Filing Summary
Registrant and period: The filing is for UAS Drone Corp., not Duke Robotics Corp. It is an unaudited Form 10-Q for the quarter and nine months ended September 30, 2017. Financial amounts below are in U.S. dollars.
Business context and results
UAS develops and sells commercial drones, focusing on law enforcement and first responders. It reported $5,000 of revenue for the first nine months of 2017, from sales of two Quadrotors to a flight-training company; the three-month quarter had no sales. The company said its Havis manufacturing and distribution arrangements were on hold while it worked with the training company on product improvements and operational feedback.
| Metric | Three months ended Sept. 30, 2017 | Nine months ended Sept. 30, 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | $0 | $5,000 | $0 |
| Gross profit | $0 | $259 | $0 |
| Operating expenses | $27,414 | $85,691 | $30,164 / $215,282 |
| Net loss | $36,770 | $113,814 | $38,178 / $237,456 |
| Basic and diluted loss per share | $0.03 | $0.10 | $0.03 / $0.21 |
Nine-month gross margin was approximately 5.2%. Operating expenses fell about 60% year over year, which management attributed mainly to lower consulting spending; professional fees were also substantially lower. Interest expense rose to $28,382 from $22,174 for the nine-month period. One customer generated all 2017 nine-month revenue.
Financial position and liquidity
At September 30, 2017, total assets were $17,571, including $460 cash, $5,111 inventory, and $12,000 prepaid expenses. Current liabilities totaled $593,415, resulting in a working-capital deficit of $575,844. Total stockholders’ deficit was $575,844. Convertible notes payable were $450,015, and related-party notes payable, net, were $44,906. The $300,000 and $100,010 convertible debentures were extended to April 1, 2018; a further $50,005 debenture matures August 1, 2018. The notes bear 8% interest and are convertible at stated prices.
Net cash used in operations for the first nine months was $47,502, compared with $134,384 in 2016. Financing provided $47,962, including $50,005 in convertible-note proceeds and net stockholder advances. Ending cash was $460, versus $669 at the end of the comparable 2016 period. Management stated that available cash was insufficient to fund operations for the next 12 months.
Outlook, risks, and notable matters
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing continuing losses and a working-capital deficit. It planned to seek additional debt or equity financing, with no assurance it would succeed.
- Management described a potential ongoing manufacturing and sales relationship with the flight-training group as under discussion, not finalized. Havis agreements remained on hold; the filing provides no formal revenue or earnings guidance.
- Key risks include minimal sales, dependence on a single customer for all reported revenue, limited liquidity, financing needs, and competition and product-development uncertainties identified in the forward-looking-statement discussion.
- Disclosure controls were assessed as ineffective, with material weaknesses attributed to limited accounting personnel and segregation of duties, absence of full-time CEO/CFO oversight, and lack of an independent audit committee. No material pending legal proceedings were reported.
- No subsequent events were reported through the filing date. Management had not determined the impact of the forthcoming revenue-recognition standard, expected to be adopted in the first quarter of 2018.
Important facts for investors to verify
- Confirm the registrant identity: the supplied filing names UAS Drone Corp., while the request identifies Duke Robotics Corp.
- Check whether additional financing was obtained and whether it was sufficient to address the disclosed going-concern uncertainty.
- Verify the status and terms of the flight-training company relationship, Havis agreements, and any subsequent sales or customer diversification.
- Review the convertible-note maturities, interest obligations, conversion terms, and any extensions or conversions after September 30, 2017.
- Assess whether the disclosed internal-control material weaknesses were remediated in later filings.