# DUKE Robotics Corp.: Form 10-Q for the period ended Jun 30, 2023

- Company: [DUKE Robotics Corp.](/companies/dukr.md) (CIK 1638911)
- Form: 10-Q
- Filed: 2023-08-07
- Accepted by EDGAR: Aug 7, 2023, 16:01 ET
- Period: 2023-06-30
- Accession: 0001213900-23-064050
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1638911/000121390023064050/f10q0623_uasdrone.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1638911/000121390023064050/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | −$206.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | −$408.0k | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$183.0k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | −$362.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.00 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $0.00 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 54,556,313 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 54,521,506 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | −$410.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $16.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-06-30 | $2.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $2.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $2.9m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $358.0k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $734.0k | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $2.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 16,507 characters.

*Readers are advised to review the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements”. You should review the “Risk Factors” section of our Annual Report for the fiscal year ended December 31, 2022 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.*

We are a robotics company dedicated to the development of an advanced robotics system that enables remote, real-time, pinpoint accurate firing of small arms and light weapons. Our advanced robotics system is able to achieve pinpoint accuracy regardless of the movement of the weapons platform or the target.

We were founded in 2014 as Unlimited Aerial Systems, LLP (“UAS LLP”), and until the consummation of the Share Exchange Agreement (as hereinafter defined), we were a developer and manufacturer of commercial unmanned aerial systems, or drones, with the goal of providing a superior Quadrotor aerial platform at an affordable price point in the law enforcement and first responder markets.

On March 9, 2020, we closed on the Share Exchange Agreement (the “Share Exchange Agreement”), pursuant to which Duke Robotics, Inc., a Delaware corporation (“Duke”) became our majority-owned subsidiary (the “Share Exchange”). Such closing date is referred to as the “Effective Time.” As a result of the Share Exchange, the Company adopted the business plan of Duke.

On April 29, 2020, we, Duke, and UAS Acquisition Corp., a Delaware corporation and our wholly-owned subsidiary (“UAS Sub”), executed an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which UAS Sub was to merge, upon the satisfaction of customary closing conditions, with and into Duke, with Duke surviving as our wholly-owned subsidiary (the “Short-Form Merger”). Pursuant to the Merger Agreement, we intended to acquire the remaining outstanding shares of Duke held by those certain Duke shareholders that did not participate in the Share Exchange. On June 25, 2020, Duke filed a Certificate of Merger with the State of Delaware, and consequently, Duke became our wholly-owned subsidiary and the Short-Form Merger was consummated.

On January 29, 2021, we, through Duke Israel, and Elbit Systems Land Ltd., an Israeli corporation (“Elbit”), entered into a collaboration agreement (the “Collaboration Agreement”) for the global marketing and sales, and the production and further development of our developed advanced robotic system mounted on an UAS, armed with lightweight firearms, which we market under the commercial name “TIKAD.”

On August 15, 2022, Duke Israel introduced the IC Drone, a drone technology for conducting routine maintenance of critical infrastructure, and has signed an agreement with Israel Electric Corporation (IEC) to provide drone-enabled systems for cleaning electric utility cable insulators.

Duke has a wholly-owned subsidiary, Duke Airborne Systems Ltd. (“Duke Israel”), which was formed under the laws of the State of Israel in March 2014 and became the sole subsidiary of Duke after its incorporation. Our mailing address is 10 HaRimon Street, Mevo Carmel Science and Industrial Park, Israel 2069203, and our telephone number is 011-972-4-8124101. Our web site address is https://dukeroboticsys.com/.

Effective as of October 22, 2020, the Company’s common stock began to be quoted on the OTCQB tier Venture Market, under the symbol “USDR”.

### Critical Accounting Policies

In connection with the preparation of our financial statements, we were required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with accounting principles generally accepted in the United States of America. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Please see Note 2 of Part I, Item 1 of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition, reference is made to Part I, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation of our Annual Report on Form 10-K for the year ended December 31, 2022 (filed on March 24, 2023) with respect to our Critical Accounting Policies and Estimates.

### Results of Operations

### Comparison of the three months ended June 30, 2023 and 2022

*Revenues*. During the three months ended June 30, 2023 and 2022, we had no revenues.

*Research and Development.* Our research and development expenses for the three months ended June 30, 2023, amounted to $0, compared to $3,000 for the three months ended June 30, 2022. We have paused our research and development activity pending our evaluation of additional and different applications for use of our technology and know-how including for use in the civil market, while the research and development activities of the TIKAD product is carried out by Elbit pursuant to the Collaboration Agreement and development activities under our Collaboration and Development Agreement with the Israel Electric Corporation Ltd. (IEC) are currently recorded in deferred expenses.

*General and Administrative.* Our general and administrative expenses for the three months ended June 30, 2023, which consisted primarily of professional services, stock-based compensation expenses and legal expenses, amounted to $206,000, compared to $327,000 for the three months ended June 30, 2022. The decrease in general and administrative expenses for the three months ended June 30, 2023 was mainly due to the decrease in share based compensations expenses.

*Financial Income, net.* For the three months ended June 30, 2023, we had financial income of $23,000 compared to financial income of $43,000 for the three months ended June 30, 2022. The reason for the decrease in financial income for the three months ended June 30, 2023, was mainly due to the decrease in interest income related to the changes in fair value in connection with warrants issued as part of our May 2021 financing offset by an increase in interest income on bank deposits resulted from the increase in interest rates.

*Net Loss.* We incurred a net loss of $183,000 for the three months ended June 30, 2023 as compared to a net loss of $287,000 for the three months ended June 30, 2022, for the reasons set forth above.

### Comparison of the six months ended June 30, 2023 and 2022

*Revenues*. We did not generate any revenues during the six months ended June 30, 2023 and 2022.

*Research and Development.* Our research and development expenses for the six months ended June 30, 2023, amounted to $0, compared to $9,000 for the six months ended June 30, 2022. We have paused our research and development activity pending our evaluation of additional and different applications for use of our technology and know-how including for use in the civil market, while the research and development activities of the TIKAD product is carried out by Elbit pursuant to the Collaboration Agreement and development activities under our Collaboration and Development Agreement with the Israel Electric Corporation Ltd. (IEC) are currently recorded in deferred expenses.

*General and Administrative.* Our general and administrative expenses for the six months ended June 30, 2023, which consisted primarily of professional services, stock-based compensation expenses and legal expenses, amounted to $408,000, compared to $658,000 for the six months ended June 30, 2022. The decrease in general and administrative expenses for the six months ended June 30, 2023 was mainly due to the decrease in share based compensations expenses.

*Financial Income, net.* For the six months ended June 30, 2023, we had financial income of $46,000 compared to financial income of $11,000 for the six months ended June 30, 2022. The reason for the increase in financial income for the six months ended June 30, 2023, was mainly due to the increase in interest income on bank deposits resulted from the increase in interest rates.

*Net Loss.* We incurred a net loss of $362,000 for the six months ended June 30, 2023 as compared to a net loss of $656,000 for the six months ended June 30, 2022, for the reasons set forth above.

### Liquidity and Capital Resources

We had $2,419,000 in cash on June 30, 2023 versus $3,154,000 in cash on June 30, 2022. The reason for the decrease in our cash balance was due to the operating expenses describe above as well as our deferred expenses under our Collaboration and Development Agreement with the IEC. Cash used in operations for the six months ended June 30, 2023 was $410,000 as compared to cash used in operations of $376,000 for the six months ended June 30, 2022. The reason for the increase in cash used in operations is mainly related to deferred expenses under our Collaboration and Development Agreement with the IEC.

Net cash used in investing activities was $16,000 for the six months ended June 30, 2023, as compared to net cash used in investing activities of $30,000 for the six months ended June 30, 2022. The decrease is mainly related to lease deposit paid during April 2022.

On September 2, 2019, we executed a promissory note having a total principal amount of $35,000 bearing interest at a 6% per annum and maturing on September 2, 2021 (the “Promissory Note”). The Promissory Note was a non-recourse and carried no personal guarantees. In conjunction with the consummation of the Share Exchange, and as a condition thereof, on March 6, 2020, we entered into several Securities Exchange Agreements, on the same terms, to exchange the Promissory Note for 9,623,621 shares of our common stock, par value $0.0001 per share (the “Common Stock”). On May 18, 2021, we issued 54,019 shares of Common Stock of the Company, to several holders pursuant to the terms of the Security Exchange Agreements pursuant to which, such holders were entitled to an anti-dilution clause in the event that the Convertible Debentures were converted into shares of our Common Stock.

In connection with the Share Exchange, immediately prior to the Effective Time, we entered into several convertible loan agreements, on the same terms, in the aggregate amount of $965,000 (each, a “Convertible Loan Agreement”). The terms of the Convertible Loan Agreements required repayment of the borrowed amount by the one-year anniversary of the Effective Time, unless, at our discretion, and subject to its compliance with any and all terms of the material terms of the Convertible Loan Agreements, the term of such loans is extended for an additional twelve (12) month period. The terms of the Convertible Loan Agreements also provide that we may repay any portion of the remaining outstanding loan amount, without penalty, provided, however, that the Company provides the specific lender with three business days’ written notice prior to such repayment, during which time the lender may elect to convert any or all of the outstanding loan amount into shares of common stock of the Company. The Convertible Loan Agreements bore simple interest at a rate equal to 15% per annum, payable on the 15th day of each calendar month. On December 9, 2020, we utilized our rights under the Convertible Loan Agreements and extended the terms of the loans for an additional twelve months. As of March 31, 2021, the Convertible Loan Agreements had an aggregate outstanding principal balance of $835,000. During May 2021, we repaid the full balance of the principal of the Convertible Loans in the amount of $835,000.

Also, in connection with the Share Exchange, we entered into securities exchange agreements (each, an “Exchange Agreement”) with our outstanding debt, Alpha Capital Anstalt (“Alpha”) and GreenBlock Capital LLC (“GBC”) to respectively cancel existing debentures or debt in the total amount of $658,323 and in exchange issue new debentures in the aggregate amount of $400,000 and issue 698,755 and 65,198 shares of common stock to each of Alpha and GBC, respectively. The New Debentures matured three years from the Effective Date, bore interest at a rate of 8% per year and were only convertible into shares of the Company’s common stock, at an original conversion price of $0.3740 (the “Original Conversion Price”); provided, however, that such Original Conversion Price shall be adjusted downward in the event that the Company, as applicable, sells or grants any options to purchase or sells or grants any right to reprice, or otherwise dispose or issues any common stock or common stock equivalents entitling any purchaser to acquire shares of the Company’s common stock at an effective price per share that is lower than the Original Conversion Price (such issuance, a “Dilutive Event”). In the event of a Dilutive Event at any time from the Effective Time through the six (6) month anniversary of the Effective Time, any such adjustment shall occur immediately after the completion of such period. As of March 31, 2021, the Convertible Debentures had an aggregate outstanding principal balance of $200,000. Subsequent to March 31, 2021, a portion of the Convertible Debentures, representing an aggregate amount of $110,614 (including interest) was converted into 295,759 shares of Common Stock. During May 2021, we prepaid the full balance of the principal and interest amount of the Convertible Debentures in the amount of $108,541.

On May 11, 2021, we entered into Securities Purchase Agreements (the “Securities Purchase Agreements”) with eight (8) non-U.S. investors (the “Investors”), pursuant to which we, in a private placement offering (the “Offering”), agreed to issue and sell to the Investors an aggregate of: (i) 12,500,000 shares of our Common Stock at a price of $0.40 per share; and (ii) warrants (the “Warrants”) to purchase 12,500,000 of our Common Stock. The Warrants are exercisable immediately and for a term of 18 months and have an exercise price of $0.40 per share. The aggregate gross proceeds from the Offering were approximately $5,000,000 and the Offering closed on May 11, 2021. On April 5, 2022, we entered into an agreement with the Investors pursuant to which we extended the term of the Warrants, which now expire on November 11, 2023.

We believe that we have sufficient cash to fund our operations for at least the next 12 months. Readers are advised that available resources may be consumed more rapidly than currently anticipated, resulting in the need for additional funding sooner than expected. Should this occur, we will need to seek additional capital earlier than anticipated in order to fund (1) further development and, if needed (2) expenses which will be required in order to expand manufacturing of our products, (3) sales and marketing efforts and (4) general working capital. Such funding may be unavailable to us on acceptable terms, or at all. Our failure to obtain such funding when needed could create a negative impact on our stock price or could potentially lead to the failure of our company. This would particularly be the case if we are unable to commercially distribute our products and services in the jurisdictions and in the timeframes we expect.

### Off-Balance Sheet Arrangements

As of June 30, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

## Market risk

As filed, 120 characters.

We are a smaller reporting company and therefore are not required to provide the information for this item of Form 10-Q.

## Controls and procedures

As filed, 1,651 characters.

#### Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Report, our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), conducted evaluations of our disclosure controls and procedures. As defined under Sections 13a–15(e) and 15d–15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosures.

Based on their evaluation, the Certifying Officers concluded that, as of June 30, 2023, our disclosure controls and procedures were not effective, at the above-described reasonable assurance level.

#### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Aug 7, 2023.
Source: SEC EDGAR, the filing index for accession 0001213900-23-064050. Last ingested by Listed: Oct 27, 2026, 16:06 ET. No prices; not investment advice.