{"url_path":"/sec/dukr/10-q/2026/item-1","section_key":"item-1","section_title":"Item 1 Financial Statements.**","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-20","source_url":"https://www.sec.gov/Archives/edgar/data/1638911/0001213900-26-059275-index.html","accession_number":"0001213900-26-059275","cik":"0001638911","ticker":"DUKR","issuer_name":"DUKE Robotics Corp.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1638911/0001213900-26-059275-index.html","primary_entity_key":"0001638911","primary_entity_name":"DUKE Robotics Corp."},"word_count":5390,"has_tables":true,"body_markdown":"**Item\n1. Financial Statements.**\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\n** **\n\nCONDENSED\nCONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)\n\n \n\nAS\nOF MARCH 31, 2026\n\n \n\n1\n\n \n\n \n\n**DUKE\nROBOTICS CORP.**\n\n** **\n\nCONDENSED\nCONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)\n\n \n\nAS\nOF MARCH 31, 2026\n\n \n\nTABLE\nOF CONTENTS\n\n** **\n\n \n**Page**\n\n**CONDENSED\nCONSOLIDATED FINANCIAL STATEMENTS:**\n \n\n[Unaudited\nCondensed Consolidated Interim Balance sheets as of March 31, 2026, and December 31, 2025](#f_001)\n3\n\n[Unaudited\nCondensed Consolidated Interim Statements of Comprehensive loss for three months ended March 31, 2026 and 2025](#f_002)\n4\n\n[Unaudited\nCondensed Consolidated Interim Statements of Stockholders’ Equity (deficit) for the period of three months ended March 31,\n2026 and 2025](#f_003)\n5\n\n[Unaudited\nCondensed Consolidated Interim Statements of Cash Flows for the three months ended March 31, 2026 and 2025](#f_004)\n6\n\n[Notes\nto unaudited condensed consolidated financial statements](#f_005)\n7\n- 18\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n2\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nUNAUDITED\nCONDENSED CONSOLIDATED INTERIM BALANCE SHEETS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nA s s e t s \n   \n  \n\nCurrent Assets \n   \n  \n\nCash and cash equivalents \n 475  \n 750 \n\nRestricted Cash \n 35  \n \n-\n \n\nTrade receivables \n 16  \n 41 \n\nOther current assets \n 287  \n 116 \n\nTotal Current assets \n 813  \n 907 \n\n  \n    \n   \n\nOperating lease right-of-use asset and lease deposit \n 114  \n 127 \n\n  \n    \n   \n\nProperty and equipment, net \n 190  \n 215 \n\nTotal assets \n 1,117  \n 1,249 \n\n  \n    \n   \n\nLiabilities and Shareholders’ Equity \n    \n   \n\nCurrent Liabilities \n    \n   \n\nAccounts payable \n 206  \n 129 \n\nOperating lease liability \n 73  \n 72 \n\nOther liabilities \n 324  \n 366 \n\nStock purchase warrants liability \n 708  \n 189 \n\nTotal current liabilities \n 1,311  \n 756 \n\n  \n    \n   \n\nRelated parties loans \n 332  \n 330 \n\n  \n    \n   \n\nOperating lease liability \n 47  \n 63 \n\n  \n    \n   \n\nTotal liabilities \n 1,690  \n 1,149 \n\n  \n    \n   \n\nStockholders’ Equity (deficit) \n    \n   \n\nCommon stock of US$ 0.0001 par value each (“Common Stock”): 350,000,000 shares authorized as of March 31, 2026 and December 31, 2025; issued and outstanding 2,260,383 and 2,177,045 shares as of March 31, 2026 and December 31, 2025, respectively. \n \n*\n  \n \n*\n \n\nAdditional paid-in capital \n 16,693  \n 12,505 \n\nForeign currency translation adjustments \n (1) \n (2)\n\nAccumulated deficit \n (17,265) \n (12,403)\n\nTotal stockholders’ Equity (deficit) \n (573) \n 100 \n\nTotal liabilities and stockholders’ Equity (deficit) \n 1,117  \n 1,249 \n\n \n\n**The\naccompanying notes are an integral part of the condensed consolidated interim financial statements.**\n\n** **\n\n3\n\n \n\n** **\n\nDUKE\nROBOTICS CORP.\n\nUNAUDITED\nCONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n  \nThree months ended \n\n  \nMarch 31 \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nRevenues \n \n-\n  \n \n-\n \n\nCost of revenues \n (33) \n (8)\n\nGross loss \n (33) \n (8)\n\n  \n    \n   \n\nResearch and development expenses \n (29) \n (22)\n\nGeneral and administrative expenses \n (451) \n (258)\n\nOperating loss \n (513) \n (288)\n\nFinancing income (expenses), net \n (408) \n 9 \n\nNet loss \n (921) \n (279)\n\nOther comprehensive gain (loss) - Foreign currency translation adjustments \n 1  \n (*) \n\nComprehensive loss \n (920) \n (279)\n\n  \n    \n   \n\nLoss per share (basic and diluted) (**) \n (0.41) \n (0.13)\n\n  \n    \n   \n\nBasic and diluted weighted average number of shares of common stock outstanding (**) \n \n2,273,753\n  \n \n2,195,045\n \n\n \n\n(*)represents\namount less than $1 thousand.\n\n \n\n(**)Adjusted\nto reflect one (1) for twenty five (25) reverse stock split on March 6, 2026 (see note 1B)\n\n \n\n**The\naccompanying notes are an integral part of the condensed consolidated interim financial statements.**\n\n** **\n\n4\n\n \n\n** **\n\nDUKE\nROBOTICS CORP.\n\nUNAUDITED\nCONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)\n\n(USD\nin thousands, except share and per share data)\n\n \n\n  \nNumber of\n\nShares  \nAmount  \nAdditional\n\npaid-in\n\ncapital  \nForeign\n\ncurrency\n\ntranslation adjustments  \nAccumulated\n\ndeficit  \nTotal\n\nstockholders’\n\nequity \n\n  \n   \n   \n   \n   \n   \n  \n\nBALANCE AT DECEMBER 31, 2025 \n \n** 2,177,045\n  \n *****  \n 12,505  \n (2) \n (12,403) \n 100 \n\nShare based compensation for services \n -  \n \n-\n  \n 95  \n \n-\n  \n \n-\n  \n 95 \n\nIssuance of shares, net \n 83,338  \n *  \n 152  \n \n-\n  \n \n-\n  \n 152 \n\nWarrants modification \n -  \n \n-\n  \n 3,941  \n \n-\n  \n (3,941) \n \n-\n \n\nForeign currency translation adjustments \n -  \n \n-\n  \n \n-\n  \n 1  \n \n-\n  \n 1 \n\nNet loss for the period \n -  \n \n-\n  \n \n-\n  \n \n-\n  \n (921) \n (921)\n\nBALANCE AT MARCH 31, 2026 \n 2,260,383  \n *****  \n 16,693  \n (1) \n (17,265) \n (573)\n\n \n\n  \nNumber of\nShares  \nAmount  \nAdditional\npaid-in\ncapital  \nForeign\ncurrency\ntranslation\nadjustments  \nAccumulated\ndeficit  \nTotal\nstockholders’\nequity \n\n  \n   \n   \n   \n   \n   \n  \n\nBALANCE AT DECEMBER 31, 2024 \n \n**2,177,045**\n  \n *****  \n 12,013  \n \n-\n  \n (11,162) \n 851 \n\nShare based compensation for services \n -  \n \n-\n  \n 10  \n \n-\n  \n \n-\n  \n 10 \n\nForeign currency translation adjustments \n -  \n \n-\n  \n \n-\n  \n (*) \n \n-\n  \n **(*)** \n\nNet loss for the period \n -  \n \n-\n  \n \n \n  \n \n \n  \n (279) \n (279)\n\nBALANCE AT MARCH 31, 2025 \n \n2,177,045\n  \n *****  \n 12,023  \n **(***) \n (11,441) \n 582 \n\n \n\n(*)represents\namount less than $1 thousand.\n\n \n\n(**)See\nnote 4.\n\n**The\naccompanying notes are an integral part of the condensed consolidated interim financial statements.**\n\n** **\n\n5\n\n \n\n** **\n\nDUKE\nROBOTICS CORP.\n\nUNAUDITED\nCONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n  \nThree months ended \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nCASH FLOWS FROM OPERATING ACTIVITIES: \n   \n  \n\nLoss for the period \n (921) \n (279)\n\nAdjustments required to reconcile net loss for the period to net cash used in operating activities: \n    \n   \n\nDepreciation \n 25  \n 13 \n\nShare based compensation \n 95  \n 10 \n\nInterest on loans from related parties \n 2  \n 2 \n\nChanges in fair value of warrant liability \n 409  \n \n-\n \n\nReduction in the carrying amount of right-of-use assets \n 14  \n 11 \n\nChange in operating lease liabilities \n (15) \n (11)\n\nDecrease in trade receivable \n 25  \n 37 \n\nDecrease (increase) in other current assets \n (170) \n 1 \n\nIncrease in accounts payable \n 77  \n 19 \n\nDecrease in other liabilities \n (58) \n (21)\n\nNet cash used in operating activities \n (517) \n (218)\n\n  \n    \n   \n\nCASH FLOWS FROM INVESTING ACTIVITIES: \n    \n   \n\nPurchase of property and equipment \n \n-\n  \n (25)\n\nNet cash used in investing activities \n \n-\n  \n (25)\n\n  \n    \n   \n\nCASH FLOWS FROM FINANCING ACTIVITIES: \n    \n   \n\nProceeds from Share issuance \n 275  \n \n-\n \n\nNet cash provided by financing activities \n 275  \n \n-\n \n\n  \n    \n   \n\nEffect of exchange rate changes on cash and cash equivalents \n 2  \n \n(*)\n \n\n  \n    \n   \n\nDECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH \n (240) \n (243)\n\n  \n    \n   \n\nCASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD \n 750  \n 1,287 \n\n  \n    \n   \n\nCASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD \n 510  \n 1,044 \n\n** **\n\n(*)\nrepresents amount less than $1 thousand.\n\n \n\n**The\naccompanying notes are an integral part of the condensed consolidated interim financial statements.**\n\n** **\n\n6\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\nNOTE\n1 – GENERAL\n\n \n\nA.Duke\nRobotics Corp. (“the Company”) was incorporated under the laws of the State of\nNevada on February 4, 2015.\n\n \n\nOn\nMarch 9, 2020, the Company closed on the Share Exchange Agreement (as defined hereunder), pursuant to which, Duke Robotics, Inc. (“Duke\nInc.”) a corporation incorporated under the laws of the state of Delaware, became a majority-owned subsidiary of the Company. Duke\nInc. has a wholly-owned subsidiary, Duke Airborne Systems Ltd. (“Duke Israel,” and collectively with Duke Inc., “Duke”),\nwhich was formed under the laws of the State of Israel in March 2014 and became the sole subsidiary of Duke after its incorporation.\n\n \n\nOn\nApril 29, 2020, the Company, Duke Inc., and UAS Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company\n(“UAS Sub”), executed an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which UAS Sub merged\nwith and into Duke Inc., with Duke Inc. surviving as our wholly-owned subsidiary (the “Short-Form Merger”). Upon closing\nof the Short-Form Merger, each outstanding share of UAS Sub’s common stock, par value $0.0001 per share, was converted into and\nbecame one share of common stock of Duke Inc., with Duke Inc. surviving as a wholly-owned subsidiary of the Company.\n\n \n\nFollowing\nthe above transactions, Duke Israel became a wholly-owned subsidiary of Duke Inc., which is a wholly-owned subsidiary of the Company.\n\n \n\nOn\nFebruary 18, 2025, the Company established Duke Robotics Hellas M I.K.E (“Duke Greece”), a wholly owned subsidiary, formed\nunder the laws of Greece, to support the ongoing global commercialization efforts of the Company’s Insulator Cleaning (“IC”)\nDrone system.\n\n \n\nThe\nCompany (collectively with Duke, the “Group”) is a robotics company dedicated to developing an advanced robotics stabilization\nsystem that enables remote, real-time, pinpoint accurate firing of small arms and light weapons as well as other civilian applications,\nwith an emphasis in the field of routine infrastructure maintenance. The Company offers high-voltage insulator washing abilities using\nits innovative Insulator Cleaning (“IC”) Drone system. This technology provides an efficient and safe method for cleaning\nhigh-voltage insulators, improving their performance, enhancing safety, and reducing maintenance costs.\n\n \n\nOn\nOctober 28, 2024, the Company filed a certificate of amendment to its Articles of Incorporation with the Nevada Secretary of State to\nchange the Company’s corporate name from UAS Drone Corp. to DUKE Robotics Corp. effective as of November 4, 2024.\n\n \n\nThe Company’s common stock, par value $0.0001 per share (the\n“Common Stock”) was previously quoted on the OTC Markets Group, Inc.’s OTCQB® tier Venture Market, under the symbol\n“DUKR” (“USDR” prior to November 4, 2024).\n\n \n\n7\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n**NOTE\n1 – GENERAL (continued)**\n\n \n\nB.On May 14, 2026, the Company entered into the underwriting agreement\n(the “Underwriting Agreement”) with Maxim Group LLC, as representative of the several underwriters (the “Underwriters”)\n relating to the a public offering (the “Offering”) of 1,125,000 units, with each unit consisting of one share of Common\nStock and warrants to purchase one share of Common Stock at an exercise price of $8.60 per share, exercisable for a period of five years,\nsubject to certain adjustments and cashless exercise provisions. The combined price public offering price per unit was $8.20. Under the\nterms of the Underwriting Agreement, the Company granted the Underwriters an option, exercisable for 45 days following the closing of\nthe Offering, to purchase up to an additional 168,750 shares of Common Stock and/or Warrants to purchase 168,750 shares of common stock\nto cover over-allotments, if any. On May 15, 2026, the Underwriter partially exercised its over-allotment option with respect to Warrants\nto purchase 168,750 shares of Common Stock.\n\n \n\nOn May 18, 2026, the Company closed the\nOffering, as well as the partial exercise of the over-allotment option, and issued the Shares and Warrants, resulting in aggregate gross\nproceeds of approximately $9,225 thousands, before deducting underwriting discounts and commissions and estimated offering expenses. Concurrently\nwith the closing of the Offering, the Company also issued warrants to purchase an aggregate of up to 90,000 shares of Common Stock\nto the representative of the Underwriters, with an exercise price of $10.25 per share (the “Representative’s Warrants”).\nThe Representative’s Warrants are exercisable beginning on November 14, 2026, and expire on November 14, 2031, pursuant to the terms\nand conditions of the Representative’s Warrants.\n\n \n\nOn May 14, 2026, the Company’s Common Stock and Warrants were\napproved for listing on the Nasdaq Capital Market, and on May 15, 2026, the Common Stock and Warrants began trading on the Nasdaq Capital\nMarket under the symbols “DUKR” and “DUKRW,” respectively.\n\n \n\nC.**Reverse\nstock split**\n\n \n\nOn\nAugust 12, 2025, the majority of the Company’s stockholders approved the Reverse Stock Split and on February 15, 2026, the Company’s\nBoard of Directors approved a 25-for-1 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and\noutstanding shares of Common Stock.\n\n \n\nOn\nMarch 4, 2026, the Company filed a Certificate of Amendment (the “Amendment”) to its Amended and Restated Certificate of\nIncorporation in Nevada to effect the Reverse Stock Split. The Amendment became effective on March 6, 2026.\n\n \n\n8\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n**NOTE\n1 – GENERAL (continued)**\n\n \n\nAs a result of the Reverse Stock Split, every 25 shares of the Company’s\noutstanding shares of Common Stock prior to the effect of the Amendment were combined and reclassified into one share of the Company’s\nCommon Stock. No fractional shares were issued in connection with or following the reverse split and the shares were rounded to the nearest\nwhole number. The authorized capital and par value of the Common Stock remained unchanged.\n\n \n\nAll\nshares, stock option and per share information in these consolidated financial statements have been restated to reflect the Reverse Stock\nSplit on a retroactive basis.\n\n \n\nD.**Liquidity**\n\n** **\n\nSince inception, the Company has incurred\nlosses and negative cash flows from operations. The Company has financed its operations mainly through fundraising from various investors.\n\n \n\nAs described in Note 1B above, on May 18, 2026, the Company closed\nthe Offering resulting in aggregate gross proceeds of approximately $9,225 and commencing May 15, 2026, the Company's Common Stock and\nWarrants began trading on the Nasdaq Capital Market. In light of the proceeds received from this fundraising, and based on the projected\ncash flows and cash balances as of the date of approval of these consolidated financial statements, management is of the opinion that\nthe Company’s existing cash will be sufficient to meet its obligations for a period of more than 12 months from the date of approval\nof these consolidated financial statements.\n\n \n\nE.In\nOctober 2023, a large-scale terrorist attack in southern Israel led to the outbreak of armed\nconflict between Israel and Hamas. The conflict subsequently expanded to additional regional\nfronts and contributed to a period of heightened geopolitical and security instability in\nthe region.\n\n \n\nDuring\n2024 and 2025, hostilities included military operations in Lebanon and direct confrontations involving Iran. These developments increased\nregional uncertainty and, at times, resulted in temporary disruptions to the Company’s operations in Israel, including limited\ninterruptions to routine business activities.\n\n \n\n9\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n**NOTE\n1 – GENERAL (continued)**\n\n \n\nIn\nSeptember 2025, a ceasefire agreement was reached between Israel and Hamas, and all remaining living Israeli hostages were released and\nreturned to Israel. While the ceasefire has generally held as of the date of these financial statements, the security situation remains\nsensitive, and the potential for renewed hostilities or broader regional escalation cannot be ruled out. More recently, on February 28,\n2026, hostilities between Israel and Iran escalated again. Israel, together with the United States, conducted a major joint military\ncampaign of air and missile strikes against targets in Iran, which triggered a broad Iranian response and contributed to significant\nregional instability. The situation remains highly fluid, and we are unable to predict when, or on what terms, this escalation will be\nresolved. Accordingly, the extent of the continued impact on the Company’s operations and financial results, if any, cannot be\nreasonably estimated at this time.\n\n \n\nGiven\nthat the majority of the Company’s operations are conducted in Israel, and that all members of the Company’s board of directors\nand management, as well as most employees, consultants, and service providers, are located in Israel, the Company is directly affected\nby the economic, political, geopolitical, and military conditions impacting the region. As of March 31, 2026, while ceasefire arrangements\nwith Hamas, Lebanon and Iran were generally in effect and large-scale military operations had subsided, the overall security environment\nin Israel and the surrounding region remained unstable and unpredictable. The recent hostilities resulted in temporary disruptions to\nthe Company’s operations, resulting in a decrease in revenues during certain periods in 2025, and may continue to have an adverse\nimpact on certain business activities. Any further escalation or expansion of the conflict could negatively affect both regional and\nglobal conditions, and may adversely impact the Company’s business, financial condition, and results of operations.\n\n \n\nNOTE\n2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION\n\n \n\n**Basis\nof presentation**\n\n** **\n\nThe\naccompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries,\nprepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion\nof management, the financial statements presented herein include all material adjustments (consisting of normal recurring adjustments)\nwhich are, in the opinion of the Company’s management, necessary for a fair statement of the financial condition, results of operations,\nchanges in shareholders equity and cash flows for three-months ended March 31, 2026. However, these results are not necessarily indicative\nof results for any other interim period or for the year ended December 31, 2026. The preparation of financial statements in conformity\nwith GAAP requires the Company to make certain estimates and assumptions for the reporting periods covered by the financial statements.\nThese estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ\nfrom these estimates\n\n \n\nThese\nfinancial statements should be read in conjunction with the audited financial statements included in the Company’s Form 10-K for\nthe year ended December 31, 2025 as filed with the Securities and Exchange Commission. The Company’s significant accounting policies\nare disclosed in the audited financial statements for the year ended December 31, 2025 included in the Company’s Form 10-K. Since\nthe date of such financial statements, there have been no changes to the Company’s significant accounting policies.\n\n \n\nThe\naccompanying unaudited condensed consolidated interim financial statements are prepared in accordance with GAAP. The unaudited condensed\nconsolidated interim financial statements of the Company include the Company and its wholly-owned and majority-owned subsidiaries. All\ninter-company balances and transactions have been eliminated.\n\n \n\n10\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\nNOTE\n2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION **(continued)**\n\n** **\n\n**Use\nof Estimates**\n\n** **\n\nThe\npreparation of unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the\nUnited States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain\nrevenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results\ncould differ from those estimates.\n\n \n\n**Fair\nValue Measurements**\n\n** **\n\nFair\nvalue of certain of the Company’s financial instruments including cash, accounts receivable, account payable, accrued expenses,\nand other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance\nwith Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosure” (“ASC 820”)\ndefines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and\nexpands disclosures about fair value investments.\n\n \n\nFair\nvalue, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction\nbetween market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants,\nprincipal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect\nthe risk of non-performance, which includes, among other things, the Company’s credit risk.\n\n \n\nValuation\ntechniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection\nand application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics\nof the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820\nmust maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for\ninputs and resulting measurement as follows:\n\n \n\nLevel\n1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.\n\n \n\nLevel\n2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in\nmarkets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived\nprincipally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and\n\n \n\nLevel\n3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the\nfair values.\n\n \n\nFair\nvalue measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in\ntheir entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded\ndisclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period\nattributable to the following: total gains or losses for the period (realized and unrealized), segregating those gains or losses included\nin earnings, and a description of where those gains or losses included in earning are reported in the statement of comprehensive loss.\n\n \n\n11\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\nNOTE\n2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION **(continued)**\n\n** **\n\nThe\nCompany’s financial liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are\nas follows:\n\n \n\n  \nAs of March 31, 2026 \n\n  \nLevel 1  \nLevel 2  \nLevel 3  \nTotal \n\n  \nUS$ \n\n  \n   \n   \n   \n  \n\nStock purchase warrants liability \n \n-\n  \n \n-\n  \n 708  \n 708 \n\nTotal \n \n-\n  \n \n-\n  \n 708  \n 708 \n\n \n\n  \nAs of December 31, 2025 \n\n  \nLevel 1  \nLevel 2  \nLevel 3  \nTotal \n\n  \nUS$ \n\n  \n   \n   \n   \n  \n\nStock purchase warrants liability \n \n-\n  \n \n-\n  \n 189  \n 189 \n\nTotal \n \n-\n  \n \n-\n  \n 189  \n 189 \n\n \n\nNOTE\n3 – LEASES\n\n \n\nA.On\nApril 4, 2022, the Company signed a lease agreement for an office space in Mevo Carmel Science and Industry Park, Israel for a term of\n3 years, with an option to extend the term of the lease agreement for an additional 2 years. The monthly lease payments under the lease\nagreement for the first two years are NIS 16.5 (approximately $4.6) and for the third year NIS 17.2 (approximately $4.8). The monthly\nlease payments for the option period will be agreed between the parties, with a minimum increase of 5% above the third year monthly payment.\nLease payments are linked to the Israeli Consumer Price Index. The property became available for Company’s use in February 2023.\nBased on the lease agreement terms, the Company made a deposit of $15 as a guarantee for its lease commitments. The Company utilized\nthe two year extension option under the above lease agreement.\n\n \n\nB.The\ncomponents of operating lease expense for the period ended March 31, 2026 and 2025 were as follows:\n\n** **\n\n \n \n**Three months ended\nMarch 31,**\n \n\n \n \n2026\n \n \n2025\n \n\n \n \n \n \n \n \n \n\nOperating lease expense\n \n \n18\n \n \n \n16\n \n\n \n\n12\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n**NOTE\n3 – LEASES (continued)**\n\n \n\nC.Supplemental\ncash flow information related to operating leases was as follows:\n\n \n\n** **\n\n \n \n**Three months ended\nMarch 31,**\n \n\n \n \n2026\n \n \n2025\n \n\n \n \n \n \n \n \n \n\nCash paid for amounts included in the measurement of lease liabilities:\n \n \n \n \n \n \n\nOperating cash flows from operating leases\n \n \n19\n \n \n \n16\n \n\n** **\n\nD.Supplemental\nbalance sheet information related to operating leases was as follows:\n\n \n\n   March 31,   December 31, \n\n   2026   2025 \n\n         \n\nOperating leases:        \n\nOperating leases right-of-use asset and lease deposit   114    127 \n\n           \n\nCurrent operating lease liabilities   73    72 \n\nNon-current operating lease liabilities   47    63 \n\nTotal operating lease liabilities   120    135 \n\n           \n\nWeighted average remaining lease term (years)   1.84    2.08 \n\n           \n\nWeighted average discount rate   8.75%   8.75%\n\n \n\nE.Future\nminimum lease payments under non-cancellable leases as of March 31, 2026 were as follows:\n\n \n\n  \n  \n\n2026 \n 57 \n\n2027 \n 71 \n\n2028 \n 1 \n\nTotal operating lease payments \n 129 \n\nLess: imputed interest \n (9)\n\nPresent value of lease liabilities \n 120 \n\n \n\n13\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n**NOTE\n4 – SHAREHOLDERS’ EQUITY**\n\n** **\n\n**Transactions:**\n\n** **\n\nA. Following the\nreverse stock split effected on March 6, 2026 as detailed in note 1B above, the Company adjusted its number of outstanding shares of\ncommon stock as of December 31, 2025, to reflect the effect of additional 8,232 shares of common stock of the Company, issued to existing\nstockholders.\n\n** **\n\nB.On May 11, 2021, the Company entered into securities purchase agreements with eight (8) non-U.S. investors, pursuant to which the Company, in a private placement offering, agreed to issue and sell to the investors an aggregate of: (i) 500,000 shares of the Company’s common stock, at a price of $10 per share; and (ii) warrants (the “Warrants”) to purchase 500,000 Company’s common stock.\n\n \n\nOn May 11, 2021, the Company entered\ninto a service agreement with a non-U.S. third party for financial and project oversight services in connection with an offering. Under\nthe agreement, the Company agreed to pay the service provider 6% of the investment amounts received, and options to receive units, each\nconsisting of one share and one warrant exercisable at $10 per share, equal to 6% of the investment amount received divided by $10. In\nthe event that the offering investors exercise their Warrants, the service provider is entitled to additional payments and options based\non 6% of the investment and warrant exercise amounts received.\n\n \n\nOn March 10, 2026, the Company entered\ninto a warrant amendment agreement with the existing Warrant (the “2021 Warrants Amendment”). According to the 2021 Warrants\nAmendment, the Company and Holders agreed to extend the warrant exercise term of the Warrants from May 11, 2026 to May 1, 2031.\n\n \n\nThe\nCompany accounted for the 2021 Warrant Amendments as deemed dividends. The fair value of the Warrant modifications was estimated using\nthe Black-Scholes option-pricing model and is presented within the consolidated statements of changes in shareholders equity as a credit\nto additional paid in capital and a debit to the accumulated deficit.\n\n \n\nThe\nfollowing are the data and assumptions used:\n\n \n\n  \nMarch 10,\n2026 \n\nDividend yield \n 0 \n\nExpected volatility (%) \n 161.54%\n\nRisk-free interest rate (%) \n 3.73%\n\nContractual term of options (years) \n 5.15-5.23 \n\nExercise price (US dollars) \n 16.25 \n\nShare price (US dollars) \n 7 \n\nFair value (USD in thousands) \n 3,941 \n\n \n\nC.On December 30, 2025, the Company entered into securities purchase agreements with seven non-U.S. investors, pursuant to which the Company issued and sold in a private placement offering an aggregate of 83,338 shares of common stock and warrants to purchase 83,338 shares of common stock. The warrants were exercisable immediately at an exercise price of $16.25 per share and were originally scheduled to expire on November 30, 2026, subject to extension to May 30, 2028 if a public offering or other qualifying financing of at least $2,500 had not occurred prior to such date. The securities purchase agreements also include a make-whole provision pursuant to which the investors may receive additional shares of common stock upon the occurrence of certain qualifying public offering events. The aggregate gross proceeds from the offering were approximately $750 of which $475 received in December 2025 and $275 received in January 2026.\n\n \n\nOn\nMarch 10, 2026, the Company entered into the Warrant Amendment Agreement with the investors of the December 30, 2025 securities purchase\nagreement, pursuant to which the term of the warrants was extended such that they expire on May 1, 2031.\n\n \n\n14\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n**NOTE\n4 – SHAREHOLDERS’ EQUITY (continued)**\n\n \n\nThe\nCompany analyzed the warrants, including the make-whole provision, in accordance with ASC 480, Distinguishing Liabilities from Equity,\nand ASC 815, Derivatives and Hedging, and concluded that the warrants do not meet the criteria for equity classification. The Company\nalso concluded that the make-whole provision is not legally detachable and cannot be separately exercised and, therefore, is not a freestanding\ninstrument. Accordingly, the warrants, inclusive of the make-whole provision, are accounted for as a single liability-classified instrument,\ninitially recorded at fair value and remeasured at fair value at each reporting date, with changes in fair value recognized in the consolidated\nstatements of operations until settlement or expiration.\n\n \n\n*Warrant\nliability*\n\n* *\n\nThe\nfair value of warrants liability and the make-whole provision was calculated using a third-party specialist.\n\n \n\nThe calculations were based on the probability of the expected offering\ndate, using the Black-Scholes option-pricing model and the make-whole provision was calculated using the Monte Carlo Simulation Model.\nThe warrants liability was estimated at $708 and $189 as of March 31, 2026 and December 31, 2025, respectively and recorded as current\nliability on the balance sheet.\n\n \n\nThe\nassumptions used to perform the calculations are detailed below:\n\n \n\n  \nMarch 31,\n2026  \nDecember 30,\n2025 \n\nExpected volatility (%) \n 84.31% - 146.92% \n 127.44% - 179.34%\n\nRisk-free interest rate (%) \n 3.7% - 3.92% \n 3.47% - 3.48%\n\nExpected dividend yield \n 0.0% \n 0.0%\n\nExpected term (years) \n 0.173-5.086  \n 0.316-2.417 \n\nConversion price (U.S. dollars) \n 16.25  \n 16.25 \n\nUnderlying share price (U.S. dollars) \n 8.48  \n 6.25 \n\nFair value (U.S. dollars in thousands) \n 708  \n 189 \n\n* *\n\n*Fair Value Proportional Allocation*\n\n \n\nBased on the above, the fair value proportion\nallocation as of March 31, 2026 and December 31, 2025, respectively, was as follows:\n\n \n\n  \n\n**March\n31, 2026**\n\n  \n\n**December\n31, 2025** \n\n \n\nEquity component \n 451  \n 286 \n\n2025 Warrants \n 299  \n 189 \n\nTotal \n750  \n475 \n\n \n\n15\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\nNOTE\n5 - SHARE BASED COMPENSATION\n\n \n\nThe\nfollowing table presents the Company’s stock option activity the three months ended March 31, 2026:\n\n \n\n** **** **\n**Number of\nOptions**** **** **\n**Weighted\nAverage\nExercise Price**** **\n\nOutstanding at December 31, 2025 \n 179,876  \n 20.33 \n\nGranted \n 138,000  \n 7.88 \n\nExercised \n \n-\n  \n \n-\n \n\nForfeited or expired \n \n-\n  \n \n-\n \n\nOutstanding at March 31, 2026 \n 317,876  \n 11.00 \n\nNumber of options exercisable at March 31, 2026 \n 124,678  \n 16.99 \n\n \n\nThe aggregate intrinsic value of the\nawards outstanding as of March 31, 2026 is $502. These amounts represent the total intrinsic value, based on the Company’s\nstock price of $8.48 as of March 31, 2026, less the weighted exercise price.\n\n \n\nThe\nstock options outstanding as of March 31, 2026, have been separated into exercise prices, as follows:\n\n \n\nExercise price  Stock options outstanding   Weighted average remaining contractual life – years   Stock options exercisable \n\n   As of March 31, 2026 \n\n0.0025   18,000    0.28    18,000 \n\n5.25   82,800    4.96    27,602 \n\n9.50   50,275    1.28    50,275 \n\n25.00   3,975    1.25    3,975 \n\n56.25   24,826    1.25    24,826 \n\n7.88   138,000    5.95    \n-\n \n\n    317,876    4.22    124,678 \n\n \n\nCompensation\nexpense recorded by the Company in respect of its share-based compensation awards for the three months ended March 31, 2026 and 2025\nwere $95 and $10, respectively. These expenses are included in General and Administrative expenses in the Statements of Operations.\n\n \n\n16\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n**NOTE\n6 – RELATED PARTIES**\n\n** **\n\n**A.****Transactions and balances with related parties**\n\n \n\n  \nThree months ended\nMarch 31, \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nGeneral and administrative expenses: \n   \n  \n\nDirectors and Officers compensation (*) \n 207  \n 120 \n\n  \n    \n   \n\n(*) Share base compensation \n 47  \n 5 \n\n  \n    \n   \n\nFinancing: \n    \n   \n\nFinancing expense \n 2  \n 2 \n\n \n\n**B.****Balances\nwith related parties:**\n\n \n\n  \nAs of\n\nMarch 31,  \nAs of\n\nDecember 31, \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nOther accounts liabilities \n 60  \n 117 \n\nLoans \n 332  \n 330 \n\n \n\n**C**.\nOn March 10, 2026, the board of directors of the Company approved the issuance of options to purchase 138,000 shares of common stock\nto employees, directors and consultants pursuant to the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) and\nin addition an increase in the number of shares of common stock available under the 2021 Plan from 360,000 to 480,000.\n\n \n\nIn\naddition, out of the options mentioned above, the board of directors approved the issuance of:\n\n \n\nName  Position  Number of options \n\nMr. Yossef Balucka  Company’s CEO   16,000 \n\nMr. Shlomo Zakai  Company’s CFO   10,000 \n\nMr. Vadim Maor  Company’s CTO   4,000 \n\nMr. Erez Nachtomy  Active chairman of the board of the Company   16,000 \n\nMs. Keren Gousman Golan  Director of the Company   4,000 \n\nMr. Eran Antebi  Director of the Company   4,000 \n\n       54,000 \n\n \n\nAll\nsuch options are exercisable at an exercise price of $7.88 per share, vest in three equal annual installments of 33% at the end of each\nyear, expire six years from the date of grant, and are subject to the other terms and conditions set forth in the 2021 Plan.\n\n \n\n17\n\n \n\n \n\nDUKE\nROBOTICS CORP.\n\nNOTES\nTO UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS\n\n(USD\nin thousands, except share and per share data)\n\n \n\n**NOTE\n7 – SEGMENT INFORMATION**\n\n** **\n\nThe\nCompany has one operating and reportable segment, drone insulators washing activity.\n\n \n\nThe\nchief operating decision maker evaluates segment performance primarily based on segment operating loss.\n\n \n\nThe\nCompany refined the name of the segment previously referred to as “Revenue from drones insulators washing” to “Revenues\nfrom civil applications segment” to better reflect its nature. The change had no impact on the composition or nature of the segment’s\nactivities.\n\n \n\nThe\nfollowing table presents information about the Company’s reportable segment for the three months ended March 31, 2026 and 2025:\n\n \n\nRevenue\nrelated to the Company’s reportable segments is as follows:\n\n \n\n  \nThree months ended \n\n  \nMarch 31 \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nRevenue from civil applications segment \n \n-\n  \n \n-\n \n\nCost of revenues from civil applications segment \n (33) \n (8)\n\nGross loss \n (33) \n (8)\n\n  \n    \n   \n\nResearch and development expenses \n (29) \n (22)\n\nDepreciation \n (2) \n (13)\n\nProfessional services \n (298) \n (175)\n\nShare base compensation \n (95) \n (10)\n\nOther general and administrative expenses \n (56) \n (60)\n\nOperating loss \n (513) \n (288)\n\n  \n    \n   \n\nInterest expenses \n (443) \n (30)\n\nInterest income \n 35  \n 39 \n\nNet loss \n (921) \n (279)\n\n \n\nFor\nthe three months ended March 31, 2026 and 2025, the Company’s operations were mostly confined to Israel. As of March 31, 2026\nand 2025, all of the fixed assets of the Company were located in Israel and Greece.\n\n \n\n**NOTE\n8 – SUBSEQUENT EVENTS**\n\n \n\nSee Note 1B above regarding the public offering closed on May 18, 2026.\n\n \n\n18"}