Filing Summary
Entity note: The supplied filing identifies the registrant as UAS Drone Corp., not DUKE Robotics Corp. It is a Form 10-Q for the quarter ended June 30, 2018, with unaudited results for the three and six months then ended.
Business context
UAS described itself as a developer and manufacturer of commercial drones targeting law enforcement and first responders. It reported no drone sales in the first half of 2018. Its manufacturing and distribution agreements with Havis were on hold, with no manufacturing or marketing/service-program development underway. The filing checked the company as a shell company.
Financial results and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue, 2018 / 2017 | $0 / $5,000 | $0 / $5,000 |
| Operating expenses, 2018 / 2017 | $18,388 / $22,941 | $47,338 / $58,277 |
| Net loss, 2018 / 2017 | $27,507 / $32,142 | $65,693 / $77,044 |
| Loss per share, 2018 / 2017 | $0.02 / $0.03 | $0.06 / $0.07 |
| Cash used in operating activities | Not provided for the quarter | $24,481 / $35,016 |
At June 30, cash was $606, inventory was $5,111, and total assets were $14,491. Current liabilities were $685,326, resulting in a working-capital deficit of approximately $670,835; stockholders’ deficit was $670,835. Current liabilities included $450,015 of convertible notes and $101,870 of related-party notes payable. The company received $41,680 in shareholder advances during the first half. No income-tax expense was reported. Gross margin for 2018 is not meaningful because there was no revenue or cost of sales.
Changes, outlook, risks and unusual items
- Compared with the first half of 2017, revenue fell from $5,000 to zero. Operating expenses and net loss declined, primarily due to lower professional fees, while operating cash use also decreased.
- Management said cash on hand was insufficient to fund the next 12 months and planned to seek additional debt or equity financing; success was not assured. The filing states that recurring losses and the working-capital deficit raise substantial doubt about the company’s ability to continue as a going concern.
- Convertible debentures include two notes totaling $400,010 that matured in April 2017 and a $50,005 note scheduled to mature August 1, 2018. The filing does not describe repayment or extension of the already-matured notes.
- Disclosure controls were deemed ineffective, with material weaknesses cited in segregation of duties, executive financial oversight, and independent audit committee oversight. No material change in internal control was reported during the quarter.
- Management identified competition, industry and regulatory changes, product development, and ability to raise capital among forward-looking risks. No material pending legal proceedings were reported.
Important facts to verify
- Confirm the intended issuer: the filing is for UAS Drone Corp., whereas the request names DUKE Robotics Corp.
- Verify the status, maturity, and repayment terms of the convertible notes and reconcile the balance-sheet note payable of $2,868 with the note disclosure of an $11,395 insurance-financing balance.
- Assess the company’s near-term funding needs, financing availability, and ability to continue as a going concern.
- Confirm whether the Havis agreements remain on hold and whether the company has resumed product sales or operations.
- Review remediation of the disclosed material weaknesses and note that the filing reports no effective disclosure controls as of June 30, 2018.