Business context and reporting period
This unaudited Form 10-Q is for UAS Drone Corp. for the quarter ended September 30, 2018. The request identifies DUKE Robotics Corp., but the supplied filing is for UAS Drone Corp.; confirm the issuer before relying on this summary. UAS describes itself as a developer and manufacturer of commercial drones for law enforcement and first responders. The filing also checks the company as a shell company.
Financial results and liquidity
All amounts are U.S. dollars. The company reported no revenue in the three or nine months ended September 30, 2018. For the nine months ended September 30, 2017, revenue was $5,000 and gross profit was $259.
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue, 2018 / 2017 | $0 / $0 | $0 / $5,000 |
| Operating expenses, 2018 / 2017 | $33,926 / $27,414 | $81,264 / $85,691 |
| Net loss, 2018 / 2017 | $42,939 / $36,770 | $108,632 / $113,814 |
| Basic and diluted loss per share, 2018 / 2017 | $0.04 / $0.03 | $0.09 / $0.10 |
At September 30, 2018, cash was $238, total assets $5,349, current liabilities $719,122, and stockholders’ deficit $713,773. Working capital was negative $713,773. Liabilities included $450,015 of convertible notes and $138,951 due to a stockholder; the related-party advances bear no interest and have no stated maturity. The company had $5,111 of inventory, net of an obsolescence allowance.
Net cash used in operating activities was $59,062 for the nine months, compared with $47,502 in 2017. Financing activities provided $58,957, principally from $78,761 of stockholder advances, partly offset by $19,804 in insurance-financing payments. Cash declined by $105 to $238. The filing states that cash on hand is insufficient to fund operations for the next twelve months.
Material changes and management commentary
- No drones were sold in either the third quarter of 2018 or the first nine months of 2018; the comparable 2017 nine-month period included $5,000 in sales.
- Nine-month operating expenses declined by $4,427, primarily because of lower professional fees; nine-month net loss improved by $5,182. Third-quarter expenses rose by $6,512 and net loss worsened by $6,169, with management attributing the expense increase to professional fees related to becoming DTC eligible.
- The manufacturing and distribution agreements with Havis are on hold; no drone manufacturing or marketing or service-program development had occurred under them.
- Management says it plans to seek additional funds through debt or equity offerings, but gives no assurance of success. The filing cites losses and a working-capital deficit as conditions raising substantial doubt about the company’s ability to continue as a going concern.
- Management concluded disclosure controls were ineffective and identified material weaknesses involving limited accounting personnel and segregation of duties, lack of full-time CEO/CFO oversight, and absence of an independent audit committee. No material change in internal control was reported during the quarter.
- Forward-looking statements identify risks including competition, industry and regulatory changes, product development, and the ability to raise capital. No material pending legal proceedings were reported.
Important facts for investors to verify
- Confirm whether this UAS Drone Corp. filing is the intended filing for the requested company, DUKE Robotics Corp.
- Verify current cash needs, the availability and terms of any further stockholder advances, and the status and maturity of the $450,015 in convertible notes.
- Assess the company’s ability to raise capital and continue as a going concern, given $238 of cash and its stated inability to fund the next twelve months.
- Check whether sales have resumed and whether the Havis agreements have moved forward since the reporting period.
- Review remediation of the disclosed material weaknesses and the status of the company’s shell-company designation.