DroneShield : Cash Receipts Surge in 2021

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10 January 2022

ASX RELEASE

DroneShield Cash Receipts Surge in 2021

DroneShield Limited (ASX:DRO) ("DroneShield" or the "Company") is pleased to report strong results for the 2021 Calendar Year.

The Company has reported approximately doubling of its revenues compared to 2020, to $10.5 million, and approximately tripling of customer and grant cash receipts to $14.8 million. Customer and grant cash receipts for the last quarter were approximately $2.7 million.

These results are subject to an audit of the Company's accounts which is expected to be completed and reported to the market with the release Appendix 4E and annual report in February.

Rapid Revenue Growth

10.5

94% growth

5.4

3.3

1.0

2018

2019

2020

2021

FY

Rapid Customer and Grant Cash Receipt Growth

14.8

174% growth

5.4

3.7

1.8

2018

2019

2020

2021

FY

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The closing cash balance for the December 2021 quarter was $9.5 million.

Oleg Vornik, DroneShield CEO, commented, "We are pleased to deliver another year of strong top line growth. 2021 was a pivotal year with our first multi-year, $3.8m contract with the Department of Defence, doubling of the global team from 30 to over 60 staff, and entering into larger scale Artificial Intelligence contracts with our customers that are adjacent to the counterdrone sector.

"2022 is shaping as another record year, with over $200m in sales pipeline diversified across geographies and products, underpinned by our talented staff who are global leaders in their respective technology segments."

"We have also taken advantage of our supply chain relationships to secure access to material amounts of complex circuit board and other inventory, which serves as a further differentiator to our customers, reducing final product delivery lead times, in the current environment of supply chain disruptions for much of the industry."

"Importantly, Software as a Service (SaaS) and, generally, software-related revenues are expected to continue increasing as total percentage of customer cash receipts."

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

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Strong 2021 - Year in Review

The United States Department of Defense and other U.S. government agencies

The United States governmentis the largest counterdrone customer globally. As a result of its commitment to its U.S. customer base, DroneShield experienced many highlights throughout 2021 and looks to build upon this success in 2022 and beyond.

Last week, DroneShield promoted Matt McCrann, its U.S. Vice President of Sales, to CEO of its U.S. based, DroneShield LLC. As a substantial amount of near term anticipated growth is expected to originate from the United States, DroneShield continues to grow its team and footprint within the market.

DroneShield will continues to expand its US operations, including doubling the size of its U.S. headquarters within Warrenton, Virginia. The Company has also continued to expand its US team, across sales, engineering and support roles.

DroneShield has continued to participate in a number of invite-only U.S. Government led Test and Evaluation (T&E) exercises, most notably the Joint Counter-sUAS Office (JCO) led evaluation at Yuma Proving Grounds (YPG). There are many entry points and influencers within the C-UAS market in the US. Due to its market size and the wide-ranging requirements for C-UAS, trials and evaluations like these, serve as key milestones towards subsequent purchases by each primary agency.

DroneShield continues to increase its presence and visibility within the U.S. market, which now includes a customer base that spans Department of Defense, Federal and State level government, Public Safety, and commercial organisations and integrators. In 2021, DroneShield successfully delivered several orders across the U.S. Government to include Military, Federal, and State level law enforcement agencies. Several of these were follow on orders and expansion projects with existing customers, which is a testament to the quality of the products and solutions provided.

Image: U.S. Government agency DroneSentryTM trials

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

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Image: DroneSentryTM system deployed in the U.S.

DroneSentry-XTM successfully completed a demonstration exercise with the U.S. Navy. The system was deployed on the Stiletto experimentation vessel for six weeks, successfully completing a range of performance and evaluation metrics.

DroneSentry-XTM is a high-performance detection and mitigation solution for a wide range of environments including ground mobility operations, maritime security and fixed-site base requirements. DroneSentry-XTM is powered by RFAI, DroneShield's cutting-edge AI/ML signal detection and classification engine, providing unparalleled performance in the C-UAS space. DroneSentry-XTM's open architecture and interoperability allows users to easily integrate DroneSentry-XTM with other solutions to further enhance existing mission systems or counter-UAS capabilities.

The system demonstrated overall detection capability, detection and defeat ranges, on-the-move operation in various sea states, and effectiveness against drone swarms, involving a wide range of unmanned robotic threats.

Image: DroneSentry-XTM on the US Navy Stiletto vessel

The successful U.S. Navy demonstration validates other recent DroneSentry-XTM evaluations by the U.S. Department of Defense, Department of Homeland Security, and both Federal and State Law Enforcement agencies.

droneshield.com	DroneShield Limited	ABN: 26 608 915 859	ASX:DRO	3
	Level 5, 126 Phillip St, Sydney NSW 2000

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The Company entered into a new Cooperative Research and Development Agreement (CRADA) with the U.S. Department of Homeland Security Science and Technology Directorate ("DHS S&T"). The research will involve DroneShield's multi-sensor Unmanned Aerial System ("UAS") detection and mitigation capabilities, with the primary focus on DroneSentryTM and DroneSentry-C2TM solutions for fixed and semi-fixed site applications.

Image: DroneShield's DroneSentry-XTM system on a vehicle

In the Law Enforcement sector, the ease of use and cost-effectiveness of DroneShield's solutions have led to multiple orders from State and Local law enforcement and Homeland Security agencies.

Australian Department of Defence and other government agencies

Being an Australian sovereign industrial defence capability business, DroneShield is well positioned for work with the Australian Department of Defence ("DoD") and other Government agencies.

During the year, the Company successfully completed its first Artificial Intelligence contract with the Department of Defence.

DroneShield subsequently received a $3.8 million, 2-year R&D contract with the Department of Defence. The contract was awarded to DroneShield on a sole source basis. Importantly, the contract was not in the C-UAS, but Electronic Warfare and Signals Intelligence, an adjacent area utilising existing DroneShield skillset, but with much wider applications.

DoD has further awarded a third, 12-month $800,000 contract relating to Artificial Intelligence in multi-domain applications including sensor fusion of these separate domains, such as computer vision and electronic warfare. The work relates to both the counterdrone space as well as more general military/Government agency applications.

droneshield.com	DroneShield Limited	ABN: 26 608 915 859	ASX:DRO	4
	Level 5, 126 Phillip St, Sydney NSW 2000

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Additional, and larger, contracts are expected with the Department of Defence, as DroneShield builds up its capabilities in the Electronic Warfare and Signals Intelligence arena.

As part of the engagement with the Department of Defence, as DroneShield is in the business of understanding, and minimising, defence and Government customer vulnerabilities, secret clearances are important for closer and more productive customer engagements as the Company scales its business. During the year, the Company was accordingly approved for Defence Industry Security Program ("DISP") process and became eligible for a defence clearance.

Australian Army has recently released images of DroneShield's equipment in their deployment, in a mobile configuration on a vehicle. These can be viewed here.

In December 2021, the Australian Communications and Media Authority (ACMA), the Australian Federal Government agency regulator of the communications spectrum nationally, has granted DroneShield the first exemption permit of its kind to both undertake advanced testing of the Company's Electronic Warfare and counterdrone portfolio in Australia. The exemption has appropriate safeguards in place to balance the need to develop and test advanced technologies in Australia, while maintaining restrictions around impact on the broader community. This permit substantially accelerates the development and optimisation of advanced Artificial Intelligence- powered electronic warfare and counter-terrorism technologies here in Australia, and we are excited to rapidly move forward in undertaking the work, at DroneShield and University of Technology Sydney (UTS) facilities.

Image: DroneShield's AI-poweredbody-worn RfPatrol sensor

Middle East

DroneShield received earlier in the year, the outstanding $2.3 million (in addition to the funds previously received by DroneShield under this order) for a shipment of the remaining DroneGun

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