VOL Volatus Aerospace Corp

• 50/50 merger of equals, creating a global diversified drone technology and services leader.
• Combined company will be called "Volatus Aerospace Corp.", leveraging the Volatus global name and brand, while maintaining Drone Delivery Canada's name and brand for cargo operations.
• Shared management team led by Glen Lynch (CEO of Volatus) and Steve Magirias (CEO of Drone Delivery Canada) with current Volatus board chairman, Ian McDougall, to become chairman of the combined company's board.
• Combined company anticipated to be cash flow neutral by the fourth quarter of 2024 and accelerate achievement of profitability goals in 2025, through a combination of immediate cost synergies and identified revenue opportunities.
• Transaction anticipated to close in the third quarter of 2024.

TORONTO, May 21, 2024 /CNW/ - Drone Delivery Canada Corp. ("Drone Delivery Canada") (TSXV: FLT) (OTCQX: TAKOF) (Frankfurt: A3DP5Y) (Frankfurt: ABBA.F), an award-winning drone technology company focused on the design, development, and implementation of its proprietary technologies for remotely piloted aircraft operations with an emphasis on cargo delivery and Volatus Aerospace Corp. ("Volatus") (TSXV: VOL) (OTCQB: VLTTF), a leader in the operation of piloted and remotely piloted aircraft systems (drones), are both pleased to announce that they have entered into a business combination agreement (the "Business Combination Agreement") to combine the companies in a merger of equals transaction (the "Merger"), with the combined company to continue under the name "Volatus Aerospace Corp." and, subject to approval of the TSX Venture Exchange (the "TSXV"), continue trading under the ticker "FLT".

Under the Merger, which the boards of directors of both companies have approved, the combined company will be led by a board of directors and management team of experienced drone technology industry and business leaders, bringing together the cultures, strengths, and capabilities of both companies. By joining forces, Volatus and Drone Delivery Canada plan to immediately begin commercialization efforts, which is intended to enhance shareholder value by forging a robust, financially sound enterprise focused on immediate and long-term revenue with a clear path to sustainable growth and market leadership. Subject to customary closing conditions, the Merger is expected to close in the third quarter of 2024.

Pursuant to the Merger, Volatus shareholders will receive 1.785 (the "Exchange Ratio") Drone Delivery Canada voting common shares (each, a "Drone Delivery Canada Share") for each Volatus common share (a "Volatus Share") held (the "Consideration"). Upon closing of the Merger, existing shareholders of Volatus and Drone Delivery Canada will each own approximately 50% of the combined company (based on the current issued and outstanding shares of each of the companies).

To date, Drone Delivery Canada has invested $40 Million into building strong, competitive drone cargo solutions that are now ready to go to market. By focusing on drone services, training, and equipment sales, Volatus is well-positioned to leverage these technologies and bring them to market. As regulations begin to enable the commercialization of drone cargo and remote drone operations, Volatus has been planning to commercialize its efforts in Advanced Air Mobility, adding to its go-to-market strategy. Without technology such as Drone Delivery Canada's remote operations centre; Flyte management software; DroneSpot infrastructure; and cargo-focused, commercialized aircraft, the path to competitively enter the Advanced Air Mobility market would require significant research and development ("R&D") investment for any drone-based services company. The combined company, with its shared decades of technology and aviation experience as well as strong financial and operating metrics, is expected to have a leading presence globally as a diversified technology and service leader to drive both short- and long-term growth opportunities in existing and new markets. Further, it is expected that the combined company will be able to achieve material cost synergies to support near-term profitability and enhance its margin profile as its revenue profile continues to grow.

Steve Magirias, Chief Executive Officer of Drone Delivery Canada, commented, "Drone Delivery Canada has been searching for the right partner to join us on our growth journey and we are confident that Volatus is a great fit, from a management vision point of view, industry know-how, and experience. We were initially attracted to Volatus' strong reputation in the industry, admirable fiscal management through a challenging capital markets environment, and vision towards generating diversified lines of revenue."

Ian McDougall, Chair of Volatus board of directors, commented, "We are thrilled to announce this transformative merger with Drone Delivery Canada. Merging with Drone Delivery Canada will enhance our ability to offer cutting edge technology and services to our clients and help position the combined company as a global leader. Volatus sees a tremendous opportunity to commercialize Drone Delivery Canada's advanced technologies, through our network of partners, Fortune 500, international mining, oil and gas, and utilities clients, further positioning the combined company as a global leader in drone technologies and services."

Glen Lynch, Chief Executive Officer, President and Director of Volatus, commented, "We believe that the strategic impact will be significant right out of the gate, and allow us to drive innovative technology advancements and offer our clients industry leading technology and service."

Following the closing of the Merger, the board of directors of the combined company will consist of seven (7) directors, comprised of three (3) directors from Volatus including Ian McDougall who will act as the Chair of the combined company, two (2) independent directors from Drone Delivery Canada, and two (2) independent directors to be mutually agreed upon at a future date. Management of the combined company will include executives from both Volatus and Drone Delivery Canada, with Volatus' current Chief Executive Officer, President and Director, Glen Lynch, assuming the role as Chief Executive Officer of the combined company, and Drone Delivery Canada's current Chief Executive Officer, Steve Magirias, becoming the Chief Operating Officer of the combined company.

• Pro forma ownership of 50% in the combined company is expected to provide immediate exposure to Volatus' revenue profile and near-term cash flow generation with attractive long-term growth potential from Drone Delivery Canada's portfolio of proprietary technology
• Greater access to new geographies and sectors
• Enhanced ability to realize value from an existing proprietary drone technology portfolio via a stronger financial position of the combined company, which is expected to achieve profitability in the near-term
• Accretive to Drone Delivery Canada on key financial and operating metrics
• Significant value upside as the combined company advances its business plan and achieves profitability

• Pro forma ownership of 50% in the combined company is expected to provide Volatus shareholders exposure to Drone Delivery Canada's advanced operational and proprietary cargo drone technology and remote operating capabilities to enhance Volatus' existing service offerings
• Market expansion opportunity through enhanced geographic diversification, and entrance into new end markets including the emerging cargo sector, which is expected to have significant long-term upside
• Presents opportunity to leverage the Volatus management team's strong commercial expertise to ensure optimal commercialization of Drone Delivery Canada's technology and product portfolio
• Enhanced capital markets profile, supported by Drone Delivery Canada's strong shareholder base
• Significant re-rating potential as the combined company advances its business plan and achieves near-term profitability

The Merger will be implemented by way of a court-approved plan of arrangement under the Business Corporations Act (Ontario) (the "Arrangement"). At closing, each outstanding Volatus Share will be exchanged for 1.785 Drone Delivery Canada Shares. The implementation of the Arrangement is subject to the approval of at least 66 2/3% of the votes cast by holders of Volatus Shares, and if required under applicable securities law, a simple majority of holders of Volatus Shares excluding votes cast by certain holders of Volatus Shares that are required to be excluded pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transaction ("MI 61-101"), at a special meeting of Volatus shareholders expected to take place in the third quarter of 2024. The Arrangement is also subject to the approval of a majority of the votes cast by the holders of Drone Delivery Canada Shares at a special meeting of Drone Delivery Canada shareholders expected to take place in the third quarter of 2024.

The directors and executive officers of each of Volatus and Drone Delivery Canada have entered into customary voting and support agreements and have agreed to, among other things, vote their securities in favour of the Arrangement. Total Volatus Shares under such support agreements represent approximately 62% of the issued and outstanding Volatus Shares and Drone Delivery Canada Shares under such support agreements represent less than 1% of the issued and outstanding Drone Delivery Canada Shares.

The Arrangement includes a reciprocal non-solicitation covenant, subject to customary "fiduciary out" rights, including the right of either Volatus or Drone Delivery Canada to accept a superior proposal in certain circumstances, with each party having a five (5) business day right to match any such superior proposal received by the other party. The Arrangement also provides for the payment of a termination fee by Volatus of $700,000 and Drone Delivery Canada of $1,800,000 if the Business Combination Agreement is terminated in certain specified circumstances, and an expense reimbursement of $500,000, payable by either party, if the Arrangement is terminated under other certain specified circumstances.

Under the terms of the Arrangement, any outstanding options to purchase Volatus Shares will be exchanged for options to purchase Drone Delivery Shares with equivalent economic terms and vesting provisions, any outstanding Volatus warrants exercisable to purchase Volatus Shares will be adjusted in accordance with their terms such that, upon the exercise of a Volatus warrant, the holder thereof, for the same aggregate consideration payable therefor, will receive 1.785 Drone Delivery Shares, any outstanding Volatus senior unsecured convertible debentures will be adjusted in accordance with their terms such that, upon conversion of a Volatus debenture, the holder thereof, for the same aggregate principal and interest amount convertible therefor, will receive such number of Drone Delivery Shares equal to the number of Volatus Shares they would otherwise be entitled to receive multiplied by 1.785, rounded down to two decimal places, and any outstanding preferred shares of Volatus will remain outstanding unaffected by the Arrangement.

Drone Delivery Canada expects to issue 224,345,513 Drone Delivery Canada Shares as Consideration to the shareholders of Volatus in connection with the Merger and to reserve approximately 42,404,567 Drone Delivery Canada Shares for issuance upon exercise of Volatus options and Volatus warrants.

The Merger will constitute a "Reviewable Transaction", as defined in TSXV Policy 5.3 – Acquisitions and Dispositions of Non-Cash Assets. As a result, the completion of the Merger is subject to approval by the TSXV. The Arrangement is also subject to receipt of court and other applicable regulatory approvals and the satisfaction of certain other closing conditions customary in transactions of this nature. Subject to the satisfaction (or waiver) of the conditions precedent, the Arrangement is expected to close in the third quarter of 2024.

Echelon Capital Markets, financial advisor to Volatus, has provided a fairness opinion to the board of directors of Volatus that, as of the date of such opinion and subject to the assumptions, limitations and qualifications set out in such fairness opinion, the Consideration to be received by Volatus shareholders in connection with the Arrangement is fair, from a financial point of view, to the Volatus shareholders. National Bank Financial Inc., financial advisor to Drone Delivery Canada, has provided a fairness opinion to the board of directors of Drone Delivery Canada that, as of the date of such opinion and based upon and subject to the assumptions, limitations and qualifications set out in such opinion, the Consideration to be paid by Drone Delivery Canada to the Volatus shareholders in connection with the Arrangement is fair, from a financial point of view, to Drone Delivery Canada.

Following their review and in consideration of, among other things, their respective fairness opinions and the recommendations from their respective special committees, each of the board of directors of Volatus and Drone Delivery Canada have approved the Arrangement and determined that the Arrangement is fair to its shareholders and is in the best interest of Volatus and Drone Delivery Canada, respectively, and each board of directors recommends to its shareholders that they vote in favour of the Arrangement.

Further information regarding the Arrangement will be contained in the joint information circular that Volatus and Drone Delivery Canada will prepare, file and mail in due course to their respective shareholders in connection with the special meetings of each of the Volatus and Drone Delivery Canada shareholders to be held to consider and vote on the Arrangement. All shareholders are urged to read the information circular once it becomes available as it will contain additional important information concerning the Arrangement. The Business Combination Agreement will be filed on the SEDAR+ profiles of Volatus and Drone Delivery Canada on the SEDAR+ website at www.sedarplus.ca.

In connection with Merger, Volatus expects to raise approximately $1,000,000 in gross proceeds, inclusive of the Loan and Debentures, as defined below.

Delta-Mike Inc., a corporation beneficially owned and controlled by Ian McDougall, Chair of Volatus board of directors, has provided a non-convertible, unsecured loan to Volatus for gross proceeds of $425,000 (the "Loan"). The Loan bears interest at a rate of 15.0% per annum and has a maturity date of May 31, 2029. Ian McDougall is an insider of Volatus and therefore the Loan constitutes a "related party transaction" within the meaning of TSXV Policy 5.9 and MI 61-101. Volatus has relied on the exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 contained in sections 5.5(a) and 5.7(1)(a) of MI 61-101 in respect of the Loan. Volatus did not file a material change report more than 21 days before completion of the Loan as the details of the Loan were finalized in connection with the Merger and Volatus wished to complete the Loan as soon as practicable to allow for a concurrent announcement with the Merger.

Volatus is also pleased to announce its plan to complete a non-brokered private placement of $1,000 principal amount of unsecured non-convertible debentures (the "Debentures") for gross proceeds of up to $980,000 through the issuance of up to 1,000 Debentures at a price of $980 per debenture in one or more tranches (the "Offering"). Volatus has signed subscription agreements for the first tranche with gross proceeds of $585,060. Volatus may choose to complete subsequent tranches in its sole discretion. The Merger is not contingent on closing of the first tranche or any subsequent tranches. It is anticipated that the Debentures shall have a maturity date of 12 months from the date of issuance and will bear an initial interest rate of 15.0% per annum if the Debentures remain outstanding for 7 months or less. If the Debentures remain outstanding longer than 7 months, beginning with month 8, the annualized initial interest rate shall increase by 1.0% each month until maturity, at which point the maximum annualized interest rate will be 20.0%. The Debentures are redeemable, in whole or in part, at any time, at the option of Volatus. If, at any time while the Debentures remain outstanding and prior to the maturity date of the Debentures, Volatus completes a financing of equity or quasi-equity securities of Volatus with a minimum of ten distinct investors, holders of Debentures will be entitled to participate in such financing up to the amount of principal of their respective Debentures at a price per security equal to the greater of (i) a 10% discount to such financing price and (ii) the maximum discount to such financing price permitted by the policies of the TSXV. In connection with the Offering, Volatus may pay eligible finders a cash fee of 10.0% of the aggregate gross proceeds of the Offering, payable on the closing of the Offering. It is anticipated that the net proceeds of the Offering will be used for the purchase of inventory, sales and marketing, and working capital requirements of Volatus. All securities issued pursuant to the Offering are subject to a statutory four month plus a day hold period from the date of issuance as required by applicable securities laws. The Offering is expected to close on or about May 22, 2024.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any applicable state securities laws, and may not be offered or sold to, or for the account or benefit of, persons in the United States or to U.S. persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available. "United States" and "U.S. persons" shall have the meanings assigned to them in Regulation S under the U.S. Securities Act.

Chris Irwin, a director of DDC, resigned from the board of directors of DDC effective May 20, 2024. DDC does not intend to fill the vacancy on the board of directors resulting from the resignation at this time.

Echelon Capital Markets is acting as exclusive financial advisor to Volatus and Wildeboer Dellelce LLP is acting as legal counsel to Volatus.

National Bank Financial Inc. is acting as exclusive financial advisor to Drone Delivery Canada, Bennett Jones LLP is acting as legal counsel to the special committee of the board of directors of Drone Delivery Canada and Irwin Lowy LLP is acting as legal counsel to Drone Delivery Canada.

In conjunction with this release, there will be a webinar on Tuesday May 21st, 2024, at 8:30 AM EST at which time Steve Magirias, CEO of Drone Delivery Canada and Glen Lynch, CEO of Volatus, will review the transaction with Danielle Gagne, Head of Marketing and Corporate Communications of Volatus as moderator. Investors are invited to register for the webinar here.

https://us06web.zoom.us/webinar/register/WN_h-5etgGwQ6G5y3S_Xirz4A

An audio replay of the event will be archived on the companies' respective Investor Relations pages.

Volatus is a leading provider of integrated drone solutions throughout North America and growing into Latin America and globally. Volatus serves civil, public safety, and defense markets with imaging and inspection, security and surveillance, equipment sales and support, training, as well as R&D, design, and manufacturing. Through Volatus' subsidiary, Volatus Aviation, it is introducing green and innovative drone solutions to supplement and replace traditional aircraft and helicopters for long-linear inspections such as pipeline, energy, rail, and cargo services. Volatus is committed to carbon neutrality; the fostering of a safe, equitable and inclusive workplace; and responsible governance.

For more information, please visit www.VolatusAerospace.com.

Drone Delivery Canada is an award-winning drone technology company focused on the design, development, and implementation of its proprietary logistics software platform using drones. Drone Delivery Canada's platform is intended to be used as a Software as a Service (SaaS) model for government and corporate organizations globally.

For more information, please visit www.DroneDeliveryCanada.com and connect with Drone Delivery Canada on its social media channels: LinkedIn, Facebook, YouTube, Instagram and X

Certain information contained in this news release may constitute forward-looking information, forward-looking statements and future-oriented financial information within the meaning of applicable securities legislation (collectively "forward-looking statements"). Forward-looking statements include, but are not limited to, statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. Forward-looking statements may be identified by words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "indicates", "forecasts", "intends", "anticipates", "believes", "may", "could", "should", "would", "plans", "proposed", "potential", "will", "target", "approximate", "continue", "might", "possible", "predicts", "projects" and similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this news release may include but are not limited to: (i) statements about Volatus' or Drone Delivery Canada's ability to effectuate the Merger; (ii) the anticipated benefits and value to shareholders and timing of the Merger; (iii) the future financial performance of the combined company; (iv) the business plans, expectations, and goals of the combined company; (v) statements and expectations regarding the Offering, including but not limited to, the timing of closing of the Offering, expected gross proceeds of the Offering, expectations regarding subsequent tranches with respect to the Offering and the use of proceeds of the Offering; (vi) expected timing of the Volatus and Delivery Drone Canada shareholders meetings; (vii) expectations regarding the number of Drone Delivery Canada Shares to be issued in connection with the Merger and reservation of Drone Delivery Canada Shares for issuance upon exercise of Volatus options and Volatus warrants; (viii) participation by holders of Debentures in any financings completed by Volatus; and (ix) expectations for other economic, business, and/or competitive factors with respect to the Merger and the combined company. These forward-looking statements are based on information available as of the date of this news release, and the current expectations, forecasts, assumptions, views and beliefs of management of each of Volatus and Drone Delivery Canada, but involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of Volatus, Drone Delivery Canada or the combined company, as applicable, to differ materially from those expressed or implied by the forward-looking statements. Some factors that could cause actual results to differ include: (i) the inability to complete the Merger due to the failure to obtain the approval of the TSXV, shareholders of each of Volatus and Drone Delivery Canada or the court; (ii) the risk that the Merger disrupts current plans and operations of Volatus or Drone Deliver Canada; (iii) the ability to recognize the anticipated benefits of the Merger; (iv) unexpected costs related to the Merger; (v) the management and board composition of the combined company following completion of the Merger; (vi) the commercialization of drone flights beyond visual line of sight and potential benefits to Volatus and Drone Delivery Canada; (vii) geopolitical risk and changes in applicable laws or regulations; (viii) operational risks; (ix) meeting the continued listing requirements of the TSXV; * the inability to complete the Offering on the terms expected; (xi) unexpected costs or risks related to the Offering; and (xii) other factors set forth in Volatus' and Drone Delivery Canada's respective Annual Information Forms under the section "Risk Factors". Although Volatus and Drone Delivery Canada have attempted to identify important factors and that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Readers are cautioned that forward-looking statements are not based on historical facts but instead reflect expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made. The forward-looking statements contained herein are made as of the date of this news release. Accordingly, forward-looking statements should not be relied upon as representing Volatus' or Drone Delivery Canada's views as of any subsequent date, and except as expressly required by applicable securities laws, Volatus and Drone Delivery Canada disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Readers should not place undue reliance on these forward-looking statements. Any and all forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

None of the securities to be issued pursuant to the transaction have been or will be registered under the U.S. Securities Act, or any state securities laws, and any securities issuable in the transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements pursuant to Section 3(a)(10) of the U.S. Securities Act and applicable exemptions under state securities laws. This news release does not constitute an offer to purchase or a solicitation of an offer to sell securities. 

Shareholders of Volatus and Drone Delivery Canada are advised to review any documents that may be filed with securities regulatory authorities and any subsequent announcements because they will contain important information regarding the Merger and the terms and conditions thereof.

Neither TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this news release.

SOURCE Drone Delivery Canada Corp.