Business context and reporting period
This is UAS Drone Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2019. The filing describes a developer and manufacturer of commercial drones targeting law enforcement and first responders. The request identifies DUKE Robotics Corp.; the filing itself identifies the registrant as UAS Drone Corp., a discrepancy investors should verify.
Financial results and condition
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $27,685 | $28,950 |
| Operating loss | $27,685 | $28,950 |
| Interest expense | $9,392 | $9,236 |
| Net loss | $37,077 | $38,186 |
| Net loss per share | $0.03 | $0.03 |
| Cash used in operating activities | $14,280 | $11,124 |
At March 31, 2019, cash was $582, total assets were $18,082, and current liabilities were $802,624, producing a working capital deficit of $784,542. Total liabilities were $802,624, including $450,015 in convertible notes and $173,741 in non-interest-bearing stockholder advances. Stockholders’ deficit was $784,542. No gross margin or other operating margin is available because the company reported no sales.
Financing activities provided $14,801 in cash, including $27,384 in related-party advances, partly offset by $12,583 in note payments. Cash increased from $61 at the start of the quarter to $582 at quarter-end.
Material changes versus the prior period
Revenue remained zero, with no drone sales in either comparable quarter. Net loss improved by $1,109, while operating cash use increased by $3,156. Cash remained very limited; stockholder advances increased by $27,384 during the quarter. Outstanding shares remained 1,172,544.
Outlook, risks and unusual items
- Management states that available cash is insufficient to fund operations for the next 12 months and plans to raise additional capital through debt or equity, with no assurance of success.
- The filing cites recurring losses and a working capital deficit as creating substantial doubt about the company’s ability to continue as a going concern.
- The company reported no drone sales in 2018 or Q1 2019. Its Havis manufacturing and distribution agreements are on hold and may be terminated.
- Disclosure controls were deemed ineffective, with material weaknesses involving limited accounting personnel and segregation of duties, lack of a full-time CEO/CFO, and no independent audit committee.
- Convertible debentures totaling $450,015 have maturity dates extended to December 31, 2019. Management cites risks including competition, product development, regulation, industry conditions, and ability to raise capital.
- No material pending legal proceedings were reported. The filing reports no unregistered equity sales during the quarter.
Important facts for investors to verify
- Confirm the registrant’s identity and its relationship, if any, to DUKE Robotics Corp.
- Verify the status and terms of the planned financing and the company’s near-term ability to meet obligations.
- Confirm repayment, conversion, or further extension of the $450,015 convertible notes due December 31, 2019.
- Check whether the Havis agreements remain in effect and whether the company has resumed product development or sales.
- Assess remediation of the disclosed internal-control weaknesses and the continuing going-concern uncertainty.