UAS Drone Corp. (Duke Robotics business) — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. The filing’s registrant is UAS Drone Corp., not Duke Robotics Corp.; Duke Robotics is a wholly owned subsidiary. Financial amounts below are in U.S. dollars; statements are unaudited and generally presented in thousands.
Business context and financial results
The company is developing the TIKAD robotics system, designed to enable remote, stabilized firing of small arms and light weapons. Management says it has generated limited revenue and has not begun meaningful commercialization.
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 | Comparable 2021 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 for Q2; $500 for six months |
| Research and development | $3 | $9 | $0 for both periods |
| General and administrative | $327 | $658 | $271 for Q2; $433 for six months |
| Net loss | $287 | $656 | $418 loss for Q2; $167 loss for six months |
| Operating cash flow | Not provided for the quarter | $376 used | $152 provided for six months |
Q2 financial income was $43, compared with financial expense of $147 in Q2 2021. For the first half, financial income was $11, versus expense of $366 in 2021. Management attributes the improvement mainly to repayment or conversion of prior convertible loans. The 2021 first-half revenue came from the collaboration agreement with Elbit Systems Land Ltd. Cost of revenue was zero in the reported periods; the filing does not provide a meaningful current-period gross margin because 2022 revenue was zero.
Financial position and changes
- At June 30, 2022, cash and cash equivalents were $3.154 million, down from $3.560 million at December 31, 2021. Total assets were $3.244 million; current liabilities were $175,000 and total liabilities were $476,000, including $301,000 in stockholder loans.
- Cash used in investing activities was $30,000, including a $15,000 lease deposit and $15,000 of property and equipment purchases. No financing cash flow was reported for the first half of 2022; the comparable 2021 period included $3.689 million of net financing inflows, principally from the private placement.
- General and administrative expense increased year over year, primarily due to higher stock-based compensation and professional services. First-half net loss widened despite lower financing expense and the absence of 2021’s $500,000 revenue.
- Issued and outstanding shares rose from 54,018,813 at year-end 2021 to 54,118,813 at June 30, 2022. The filing reports 54,218,813 shares outstanding as of August 5, 2022.
Outlook, risks and unusual items
- Management expects cash balances to fund operations through the end of 2023. It may seek capital through securities sales; if funding is unavailable on acceptable terms, it may need to scale back development, change strategy or cease operations. Additional equity financing could dilute existing shareholders.
- The company extended its 12.5 million warrants, exercisable at $0.40 per share, to November 11, 2023. The filing estimated the fair value of expected additional cash payments related to the extension at $27,000.
- A three-year office lease was signed in April 2022, with monthly payments of approximately $5,200 for the first two years and $5,400 for the third year. The filing said the lease had not yet commenced under the applicable accounting guidance as of June 30.
- Risks include early-stage commercialization, dependence on future sales and financing, possible regulatory approvals for product sales or exports, manufacturing and supplier disruption, and uncertainty around COVID-19 effects. Management reported no material COVID-19 impact to date but noted that future effects remain uncertain.
- The company issued 100,000 restricted shares to an investor-relations consultant in March and another 100,000 shares in July 2022. It recorded $323,000 of stock-based compensation for the first half, including $308,000 in general and administrative expense.
The filing gives no specific revenue or earnings guidance. Management states that forward-looking expectations are subject to substantial uncertainty. It reported disclosure controls effective at a reasonable-assurance level and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the Elbit collaboration or other commercialization efforts are producing new contracts, revenue or a path to recurring sales.
- Whether the stated cash runway through 2023 remains reasonable given operating cash use and the company’s development plans.
- The terms and potential dilution from the outstanding warrants, stock options and any future capital raises.
- The status and accounting commencement date of the new office lease, and any resulting lease liabilities or cash commitments.
- Whether regulatory, export, manufacturing or supplier constraints could delay product sales or delivery.