{"url_path":"/sec/dukr/10-q/2026/item-2","section_key":"item-2","section_title":"Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations**","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":2773,"has_tables":true,"body_markdown":"**Item\n2. Management’s Discussion and Analysis of Financial Condition and Results of Operations**\n\n \n\n*Readers\nare advised to review the following discussion and analysis of our financial condition and results of operations together with our consolidated\nfinancial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial\nstatements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2025. Some of the information\ncontained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our\nplans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary\nNote Regarding Forward-Looking Statements”. You should review the “Risk Factors” section of our Annual Report for the\nfiscal year ended December 31, 2025 for a discussion of important factors that could cause actual results to differ materially from the\nresults described in or implied by the forward-looking statements contained in the following discussion and analysis*.\n\n \n\nWe\nare a robotics company developing advanced robotic and drone-based systems. Our technologies include an advanced robotic stabilization\nsystem that enables remote, real-time, pinpoint-accurate firing of small arms and light weapons, as well as civilian drone-based solutions\nfocused on infrastructure maintenance, which is a drone technology for conducting routine maintenance of critical infrastructure for\nelectric utility insulator cleaning.\n\n \n\nAlthough\nour stabilization technology was initially designed for use on unmanned aerial systems (“UAS”), our robotic solutions are\nadaptable to other military platforms and civilian applications.\n\n \n\nOn\nJanuary 29, 2021, we, through Duke Airborne Systems Ltd. (“Duke Israel”), and Elbit Systems Land Ltd., an Israeli corporation\n(“Elbit”), entered into a collaboration agreement (the “Collaboration Agreement”) for the global marketing and\nsales, and the production and further development by Elbit of our developed advanced robotic system mounted on a UAS armed with lightweight\nfirearms, which we then marketed under the commercial name “TIKAD.” On April 2, 2025, we and Elbit executed a supplement\nletter (the “Supplement Letter”) to the Collaboration Agreement relating to the stabilized weapons drone system technology\nthat Elbit has been marketing and deploying under the brand name “Bird of Prey”. Pursuant to the Supplement Letter, we and\nElbit have agreed to expand our collaboration to allow us to market the system to military, defense, home-land security and para-military\ncustomers, in coordination with Elbit. We will be entitled to a commission fee, in the mid-single figure percentage range, from any proceeds\nresulting from our marketing activities, in addition to the royalties we will receive as part of the Collaboration Agreement.\n\n \n\nOn\nAugust 15, 2022, Duke Israel introduced the Insulator Cleaning (“IC”) Drone, a drone technology for conducting routine maintenance\nof critical infrastructure, and has signed an agreement with Israel Electric Corporation Ltd. (the “IEC”) to provide drone-enabled\nsystems for cleaning electric utility cable insulators. During October 2023, we completed our obligations under the agreement with\nthe IEC. This was followed in August 2024, by a new agreement with the IEC to utilize our innovative IC Drone system for cleaning electric\nutility cable insulators. On May 12, 2025, we announced the successful commencement of our 2025 insulator cleaning activity in Israel\nwith the IEC under our previously announced service agreement. On June 10, 2025, we announced the launch of our next-generation IC Drone\nSystem - the ICDS2 - representing a significant technological advancement in our innovative utility maintenance drone solution. The ICDS2\nfeatures several key technological advancements over its predecessor, featuring extended flight time, higher payload capacity, enhanced\nstability, advanced radar and improved cleaning durability. It has been successfully deployed at the start of the insulator cleaning\nseason in May 2025, marking a full-season operational timeline compared to 2024’s mid-season commencement.\n\n \n\nIn\nFebruary 2026, we announced the introduction of AEROTRACE™, an aerial monitoring and intelligence solution integrating a combination\nof capabilities and developments in the fields of hardware, sensors, software and artificial intelligence (“AI”), including\nthrough collaboration with other parties, designed to support infrastructure operators in assessing asset conditions and enhancing situational\nawareness. AEROTRACE™ integrates aerial data capture with software-driven analytics, including AI-assisted image analysis, to help\nidentify areas of interest and potential anomalies across large-scale and distributed infrastructure assets. AEROTRACE™ is designed\nto be deployed as a standalone monitoring solution and may also complement our existing robotic IC Drone services by informing maintenance\nplanning and prioritization. The introduction of AEROTRACE™ reflects our ongoing efforts to expand its technology portfolio beyond\nrobotic hardware to include data- and intelligence-driven solutions.\n\n \n\nOn May 14, 2026, we entered\ninto an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC, as representative of the several underwriters\nidentified therein (the “Underwriters”), relating to the public offering (the “Offering”) of 1,125,000 units,\nwith each unit consisting of one share of our common stock, par value $0.0001 (the “Shares”), and warrants to purchase one\nshare of our common stock (the “Warrants”) 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, we granted the Underwriters an option, exercisable for 45 days following the closing of the Offering,\nto purchase up to an additional 168,750 shares of common stock and/or Warrants to purchase 168,750 shares of common stock to cover over-allotments,\nif any. On May 15, 2026, the Underwriter partially exercised its over-allotment option with respect to Warrants to purchase 168,750 shares\nof common stock.\n\n \n\nOn May 14, 2026, the Company\nentered into a warrant agency agreement with Equiniti Trust Company LLC (“Equiniti”), appointing Equiniti as Warrant Agent\nfor the Warrants.\n\n \n\n19\n\n \n\n \n\nOn May 18, 2026, we closed\nthe Offering, as well as the partial exercise of the over-allotment option, and issued the Shares and Warrants, resulting in aggregate\ngross proceeds of approximately $9,225,000, before deducting underwriting discounts and commissions and estimated offering expenses.\n\n \n\nOn May 14, 2026, our common\nstock and Warrants were approved for listing on the Nasdaq Capital Market, and on May 15, 2026, our common stock and Warrants began trading\non the Nasdaq Capital Market under the symbols “DUKR” and “DUKRW,” respectively.\n\n \n\n**Critical\nAccounting Policies**\n\n \n\nIn\nconnection with the preparation of our financial statements, we were required to make assumptions and estimates about future events and\napply judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our assumptions,\nestimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time\nour consolidated financial statements are prepared. Regularly, management reviews the accounting policies, assumptions, estimates, and\njudgments to ensure that our financial statements are presented fairly and by accounting principles generally accepted in the United\nStates of America. However, because future events and their effects cannot be determined with certainty, actual results could differ\nfrom our assumptions and estimates, and such differences could be material.\n\n \n\nPlease\nsee Note 2 of Part I, Item 1, of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition,\nreference is made to Part I, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation”\nof our Annual Report on Form 10-K for the year ended December 31, 2025 (filed on March 12, 2026) concerning our Critical Accounting Policies\nand Estimates.\n\n \n\n**Results\nof Operations**\n\n \n\n**Comparison\nof the three months ended March 31, 2026 and 2025**\n\n \n\n*Revenues*.\nDuring the three months ended March 31, 2026 and 2025 we had no revenues, given that our IC Drone services to the IEC are seasonal in\ntheir nature (spring to fall seasons).\n\n* *\n\n*Cost\nof revenues*. Our cost of revenues expenses for the three months ended March 31, 2026, amounted to $33,000, compared to $8,000 for\nthe three months ended March 31, 2025. The cost of revenues mainly consists of depreciation expenses and other operational costs associated\nwith our agreements with the IEC as detailed above. The increase in cost of revenues was primarily attributed to the growth in our IC\nDrone service activities.\n\n \n\n*Research\nand Development.* Our research and development expenses for the three months ended March 31, 2026, amounted to $29,000, compared to\n$22,000 for the three months ended March 31, 2025. The increase in research and development expenses was mainly due to continued improvements\nto the insulator washing system.\n\n \n\n*General\nand Administrative.*Our general and administrative expenses for the three months ended March 31, 2026, which consisted primarily\nof professional services, such as accounting, auditing, stock-based compensation expenses, insurance costs, consulting and legal services,\namounted to $451,000, compared to $258,000 for the three months ended March 31, 2025. The increase in general and administrative expenses\nfor the three months ended March 31, 2026 was mainly due to an increase in professional services attributable to strategic consulting\nand advisory board compensation expenses, as well as in stock-based compensation expenses, attributable to equity awards granted in March\n2026.\n\n \n\n*Financial\nIncome (expenses), net.* For the three months ended March 31, 2026, we had financial expenses of $408,000 compared to financial income\nof $9,000 for the three months ended March 31, 2025. The reason for the increase in financial expenses, was mainly attributable to the\nmodification of the terms of certain warrant agreements, which resulted in a change in the warrant liability.\n\n \n\n*Net\nLoss.* We incurred a net loss of $921,000 for the three months ended March 31, 2026, compared to a net loss of $279,000 for the three\nmonths ended March 31, 2025, for the reasons set forth above.\n\n \n\n20\n\n \n\n \n\n**Liquidity\nand Capital Resources**\n\n \n\nWe\nhad $475,000 in cash on March 31, 2026, versus $1,014,000 in cash on March 31, 2025. The reason for the decrease in our cash balance\nwas due to the operating expenses described above. Cash used in operations for the three months ended March 31, 2026, was $517,000 as\ncompared to cash used in operations of $218,000 for the three months ended March 31, 2025. The reason for the increase in cash used in\noperations is mainly related to the increase in our operating expenses described above.\n\n \n\nNet\ncash used in investing activities was $0 for the three months ended March 31, 2026, compared to net cash used in investing activities\nof $25,000 for the three months ended March 31, 2025.\n\n \n\nNet\ncash provided by financing activities was $275,000 for the three months ended March 31, 2026, compared to net cash used in investing\nactivities of $0 for the three months ended March 31, 2025. The reason for the increase is related to proceeds from share issuance.\n\n \n\nSince\nour inception we and Duke have funded our operations through equity and debt financing, bank loans, loans provided by shareholders and\ndemonstration projects of its technology to potential customers.\n\n \n\nSince\nDuke’s inception and until 2017, certain Duke affiliates provided loans to Duke from time to time, as needed. Before entering into\nthe Share Exchange, Duke entered into debt cancellation letters (the “Debt Cancellation Letters”) with regard to the Stockholders\nLoans. Pursuant to the Debt Cancellation Letters the accumulated interest on the Stockholders’ Loans was waived and 842,135 shares\nof Duke’s common stock were issued in exchange for the cancellation of $623,180 in debt, leaving $280,000 of outstanding Stockholders\nLoans (the “Outstanding Stockholders’ Loans”). The Outstanding Stockholders’ Loans, including the accumulated\ninterest amount, shall be repaid on the later of the following: (i) three years after the Effective Date (March 9, 2020); or (ii) Duke\nraised capital amounting to at least $15 million following the Effective Date and the Earnings before interest, tax, depreciation and\namortization of Duke has reached an amount of $3 million.\n\n \n\nAs\nof March 31, 2026 and March 31, 2025, the outstanding balances of such stockholders’ loans were $332,000 and $324,000, respectively.\n\n \n\nOn\nMay 11, 2021, we entered into securities purchase agreements with eight (8) non-U.S. investors, pursuant to which we, in a private placement\noffering, agreed to issue and sell to investors an aggregate of: (i) 500,000 shares of our Common Stock at a price of $10.00 per share;\nand (ii) warrants to purchase 500,000 of our Common Stock. The warrants were exercisable immediately and for a term of 18 months and\nhave an exercise price of $10 per share. The aggregate gross proceeds from the offering were approximately $5,000,000 and the offering\nclosed on May 11, 2021. On April 5, 2022, we entered into an agreement with the Investors pursuant to which we extended the term of the\nwarrants, to expire on November 11, 2023. On November 1, 2023, we and the Investors executed a second extension agreement, such that\nthe term of the warrants was extended to expire on November 11, 2024. On June 20, 2024, we entered into a Warrant Amendment Agreement\nwith the Investors to amend the terms of the warrants issued in connection with the May 11, 2021 securities purchase agreements. Under\nthe Warrant Amendment Agreement, we and the Investors agreed to: (i) extend the warrant exercise term to May 11, 2026; (ii) amend the\nwarrant exercise price, increasing it from $10.00 per share to $16.25 per share; and (iii) include a beneficial ownership blocker that\nlimits the exercise of such warrants if the exercise would result in the holder beneficially owning more than 19.99% of the Company’s\ncommon stock immediately following the exercise. On March 10, 2026, we entered into an additional Warrant Amendment Agreement with the\nInvestors pursuant to which we extended the term of the warrants, to expire on May 1, 2031.\n\n \n\n21\n\n \n\n \n\nOn\nDecember 30, 2025, we entered into securities purchase agreements with seven (7) non-U.S. investors, pursuant to which we, in a private\nplacement offering, agreed to issue and sell to the investors an aggregate of: (i) 83,338 shares of our common stock at a price\nof $9.00 per share); and (ii) warrants to purchase 83,338 shares of common stock. The warrants have an exercise price of $16.25 per share,\nare exercisable immediately and expire on November 30, 2026, subject to extension to May 30, 2028 if a public offering or other qualifying\nfinancing of at least $2,500,000 has not occurred prior to such date. In addition, the securities purchase agreement contains a make\nwhole provision that provides for the investors to receive additional shares of Common Stock in the event that we consummates a firm-commitment\nunderwritten public offering on a major stock exchange by November 30, 2026 at a price per share (after giving effect to a 20% discount)\nthat is less than the Purchase Price. The aggregate gross proceeds from the offering were approximately $750,000 and the offering closed\non January 6, 2026. Proceeds from the offering were used for general corporate purposes and working capital, including supporting our\noperational and commercialization initiatives. On March 10, 2026, we entered into an additional Warrant Amendment Agreement with the\nInvestors pursuant to which we extended the term of the warrants, to expire on May 1, 2031.\n\n \n\nOn May 14, 2026, we entered\ninto the Underwriting Agreement with the Underwriters relating to the the Offering of 1,125,000 units, with each unit consisting of one\nshare of our common stock and warrants to purchase one share of our common stock at an exercise price of $8.60 per share, exercisable\nfor a period of five years, subject to certain adjustments and cashless exercise provisions. The combined price public offering price\nper unit was $8.20. Under the terms of the Underwriting Agreement, we granted the Underwriters an option, exercisable for 45 days following\nthe closing of the Offering, to purchase up to an additional 168,750 shares of common stock and/or Warrants to purchase 168,750 shares\nof common stock to cover over-allotments, if any. On May 15, 2026, the Underwriter partially exercised its over-allotment option with\nrespect to Warrants to purchase 168,750 shares of common stock.\n\n \n\nOn May 18, 2026, we closed\nthe Offering, as well as the partial exercise of the over-allotment option, and issued the Shares and Warrants, resulting in aggregate\ngross proceeds of approximately $9,225,000, before deducting underwriting discounts and commissions and estimated offering expenses. Concurrently\nwith the closing of the Offering, we also issued warrants to purchase an aggregate of up to 90,000 shares of common stock to the\nrepresentative of the Underwriters, with an exercise price of $10.25 per share (the “Representative’s Warrants”). The\nRepresentative’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\nWe currently believe that\nour existing capital resources will be sufficient to support our operating for the next twelve months.\n\n \n\n**Off-Balance\nSheet Arrangements**\n\n \n\nAs\nof March 31, 2026, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K."}