is applied for under the Plan, the full amount of the shortfall may be placed at the discretion of the Board subject to compliance with all necessary legal requirements. The Company confirms that any issue of shortfall will be placed subject to the Company’s compliance with ASX Listing Rule 7.1 at the time of issue. As at the date of this document, assuming that all Shares subscribed for under the Placement are issued, the Company will have the capacity to issue 14,631 Shares under its ASX Listing Rule 7.1 capacity. Where the shortfall exceeds the Company’s available placement capacity, the shortfall will only be placed if shareholder approval is obtained.

Indicative Timetable

Record Date for Share Purchase Plan

Announce Share Purchase Plan Placement and lodge Appendix 3B

Opening date for Share Purchase Plan

Closing date for Share Purchase Plan

and

7.00pm (AEDT) 3 February 2023 6 February 2023

9 February 2023

2 March 2023 7 March 2023

9 March 2023

 Event

  Date*

   Lodge Cleansing Notice for the Offer, release Offer Booklet on the ASX platform and dispatch Share Purchase Plan booklet to shareholders

  9 February 2023

  Issue of Shares under Placement, and lodge Appendix 2A and Cleansing Notice with ASX for Placement

  10 February 2023

  Announcement of result of Share Purchase Plan

Issue of new Shares under the Share Purchase Plan and lodge Appendix 2A

  * These dates are indicative only. The Company may vary the dates and times of the Offer without notice. Accordingly, shareholders are encouraged to submit their Applications as early as possible.

Should you wish to discuss any information contained in this document further, do not hesitate to contact Stevan Adzic (Peloton Shareholder Services), on +61 401 639 114 or email stevan.adzic@pelshare.com.au.

Yours faithfully

Oleg Vornik CEO/Managing Director DRONESHIELD LIMITED

 DRONESHIELD LIMITED

ACN 608 915 859

Share Purchase Plan - Terms and Conditions

Purpose

The purpose of the Share Purchase Plan (the Plan), which will be conducted in conjunction with the Placement, is to offer shareholders of DroneShield Limited (DroneShield or the Company) the opportunity to acquire additional fully paid ordinary shares in the Company (Shares) up to a maximum value of $30,000 (when combined with any shares issued under any share purchase plan in the 12 months preceding the date of the Plan) and a minimum value of $2,000.

The issue price of $0.30 under the Plan will be at a discount of 19.9% to the volume weighted average market price of the Shares over the last five trading days on which sales in the Shares were recorded prior to the date the Plan was announced.

The Company is intending to raise $3,000,000 under the Plan. The Shares will not attract brokerage costs and will be issued without the need for the Company to issue a prospectus. The Plan is governed upon such terms and conditions as the board of directors of the Company, in its absolute discretion, sees fit.

No Financial Advice

This document does not provide financial advice and has been prepared without taking account of any person’s investment objectives, financial situation or particular needs. You should consider the appropriateness of participating in the Plan having regard to your investment objectives, financial situation or particular needs. Shareholders should seek independent financial and taxation advice before making any investment decision in relation to these matters.

Shareholders Eligible to Participate

Holders of Shares that are registered with an address in either Australia, New Zealand, Hong Kong or Singapore (Permitted Jurisdictions) at the Record Date are eligible shareholders (Eligible Shareholders) and may participate in the Plan, unless such registered shareholder holds Shares on behalf of another person who resides outside the Permitted Jurisdictions. Due to foreign securities laws, it is not practical for shareholders (or beneficial shareholders) resident in other countries to be offered the opportunity to participate in the Plan.

Participation in the Plan is optional and is subject to these Terms and Conditions. Offers made under the Plan are non-renounceable (i.e. Eligible Shareholders may not transfer their rights to any Shares offered under the Plan). Eligible Shareholders who wish to take up Shares issued under the Plan agree to be bound by the Company’s constitution in respect of Shares issued under the Plan.

An offer may, at the discretion of the directors of the Company (Directors), be made under the Plan once a year. The maximum amount which any shareholder may subscribe for in any consecutive 12-month period is $30,000. The Directors may also determine in their discretion the minimum amount for participation, the multiple of Shares to be offered under the Plan and the period the offer is available to Eligible Shareholders.

Custodians, trustees and nominees

If you are an Eligible Shareholder and hold Shares as a custodian (as defined in ASIC Corporations (Share and Interest Purchase Plans) Instrument 2019/547 (ASIC CI 2019/547)

(refer below) (Custodian) or in any more specific ASIC relief granted to the Company in relation to the Plan), you may apply for Shares up to a value of $30,000 for each beneficiary for whom you act as custodian provided you complete and submit, together with an Application, a certificate (Custodian Certificate) with the following information:

(a) that you held Shares on behalf of:

(i) one or more other persons that are not custodians; and/or

(ii) another custodian (Downstream Custodian) that holds beneficial interests in Shares on behalf of one or more other persons who are resident in a Permitted Jurisdiction, to which those beneficial interests relate,

(each a Participating Beneficiary) at the Record Date who have subsequently instructed you, and/or the Downstream Custodian, to apply for Shares under the Plan on their behalf;

(b) the number of Participating Beneficiaries and their names and addresses;

(c) the number of Shares that you hold on behalf of each Participating Beneficiary;

(d) the number or dollar amount of Shares that each Participating Beneficiary has instructed you, either directly or indirectly through a Downstream Custodian, to apply for on their behalf;

(e) that the application price for Shares applied under the Offer for each Participating Beneficiary for whom you act in addition to the application price for any other Shares issued to you as custodian (as a result of instruction given to you as Custodian or a Downstream Custodian) for that Participating Beneficiary under any arrangement similar to the Plan in the prior 12 months does not exceed $30,000;

(f) that a copy of the written offer document was given to each Participating Beneficiary; and

(g) where you hold Shares on behalf of a Participating Beneficiary indirectly, through one or more Downstream Custodians, the name and address of each Downstream Custodian.

For the purposes of ASIC CI 2019/547 you are a ‘Custodian’ if you provide a custodial or depository service in relation to shares of a body or interests in a registered scheme and you:

(a) hold an Australian financial services licence covering the provision of a custodial or depository service;

(b) are exempt from the requirement to hold an Australian financial services licence covering the provision of a custodial or depository service;

(c) hold an Australian financial services licence covering the operation of an IDPS or is a responsible entity of an IDPS-like scheme;

(d) are a trustee of a self-managed superannuation fund or a superannuation master trust; or

(e) are a registered holder of shares or interests in the class and is noted on the register of members of the body or scheme as holding the shares or interests on account of another person.

If you hold Shares as a trustee or nominee for another person or persons but are not a Custodian as defined above, you cannot participate for beneficiaries in the manner described above. In this case, the rules for multiple single holdings (above) apply.

Custodians should request a Custodian Certificate when making an Application on behalf of Participating Beneficiaries. To request a Custodian Certificate and if you would like further information on how to apply, you should contact the Company’s share registry at any time from 8.30am to 5.00pm (AEDT time) Monday to Friday during the Offer period.

The Company reserves the right to reject any Application to the extent it considers that the Application (whether alone or in conjunction with other Applications) does not comply with these requirements. The Company reserves the right to reject Applications in accordance with these Terms and Conditions.

Price of Shares

The price of Shares to be issued under the Plan is $0.30 which represents a discount of 19.9% of the volume weighted average market price for the Shares over the last five trading days on which sales in the Shares were recorded prior to the date the Plan was announced, being $0.374.

Applications and Notices

At the discretion of the Directors, the Company will send Eligible Shareholders a letter of offer and acceptance procedures, inviting them to subscribe for Shares under the Plan, and accompanied by these Terms and Conditions of the Plan and an Application Form. Applications will not be accepted after the Closing Date of the Offer being 2 March 2023. Over subscriptions to an offer may be refunded without interest.

Notices and statements made by the Company to participants may be given in any manner prescribed by its Constitution.

Acknowledgement

By completing an Application and making the associated payment in accordance with the options on your Application Form, you:

(a) irrevocably and unconditionally agree to the terms and conditions of the Plan and the terms and conditions of the Application Form and agree not to do any act or thing that would be contrary to the spirit, intention or purpose of the Plan;

(b) warrant that all details and statements in your Application are true and complete and not misleading;

(c) agree that your Application will be irrevocable and unconditional (that is, it cannot be withdrawn even if the market price of the Shares is less than the Price);

(d) warrant that you are an Eligible Shareholder and are eligible to participate in the Plan;

(e) acknowledge that no interest will be paid on any application monies held pending the issue of Shares under the Plan or subsequently refunded to you for any reason;

(f) acknowledge that the Company and its officers and agents, are not liable for any consequences of the exercise or non-exercise of its discretions referred to in these terms and conditions;

(g) acknowledge and agree that if you are acting as a trustee, nominee or Custodian, each beneficial holder on whose behalf you are participating is resident in a Permitted Jurisdiction, and you have not sent these Terms and Conditions, an Offer Document, or any materials relating to the Plan, to any person outside the Permitted Jurisdictions;

(h) if you are applying on your own behalf (and not as a Custodian), acknowledge and agree that:

(i) you are not applying for Shares with an application price of more than $30,000 under the Plan (including by instructing a Custodian to acquire Shares on your behalf under the Plan); and

(ii) the total of the application price for the following does not exceed $30,000:

(A) the Shares the subject of the Application;

(B) any other Shares issued to you under the Plan or any similar arrangement in the 12 months before the Application (excluding Shares applied for but not issued);

(C) any other Shares which you have instructed a Custodian to acquire on your behalf under the Plan; and

(D) any other Shares issued to a Custodian in the 12 months before the Application as a result of an instruction given by you to the Custodian to apply for Shares on your behalf under an arrangement similar to the Plan.

(i) if you are a Custodian and are applying on behalf of a Participating Beneficiary on whose behalf you hold Shares, acknowledge and agree that:

(i) you are a Custodian (defined above);

(ii) you hold Shares (directly or indirectly) on behalf of one or more Participating Beneficiaries;

(iii) you held Shares on behalf of the Participating Beneficiary as at the Record Date who has instructed you to apply for Shares on their behalf under the Plan;

(iv) each Participating Beneficiary on whose behalf you are applying for Shares has been given a copy of this document;

(v) the application price for the Shares applied for on behalf of the Participating Beneficiary, and any other Shares applied for on their behalf under a similar arrangement in the previous 12 months (excluding shares applied for but not issued), does not exceed $30,000; and

(vi) the information in the Custodian Certificate submitted with your Application is true, correct and not misleading;

(j) agree to be bound by the constitution of the Company (as amended from time to time);

(k) acknowledge that none of the Company, its advisers or agents, has provided you with any financial product or investment advice or taxation advice in relation to the Plan, or has any obligation to provide such advice; and

(l) authorise the Company, and its officers and agents, to correct minor or easily rectified errors in, or omissions from, your Application including the Application Form and to complete the Application by the insertion of any missing detail.

Placement of Shortfall

Any shortfall from the Offer may be placed at the discretion of the Directors. The Company confirms that any issue of shortfall will be placed subject to the Company’s compliance with ASX Listing Rule 7.1 at the time of issue. As at the date of this document and assuming all Shares under the Placement are issued, the Company will have capacity to issue 14,631 Shares under its ASX Listing Rule 7.1 capacity.

Issue of Shares

Shares to be issued under the Plan will be issued as soon as reasonably practicable after the Closing Date and in any event no more than five business days of the Closing Date and will rank equally in all respects with all other fully paid ordinary shares in the capital of the Company from the date of issue.

Shareholding statements or CHESS notification will be issued in respect of all Shares issued under the Plan. The Company will, promptly after the issue of Shares under the Plan, make application for those Shares to be listed for quotation on the official list of ASX.

Modification and Termination of the Plan

The Company may modify or terminate the Plan at any time. The Company will notify ASX of any modification to, or termination of, the Plan. The omission to give notice of any modification to, or termination of, the Plan or the failure of ASX to receive such notice will not invalidate the modification or termination.

Without limiting the above, the Company may issue to any person fewer Shares than the person applied for under the Plan if the issue of Shares applied for would contravene any applicable law or the Listing Rules of ASX.

Raising Amount and Scale back

The Company is seeking to raise a maximum of $3,000,000 under the Plan. However, the Company reserves its absolute discretion regarding the final amount raised under the Plan subject to compliance with the ASX Listing Rules.

In accordance with the ASX Listing Rules, the maximum number of Shares that can be issued as at the date of this document is 135,312,595 Shares.

In the event of oversubscriptions, the Directors may, in their absolute discretion, accept oversubscriptions (in accordance with the ASX Listing Rule parameters) or alternatively scale-back all Applications on an equitable basis. If the Company rejects or scales-back an Application or purported Application, the Company will promptly return to the shareholder the relevant application monies, without interest.

Dispute Resolution

The Company may, in any manner it thinks fit, settle any difficulties, anomalies or disputes which may arise in connection with or by reason of the operation of the Plan, whether generally or in relation to any participant, Application or Shares. The decision of the

Company in this respect will be conclusive and binding on all shareholders and other persons to whom that determination relates.

The Company reserves the right to waive strict compliance with any provision of these terms and conditions. The powers of the Company under these conditions may be exercised by the directors of the Company or any delegate of the directors of the Company.

Questions and Contact Details

If you have any questions regarding the Plan or how to deal with this Offer, please contact your stockbroker or professional adviser or Stevan Adzic (Peloton Shareholder Services), on +61 401 639 114 or email stevan.adzic@pelshare.com.au.

               All Registry Communication to:

GPO Box 5193, Sydney NSW 2001

1300 288 664 (within Australia)

+61 2 9698 5414 (international) corporate.actions@automicgroup.com.au www.automicgroup.com.au

 DRONESHIELD LIMITED| ACN 608 915 859

 [EntityRegistrationDetailsLine1Envelope] [EntityRegistrationDetailsLine2Envelope] [EntityRegistrationDetailsLine3Envelope] [EntityRegistrationDetailsLine4Envelope] [EntityRegistrationDetailsLine5Envelope] [EntityRegistrationDetailsLine6Envelope]

 SRN/HIN: [HolderNumberMasked] ASX Code: DRO Record Date: 7:00pm (AEDT), 3 February 2023

[ReplaceNoImages]

SHARE PURCHASE PLAN APPLICATION FORM

IMPORTANT: OFFER CLOSES 5:00PM (AEDT) ON 2 MARCH 2023 (UNLESS VARIED) 1: SUBSCRIPTION

This Offer entitles each Eligible Shareholder in DroneShield Limited (Company) (ASX: DRO) to subscribe through the Company’s Share Purchase Plan (SPP) for a maximum of $30,000 worth of fully paid ordinary shares in the Company (New Shares). The SPP is open to all shareholders recorded as holding fully paid ordinary shares (Shares) on the Company’s Register as at the Record Date with a registered address either in Australia, New Zealand, Hong Kong or Singapore (Eligible Shareholders). The issue price of the New Shares is $0.30 (Price). Eligible Shareholders may subscribe for any one of the following parcels (subject to a maximum band or any scale back) described below by paying the applicable Subscription Amount in accordance with the payment instructions in section 2 of this Application Form:

$30,000 (maximum) $25,000 $20,000 $15,000 $10,000 $5,000 $2,000 (minimum)

100,000 83,333 66,666 50,000 33,333 16,666 6,666

No fractions of Shares will be issued. Any fraction of a Share will be rounded down to the nearest whole number of Shares (where applicable).

2: PAYMENT - You can pay either by BPAY® or Electronic Funds Transfer “EFT” Payment under the Share Purchase Plan can only be made by BPAY® or EFT.

3: Elect to receive email communication

Return to Automic Group by email to corporate.actions@automicgroup.com.au

    Application Amount

  Number of New Shares

 Offer A

 Offer B

 Offer B

 Offer C

 Offer D

 Offer E

 Offer F

        SAMPLE

  Option A – BPAY® Option B – Electronic Funds Transfer (EFT)

   Biller Code: Ref No:

 The unique Payment Reference which has been assigned to your

Application is:

Funds are to be deposited directly to following bank account:

Account name: Account BSB: Account number: Swift Code:

IMPORTANT: You must quote your unique payment reference as your payment reference/ description when processing your EFT payment. Failure to do so may result in your funds not being allocated to your application and shares subsequently not issued.

       Contact your financial institution to make your payment from your cheque or savings account.

  Note: You do not need to return this form if you have made payment via BPAY® or EFT. Your BPAY® reference number or unique reference number will process your payment for your application for New Shares electronically.

         Telephone Number Contact Name (PLEASE PRINT) DRO-[HolderId] ()

Please insert your email address if you wish to elect to be an e-Shareholder, and you consent to receiving communications from the Share Registry

INSTRUCTIONS FOR COMPLETION OF THIS FORM

The right to participate in the SPP is optional and is offered exclusively to all Shareholders (including Custodians) who are registered as holders of fully paid ordinary shares in the capital of the Company on the Record Date with a registered address in Australia, New Zealand, Hong Kong or Singapore (Eligible Shareholders).

If the Company rejects or scales-back an application or purported applications, the Company will return to the Shareholder the relevant Application Monies, without interest.

HOW TO APPLY FOR SHARES UNDER THE SPP

1 Subscription

As an Eligible Shareholder, you can apply for up to a maximum of $30,000 worth of Shares. Eligible Shareholders can select one of the parcels prescribed overleaf.

In order to comply with ASIC Corporations (Share and Interest Purchase Plans) Instrument 2019/547, the maximum value of Shares each Eligible Shareholder (irrespective of the size of their shareholding) may apply for under this Offer is $30,000 (including through joint holding(s), multiple share accounts or any holding in which they have a beneficial interest/s). This limit will apply even if you receive more than one offer from the Company (for example, because you are a joint holder of Shares or because you hold more than one shareholding under separate share accounts).

If the Company receives an amount that does not equal one of the amounts specified overleaf the Company may accept the payment at their discretion and refund any excess Application Money (without interest) to the Eligible Shareholder. If the Company receives a subscription of over $30,000 worth of Shares by an Eligible Shareholder through multiple applications or joint holdings, the Company may refund any excess Application Money (without interest) to the Eligible Shareholder.

Any application made under the SPP Offer is not guaranteed to result in the Eligible Shareholder receiving any Shares that have been applied for. Applications may be scaled back at the absolute discretion of the Company.

2 Payment

By making a payment via BPAY or EFT, you agree that it is your responsibility to ensure that funds are submitted correctly and received by Automic Share Registry by the closing date and time. Payment must be received by the Share Registry by 5:00pm (AEDT) on 2 March 2023.

It is your responsibility to ensure your CRN or unique Payment Reference is quoted, as per the instructions in Section 2. If you fail to quote your CRN or unique Payment Reference correctly, Automic may be unable to allocate or refund your payment. If you need assistance, please contact Automic.

Payment by BPAY®: You can make a payment via BPAY® if you are the holder of an account with an Australian financial institution that supports BPAY® transactions. To BPAY® this payment via internet or telephone banking use your reference number on this Form. Multiple acceptances must be paid separately.

Payment by EFT: You can make a payment via Electronic Funds Transfer “EFT”. Multiple acceptances must be paid separately. Please use your unique reference on this Form. This will ensure your payment is processed correctly to your application electronically.

If you make a payment by BPAY® or EFT and the Company receives an amount which is not equal to either $30,000, $25,000, $20,000, $15,000, $10,000, $5,000, or $2,000 the Company may accept the payment at their discretion. Your payment must be for a minimum of $2,000.

Applicants should be aware of Automic’s financial institution’s cut off-time, their own financial institution’s cut-off time and associated fees with processing a funds transfer. It is the Applicant’s responsibility to ensure funds are submitted correctly by the closing date and time, including taking into account any delay that may occur as a result of payments being made after 5pm (AEDT) and/or on a day that is not a business day (payment must be made to be processed overnight). You do not need to return this Form if you have made payment via BPAY® or EFT. Your reference number will process your payment to your application electronically and you will be deemed to have applied for such shares for which you have paid.

3 Contact Details - Elect to receive email communication

As a valued shareholder in DroneShield Limited, the Company encourages shareholders to elect to receive their shareholder communications electronically. This will ensure you receive all future important shareholder communications in a faster and more secure way and reduce the environmental footprint of printing and mailing.

IMPORTANT INFORMATION

1. This is an important document which requires your immediate attention. If you are in any doubt as to how to deal with this Application Form, please consult a professional adviser.

2. If you do not wish to purchase Shares under the SPP, there is no need to take action.

3. Please ensure you have read and understood the terms and conditions of the SPP in the Offer Booklet accompanying this Application Form and this section

entitled "Important Information" before making payment by BPAY® or EFT.

4. The offer for Shares under the SPP is non-renounceable. Applications can only be accepted in the name printed on the Application Form.

5. If you are a custodian, trustee or nominee within the meaning of “Custodian” as defined in ASIC Corporations (Share and Interest Purchase Plans) Instrument

2019/547, you must complete and submit an additional certificate that contains further certifications and details (Custodian Certificate) that must be provided before your application will be received. The Custodian Certificate can be obtained by contacting the Share Registry on the telephone number set out below. Applications received by Custodians that are not accompanied by the Custodian Certificate will be rejected. A completed Custodian Certificate must be emailed to: custodialcertificates@automicgroup.com.au, failure to do so will result in the Application being rejected.

6. For applicants that are not required to complete the Custodian Certificate, by making payment by BPAY® or EFT, you certify that the aggregate of the payment paid by you for:

• the parcel of Shares indicated on this Application Form or BPAY® or EFT; and

• any other Shares applied for by you, or which you have instructed a custodian to acquire on your behalf under the SPP or any other similar arrangement

in the 12 months prior to making payment by BPAY® or EFT does not exceed A$30,000.

7. The maximum subscription limitation of A$30,000 will apply even if you have received more than one Application Form (whether in respect of a joint holding or

because you have more than one holding under separate security accounts).

8. You are not guaranteed to receive any Shares that you have applied for and the Company may, in its absolute and sole discretion:

a. scale back any applications made; and

b. reject your application, without limit.

9. By making payment of application monies, you certify that:

• you wish to apply for Shares under the SPP as indicated on this Application Form and acknowledge that your application is irrevocable and unconditional;

• you received a copy of the Offer Booklet and you have read and understood the terms and conditions of the SPP;

• you agree to be bound by the Constitution of the Company and the terms and conditions in the Offer Booklet;

• you agree to accept any lesser number of Shares than the number of shares applied for; and

• you are not in the United States and are not acting for the account or benefit of a person in the United States and have not sent any offering materials relating to the SPP offer to any person in the United States.

If you require further information about the Offer, please contact Automic on 1300 288 664 or +61 2 9698 5414 between 8:30am and 8:00pm (AEDT).

  SAMPLE

whilst this article doesn’t mention Droneshield clearly this is a problem costing a huge number of dollars… tailwinds!

https://www.irishmirror.ie/news/irish-news/dublin-airport-drone-cash-back-29153685?int_source=amp_continue_reading&int_medium=amp&int_campaign=continue_reading_button#amp-readmore-target

Drone use on the battlefield getting more airtime by abc news

https://www.abc.net.au/news/2023-02-04/diy-weapons-innovation-drones-in-ukraine-war-russia/101910506

I think Droneshield have a lot of momentum @Noddy74 and the recent Drone bomb attack in Iran could provide even more opportunities.

https://www.abc.net.au/news/2023-01-29/iran-thwarts-drone-attack-on-military-site-state-media/101904644

Hold

Interview

Further to @Summer12sstraw about the ShareCafe interview with Oleg I wanted to add a few notes. (I haven’t watched the Market Herald interview that @slymeats posted yet, but judging from the slide notes the content looks similar) Sometimes Droneshield can be a bit over promotional so I am trying to keep track of some of the statements made to compare to the actual outcomes over FY23.

• The company is now reaching its breakout phase of the growth profile. Size of contracts have been progressively getting larger as Droneshield establishes itself with the government departments globally. This is indicated by the two recent 8 figure contracts. Ongoing contracts are expected to be more of this nature going forward.

• SaaS was 5% of Revenue in FY2021. Oleg re-iterated that the goal is for this to make up 50% of Revenue within 5 Years. How this is tracking / growing will be able to be determined in the upcoming FY2022 results.

• Expecting follow up to multiple R&D contracts. These are great contracts for Droneshield as they develop relationships with the client and are improving their product / SaaS offering to directly meet clients needs. They also further Droneshield’s capacity in the adjacent AI / Machine Learning sectors. There may be some key personnel risk here if the company starts taking on too much work, but the other side of that coin is that they can use these types of contracts to further develop their teams.
• Australian DoD AI electronic warfare contract. The next contract is also expected to be larger than the previous ($3.8m over 2 years. Expected to end in the 2QFY23)
• Australian DoD AI computer vision contract. ($800k over 1 year). Phase 2 expected commence early 2023
• ISREW Panel
• Expecting similar work with US DoD eg. the SBIR Phase 1 JV with Quantam Research - due for completion in Q1FY2023



• Recommendation from the US DoD for Droneshield products to be deployed at military bases across the U.S. The rollout is expected to commence this year. This was a 12 month selection process, where 3 companies were selected to form a panel. I have listed the companies selected below which helps provide some insight into Droneshield’s competitors in the market. A point of interest is that D-Fend Solutions isn’t listed in Droneshield’s slides. It will be worth monitoring which companies are getting contracts and the associated values, in particular LITEYE.

• Droneshield - Detection & Defeat - Announcement
• D-Fend Solutions - Forced Land - Announcement
• LITEYE - Detection & Defeat - Announcement

• Bill amended last year in Australia for critical infrastructure owners to assess and mitigate threats against facilities. This will need to include threats from drones. (This could be a bit of an opportunity for AVA as well)

Summary of Reforms

CEO just sold half of his ordinary shares although the announcement muddies that a little by including options I presume (28% of his total undiluted holding)…

They offer that a substantial amount of this was to meet tax obligations.

Doesnt fill me with joy when the CEO sells 2 million dollars worth of shares but I’m bullish enough about DRO that I’m happy to look past it for now :

Appendix 3Y

Change of Director’s Interest Notice

Rule 3.19A.2

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

Introduced 30/09/01 Amended 01/01/11

Name of entity DroneShield Limited ABN 26 608 915 859

We (the entity) give ASX the following information under listing rule 3.19A.2 and as agent for the director for the purposes of section 205G of the Corporations Act.

Name of Director  Oleg Vornik Date of last notice  3 June 2022

Part 1 - Change of director’s relevant interests in securities

In the case of a trust, this includes interests in the trust made available by the responsible entity of the trust

Note: In the case of a company, interests which come within paragraph (i) of the definition of “notifiable interest of a director” should be disclosed in this part.

Appendix 3Y Change of Director’s Interest Notice

   Direct or indirect interest

Date of change

Direct and Indirect

10 – 12 January 2023

 Nature of indirect interest

(including registered holder)

Note: Provide details of the circumstances giving rise to the relevant interest.

  Oleg Vornik and Elena Vornik <Bennelong A/C>

  Mr Oleg Vornik + <Marathon Superfund A/C>

Mr Jethro Marks

 No. of securities held prior to change

  15,310,356 fully paid ordinary shares.

750,000 unlisted and unvested zero exercise price options, vesting if certain performance milestones are met, each exercisable at $0.00 per option, expiring on 30 November 2022.

250,000 unlisted and unvested employee options (being the Class Q Options), vesting on 30 November 2022, exercisable at $0.65 per option, expiring on 30 June 2023.

10,000,000 unlisted and unvested Performance Options, vesting if certain performance milestones are met, each exercisable at $0.00 per option, expiring on 29 April 2027.

  Class

+ See chapter 19 for defined terms. 01/01/2011 Appendix 3Y Page 1

Fully paid ordinary shares

Appendix 3Y

Change of Director’s Interest Notice

Number acquired Number disposed

Value/Consideration

Note: If consideration is non-cash, provide details and estimated valuation

Nil

a) 7,233,334 fully paid ordinary shares

b) 750,000 unlisted and unvested options a) $1,908,346.81

b) Nil

    No. of securities held after change

 8,077,022 fully paid ordinary shares.

250,000 unlisted and vested employee options (being the Class Q Options), exercisable at $0.65 per option, expiring on 30 June 2023.

10,000,000 unlisted and unvested Performance Options, vesting if certain performance milestones are met, each exercisable at $0.00 per option, expiring on 29 April 2027.

  Nature of change

Example: on-market trade, off-market trade, exercise of options, issue of securities under dividend reinvestment plan, participation in buy-back

  a) On-market trade. The sale of shares represents 28.2% of the total Director’s holding on a fully diluted basis. A substantial part of the proceeds is towards meeting ATO tax obligations associated with issue of DroneShield securities.

b) Expiry of options

  Part 2 – Change of director’s interests in contracts

Note: In the case of a company, interests which come within paragraph (ii) of the definition of “notifiable interest of a director” should be disclosed in this part.

Detail of contract N/A Nature of interest N/A

Name of registered holder N/A (if issued securities)

Date of change N/A

Interest acquired N/A Interest disposed N/A

+ See chapter 19 for defined terms. Appendix 3Y Page 2

01/01/2011

    No. and class of securities to which interest

related prior to change

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Appendix 3Y Change of Director’s Interest Notice

Value/Consideration N/A Note: If consideration is non-cash, provide details and an estimated valuation

Interest after change N/A Part 3 – +Closed period

Were the interests in the securities or contracts detailed No above traded during a +closed period where prior written clearance was required?

If so, was prior written clearance provided to allow the N/A trade to proceed during this period?

If prior written clearance was provided, on what date was N/A this provided?

        + See chapter 19 for defined terms. 01/01/2011 Appendix 3Y Page 3

Drone Shield is a company that provides a range of products and services for detecting, tracking, and mitigating drone threats. The company's products are designed to help organizations protect against unauthorized or malicious drone activity, such as drone surveillance, drone-based attacks, or drone smuggling.

Drone Shield offers a variety of products for detecting and tracking drones, including radar systems, thermal cameras, and acoustic sensors. These products can be used to detect drones at long ranges and in a variety of weather conditions. Droneshield’s three streams of revenue include

-       Hardware (drone detection and defeat devices)

-       SaaS (device software updates)

-       R&D contracts

DroneShield has its own production facility, supplemented by two outsourced manufacturers, to ensure ability to manage large hardware orders. It currently employees over 60 staff made up of engineers, sales and field support and production technicians. 

From the 2022 Annual Report the main product range is as follows:

Brief Summary of Current and Past Products

·      November 2022 DroneSentry-C2 Command and Control System Upgrade – software platform, providing counter-UAS awareness and reporting capability. https://www.asx.com.au/asxpdf/20221116/pdf/45hn16hsr6375b.pdf

·      April 2022 DroneSentry-C2 in partnership with Nearmap https://www.asx.com.au/asxpdf/20220405/pdf/457q1j380l52qg.pdf

·      September Sonar One – sonar monitoring device capable of detecting and tracking hostile unmanned underwater vehicles (UUVs) or diver intruders in protected waters. Ideal for deployment around naval vessels, harbours, and critical infrastructure. SonarOne is easy to install and monitor via the DroneSentry-C2. https://www.asx.com.au/asxpdf/20210901/pdf/4501kkmhyww1y5.pdf

·      August 2021 CompassOne – device provides real-time military grade location, orientation and direction sensing for deployed static and on-the-go assets. https://www.asx.com.au/asxpdf/20210823/pdf/44zkx2hbhvws67.pdf

·      August 2021 DroneSim – a lightweight and rapidly deployable UAS/drone simulator that is able to mimic common drone signals for the purpose of counterdrone (C-UAS) system testing and validation. The device is capable of generating aerial (UAV), ground (UGV) and water surface (USV) drone signals. https://www.asx.com.au/asxpdf/20210817/pdf/44zcmk9tt2ch7r.pdf

·      November 2019 DroneSentry-X – vehicle-mounted drone detection and defeat product. Lightweight at approximately 10kg, compact size and easily mountable on most vehicles. https://www.asx.com.au/asxpdf/20191114/pdf/44bkh00sq9q5kk.pdf

·      August 2019 RfZero is an omnidirectional drone detection device with a 1km range. It is designed to be a cost effective fixed site alternative to Droneshield’s higher end product RfOne (a 5km radiofrequency direction finder). Completely non-emitting. https://www.asx.com.au/asxpdf/20190802/pdf/4474v1xp18s3zc.pdf

·      July 2019 DroneGun MKIII – portable pistol-shape drone jammer, weighting under 2kg. Having a shorter effective range of 500m verus 1-2KM for DroneGun Tactical. https://www.asx.com.au/asxpdf/20190715/pdf/446lzqk0qszn9n.pdf

·      May 2019 RFPatrol – body worn drone detection product. Weighing under 1 kg, completely passive (non-emitting product. https://www.asx.com.au/asxpdf/20190501/pdf/444r4gbqzgn2rz.pdf

·      October 2018 DroneCannon RW – a lightweight “soft kill” drone jammer for use with “hard kill” remote weapon station. Can be used on a fixed site or a vehicle solution https://www.asx.com.au/asxpdf/20181010/pdf/43z3qbnwk9pthb.pdf

·      February 2018 Radar Zero – compact drone detection radar product. At roughly the size of a paperback book, the product can detect up to 750m away and sells for a fraction of the cost of the larger longer-range more conventional radars. Complements existing longer-range RadarOne product. RadarZero is portable and mobile. https://www.asx.com.au/asxpdf/20180207/pdf/43rdb8d4n05gzh.pdf

·       January 2018 - DroneGun Tactical No backpack – the product is entirely self-contained within the rifle body, whilst maintaining light weight and long effective range (over 1km). Addition of 433Mhz and 915Mhz frequencies, to ensure complete effectiveness across drone models. Ergonomic body and controls. Further alignment with standard military specifications, including standardised NATO military battery power. https://www.asx.com.au/asxpdf/20180131/pdf/43r5crbpxb8xww.pdf

·      September 2017 - DroneGun MKII development of second generation of DroneShield tactical drone jammer.https://www.asx.com.au/asxpdf/20170911/pdf/43m6wfp64xp3y0.pdf

·      June 2017 - Thermal Camera and Optical Camera Products – Launch of two new products – DroneHeat, a thermal camera, and DroneOpt, an optical camera, to supplement its existing acoustic products. https://www.asx.com.au/asxpdf/20170614/pdf/43jxmzp3y1thw2.pdf

·      January 2017 Drone Sentry Product – an integrated drone detection and countermeasure product. Two key categories of products acoustic drone detection system and second is DroneGun, a drone jammer, effective at distance of up to 2km. https://www.asx.com.au/asxpdf/20170116/pdf/43fb8jddq290dy.pdf

·      Dec 2016 – DroneShield - Effectiveness With deployment taking place in a dense urban area, the user has opted for DroneShield’s omnidirectional detection sensors (“omnis”), which provide a wide 180 degree protection with up to 150m range. The omnis provide an alternative to DroneShield long range dish sensor product, which is effective at up to 1km in a 30 degree cone. DroneShield’s detection sensors are not time of day dependent, do not rely on line of sight, completely passive to the surrounding environment, are not subject to export restrictions, and cover all major drone models, including frequency hoppers. https://www.asx.com.au/asxpdf/20161220/pdf/43dvgx88h84k5n.pdf

·      Nov 2016 - Drone Gun – a rifle style handheld jammer device, highly effective at 2.4Ghz and 5.8 Ghz frequencies (the standard frequencies of consumer and commercial drones globally). AN optional GPS-jamming capability is also available to customers where lawful. https://www.asx.com.au/asxpdf/20161128/pdf/43d7xbhdc23d5p.pdf

If anyone has used or been exposed or has any more information on DroneShield products would love hear about it. Thanks

DroneShield Capital Raise History – Raised $44.37m since IPO June 2016 current market cap today $126.3m ($0.28).

·      November 2022 – Raised $3.7m via Epirus at $0.20 – Epirus is a high growth US technology company

·      August 2020 – Raised $17m, $7.5m Share Placement, $9.5m SPP at $0.125 per share

·      August 2019 – Raised $9.55m Share placement at $0.20 per share

·      February 2019 – Raised $1.3m Share Placement at $0.115 per share

·      October 2018 – Raised $1.7m through SPP at  $0.14 per share

·      March 2018 – Raised $2.55m Share Placement at $0.21 per share

·      October 2017 – Raised $2.32m Share Placement at $0.20 per share

·      July 2017 – Raise $1.25m through SPP and Share Placement at $0.237 per share.

·      June 2016 - Raise $5m for IPO at $0.20 per share

Director Shareholding            Ordinary Shares          % DRO Issued              Net Value at $0.28

CEO Oleg Vornik                     15,310,356                              3.39%                          $4.29m

Peter James (Chairman)         9,301,688                                2.06%                          $2.6m

Jethro Marks (Board)              666,666                                   0.14%                          $186K

Total                                        25,278,710                              5.59%                          $7.1m

Management Changes

·      January 2022 appoints Matt McCrann as its US CEOhttps://www.asx.com.au/asxpdf/20220105/pdf/454r9lpqj6772b.pdf

·      November 2018 Angus Bean promotion to Global Technology Officer previously Vice President of Product Design https://www.asx.com.au/asxpdf/20181126/pdf/440mfhs7d7nrqx.pdf

·      May 2017 Ryan Vervack appointment of Chief Technology Officer (US) https://www.asx.com.au/asxpdf/20170522/pdf/43jdrm4k33wckb.pdf

·      Jan 2017 Oleg Vornik becomes CEO previously been the Chief Financial Officer of the company for over a year. https://www.asx.com.au/asxpdf/20170124/pdf/43fhjq7tlrz830.pdf

Below is the complete DroneShield Contracts/Orders that have been announce on the asx since listing up to today January 2022. I have not included announcement that weren't material (selling one DroneGun etc).

·      January 2023 - $11m Government Agency Customer – a new purchase order for approximately $11m order includes several different types of Droneshield counterdrones/C-UAS equipment.https://www.asx.com.au/asxpdf/20230109/pdf/45kh6b7gkcw9j6.pdf

·      December 2022 - $11m Government Agency Customer – several different types of Droneshield counterdrone/C-UAS equipment. https://www.asx.com.au/asxpdf/20221221/pdf/45k1nft8qkzp2y.pdf

·      November 2022 - $1m International Government Agency – for several of its DroneSentry-X units.https://www.asx.com.au/asxpdf/20221110/pdf/45hfnhvt8pw37q.pdf

·      October 2022- $900,000 Asian Order -  for portable counterdrone systems. The order is from a government agency of an Asian country allied with the west. https://www.asx.com.au/asxpdf/20221025/pdf/45gpx8f5bpgp8z.pdf

·      October 2022 - $1.8m US Department of Defence Contract – for its DroneGun MKIII handheld counterdrone system. https://www.asx.com.au/asxpdf/20221004/pdf/45fvrj49k8l1mf.pdf

·      September 2022 – $2m European Government Customer – order for multiple DroneSentry fixed site detect and defeat systems.https://www.asx.com.au/asxpdf/20220901/pdf/45dmg07h14zy77.pdf

·      Aug 2022 – Sub $500K First US Airport Deployment – sold and deployed its DroneSentry counterdrone system at a US international airport.https://www.asx.com.au/asxpdf/20220829/pdf/45df1qnqw0f46d.pdf

·      July 2022 – $500K US Government Agency – repeat order for its counterdrone solutions in amount of approximately $500,000 from a high profile US Government Agency.https://www.asx.com.au/asxpdf/20220727/pdf/45c6nd6nk9vvmf.pdf

·      March 2022 – Approx. $2m International Government Agency – several systems. The order consists of an upfront purchase of $2 million with an additional recurring subscription element, which is unable to be estimated at this time, but expected to be material in the context of the order. https://www.asx.com.au/asxpdf/20220321/pdf/45769mdqmp5bg7.pdf

·      February 2022 - $750,000 US Government Agency Order – follow up order of A$750K with a major government agency. Order comprises of multi-mission wearable and on-vehicle C-UAS devices, supported by AL-enabled threat awareness software, RFAI. https://www.asx.com.au/asxpdf/20220215/pdf/455zfrnq7g1xd0.pdf

·      December 2021 - $600,000 Five Eyes Defence Agency Order – for a variant of its DroneSentry system by a defence agency of a five eyes country. https://www.asx.com.au/asxpdf/20211213/pdf/4542kk3tg312y0.pdf

·      November 2021 - $800,000 Australian Department of Defence – contract relates to artificial intelligence in multi-domain applications. The work relates to both the counterdrone space as well as more general military/Government agency applications. https://www.asx.com.au/asxpdf/20211115/pdf/452yzmn9txdfq0.pdf

·      June 2021 - $3.8m Defence Contract – announce it has received a 2 year contract with the total value of $3.8 million, with the military of a key Five Eyes country. https://www.asx.com.au/asxpdf/20210604/pdf/44x3nm10rqgkhv.pdf

·      April 2021 - $1.1m Government Customer Contract - announce it has received an order in total amount of approximately $1.1 million from a high profile Government customer from a Five Eyes country. This new contract, placed by an existing customer, represents a follow up order from previously announced orders (refer to ASX announcements dated 9 March 2020 and 15 March 2021). https://www.asx.com.au/asxpdf/20210407/pdf/44vb111lkn336b.pdf

·      March 2021 - $500,000 Multiple DroneSentry-X. Orders – received multiple first orders for its latest product, DroneSentry-X, an on-the-move C-UAS system. The order includes both detection-only and detect-and-defeat variants, for North America and South East Asia regions. Detection-only variant is purchase by customers who are legally restricted in their ability to defeat UAS.https://www.asx.com.au/asxpdf/20210324/pdf/44ty7s71bmv4hj.pdf

·      March 2021 - $1m Government Customer from a Five Eyes country – place by an existing customer, is a substantial increase from the initial trail purchase of approximately $500,000 made last year https://www.asx.com.au/asxpdf/20210315/pdf/44tndl2w9yy5z0.pdf

·      January 2021 - $100,000 – EU Police Framework Agreement – received the initial order for its DroneGun Tactical product under the European Union Police Framework Agreement. https://www.asx.com.au/asxpdf/20210118/pdf/44rsxdrcwf1tk1.pdf

·      December 2020 - $400,000 – Government Agency Order – received a follow up order for its DroneGun from a major intelligence government agency of a five eyes country. It was a follow up order on an earlier $900,000 order announced 1 October 2020. https://www.asx.com.au/asxpdf/20201229/pdf/44rcgy9z7j0b49.pdf

·      November 2020 - $600,000 – Defence R&D Artificial Intelligence Contract received an R&D contract related to its Artificial Intelligence/ Machine Learning (AL/ML) algorithms from a defence department of a Five eyes country. https://www.asx.com.au/asxpdf/20201113/pdf/44ptrvsm1rvpl3.pdf

·      October 2020 - $900,000 – Government Agency Order received an order for it DroneGun Tactical hand held counter-drone products from a major intelligence Government agency of a Five Eyes country (US, Canada, Australia, UK and New Zealand). https://www.asx.com.au/asxpdf/20201001/pdf/44n7bb2g2krjpb.pdf

·      September 2020 – Approx. $1m – South East Asia Army order for DroneSentry system for an Army of a major South East Asian country. https://www.asx.com.au/asxpdf/20200911/pdf/44mjs6dzfmzztw.pdf

·      August 2020 - $750,000 European Government Orders – announced it has received orders from government agencies of two separate European countries for its products. https://www.asx.com.au/asxpdf/20200831/pdf/44m3x6zdm1s1km.pdf

·      July 2020 - $100,000 European Ministry of Defence order for RadarZero portable counterdrone system powered by the DroneShield Complete Command and Control (2) system from a significant European military.https://www.asx.com.au/asxpdf/20200724/pdf/44kszs9114b5hj.pdf

·      July 2020 - $200,000 United States Air Force contract award – contract to deploy multiple units of DroneShield’s DroneSentry integrated detect and defeat counterdrone (C-UAS) system at the Grand Forks Air Force airbase.https://www.asx.com.au/asxpdf/20200723/pdf/44ks12v1fpnf0f.pdf

·      March 2020 - $460,000 United States Government Agency Order https://www.asx.com.au/asxpdf/20200309/pdf/44fvq79bddvb8p.pdf

·      October 2019 – A$700,000 Australian DoD purchases Rfpatrol  https://www.asx.com.au/asxpdf/20191001/pdf/44933xgjyd7zmx.pdf

·      June 2018 - $3.2m Middle Eastern Ministry of Defence – orders for 70 DroneGuns https://www.asx.com.au/asxpdf/20180614/pdf/43vrlcdm5f3hxn.pdf

·      March 2018 – A$210,000 – ForcePro – one of the company’s European distributors, has placed an order for the company’s DroneSentinel product, as well as two Dronegun units.https://www.asx.com.au/asxpdf/20180305/pdf/43s55zzhq21xvm.pdf

·      Dec 2016 – A$130,000 initially with additional annual cash inflows of approximately A$150,000 per year to follow for the life of the installation. Turkey Government Order – multi-sensor product sale of its Droneshield acoustic detection product to a distributor. https://www.asx.com.au/asxpdf/20161221/pdf/43dwxkb9xc7rx7.pdf

Currently do not hold Droneshield but it does look interesting.

This one has taken me a while to work through, and the rest of the sections are still in the works but here is my first pass on the business summary for Droneshield.

• What does the company do and is it easily understandable?

Droneshield is a provider of UAV countermeasures including drone detection, tracking and disruption. They provide products and services to both the public and private sectors.

• What is the problem the company is solving and how are they solving it? - Where? Why does it need solving? 

As drone technology becomes more sophisticated, drones are increasingly being used as tools in nefarious activities such as smuggling of drugs and weapons, disruption to airports and other infrastructure, spying, remote controlled explosive devices etc, which are costly to the asset owner in terms of capital, reputation and human cost.

Due to their size drones are unable to be detected using conventional technologies. Droneshield provides a range of fixed and portable equipment which can detect, track and disrupt a drone’s flightpath. These devices can be used to protect critical infrastructure and locations from the threats listed above.

• What is the company business model? What is the pathway from product/service/offering to payment? 

Droneshield sells their devices to both private and public entities through a mixture of direct sales and partnerships. Typically a proof-of-performance trial or extended tender period are a precursor to being awarded a contract.

• Is the product offering diverse and therefore income generation diverse?

The company offers a limited range of fixed and portable devices, which can be mixed and matched to provide a tailored solution to their clients needs. The limited range of equipment is a risk in the rapidly evolving technology area, however droneshield are regularly releasing upgrades and new products to compliment the existing product range. 

The limited offering could be seen as a potential risk.

Diversity in income is primarily from the range of clients / applications for the technology.

• Is the company a price maker or price taker?

The counter drone equipment space is rapidly becoming more competitive, (8 competitors are listed in the company investor slides) and although Droneshield claim their technology is superior, they are a price taker.

• Does the business generate recurring revenues? How reliable is this recurring revenue? 

Recurring revenues are generated through ongoing software upgrades to the equipment. The recurring revenue would be expected to last for the install life of the equipment where it has been taken up by the customer. (Estimate ~5 years?) 

Currently recurring revenues only make up around 4% of total revenues as of H1FY22, but as the install base of hardware expands, the recurring revenues from software sales are expected to grow.

The CEO has stated that he expects this component of the business to grow to ~ 50% of revenues in the future.

• Who are the core customers of the business?

Core customers are government entities, such as military & law enforcement, but private sector customers are growing such as airports and infrastructure owners.

Currently defence makes up 75% of revenue and the intelligence community 15%.

• Is the customer base diverse? / • Does the company operate in multiple markets/countries?

Droneshield sells to a global customer base. (Limited by Government approvals etc). Revenue splits for H1FY22 can be seen below.

• Is it easy to convince customers to buy the products/service?

Initial sales are usually led by a proof of performance period or trials of the product, there are also significant onboarding and vetting processes to be able to sell products to many of the government institutions that Droneshield has as customers.

Once these barriers are crossed and droneshield has been awarded a contract, sales become much easier.

As drones increasingly become an problem in need of a solution the global sales pipeline available to Droneshield continues to increase. (Note. As reported by DRO)

• Does the company operate in stable markets?

Both the markets and customer base of Droneshield are stable and low risk of having significant disruptions all at once

• Is there a history of launching new lines of business successfully?

The company has launched several products over the years which complement each other. Each has had progressive trials with several entities leading to contracts.

• Is the company disruptive and innovative in its field?  

Droneshield uses similar technologies to many of its competitors using RF Jamming for its defeat options, and RF, EO/IR, Radar for it’s detection technology.

• Are the profit margins attractive (better than industry)?

Currently gross profit margins currently are around 70% (H1FY22) 

• What are the CAPEX requirements and are they ongoing?

To be able to deal with additional or large orders, droneshield has manufacturing partners to be able to subcontract to without the need to scale up its own facilities and maintain the ongoing operating expenditures. This does incur additional manufacturing costs but currently contracts are lumpy which make scaling up their own facilities a risk.

• To what degree is the business cyclical?

A large part of droneshield’s current revenue is based on government military spend, which although budgets are usually relatively stable the allocation of the budgets can vary. As Droneshield expands across wider industries and geographies the cyclicality may smooth out.

• What extent does the business experience operating leverage?

Droneshield sells manufactured devices which means there is a fixed cost that is required for each unit sold. There may be elements of efficiencies of scale, but that can’t be relied upon. There are two things working in the favour of Droneshield. 

First, most of the business’s main overheads and operating expenses have not been increasing with sales. Once staff costs do the same there will be an element of operating leverage that will appear as sales increase as operating expenses become a smaller portion of the overall expenses.

Second management have indicated that they are targeting for software upgrade sales to increase towards 50% of revenues and SaaS style sales tend to lend themselves much more favourably for demonstrating operating leverage at scale.

• How does interest rate increase and inflation affect the business?

The manufacturing costs and operating costs will be impacted and likely increase at a rate near that of inflation. As each contract is usually tendered at a single point in time supply, cost increases can be passed on to customers.

Droneshield has minimal liabilities so interest rates don’t have any significant impacts.

• Does the company spend a reasonable amount on R&D? Look at how R&D evolves over time in % of sales.

 R&D spend has stayed relatively steady at around $200k - $300k per quarter over the last 3 years which has now decreased from over 100% of sales to less than 10%.

• Is the company unknown or misunderstood by the market?

Being at the smaller end of the market and with an average volume of $120k of shares traded per day Droneshield is still a hidden company. Given the sector in which they operate it is easy to dismiss the technology if the partners and client base is not known.

great news for drone shield, hold irl since the recent meeting…

taiwan?  

feels like the Company is in the right place at the right time

25 October 2022

ASX RELEASE

 $900,000 Asian Order

 DroneShield Ltd (ASX:DRO) (DroneShield or the Company) is pleased to advise that it has received an approximately $900,000 order contract for portable counterdrone systems. The order is from a Government agency of an Asian country allied with the West.

The delivery and payment will take place over the current and March 2023 quarters.

Image: DroneGun MKIIITM

This follows a strong of recent orders including $1.8 million U.S. DoD order for DroneGun MKIIITM units, the $2 million European sale of DroneSentryTM fixed site systems and the initial US airport deployment.

DroneShield CEO, Oleg Vornik, commented, “This order is important in several ways. It demonstrates the progression of the business from development of our product suite several years ago, to regular smaller orders, to periodic larger orders, to regular larger orders, which we anticipate to further increase in size over time. The substantial inventory balance that we have created over last 2 years, enables rapid fulfilment of these orders.”

“Further, this order is a testament to the diversity of the DroneShield sales pipeline – with last 3 larger orders being US, Europe and Asia based. The Company also continues to receive regular revenues in Australia, including through execution of the 2-year, $3.8 million Electronic Warfare contract, that we are approximately half way through.”

droneshield.com DroneShield Limited ABN: 26 608 915 859 ASX:DRO 1 Level 5, 126 Phillip St, Sydney NSW 2000

 “As we are seeing in Ukraine, with the latest use of Shahed-136 drones by Russia, drone warfare continues to rapidly escalate, and Government agencies globally are responding to this threat with acquisitions of counterdrone systems, where DroneShield is the global leader in the sector.”

This announcement has been approved for release to the ASX by the Board.

Further Information

Oleg Vornik

CEO and Managing Director

Email: oleg.vornik@droneshield.com Tel: +61 2 9995 7280

About DroneShield Limited

DroneShield (ASX:DRO) provides Artificial Intelligence based platforms for protection against advanced threats such as drones and autonomous systems. We offer customers bespoke counterdrone (or counter-UAS) and electronic warfare solutions and off-the-shelf products designed to suit a variety of terrestrial, maritime or airborne platforms. Our customers include military, intelligence community, Government, law enforcement, critical infrastructure, and airports globally.

ENDS

 droneshield.com DroneShield Limited ABN: 26 608 915 859 ASX:DRO 2 Level 5, 126 Phillip St, Sydney NSW 2000

Just a few quick notes following our meeting with Oleg while they are still fresh in my mind. I would encourage you to watch the recording if you missed it (see meetings page).

I'll be honest, I last looked at this company a few years ago and pigeon holed it as a serial capital raiser, always bleeding cash and always on the cusp of something big. Yes, the technology seemed cool, but what could a tiny ASX company really bring to the table when you (i assumed) have some huge military-industrial giants likely in the same space?

So the first thing to note, taken Oleg at his word, is that Droneshield is the global leader in this very fast growing space. It sounded like they were well ahead of competitors, with a decent first mover advantage and a far more holistic product set.

Contract negotiations -- especially with defence agencies -- can be very protracted, but then tend to be very sticky. Given their existing partners in this space, they seem to be very well placed to win a lot more work here. Indeed, Oleg certainly suggested that they expected a lot more orders in the coming years.

Another noteworthy fact is that they have essentially doubled revenues each and every year in recent times, and Oleg suggested that they would again get close to doing that in FY23 (ends Dec31) -- although there can be a month or so delay between contracts signed and revenue recognised. He said that things could triple in the following year.

What really stood out was that they achieved cash flow positive status in the 3rd quarter and expect this to be the case each and every quarter going forward. With $7.5m in the bank, assuming this is true, they should avoid any capital raise. And while it's true that the global economic picture isn't pretty, this is a business that is seeing some strong tailwinds -- such is the state of the world :(

Oleg mentioned that the cost base was pretty well established and could handle 10x revenue here -- at least from an engineering perspective. There could be some additions in terms of sales. The use of contract manufacturers to help provide some elasticity to their own capacity seems smart given the lumpy nature of orders. It was also prudent, it seems, to bulk up on inventory given chip and component issues in the global supply chain.

At present 70% or so of revenue is hardware based, but Oleg expects that SaaS subscription revenue will grow to about 50% in the coming years.

Assuming (conservatively) that they do $15m in sales this year, the company is on about 3x sales. Doesn't seem that onerous for a CF +'ve company with expectations for continued strong sales momentum.

I don't own at present.

Thanks Andrew....some good insight. In fact based on what I've read previously and heard today I've bought a starter position from which I can now monitor more closely.....thanks again

Thanks Andrew, loved the meeting with Oleg, all the questions too, i personally got a lot out of that.

I had a brief look at the FY22 Results. Revenue is lumpy and fell significantly with lower hardware sales and less R&D revenue (grants?). SaaS is going in the right direction but still tiny.

A few other observations/risks:

• $4.9m loss and cash burning fast in last 6 months, down from $9.4m in Dec to $6.6m June (note: $17m was raised via SPP back in Sep 2020)
• Lots of investment in product, sales in multiple countries (not easy)
• They are investing in accreditation for UK military standards
• They are busy delivering a $3.8 million 2-year contract with the Australian Department of Defence

I think it will be important to monitor the performance of operations in the next year as they scale up. Particularly progress on their UK accreditation and AU defence schedule which will be critical for repeat business and as a reference site.

I feels like it is very early to be a shareholder as they scale up through such significant milestones especially given they just hired 40 new people out of a total headcount of 60. I see the recent comments on here regarding their TAM and recent wins but on balance I am happy to watch a little longer.

https://www.economist.com/the-economist-explains/2022/05/18/how-ukraine-is-winning-the-drone-jamming-warHow Ukraine is winning the drone-jamming war from TheEconomist

Prior to its announcement today "$1.1M Government Customer Contact" put up by GetSmart,

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02360995-2A1291235?access_token=83ff96335c2d45a094df02a206a39ff4

DRO announced yesterday 6/4/21

US Law Enforcement Initial Order

DroneShield Ltd (ASX:DRO) (“DroneShield" or the “Company”) is pleased to announce it has received an initial order from a high profile US law enforcement agency.

The order comprises of a mobile system of two passive/non-emitting UAS detection sensors, deployed in a mobile configuration, enabling rapid system setup, for detection and tracking of nefarious UAS. While the dollar value of the order is not material, it is expected to lead to follow up orders with this and other US law enforcement agencies. The value of the order is expected to be included in the total customer receipts in the Appendix 4C cashflow report for 2Q21.

Oleg Vornik, DroneShield’s CEO, commented, “We are pleased to continue expanding the breadth of our US customer base, now reaching into law enforcement. It is a large and important market, and this initial deployment will serve as a reference case for expected follow-on sales.”

Disc: I hold

Multiple DroneSentry-X Orders

DroneShield Ltd (ASX:DRO) (“DroneShield" or the “Company”) is pleased to announce it has received multiple first orders for its latest product, DroneSentry-XTM, an on-the-move C-UAS system. The orders included both detection-only and detect-and-defeat variants, for North America and South East Asia regions. Detection-only variant is purchased by customers who are legally restricted in their ability to defeat UAS.

The orders, with approximately $500,000 in proceeds, considered material by the Company, have been received in the last week, are the initial trial purchases of the system, in two separate countries, in anticipation of larger procurements. Additional follow up orders are currently being discussed, with the amounts to be confirmed. The Company expects to receive the cash proceeds from these orders through March, June and September quarters.

DISC: I hold

Next Gen Artificial Intelligence Software Rollout

DroneShield Ltd (ASX:DRO) (“DroneShield" or the “Company”) is pleased to announce the rollout of its first fully Machine Learning/AI based detection and classification software to all of its existing customer systems.

DroneShield utilises its proprietary techniques in signal processing and Machine Learning/AI to do near-real time detection and identification of unmanned robotic systems and, more broadly, other potential threats in the Electronic Warfare fields. The result is a dramatic increase in detection responsiveness, lower false positives and a significant increase in the speed at which new threats are detected, classified and tracked by the DroneShield systems.

One of the key achievements that sets DroneShield’s technology substantially ahead of the existing technologies globally, is a very lightweight machine learning architecture designed to run on low power FPGA (Field-Programable Gate Array) hardware. This enables the system to be deployed for long term periods in power scarce, air-gapped environments.

The software is designed to run on all DroneShield platforms including RfPatrolTM, DroneSentryTM and DroneSentry-XTM.

Future device software updates will build on this system architecture and increase performance and the number of detectable threats.

Oleg Vornik, DroneShield’s CEO, commented, “DroneShield customers receive regular software updates via enrolling into a Subscription-as-a-Service (SaaS) model at the time of purchase of their systems. Importantly, the software also has capabilities for deployment outside of the C-UAS space, on a hardware agnostic basis. DroneShield is currently engaging in such deployments with its Five Eye country military customers.”

DISC: I hold

First Order Under the EU Police Framework Agreement

DroneShield Ltd (ASX:DRO) (“DroneShield" or the “Company”) is pleased to announce it has received the initial order for its DroneGun TacticalTM product under the European Union Police Framework Agreement. In May 2020, DroneShield’s DroneGun TacticalTM product was selected as the preferred solution by the European Union police forces, and placed on an ongoing EU Framework Agreement.

The process was run by the Belgium Police, with an EU-wide framework. Sales, training and local support will be managed by DroneShield’s Benelux region partner ForcePro BV.

Oleg Vornik, DroneShield’s CEO, commented, “Due to COVID, there have been initial delays in mobilisation of orders under the agreement, which have now commenced despite continuous COVID constraints in Europe. While this initial purchase is small at approximately $100,000, it represents the first purchase under what we expect to be a multi-million dollar agreement supplying DroneGunsTM and associated counter-UAS products across dismounted, vehicle and fixed site range, to police forces across EU.”

https://wcsecure.weblink.com.au/pdf/DRO/02331253.pdf

Disc: I hold