Business context and reporting period
The supplied filing is UAS Drone Corp.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2019, not a filing identified as DUKE Robotics Corp. The company describes itself as a developer and manufacturer of commercial drones for law-enforcement and first-responder markets, but reports no drone sales or revenue in either the 2019 or 2018 comparable periods. It checked the box identifying itself as a shell company.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 in 2019 and 2018 | $0 in 2019 and 2018 |
| Net loss | $27,894 in 2019; $42,939 in 2018 | $92,696 in 2019; $108,632 in 2018 |
| Interest expense | $9,177 in 2019; $9,013 in 2018 | $27,706 in 2019; $27,368 in 2018 |
| Operating cash flow | Not separately provided | Cash used of $27,589 in 2019; $59,062 in 2018 |
At September 30, 2019, cash was $35,319, total assets $35,319, current liabilities $835,480, total liabilities $870,480, and stockholders’ deficit $835,161. The resulting working-capital deficit was $800,161. Current liabilities included $450,015 of convertible notes, $199,611 of stockholder advances, and $149,987 of accrued interest and expenses. The company also had a $35,000 long-term promissory note. The filing says cash on hand is insufficient to fund operations for the next twelve months.
For the nine months, operating expenses are reported as $59,990, down from $81,264, while management says the decrease reflected lower OTC Market fees, partly offset by higher audit and directors’ and officers’ insurance costs. The statements report no income tax expense. Margins are not meaningful because there was no revenue.
Material changes and management commentary
Net loss narrowed year over year for both the quarter and nine-month period. Cash rose from $61 at December 31, 2018 to $35,319 at September 30, 2019, primarily reflecting $62,847 of financing cash flow, including $53,254 in stockholder advances and a $35,000 promissory note, partly offset by operating cash use and note repayments. The company plans to seek additional debt or equity financing, but provides no specific guidance, financing commitment, or profitability timetable.
The company states that its Havis manufacturing and distribution agreements are on hold and expected to be terminated, with no manufacturing or related marketing and service-program development. Management’s going-concern disclosure says substantial doubt exists because of recurring losses and a working-capital deficit; continued operations depend on meeting obligations, obtaining financing, and ultimately achieving profitability, with no assurance of successful fundraising.
Risks, contingencies, and unusual items
- Financial statement inconsistency: The reported operating-expense totals do not agree with the listed expense components. For 2019, general and administrative plus professional fees sum to $18,717 for the quarter and $64,990 for nine months, versus reported totals of $13,717 and $59,990. The reported net losses match the higher component sums when interest is included. Verify the correct operating-expense and operating-loss figures.
- Three convertible debentures totaling $450,015 had maturities extended to December 31, 2019, shortly after the reporting date. The $35,000 note issued September 2, 2019 bears 6% interest and matures September 2, 2021; the stockholder advances bear no interest and have no stated maturity.
- Management reported ineffective disclosure controls and identified material weaknesses involving limited accounting personnel and segregation of duties, lack of a full-time CEO/CFO, and absence of an independent audit committee. No material change in internal control was reported during the quarter.
- The filing reports no material pending legal proceedings involving the company. It disclosed an SEC complaint and expected settlement concerning a beneficial owner of 37.2% of the company’s shares; the company says it was not named and was not involved in the underlying matter.
- Officers and directors may have conflicts from other business activities; the company says it has no policy for resolving such conflicts.
Most important facts for investors to verify
- Confirm the issuer identity: the provided filing names UAS Drone Corp., while the request names DUKE Robotics Corp.
- Reconcile the operating-expense and operating-loss arithmetic with the filed statements and any subsequent corrections.
- Check whether the convertible debentures were repaid, converted, or further extended after their December 31, 2019 maturity, and whether additional financing was secured.
- Assess whether the company’s shell status, lack of revenue, Havis agreement termination, going-concern uncertainty, and disclosed control weaknesses have changed.