What changed in this filing

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Item 9A. Controls and Procedures

2021-03-30 compared with 2020-04-13 · 1481 added, 812 removed, 284 unchanged (89% of the section changed)

28 unchanged sentences

in internal controls:

to the size of the Company and available resources, there are limited personnel to assist

with the accounting and financial reporting function, which results in a lack of segregation

Company does not have a full time Chief Executive Officer nor Chief Financial Officer

that can oversee day to day operations and the financial reporting function.

Company does not have an Independent Audit Committee that can provide management oversight.

Due to the size

of the Company and available resources, there are limited personnel to assist with the accounting and financial reporting

function, which results in a lack of segregation of duties.

The Company does

not have a full time Chief Executive Officer nor Chief Financial Officer that can oversee day to day operations and the financial

reporting function.

The Company does

not have an Independent Audit Committee that can provide management oversight.

Control over Financial Reporting

25 unchanged sentences

Report on Internal Control over Financial Reporting

previous management team, as in place as of December 31, 2019, assessed the effectiveness of our internal control over financial

reporting as of December 31, 2019.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring

Organizations of the Treadway Commission (COSO) in Internal Control —

the supervision and with the participation of the Company’s management, including our principal executive officer and principal

financial officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2020.

making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission

(COSO) in Internal Control —

Integrated Framework.

Based on this assessment, management,

as in place as of December 31, 2019, determined that the Company’s internal control over financial reporting as of December

31, 2019, was not effective.

Based on this assessment, management, as in place as of December 31,

2020, determined that the Company’s internal control over financial reporting as of December 31, 2020, was not effective.

Other Information

On April 12, 2020,

the board of directors appointed Erez Nachtomy as the Company’s Interim Chief Financial Officer.

No family relationships

exist between Mr.

Nachtomy and any of the Company’s directors or other executive officers.

Other than his existing compensation

with the Company pursuant to his role as Vice Chairman, there are no arrangements between Mr.

Nachtomy and any other person pursuant

Nachtomy was selected as an officer, nor are there any transactions to which the registrant is or was a participant

and in which Mr.

Nachtomy has a material interest subject to disclosure under Item 404(a) of Regulation S-K except as otherwise

set forth in this Annual Report.

Directors, Executive Officers, and Corporate Governance.

following table sets forth:

names of our current directors and executive officers,

ages as of December 31, 2019, the fiscal year for which this Annual Report is being filed;

capacities in which they served for UAS as of December 31, 2019:

in Position Since

CEO and Director

Christopher Leith

Financial Officer

Christopher M.

connection with the Share Exchange, on March 9, 2020, the above officers and directors of the Company stepped down from their

positions, and effective thereupon, the following persons become directors and officers of the Company.

directors and executive officer and their ages as of March 30, 2021, are as follows:

Chief Executive

Officer, Chief Technology Officer, President and Director

Erez Nachtomy*

Interim Chief Financial

Officer and Vice Chairman

Effective on April 12, 2020, Mr.

Nachtomy was also appointed to serve as our Interim Chief Financial Officer.

Officer and President

Chief Technology

Officer and Director

Vice Chairman

Chief Financial

Alroy , Director and Chairman.

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Yariv Alroy holds an LL.B from Tel Aviv University.

Aharon , CEO, CTO, President and Director.

Sagiv Aharon co-founded Duke Israel.

Balucka , CEO and President.

Yossef Balucka has been serving as CEO and President of our Company, Duke and Duke Israel since

Prior to entering the private sector, Mr.

Balucka served for twenty-five years in various field and headquarters positions

in the Israeli Navy and retired as Colonel.

Following his retirement from the Israeli Navy, between 2014 to 2016, Mr.

served as a senior executive and management member for retail and customer service at Partner Communications Ltd.

one of the leading mobile telecommunications companies in Israel.

From 2017 to 2019 Mr.

Aharon worked at

the Israeli Aerospace Industry as a structural design engineer on a classified hybrid structure (composite/metal) air vehicle.

Balucka served as the CEO of Electra Technologies

Ltd., a division of Electra Ltd.

(TASE:ELTR), which is active in the fields of integrated electro-mechanical and construction.

Since 2019 Mr.

Balucka is the owner of T.R.

Eshkolot Com Services Ltd., providing global strategic consulting services.

holds a BA in Economics and Business Administration and an MA in Social Sciences from the Haifa University, and MA in Public Administration

from the Bar Ilan University.

Sagiv Aharon ,

CTO and Director.

Sagiv Aharon co-founded Duke Israel and served as the Company’s CEO from March 2020 until March 2021.

From 2008 to 2010, Mr.

Aharon worked at the Israeli Aerospace Industry as a structural design engineer on a classified hybrid structure

(composite/metal) air vehicle.

From 2010 to 2011, Mr.

Aharon worked at Rafael Advanced Weapon Systems Ltd.

as a mechanical design engineer for complex active/reactive

armor solutions for land vehicles.

as a mechanical design

engineer for complex active/reactive armor solutions for land vehicles.

From 2011 to 2012, Mr.

Aharon worked for Elbit Systems Ltd.

(NASDAQ:ESLT) as a mechanical design

engineer and a system integrator at several remotely operated weapon systems upon land vehicles.

Aharon also serves as the

CEO of Axis Aerospace Mechanical Design Ltd., a company working in the field of airborne structural projects and flight experiments,

following strict aerospace level quality standards (AS9100).

Aharon worked for Elbit Systems

(NASDAQ:ESLT) as a mechanical design engineer and a system integrator at several remotely operated weapon systems upon land

Aharon also serves as the CEO of Axis Aerospace Mechanical Design Ltd., a company working in the field of airborne

structural projects and flight experiments, following strict aerospace level quality standards (AS9100).

Aharon holds a B.Sc.

in mechanical engineering with specialty

in control and robotics from the Technion –

in mechanical engineering with specialty in control and robotics from the Technion –

Israel Institute of Technology.

Nachtomy , Director, Vice Chairman and Interim Chief Financial Officer.

Erez Nachtomy is the Managing Director of Ermi

Nachtomy Assets Ltd., a private consulting services and investments firm.

Nachtomy , Director, Vice Chairman of the Board.

Erez Nachtomy is the Managing Director of Ermi Nachtomy Assets Ltd., a

private consulting services and investments firm.

Since May 2020 Mr.

Nachtomy is the Acting CEO of SHL Telemedicine Ltd.

From 1989 until 2001, Mr.

Nachtomy practiced law as

an associate in one of the leading law firms in Israel, becoming a partner in the firm in 1994 and later on promoted to a senior

Nachtomy practiced law as an associate in one of the leading law firms in Israel, becoming a partner

in the firm in 1994 and later on promoted to a senior partner.

In March 2001, Mr.

Nachtomy joined the executive team of SHL Telemedicine Ltd.

(SWX:SHLTN), as Vice President, and from

January 2005 to December 2016 he served as Executive Vice President.

SHL Telemedicine Ltd.

is active in the field of medical technology

development and provision of global telemedicine services, including in the United States, Germany, India and Japan.

Nachtomy joined the executive team of SHL Telemedicine

(SWX:SHLTN), as Vice President, and from January 2005 to December 2016 he served as Executive Vice President.

SHL Telemedicine

is active in the field of medical technology development and provision of global telemedicine services, including in the

United States, Germany, India and Japan.

In December 2018 Mr.

Nachtomy was nominated as Member of the Board of SHL Telemedicine,

and since May 2021 Mr.

Nachtomy has been serving as the acting CEO of SHL Telemedicine Ltd.

Nachtomy holds an LL.B.

from Tel Aviv University,

Aviv University, Israel.

Antebi , Director.

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Antebi joined SHL in May 2004 as

CFO of ShahalIsrael.

CFO of Shahal Israel.

Prior to joining SHL, from 2000 to 2004, Mr.

Antebi was a manager with Ernst & Young in Israel.

is a certified public accountant (CPA) in Israel and holds a B.A.

in Accounting and Economics from Tel Aviv University, Israel.

addition to our officers and directors, the following persons serve as advisory board members.

“Eric”

Womble –

Advisory Board Member (since June 2018).

Womble brings many years of experience

in the defense industry and the executive and legislative branches of the U.S.

federal government and currently serves as a consultant

with Elbit Systems of America LLC.

Prior to that Mr.

Womble served as President and Chief Executive Officer of ELTA North America

from February 2015 until February 2018.

Prior to that, Mr.

Womble served in leading executive roles at Northrop Grumman Corporation

(NGC) –

Huntington Ingalls Industries.

He joined NGC with over twenty-three years of experience serving in the Executive

and Legislative Branches of the United States federal government.

Jay Cohen, Ph.D.

, Advisory Board Member (since January 1, 2017).

From 1984 to 1989, Mr.

Cohen worked at McDonnell Douglas

Aerospace, as Director of Technical Operations and then as Director of Advance Launch System.

From 1989 to 1996, Mr.

as Vice President of Advance Programs for McDonnell Douglas in Russia, working closely with launch vehicle manufacturers and strategic

weapon systems designers, and in the United States as Director of the Army/Grumman/McDonnell Douglas Neutral Particle Beam Experiment.

From 1996 to 2001, Mr.

Cohen served as Director of Advance Program Development for Cytec Fiberite Inc.

& AMT I and was responsible

for the Aerospace Advanced Program development.

From 2001 to 2018, Mr.

Cohen served as Senior Vice President of New Business Development

and Strategic Technology for Hitco Carbon Composites, a major supplier to the aerospace and industrial markets, where he was responsible

for all business development and strategic technology.

Cohen was a Fullbright Hayes Post Doctoral Fellow at the Israel Institute

of Technology, and has published over 40 professional papers over the course of his career.

Cohen holds a B.S., M.S., and

in Civil Engineering (Structures & Materials) from the Carnegie Institute of Technology.

Rothschild (Major General, Res.) , Advisory Board Member (since January 1, 2017).

Rothschild served in the IDF intelligence

corps for over thirty years, in various capacities, including Assistant to the IDF Chief of Staff, commander of the IDF Units

in Southern Lebanon, Deputy Director of Military Intelligence and Chief of Intelligence Research and Analysis.

In 1995, upon retiring

from the IDF, Gen.

Rothschild co-founded Netacs Security Ltd.

where he continues to serve as President.

Rothschild was most

recently the Director of the Institute for Policy and Strategy at the Interdisciplinary Center Herzliya and is currently the Chairman

of the Annual Herzliya Conference Series on the Balance of Israel’s National Security.

Rothschild has served as a member

of the advisory board of the Central Bank of Israel, chairman of the board of trustees of the Afeka Tel Aviv Academic College

of Engineering, chairman of the Israeli Board of the America-Israel Friendship League and member of the board of governors of

the Hebrew University Jerusalem.

Russo (Major General, Res.) , Advisory Board Member (since August 15, 2017).

Russo served in many positions of command

in the IDF and was a former GOC Southern Commander and member of the IDF General Staff.

He played an integral role in the planning

and construction of the southern border fence project that has been responsible for preventing further infiltration by illegal

migrants and terrorists.

Since his retirement from the IDF in 2013, Gen.

Russo has been providing strategic consultancy services

to various companies in Israel and abroad.

He holds a B.A.

in political science from the University of Haifa and an M.B.A.

Tel Aviv University.

Antebi is a certified public accountant (CPA) in Israel and holds a B.A.

in Accounting and Economics from Tel Aviv University,

Zakai , Chief Financial Officer.

Zakai brings extensive and proven experience in similar positions with companies operating

in international markets and related industries.

Prior to joining the Company Mr.

Zakai served as the Chief Financial Officer

of Save Foods, Inc.

(SAFO:OTC) (August 2017 to date), Sonovia Ltd.

(NNTTF:OTC) (October 2014 to August 2020), Blue Sphere Corp.

(BLSP:OTC) (January 2012 till May 2016) and of Todos Medical Ltd.

(TOMDF:OTC) (February 2017 till January 2018).

Prior to that,

Mr Zakai worked as an accountant for nine years at Kost, Forer, Gabbay & Kasierer, an independent registered public accounting

firm and a member firm of Ernst & Young Global, where he last served as a Senior Manager and worked with technology companies

publicly traded on the Nasdaq Stock Market and on the Tel Aviv Stock Exchange.

Zakai holds a B.A.

in accounting from the College

of Management in Rishon Le’Zion, Israel.

is no family relationship among the directors and officers of the Company.

in Certain Legal Proceedings

the past ten years, none of our present or former directors, executive officers or persons nominated to become directors or executive

A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent

or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a

general partner at or within two years before the time of such filing, or any corporation or business association of which he

was an executive officer at or within two years before the time of such filing;

Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations

and other minor offenses);

Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of

competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker,

leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person

of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person,

director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing

any conduct or practice in connection with such activity;

Engaging in any type of business practice;

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation

of Federal or State securities laws or Federal commodities laws;

Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal

or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity

described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal

or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed,

suspended, or vacated;

Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to

the past ten (10) years, none of our directors or our executive officer have been (i) involved in any petition under Federal bankruptcy

laws or any state insolvency law, (ii) convicted in a criminal proceeding or is a named subject of a pending criminal proceeding

(excluding traffic violations and other minor offenses), (iii) subject of any order, judgment, or decree, not subsequently reversed,

suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from (a) acting as a future’s

commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction

merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing,

or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of

any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice

in connection with such activity, (b) engaging in any type of business practice, or (c) engaging in any activity in connection

with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws

or Federal commodities laws, or (d) subject of any order, judgment or decree, not subsequently reversed, suspended or vacated,

of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right to engage in any activity

described in (iii)(a), (iv) found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal

or State securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended,

or vacated, (v) found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to

have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission

has not been subsequently reversed, suspended or vacated.

Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding,

not subsequently reversed, suspended or vacated, relating to an alleged violation of:

Any Federal or State securities or commodities law or regulation;

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent

injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal

or prohibition order;

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity;

Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any

self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.

78c(a)(26))), any registered entity

(as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.

1(a)(29))), or any equivalent exchange, association, entity

or organization that has disciplinary authority over its members or persons associated with a member.

On September 30, 2019, the SEC filed a complaint in the Southern District of New York regarding certain actions by Christopher

Spencer, who is the beneficial owner of GBC, the beneficial owner of 37.2 percent of our outstanding common stock, involving

FAB Universal Corp.

(“FAB”).

The Company understands that the SEC is in the process of filing settled charges arising

out of the complaint for court approval and expects that public notice regarding such settlement will appear shortly on the SEC’s

to the SEC’s complaint, between 2012 and 2013, Mr.

Spencer and John Busshaus, the former Chief Executive Officer and former

Chief Financial Officer of FAB, respectively, negligently used a series of misrepresentations about the capabilities and growth

prospects of a central component of FAB’s business in China, namely FAB’s multi-media kiosk business.

Spencer and Mr.

Busshaus believed they were acting properly in receiving and reviewing information provided by FAB’s

accounting and financial personnel located in China and relying upon this information prior to making these representations, and

have accepted the SEC’s offer of settlement without admitting or denying the allegations or findings contained in the complaint.

The settlement is not expected to prevent Mr.

Spencer or Mr.

Busshaus from serving as an officer or director of a public company.

Spencer nor Mr.

Busshaus are officers or directors of the Company.

The Company was not named in this SEC complaint nor

involved in any way in the underlying activities of FAB from 2012 to 2013.

Furthermore, neither GBC, a shareholder of the

Company, nor any officers, directors or employees of GBC other than Mr.

Spencer were named in the SEC complaint or involved in

any way in the underlying activities of FAB from 2012 to 2013.

During the quarterly period ended December 31, 2019, there were no changes to the procedures by which shareholders may recommend

nominees to the Company’s Board of Directors.

(vi) subject of, or a party to, any Federal or State judicial or administrative

order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (a)

any Federal or State securities or commodities law or regulation, (b) any law or regulation respecting financial institutions

or insurance companies, or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity,

or (vii) the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory

organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.

78c(a)(26))), any registered entity (as defined in

Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.

1(a)(29))), or any equivalent exchange, association, entity or organization

that has disciplinary authority over its members or persons associated with a member.

Except as set forth in our discussion below

in “Transactions with Related Persons;

Promoters and Certain Control Persons;

Director Independence,”

directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive

officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

uphold a set of basic values to guide our actions and are committed to maintaining the highest standards of business conduct and

2 unchanged sentences

officers (including our principal executive officer and principal financial officer) and employees, which, in conjunction with

our Certificate of Incorporation, and Bylaws, form the framework for governance of UAS.

The Code of Ethics and Business Conduct,

Bylaws and Article of Incorporation are available at our corporate offices.

Stockholders may request free printed copies of these

documents from:

our Certificate of Incorporation, and Bylaws, as amended (the “Bylaws”) form the framework for governance of UAS.

The Code of Ethics and Business Conduct, Bylaws and Article of Incorporation are available at our corporate offices.

may request free printed copies of these documents from:

Carmel, Israel, 3903212

Delinquent Section 16(a) Reports

16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to file

reports regarding ownership of, and transactions in, our securities with the SEC and to provide us with copies of those filings.

have reviewed all forms provided to us or filed with the SEC.

Based on that review and on written information given to us by our executive

officers and directors, we believe that all Section 16(a) filings during the past fiscal year were filed on a timely basis and that all

directors, executive officers and 10% beneficial owners have fully complied with such requirements during the past fiscal year, except

Afek Trading –

Kadosh and Razi Ltd.

did not file a Form 3 as required due to their acquisition of shares on or about March 10, 2020.

of the Board of Directors

The board of directors has not adopted any

written charters for any standing.

Our board of directors oversees the operations of the Company.

do not have an audit or compensation committee and have no independent directors that examines transactions of the nature described

herein this item.

We do not have any audit or compensation committee.

the board of directors performs these functions as a whole.

Thus, there is a potential conflict in that board members who are also part of management will participate in discussions concerning

management compensation and audit issues that may affect management decisions.

To the extent possible, a majority of the disinterested

members of our board of directors will approve future affiliated transactions.

Additionally, because the Company’s Common

Stock is not listed for trading or quotation on a national securities exchange, we are not required to have such committees.

to the Board of Directors

12 unchanged sentences

Non-equity incentive plan compensation

Change in Pension Value and Nonqualified deferred

compensation earnings

Change in Pension Value and Nonqualified deferred compensation earnings

All other compensation

1 unchanged sentence

Chris Leith –

the years ended December 31, 2018 and December 31, 2019, the Company accrued pay in the amount of $10,000 and $7,500, respectively,

to its Chief Executive Officer and Chairman of the Board for his services.

The total accounts payable of the Company to its Chief

Executive Officer and Chairman of the Board for his services is $32,500 as of December 31, 2019.

The account payable was compromised

and converted to shares of the Company post-Share Exchange in conjunction with the Share Exchange.

Sagiv Aharon –

Former CEO and current CTO and Director*

Shlomo Zakai –

and Chris Leith are no longer executive officers.

Aharon and Zakai became members of our executive officers, as the

case may be, following the Share Exchange.

During the years

ended December 31, 2020 and December 31, 2019, the Company accrued pay in the amount of $200 and $7,500, respectively, to

its Chief Executive Officer and Chairman of the Board for his services.

The total accounts payable of the Company to its former

Chief Executive Officer and Chairman of the Board for his services is $32,500 as of December 31, 2020.

The account payable

was compromised and converted to shares of the Company post-Share Exchange in conjunction with the Share Exchange.

were no shares of restricted stock awarded during the Company’s fiscal year ended December 31, 2020.

3 unchanged sentences

EQUITY AWARDS AT DECEMBER 31, 2020

Option awards

of securities

unexercisable

Equity incentive plan awards:

number of securities underlying unexercised unearned options (#)

expiration date

Equity incentive plan awards:

number of unearned shares, units or other rights that have not vested

Equity incentive plan awards:

market or payout value of unearned shares, units or other rights that have not vested

Equity Awards at Fiscal Year End

are no outstanding equity awards for the year ended December 31, 2020.

of Plan-Based Awards for 2020

1 unchanged sentence

Exercises and Stock Vested

following table sets forth information concerning fiscal 2019 option exercises and restricted stock that vested during fiscal

2019 for the named executives.

EXERCISES AND STOCK VESTED DURING FISCAL 2019

Option awards

Pension Benefits

are no option exercises and restricted stock that vested during fiscal 2020 for our named executives.

Company does not have any plans that provide for payments or other benefits at, following, or in connection with retirement.

9 unchanged sentences

of paying for the exercise of stock options.

Stockholder Approval of Equity Compensation

The following table presents information as of December 31, 2019, about our common stock that

may be issued upon the exercise of options granted to employees, consultants or members of the board of directors under all of

our existing equity compensation plans and individual arrangements.

Plan Category

to be issued upon

exercise of options

Weighted-average

exercise price of

outstanding options

available for future

issuance under

existing equity

compensation plans

(excluding shares

first column)

Plans approved by stockholders

Plans not approved by stockholders

In 2019, we did not pay our non-employee directors

a cash retainer.

We reimburse directors for out-of-pocket expenses they incur when attending meetings of the board of directors.

On April 12, 2020, effective as of March 1, 2020, our board of directors approved payment of certain fees to our directors in the

amounts of $4,980, $4,980 and $6,950 per month to our directors, Yariv Alroy, Sagiv Aharon and Erez Nachtomy (each, an “Active

Director”), respectively.

On April 12, 2020, we also enacted a policy to pay each director (that is not otherwise an Active

Director) an amount of $1,500 for each calendar quarter and $400 for attendance of each meeting of the board of directors.

amounts are exclusive of Israeli VAT, if applicable.

following table sets forth the compensation we paid our non-employee directors during the fiscal year ended December 31, 2019.

Unless otherwise noted, the amounts shown represent what was earned in the Company’s fiscal year ended December 31, 2019.

COMPENSATION TABLE –

FISCAL YEAR ENDED DECEMBER 31, 2019

Option awards

Non-equity incentive plan compensation ($)

Nonqualified deferred compensation earnings ($)

All other compensation ($)

of December 31, 2019, there were 25,000 stock options outstanding that were granted to the outside directors.

reimburse directors for out-of-pocket expenses they incur when attending meetings of the board of directors.

On April 12, 2020,

effective as of March 1, 2020, our board of directors approved payment of certain fees to our directors in the amounts of $4,980,

$4,980 and $6,950 per month to our directors, Yariv Alroy, Sagiv Aharon and Erez Nachtomy (each, an “Active Director”),

respectively.

On April 12, 2020, we also enacted a policy to pay each director (that is not otherwise an Active Director) an amount

of $1,500 for each calendar quarter and $400 for attendance of each meeting of the board of directors.

These amounts are exclusive

of Israeli VAT, if applicable.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Ownership of Certain Beneficial Owners

following table sets forth certain information as of April 13, 2020 regarding the beneficial ownership of our common stock,

each person (or

group of affiliated persons) who, insofar as we have been able to ascertain, beneficially owned more than 5% of the outstanding

shares of our common stock;

each director;

each named executive

all directors and

executive officers as a group.

following table sets forth certain information as of March 30, 2021 regarding the beneficial ownership of our common stock, for:

person (or group of affiliated persons) who, insofar as we have been able to ascertain, beneficially owned more than 5% of

the outstanding shares of our common stock;

named executive officer;

directors and executive officers as a group.

ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities.

2 unchanged sentences

computing the number and percentage of shares beneficially owned by a person, shares that may be acquired by such person within

60 days of the date of this Annual Report are counted as outstanding, while these shares are not counted as outstanding for computing

60 days of the date of this prospectus are counted as outstanding, while these shares are not counted as outstanding for computing

the percentage ownership of any other person.

1 unchanged sentence

Robotics, 1 Etgar Street (1st Floor), Tirat-Carmel, Israel 3903212.

We relied on information received from each

stockholder as to beneficial ownership, including information contained on Schedules 13D and 13G and Forms 3, 4 and 5.

of April 13, 2020, there were 40,075,151 shares of common stock issued and outstanding.

Name and Address of Beneficial Owner

relied on information received from each stockholder as to beneficial ownership, including information contained on Schedules

13D and 13G and Forms 3, 4 and 5.

As of March 30, 2021, there were 41,169,035 shares of common stock issued and outstanding.

Address of Beneficial Owner

and Nature of

7 unchanged sentences

Eran Meytal (6)

Executive Officers:

Named Executive Officers:

Christopher Leith**

Christopher M.

Yossef Balucka

Erez Nachtomy

All directors and executive officers as a group (9 Persons)**

Begley, Christopher Leith and Christopher M.

are no longer members of our board of directors or executive officers, as the case may be.

Aharon, Alroy, Nachtomy and

Antebi became members of our board of directors and executive officers, as the case may be, following the Share Exchange.

(1) The persons named in this table have sole voting and investment

power with respect to all shares of common stock reflected as beneficially owned by them.

A person is deemed to be the beneficial

owner of securities that can be acquired by such person within sixty (60) days from April 13, 2020, and the total outstanding

shares used to calculate each beneficial owner’s percentage includes such shares, although such shares are not taken into

account in the calculations of the total number of shares or percentage of outstanding shares.

Beneficial ownership as reported

does not include shares subject to option or conversion that are not exercisable within 60 days of March 28, 2020.

Amir Kadosh, Zabotinsky 50, Givat Shmuel,

(3) Includes 645,053 shares of common stock issuable upon full

conversion of the currently outstanding principal amount of the Convertible Loan Agreement entered into by the shareholder at

the conversion price in effect as of the date of this Current Report.

Christopher Leith and Christopher M.

Nelson are no longer members of our board of directors or executive officers, as the

Aharon, Alroy, Nachtomy, Antebi and Zakai became members of our board of directors and executive officers,

as the case may be, following the Share Exchange.

The persons named

in this table have sole voting and investment power with respect to all shares of common stock reflected as beneficially owned

A person is deemed to be the beneficial owner of securities that can be acquired by such person within sixty

(60) days from March 30, 2021, and the total outstanding shares used to calculate each beneficial owner’s percentage

includes such shares, although such shares are not taken into account in the calculations of the total number of shares or

percentage of outstanding shares.

Beneficial ownership as reported does not include shares subject to option or conversion

that are not exercisable within 60 days of March 30, 2021.

Amir Kadosh, Zabotinsky 50, Givat Shmuel, Israel.

Includes 645,053

shares of common stock issuable upon full conversion of the currently outstanding principal amount of the Convertible Loan

Agreement entered into by the shareholder at the conversion price in effect as of the date of this Current Report Address:

5201 Pine Tree Dr., Miami Beach, FL,33140, USA.

(4) Includes 645,053 shares of common stock issuable upon full

conversion of the currently outstanding principal amount of the Convertible Loan Agreement entered into by the shareholder at

the conversion price in effect as of the date of this Current Report.

Protasio Tagle 59, San Miguel Chapultepec, 11850,

Miguel Hidalgo, CDMX, Mexico.

(5) Includes 512,476 shares of common stock issuable upon full

conversion of the currently outstanding principal amount of the Convertible Loan Agreement entered into by an affiliate of the

shareholder at the conversion price in effect as of the date of this Current Report.

Includes 645,053

shares of common stock issuable upon full conversion of the currently outstanding principal amount of the Convertible Loan

Agreement entered into by the shareholder at the conversion price in effect as of the date of this Current Report.

Protasio Tagle 59, San Miguel Chapultepec, 11850, Miguel Hidalgo, CDMX, Mexico.

Includes 512,476

shares of common stock issuable upon full conversion of the currently outstanding principal amount of the Convertible Loan

Agreement entered into by an affiliate of the shareholder at the conversion price in effect as of the date of this Current

Zuk Marble Products 1998 Ltd.

is the lender

under the Convertible Loan Agreement, and to the Company’s knowledge, this is a company held and controlled by Moshe Zuk

and as a result thereof, Mr.

Zuk may be deemed to be the beneficial owner of such shares.

22 Hataas Street, Kfar Saba,

(6) Includes 430,037 shares of common stock issuable upon full

conversion of the currently outstanding principal amount of the Convertible Loan Agreement entered into by an affiliate of the

shareholder at the conversion price in effect as of the date of this Current Report.

is the lender under the Convertible Loan Agreement, and to the Company’s knowledge,

this is a company held and controlled by Moshe Zuk and as a result thereof, Mr.

Zuk may be deemed to be the beneficial owner

of such shares.

22 Hataas Street, Kfar Saba, Israel.

Includes 430,037

shares of common stock issuable upon full conversion of the currently outstanding principal amount of the Convertible Loan

Agreement entered into by an affiliate of the shareholder at the conversion price in effect as of the date of this Current

Alonim Marketing and Sales Promotion Ltd.

is the lender under the Convertible Loan Agreement, and to the Company’s knowledge, this is a company held and controlled

by Eran Meytal and as a result thereof, Mr.

Meytal may be deemed to be the beneficial owner of such shares.

Elkakhi Street, Tel Aviv, Israel.

420 Royal Palm Way, Suite 100, Palm Beach, FL

is the lender under the Convertible Loan Agreement, and to the Company’s

knowledge, this is a company held and controlled by Eran Meytal and as a result thereof, Mr.

Meytal may be deemed to be the

beneficial owner of such shares.

31 Mordekhai Elkakhi Street, Tel Aviv, Israel.

are no arrangements known to the Company, including any pledge by any person of securities of the Company, the operation of which

may at a subsequent date result in a change in control of the Company.

Equity Compensation Plan Information

The following information is provided as of December 31, 2019:

Plan Category

of securities to be issued upon exercise of outstanding options

average exercise price of outstanding options

of securities remaining available for future issuance under equity compensation plans excluded securities reflected in column

Equity compensation plans approved by stockholders

Equity compensation plans not approved by stockholders

Compensation Plan Information

there is no equity compensation plan in place.

Certain Relationships and Related Transactions, and Director Independence.

with Related Persons

of December 31, 2019, Christopher Nelson, then a Director of UAS Drone Corp., is also a Managing Director of GBC, an affiliated

party and greater than 10% stockholder.

Christopher Leith, our then Acting CFO, is a Vice President at GBC.

Leith have any ownership interests in GBC and have no rights to vote or receive any benefits from shares of the Company

owned by GBC.

2018, GBC, a stockholder of the Company, advanced $98,349 to the Company.

During 2019, this stockholder advanced $53,754 to the

The advances bear no interest or maturity.

The balance due to the stockholder was $200,111, as of December 31, 2019.

In connection with the Share Exchange, to extinguish this debt, immediately effective as of the Effective Time, we issued to GBC

its New Debenture in the amount of $99,054.

the Share Exchange, the Company was a party to the below related transactions.

On January 1, 2015 the Duke executed a Loan Agreement with Aphek,

whereby Aphek agreed to provide a loan up to an amount of approximately $132,000 (the “Aphek Loan”).

On January 1,

2015 Duke executed a Loan Agreement with Sagiv Aharon whereby he agreed to provide a loan of approximately $55,000 (the “Sagiv

Loan”).

The Aphek Loan and Sagiv Loan bear interest rates as defined in Section 3(j) of the Israeli tax ordinance (the interest

rate for 2015 is 3.05% and 2.56% for 2016).

On June 5, 2016, Duke executed a Loan Agreement with Iki Alroy Investment Ltd., Erez

Alroy Investment Ltd.

January 1, 2015 the Duke executed a Loan Agreement with Aphek, whereby Aphek agreed to provide a loan up to an amount of approximately

$132,000 (the “Aphek Loan”).

On January 1, 2015 Duke executed a Loan Agreement with Sagiv Aharon whereby he agreed

to provide a loan of approximately $55,000 (the “Sagiv Loan”).

The Aphek Loan and Sagiv Loan bear interest rates as

defined in Section 3(j) of the Israeli tax ordinance (the interest rate for 2015 is 3.05% and 2.56% for 2016).

On June 5, 2016,

Duke executed a Loan Agreement with Iki Alroy Investment Ltd., Erez Alroy Investment Ltd.

and Ermi Nachtomy Assets Ltd.

(collectively, the “Lenders”), whereby the Lenders agreed to provide

a loan in an aggregate amount of $100,000 to $500,000 in the aggregate (the “Group Loan”).

Pursuant to the terms of

the Group Loan, the Lenders were scheduled to provide monthly installments of between $20,000 and $40,000, subject to the Lender’s

The Group Loan bears an annual fixed interest rate of 3%.

Any additional amounts lent to Duke in 2017 by Aphek, Sagiv

or the Lenders, over the amounts stated in the Aphek Loan and Sagiv Loan agreements or the Group Loan agreement, were made available

to Duke on the same terms as stated in the respective agreements.

On November 20,

2017, Duke Israel made available to Mr.

Sagiv Aharon, Duke’s CEO and CTO and Director, a loan in the amount of $10,000.

loan shall bear interest rates as defined in the Israeli tax ordinance.

The Loan, including the accumulated interest amount, shall

be repaid at the earlier of the following dates:

(collectively,

the “Lenders”), whereby the Lenders agreed to provide a loan in an aggregate amount of $100,000 to $500,000 in the

aggregate (the “Group Loan”).

Pursuant to the terms of the Group Loan, the Lenders were scheduled to provide monthly

installments of between $20,000 and $40,000, subject to the Lender’s discretion.

The Group Loan bears an annual fixed interest

Any additional amounts lent to Duke in 2017 by Aphek, Sagiv or the Lenders, over the amounts stated in the Aphek Loan

and Sagiv Loan agreements or the Group Loan agreement, were made available to Duke on the same terms as stated in the respective

November 20, 2017, Duke Israel made available to Mr.

Sagiv Aharon, Duke’s CEO and CTO and Director, a loan in the amount

This loan shall bear interest rates as defined in the Israeli tax ordinance.

The Loan, including the accumulated interest

amount, shall be repaid at the earlier of the following dates:

(i) December 31, 2019;

or (ii) at the date of repayment of the loan made available

or (ii) at the date of repayment of the

loan made available by Mr.

Aharon to Duke according to a loan agreement dated January 1, 2015;

or (iii) from any dividend or other distribution to

be made by Duke to its shareholders.

Aharon is entitled to repay the outstanding amount of the loan at any time.

On November 20, 2017, Duke made available to Mr.

Raziel Atuar,

then Duke’s CEO, a loan in the amount of $10,000.

The loan shall bear an annual fixed interest of 3.25%.

This loan, including

the accumulated interest, shall be repaid at the earlier of the following dates:

or (iii) from any dividend or other

distribution to be made by Duke to its shareholders.

Aharon is entitled to repay the outstanding amount of the loan at any

November 20, 2017, Duke made available to Mr.

Raziel Atuar, then Duke’s CEO, a loan in the amount of $10,000.

The loan shall

bear an annual fixed interest of 3.25%.

This loan, including the accumulated interest, shall be repaid at the earlier of the following

(i) December 31, 2019;

or (ii) at the date of

repayment of the loan made available by Aphek to Duke Israel, according to a loan agreement dated January 1, 2015;

(iii) from any

dividend or other distribution to be made by Duke to its shareholders.

Atuar is entitled to prepay the outstanding amount of

the loan at any time.

or (ii) at the date of repayment of the loan made available by Aphek to Duke Israel, according to

a loan agreement dated January 1, 2015;

(iii) from any dividend or other distribution to be made by Duke to its shareholders.

Atuar is entitled to prepay the outstanding amount of the loan at any time.

loans made from Duke to each of Messrs.

20 unchanged sentences

registration of the securities.

The board of directors has not determined that

we have any independent directors.

The Company filed a Registration Statement on Form S-1 with the SEC, which was declared effective

on June 19, 2020, in compliance with the requirements of the Registration Rights Agreement.

board of directors has not determined that we have any independent directors.

Principal Accounting Fees and Services.

following is a summary of the fees billed to UAS by its principal auditor during the calendar years ended December 31, 2019 and

following is a summary of the fees billed by our principal auditor during the calendar years ended December 31, 2020 and 2019:

Audit Fees (1)

1 unchanged sentence

All other fees

of fees for audit of the Company’s annual financial statements, audit of the financial statements of acquired subsidiaries, the

review of interim financial statements included in the Company’s quarterly reports, and the review of other documents filed with

the Commission.

Consists of fees

for audit of the Company’s annual financial statements, audit of the financial statements of acquired subsidiaries,

the review of interim financial statements included in the Company’s quarterly reports, consents, and the review of

other documents filed with the Commission.

fees - Consists of fees for professional services rendered by our principal auditor for the audit of our annual financial statements

23 unchanged sentences

who execute and deliver this Share Exchange Agreement.

of Incorporation as filed on February 4, 2015 (incorporated by reference to our Registration

Statement on Form S-1 filed on August 25, 2019).*

(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

and Plan of Merger, dated April 29, 2020, by and among UAS Drone Corp., Duke Robotics, Inc., and UAS Acquisition Corp.

(incorporated

by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 29,

Articles of Incorporation as filed on February 4, 2015 (incorporated by reference to our Registration Statement on Form S-1 filed on August 25, 2019)

Bylaws, as amended, on March 4, 2020.

Description of Securities.**

(incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

Description of Securities (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 13, 2020).

Form of Convertible Loan Agreement dated March 9, 2020 between UAS Drone Corp.

and certain lenders.

Form of Securities Exchange Agreement dated March 9, 2020 between UAS Drone Corp.

(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

of Securities Exchange Agreement dated March 9, 2020 between UAS Drone Corp.

and Alpha Capital Anstalt.

(incorporated by reference

to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

Form of Securities Exchange Agreement dated March 9, 2020 between UAS Drone Corp.

and GreenBlock Capital LLC.

Form of Securities Exchange Agreement dated March 9, 2020 between UAS Drone Corp.

(incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

of Securities Exchange Agreement dated March 9, 2020 between UAS Drone Corp.

and certain lenders.

Registration Rights Agreement dated March 9, 2020 and certain investors.

(incorporated by reference

to Exhibit 10.4 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

Rights Agreement dated March 9, 2020 and certain investors.

(incorporated by reference to Exhibit 10.5 to the Current Report

on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

8% Convertible Debenture of Alpha Capital Anstalt.

(incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

8% Convertible Debenture of GreenBlock Capital LLC (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

Collaboration Agreement,

dated January 29, 2021, by and between Duke Airborne Systems Ltd.

and Elbit Systems Land Ltd.

(translation from Hebrew)***

Services Agreement,

dated March 25, 2021, between UAS Drone Corp.

and Yossef Balucka.

Amended and Restated Code of Business Conduct and Ethics.

(incorporated by reference to Exhibit 14.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020)

Letter from D.

1 unchanged sentence

Addressed to the U.S.

Securities and Exchange Commission dated March 10, 2020.

Subsidiaries of Registrant.

Certification

of Chief Executive Officer pursuant to Sec.

Securities and Exchange Commission dated March 10, 2020 (incorporated by reference to Exhibit 16.1 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 13, 2020)

List of Subsidiaries of the Company.

Certification of Chief Executive Officer pursuant to Sec.

302 of the Sarbanes-Oxley Act of 2002.

Certification

of Chief Financial Officer pursuant to Sec.

Certification of Chief Financial Officer pursuant to Sec.

302 of the Sarbanes-Oxley Act of 2002.

Certification

of Chief Executive Officer pursuant to 18 U.S.C.

Certification of Chief Executive Officer pursuant to 18 U.S.C.

SECTION 1350.

Certification

of Chief Financial Officer pursuant to 18 U.S.C.

Certification of Chief Financial Officer pursuant to 18 U.S.C.

SECTION 1350.

The following materials from the Registrant,

formatted in XBRL (Extensible Business Reporting Language):

(i) Balance Sheets as of December 31, 2019 and 2018, (ii) Statements

of Operations for the years ended December 31, 2019 and 2018, (iii) Statements of Stockholders’

Deficit for the years ended

December 31, 2019 and 2018, (iv) Statements of Cash Flows for the years ended December 31, 2019 and 2018, and (v) Notes to Financial

Statements.**

Pursuant to Rule 12b-32 of the SEC, this exhibit is incorporated herein by reference to our Registration Statement on Form S-1, filed with the SEC on August 25, 2015.

The following materials

from the Registrant, formatted in XBRL (Extensible Business Reporting Language):

(i) Balance Sheets as of December 31, 2020

and 2019, (ii) Statements of Operations for the years ended December 31, 2020 and 2019, (iii) Statements of Stockholders’

Deficit for the years ended December 31, 2020 and 2019, (iv) Statements of Cash Flows for the years ended December 31, 2020

and 2019, and (v) Notes to Financial Statements.**

Pursuant to Rule

12b-32 of the SEC, this exhibit is incorporated herein by reference to our Registration Statement on Form S-1, filed with

the SEC on August 25, 2015.

Filed herewith.

Certain identified

information in the exhibit has been excluded from the exhibit because it is both (i) not material and (ii) would likely cause

competitive harm to the Company if publicly disclosed.

Furnished herewith.

1 unchanged sentence

following documents are filed as part of this Report:

Financial Statements

Index to Financial Statements

Statement Schedules:

Financial Statement

financial statement schedules have been omitted because they are not applicable or the required information is presented in the

3 unchanged sentences

to be signed on its behalf by the undersigned, thereunto duly authorized.

UAS DRONE CORP.

Executive Officer and Director

March 30, 2021

Yossef Balucka

Chief Executive

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf

of the registrant and in the capacities and on the dates indicated.

Executive Officer and Director

March 30, 2021

Yossef Balucka

Chief Executive Officer

(Principal Executive Officer)

March 30, 2021

Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)

March 30, 2021

Chairman of the

March 30, 2021

Erez Nachtomy

Chief Financial Officer and Vice Chairman of the Board

to Financial Statements

of Independent Registered Public Accounting Firm

Sheets as of December 31, 2019 and 2018

of Operations for the years ended December 31, 2019 and 2018

of Stockholders’

Erez Nachtomy

Vice Chairman

March 30, 2021

Chief Technology

Officer and Director

March 30, 2021

UAS DRONE CORP.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheets as of December 31, 2020 and December 31, 2019

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020 and 2019

Statements of Changes in Shareholders’

Deficit for the years ended December 31, 2020 and 2019

of Cash Flows for the years ended December 31, 2019 and 2018

to Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

on the Consolidated Financial Statements

have audited the accompanying balance sheet of UAS Drone Corp.

(the “Company”) as of December 31, 2019, the related

statements of operations, changes in stockholders’

deficit and cash flows for each of the year in the period ended December 31,

Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF

DIRECTORS AND STOCKHOLDERS OF

UAS DRONE CORP., INC.

Opinion on the Financial Statements

We have audited the accompanying balance

sheets of UAS Drone Corp.

(the “Company”) as of December 31, 2020 and 2019, the related statements of operations and

comprehensive loss, changes in stockholders’

deficit and cash flows for the years in the period ended December 31, 2020 and

2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results

of its operations and its cash flows for each of the year in the period ended December 31, 2019, in conformity with accounting

principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming

that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has not yet

generated material revenues from its operations to fund its activities and is therefore dependent upon external sources for financing

its operations.

As of December 31, 2019, the Company has incurred accumulated deficit of $1,063,576 and negative operating cash

These factor among others, as discussed in Note 1 to the financial statements raise substantial doubt about the Company’s

ability to continue as a going concern.

Management’s plans concerning these matters are also described in Note 1 to the financial

The financial statements do not include any adjustments that might result from the outcome of’

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and

the results of its operations and its cash flows for the year in the period ended December 31, 2020 and 2019, in conformity with

accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have

been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the

Company has not yet generated material revenues from its operations to fund its activities and is therefore dependent upon external

sources for financing its operations.

As of December 31, 2020, the Company has incurred accumulated deficit of $5,131 thousands

and negative operating cash flows.

These factor among others, as discussed in Note 1 to the financial statements raise substantial

doubt about the Company’s ability to continue as a going concern.

Management’s plans concerning these matters are also

described in Note 1 to the financial statements.

The financial statements do not include any adjustments that might result from

the outcome of’

these uncertainties.

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

This matter is also described in the “Critical Audit Matters”

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based

on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have,

nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Halperin Ilanit

Public Accountants (Isr.)

have served as the Company’s auditor since 2020.

Our audit included performing procedures

to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures

in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable

basis for our opinion.

Critical audit matters

The critical audit

matters communicated below are matters arising from the current period audit of the consolidated financial statements that were

communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material

to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication

of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and

we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on

the accounts or disclosures to which they relate.

Going concern assessment

The accompanying

consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in

Note 1 to the consolidated financial statements, the Company has not yet generated material revenues from its operations to fund

its activities and is therefore dependent upon external sources for financing its operations.

As of December 31, 2020, the Company

has incurred accumulated deficit of $5,131 thousands and negative operating cash flows.

These factor among others, as discussed

in Note 1 to the financial statements raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans concerning these matters are also described in Note 1 to the financial statements.

This matter is also

described in the “Emphasis of Matter –

Going Concern”

section of our report.

We identified

management’s assumptions used to assess the Company’s ability to continue as a going concern as a critical audit matter

due to inherent complexities and uncertainties related to the Company’s Management’s plans.

Auditing this assumptions

involved especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address

these matters.

The primary procedures we performed to

address this critical audit matter included the following:

Assessing the reasonableness of key assumptions underlying

management’s forecast operating cash flows, including revenue growth and gross margin assumptions and evaluating the reasonableness

of management’s forecast operating cash flows

Evaluating the probability that the Company will be able

to reduce capital expenditures and other operating expenditures if required

Assessing management’s plans in the context of other

audit evidence obtained during the audit to determine whether it supported or contradicted the conclusions reached by management

Assessing the effect of events and agreement signed after balance

Fair value measurement of Level 3 liabilities

As discussed in

Notes 2M and 6 to the consolidated financial statements, the Company entered into several Convertible Loan Agreements and in accordance

with ASC 815-15-25, the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair

value as its fair value can be separated from the convertible loan and its conversion is independent of the underlying note value.

The Company recorded finance expenses in respect of the convertible component in the convertible loan in the excess amount of the

convertible component fair value over the face loan amount.

The fair value

of the convertible component was estimated by third party appraiser using the Black-Scholes option pricing model, to compute the

fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet date.

Under accounting

principles generally accepted in the United States of America, these convertible component are generally classified as Level 3

convertible component.

We identified

Level 3 convertible component as a critical audit matter because of the complex proprietary models and unobservable inputs management

uses to estimate the fair value.

This evaluation required a high degree of auditor judgment and an increased extent of effort,

including the need to involve our internal valuation specialists who possess significant quantitative and modeling expertise, to

audit and evaluate the appropriateness of these models and inputs.

Our audit procedures related to the

complex proprietary models and unobservable inputs used by management to estimate the fair value of Level 3 convertible component

included the following, among others:

We assessed the consistency by which management has applied significant unobservable valuation assumptions.

With the assistance of our internal valuation specialists, we evaluated the appropriateness of the valuation methodologies and techniques used in determining the fair value of Level 3 convertible component.

Also, we evaluated the appropriateness of estimates of the key inputs used in determining the fair value of the Level 3 convertible component

/s/ Halperin Ilanit.

Certified Public Accountants (Isr.)

Tel Aviv, Israel

March 30, 2021

We have served as the Company’s auditor since 2019

UAS DRONE CORP.

BALANCE SHEETS

(USD in thousands except share and per share

Current Assets

Prepaid expenses

Cash and cash equivalents

Other current assets (Note 3)

Total current assets

LIABILITIES AND STOCKHODERS’

Property and equipment,

Liabilities and Shareholders’

Current Liabilities

Current maturities of long-term bank loan

Accounts payable

Accrued interest and expenses

Advances from stockholder

Convertible notes payable

Other accounts liabilities (Note 5)

Stockholders loans (Note 7)

Convertible loans and debentures(Note 6B)

Fair Value of convertible component in convertible loan (Note 6B)

Total current liabilities

LONG TERM LIABILITIES:

Promissory note payable

Convertible Loans (Note 6A)

Fair Value of convertible component in convertible loan (Note 6A)

Stockholders loans (Note 7)

Long term bank loans

Total liabilities

COMMITMENTS AND CONTINGENCIES

Stockholders’

Common stock, $0.0001 par value:

100,000,000 shares authorized;

1,172,544 shares issued and outstanding at December 31, 2019 and December 31, 2018

Deficit (Note 8)

Common stock of $0.0001 par value each (“Common Stock”):

100,000,000 shares authorized as of December 31, 2020 and 2019;

issued and outstanding 40,075,151 and 25,130,126 shares as of December 31, 2020 and 2019, respectively.

Additional paid-in capital

2 unchanged sentences

Total liabilities and stockholders’

accompanying notes are an integral part of the financial statements.

OF OPERATIONS

Cost of Revenue

Cost of sales

Total cost of revenue

OPERATING EXPENSES:

General and administrative

Professional fees

Total operating expenses

LOSS FROM OPERATIONS

OTHER EXPENSE:

Interest expense

Total other expense

LOSS BEFORE INCOME TAXES

BASIC AND DILUTED LOSS PER COMMON SHARE

BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

accompanying notes are an integral part of the financial statements.

OF STOCKHOLDERS’

Balance at December 31, 2017

The accompanying notes are an integral

part of the consolidated financial statements.

UAS DRONE CORP.

CONSOLIDATED STATEMENTS

OF COMPREHENSIVE LOSS

(USD in thousands except share and per share

Cost of revenues

Research and development expenses

General and administrative expenses (Note 10)

Operating loss

Financing expenses, net

Loss per share (basic and diluted) (Note 12)

Basic and diluted weighted average number of shares of Common Stock outstanding

UAS DRONE CORP.

STATEMENTS OF CHANGES

IN STOCKHOLDERS’

(USD in thousands, except share and per

stockholders’

BALANCE AT JANUARY 1, 2019

CHANGES DURING THE YEAR ENDED DECEMBER 31, 2019:

Share based compensation for services

Comprehensive loss for the year

BALANCE AT DECEMBER 31, 2019

CHANGES DURING THE YEAR ENDED DECEMBER 31, 2020:

Issuance of shares in exchange for extinguishment of debt

Issuance of shares in exchange for convertible loans

Share based compensation for services

Effect of Reverse Capitalization

Comprehensive loss for the year

BALANCE AT DECEMBER 31, 2020

$ (1,063,576 )

accompanying notes are an integral part of the financial statements.

The accompanying notes are an integral

part of the consolidated financial statements.

UAS DRONE CORP.

CONSOLIDATED STATEMENTS

OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net loss to net cash used in operating activities:

Write- off of obsolete inventory

Change in assets and liabilities:

Prepaid expenses

Accounts payable

Accrued interest and expenses

Net loss for the period

Adjustments required to reconcile net loss for the

period to net cash used in operating activities:

Depreciation and amortization

Finance expenses

Stock based compensation

Interest on loans

Expenses with respect to convertible loans and debentures

Decrease (increase) in other current assets

Increase (decrease) in accounts payable

Increase (decrease) in other accounts payable

Net cash used in operating activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments on note payable

Advances from stockholder

Repayment of advances from stockholder

Proceeds from promissory note payable

Net Cash Provided by Financing Activities

Net increase (decrease) in cash

Cash at Beginning of Year

Cash at End of Year

Supplemental Disclosures of Cash Flow Information

Cash paid during the years for:

Supplemental Disclosures of

Non-Cash Investing and Financing Activities:

of note payable for prepaid insurance

accompanying notes are an integral part of the financial statements.

TO FINANCIAL STATEMENTS

Proceeds from secured promissory notes

Repayments of long term banking institute

Net cash provided by (used in) financing activities

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS AT END OF YEAR

Supplemental disclosure of cash flow information:

Cash paid during the year for:

Non cash transactions:

Issuance of shares in exchange for extinguishment of debt

Issuance of shares in exchange for convertible loans

The accompanying notes are an integral

part of the consolidated financial statements.

UAS DRONE CORP.

(“the Company”) was incorporated

under the laws of the State of Nevada on February 4, 2015.

The Company began limited operations on February 11, 2015.

the Company’s formation, the operations were functioning under Unlimited Aerial Systems, LLP (“UAS LLP”).

LLP was formed under the laws of the State of Louisiana on August 22, 2014.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

(USD in thousands)

UAS Drone Corp.

Company”

or “USDR”) was incorporated under the laws of the State of Nevada on February 4, 2015.

Company’s formation, the operations were functioning under Unlimited Aerial Systems, LLP (“UAS LLP”).

was formed under the laws of the State of Louisiana on August 22, 2014.

Effective March 31, 2015, the Company completed a reverse

1 unchanged sentence

The reverse merger was accounted for as a reverse capitalization.

On March 9, 2020, the Company closed on the Share Exchange Agreement,

pursuant to which Duke became a majority-owned subsidiary of the Company.

Duke has a wholly-owned subsidiary, Duke Airborne Systems

(“Duke Israel”), which was formed under the laws of the State of Israel in March 2014 and became the sole subsidiary

of Duke after its incorporation (see Note 7A below).

accompanying financial statements have been prepared assuming that the Company will continue

as a going concern.

The Company recognized $0 of revenue in 2019 and net losses for the

years ended December 31, 2019 and 2018.

These conditions raise substantial doubt about

the Company’s ability to continue as a going concern.

The Company’s continuation

as a going concern is dependent on its ability to meet its obligations, to obtain additional

financing as may be required and ultimately to attain profitability.

The financial statements

do not include any adjustments that might result from the outcome of this uncertainty.

Management is planning to raise additional funds through debt or equity offerings.

is no guarantee that the Company will be successful in these efforts.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Accounting

financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally

accepted in the United States.

The Company’s financial statements are prepared using the accrual method of accounting.

Company has elected a December 31 fiscal year end.

of Estimates and Assumptions

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses

during the reporting period.

Actual results could differ from those estimates.

Significant estimates include the evaluation of

us continuing as a going concern.

and Cash Equivalents

Company considers all highly liquid investments with an original maturity date of three months or less when purchased to be cash

At December 31, 2019, there are no cash instruments and the Company had no cash balance in excess of federally insured

TO FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

Value of Financial Instruments

carrying value of the Company’s financial instruments, consisting of accounts payable, convertible debt and notes payable

approximate their fair value due to the short-term maturity of such instruments.

Unless otherwise noted, it is management’s

opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial statements.

deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating

loss carry forwards.

Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some

portion or all of the deferred tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects

of changes in tax laws and rates on the date of enactment.

required, the Company records a liability for unrecognized tax positions, defined as the aggregate tax effect of differences between

positions taken on tax returns and the benefits recognized in the financial statements.

Tax positions are measured at the largest

amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

No tax benefits are recognized

for positions that do not meet this threshold

recognize interest and penalties related to unrecognized tax benefits on the interest expense line and other expense line, respectively,

in the accompanying statement of operations.

Accrued interest and penalties are included on the related liability lines in the

unaudited condensed balance sheet.

basic loss per share is calculated by dividing our net loss by the weighted average number of common shares during the period.

The diluted earnings (loss) per share is calculated by dividing our net loss by the diluted weighted average number of shares

outstanding during the period.

The diluted weighted average number of shares outstanding is the basic weighted number of shares

adjusted for any potentially dilutive debt or equity.

For the year ended December 31, 2019, the Company had 1,378,121 shares underlying

its convertible debt, and 25,000 vested stock options, which have been excluded from the calculation of diluted loss per share

because their impact was anti-dilutive.

For the year ended December 31, 2018, the Company had 1,297,651 shares underlying its

convertible debt, and 35,000 vested stock options, which have been excluded from the calculation of diluted loss per share because

their impact was anti-dilutive.

RELATED PARTY TRANSACTIONS

During 2018, a stockholder of the Company advanced $98,349 to

During 2019, a stockholder of the Company advanced $53,754 to the Company.

The advances bear no interest or maturity.

The balance due to the stockholder is $200,111, as of December 31, 2019 (see Note 7A below).

the year ended December 31, 2019, the Company accrued pay in the amount of $7,500 to its Chief Executive Officer and Chairman

of the Board for his services during the year ended December 31, 2019.

The total accounts payable of the Company to its Chief

Executive Officer and Chairman of the Board for his services in 2018 and 2019 is $32,500 as of December 31, 2019.

payable was compromised and converted to shares of the Company post-Share Exchange in conjunction with the Share Exchange.

- Subsequent Events.

TO FINANCIAL STATEMENTS

NOTES PAYABLE

April 1, 2015, the Company closed a Subscription Agreement by which one institutional investor purchased an 8% Convertible Debenture

having a total principal amount of $300,000, convertible into common shares of the Company at $0.33 per share and maturing April

1, 2017 (the “Subscription Agreement”).

The maturity date of the note purchased under the Subscription Agreement was

extended to coincide with the closing of the transaction referenced in Note 7 - Subsequent Events.

The Company determined that

the embedded conversion option did not require bifurcation and liability treatment because the underlying shares were not readily

convertible to cash.

The Company estimated the fair value of the underlying common stock and determined that the convertible note

did not include a beneficial conversion feature.

As of December 31,2019 and 2018, the balance of this convertible note payable

was $300,000.

April 1, 2016, the Company closed an Additional Advance Agreement by which one institutional investor purchased an 8% Convertible

Debenture having a total principal amount of $100,010, convertible into common shares of the Company at $1.55 per share and maturing

April 1, 2017 (the “Additional Advance Agreement”).

The maturity date of the note purchased under the Additional Advance

Agreement was extended to coincide with the closing of the transaction referenced in Note 7 - Subsequent Events.

The Company determined

that the embedded conversion option did not require bifurcation and liability treatment because the underlying shares were not

readily convertible to cash.

The Company estimated the fair value of the underlying common stock and determined that the convertible

note did not include a beneficial conversion feature.

As of December 31, 2019 and 2018, the balance of these convertible notes

payable were $100,010.

January 27, 2017, the Company closed a convertible debenture by which one institutional investor purchased an 8% Convertible Debenture

having a total principal amount of $50,005, convertible into common shares of the Company at $1.55 per share and maturing August

1, 2018 (the “Convertible Debenture”).

The maturity date of the note purchased under the Convertible Debenture was

extended to coincide with the closing of the transaction referenced in Note 7 - Subsequent Events.

The Company determined that

the embedded conversion option did not require bifurcation and liability treatment because the underlying shares were not readily

convertible to cash.

The Company estimated the fair value of the underlying common stock and determined that the convertible note

did not include a beneficial conversion feature.

As of December 31, 2019 and 2018, the balance of this convertible note payable

October 1, 2018, the Company financed the premium for directors’

and officers’

The Company borrowed $31,610

at 5.68% interest per annum and the borrowed amount is scheduled to be repaid in 10 equal installments of $3,244.

As of December

31, 2018, the balance of the borrowed amount was $25,407.

September 2, 2019, the Company executed a promissory note having a total principal amount of $35,000 bearing interest at 6%

per annum and maturing September 2, 2021 (the “Promissory Note”).

The Promissory Note is non-recourse and

carries no personal guarantees.

As of December 31, 2019, the balance of this Promissory Note was $35,000 (see Note 7A

October 1, 2019, the Company financed the premium for directors’

and officers’

The Company borrowed $12,293

at 7.35% interest per annum, and the borrowed amount is scheduled to be repaid in 5 equal installments of $2,459.

On March 9, 2020, the Company

closed on the Share Exchange Agreement (as defined hereunder), pursuant to which, Duke Robotics, Inc.

(“Duke Inc.”)

a corporation incorporated under the laws of the state of Delaware, became a majority-owned subsidiary of the Company.

has a wholly-owned subsidiary, Duke Airborne Systems Ltd.

(“Duke Israel,”

and collectively with Duke Inc., “Duke”),

which was formed under the laws of the State of Israel in March 2014 and became the sole subsidiary of Duke after its incorporation.

On April 29, 2020, the Company,

Duke Inc., and UAS Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company (“UAS Sub”),

executed an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which UAS Sub merged with and into Duke

Upon closing of the Short-Form Merger (as defined hereunder), each outstanding share of UAS Sub’s common stock, par

value $0.0001 per share, was converted into and became one share of common stock of Duke Inc., with Duke Inc.

surviving as a wholly-owned

subsidiary of the Company.

Pursuant to the Merger Agreement, the Company intended to acquire the remaining outstanding shares of

held by certain stockholders of Duke Inc.

that did not participate in the Share Exchange Agreement (as defined hereunder).

On April 30, 2020, the Company

filed a Registration Statement on Form S-1, which was declared effective by the U.S.

Securities and Exchange Commission (“SEC”)

on June 19, 2020, to register:

(i) 63,856 shares of common stock of the Company that were issued to certain stockholders of Duke

upon the consummation of the Short-Form Merger;

(ii) 14,614,751 shares of common stock of the Company of certain selling stockholders

named in the S-1 Registration Statement;

and (iii) 3,649,733 shares of common stock of the Company issuable upon conversion of

Convertible Notes (see Note 6 below).

On June 25, 2020, at the closing

of the transaction contemplated by the Merger Agreement, the Company issued 63,856 shares to certain Duke Inc.

stockholders, and

became a wholly owned subsidiary of the Company.

The Company (collectively with

Duke, the “Group”) is a robotics company dedicated to the development of an advanced robotics stabilization system

that enables remote, real-time, pinpoint accurate firing of small arms and light weapons.

The Company’s advanced robotics

system is able to achieve pinpoint accuracy regardless of the movement of the weapons platform or the target.

On January 29, 2021, the Company,

through Duke Israel, and Elbit Systems Land Ltd., an Israeli corporation, entered into a collaboration agreement for the global

marketing and sales, and the production and further development of our developed advanced robotic system mounted on an UAS, armed

with lightweight firearms, which we market under the commercial name “TIKAD.”

Effective October 22, 2020,

Company’s common stock in quoted on the OTC Markets Group, Inc.’s OTCQB®

tier Venture Market, under the symbol

“USDR”.

On March 4, 2020, USDR entered

into a Share Exchange Agreement with Duke Inc., and certain shareholders of Duke Inc.

who executed and delivered the Share Exchange

Agreement (the “Share Exchange Agreement”), pursuant to which Duke Inc.

became a majority-owned subsidiary of USDR

(the “Share Exchange”).

The Share Exchange closed on March 9, 2020.

Such closing date is referred to as the “Effective

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

GENERAL (continue)

entering into the Share Exchange Agreement:

(i) Duke entered into debt cancellation letters (the “Debt Cancellation Letters”)

with each of its Stockholders with regard to the Stockholders Loans.

Pursuant to the Debt Cancellation

Letters, 842,135 shares of the Duke Inc.

common stock (1,046,016 shares post Exchange Ratio) were issued in exchange for the cancellation

of $623 in debt, leaving $280 of outstanding Stockholders Loans.

These Stockholders Loans, including interest (which shall bear

an annual fixed interest rate of 3% as of January 1, 2020), shall be repaid at the date upon which the Company raises at least

$15 million and has achieved earnings before interest, tax, depreciation and amortization of $3 million, but not before the three

year anniversary of the Effective Time and the full repayment of the amounts outstanding under certain convertible loan agreements

in the aggregate amount of $965 (each, a “Convertible Loan Agreement”) (see Note 6B) entered into at the Effective

Time, unless such repayment is otherwise waived by the parties to the Investors’

(ii) Loans made from Duke to an executive

officer and a former executive officer, who are also stockholders were extinguished in connection with the Debt Cancellation Letters;

(iii) Duke issued a consultant 1,146,005 shares of the Duke Inc.

common stock (1,423,453 shares post Exchange Ratio), at par value,

regarding services rendered to Duke Inc.

The fair value of the shares issued was estimated at $429 and were recorded to share based

compensation expenses.;

and (iv) a convertible loan agreement in amount of $400 bearing an annual interest rate of 6%, including

accumulated interest in amount of $48, was converted into 700,000 shares of Duke Inc.

common stock (869,470 shares post Exchange

conjunction with the consummation of the Share Exchange, and as a condition thereof, the USDR entered into the agreements listed

(i) Convertible Loan Agreements, on the same terms, in the aggregated amount of $965 with several investors.

The term of each investor’s loan is for 12 month and each such agreement bears annual interest of 15%, and at the discretion

of USDR, the term of the investors’

loans can be extended for an additional 12 month period, which the Company did elect

to extend (see also note 6 below).

The investors have the option to convert the respective unpaid balance of their loan into shares

of USDR’s common stock based on the lower of the following valuations:

(i) the lowest effective price per share set in connection

with any funds raised by USDR during the six months following the Share Exchange;

(ii) 80% of the lowest effective price per share

set in connection with any funds raise by USDR at any time subsequent to six months following the Share Exchange until such time

as the Investors’

Loans are fully repaid;

(iii) a price per share reflecting a post-money valuation of USDR of $15 million

following the next investment in USDR following closing;

or (iv) if at any time following the 6 month anniversary of the closing

of the Share Exchange and until such time as the Investors’

Loans are fully repaid, USDR sells or grants any option to purchase

or sells or grants any right to reprice, or otherwise disposes of or issues any common stock entitling any person to acquire shares

of common stock at an effective price per share that is lower than $0.374.

The conversion price is currently $0.374.

30, 2021, the Convertible Loan Agreements have an aggregate outstanding principal balance of $835 as a result of the conversions

of certain Convertible Loan Agreements (see note 15 below).

(ii) In addition, before entering into the Share Exchange the parties to certain consulting agreements

agreed to exchange their contractual right to receive options in Duke for options to be granted by USDR following the Effective

Time, subject to the terms and conditions of a stock incentive plan, to be adopted by the Board of Directors of USDR.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

NOTE 1 –

GENERAL (continue)

(iii) Securities exchange agreements with outstanding debt holders of USDR, Alpha Capital Anstalt (“Alpha”)

and GreenBlock Capital LLC (“GBC”) to respectively cancel existing debentures or debt in the total amount of $658 and

in exchange issue new debentures in the aggregate amount of $400 and issue 698,755 and 65,198 shares of common stock to each of

Alpha and GBC, respectively (the “New Debentures”).

The New Debentures mature three years from the Effective Date,

bear interest at a rate of 8% per year and are only convertible into shares of the Company’s common stock, at an original

conversion price of $0.374 (the “Original Conversion Price”);

provided, however, that such Original Conversion Price

shall be adjusted downward in the event that USDR, as applicable, sells or grants any options to purchase or sells or grants any

right to reprice, or otherwise dispose or issues any common stock or common stock equivalents entitling any purchaser to acquire

shares of the Company’s common stock at an effective price per share that is lower than the Original Conversion Price (such

issuance, a “Dilutive Event”).

In the event of a Dilutive Event at any time from the Effective Time through the six

(6) month anniversary of the Effective Time, any such adjustment shall occur immediately after the completion of such period.

As of March 30, 2021, the New Debentures have an aggregate outstanding principal balance of $200 as a result of conversions of

the New Debentures (see note 15 below).

(iv) Several Securities Exchange Agreements, with similar terms, to exchange certain promissory notes

having a total principal amount of $35 bearing interest of 6% per annum, for 9,623,621 shares of Company’s common stock.

Signatories to the Securities Exchange Agreements are entitled to an anti-dilution clause in the event that the Convertible Loans

detailed in Note 1(iii) above are converted such that such the number of shares held by such investors would not be lower than

original holding on a fully diluted basis prior to such conversions.

Per Accounting Standards Update (“ASU”) 2017-11,

the Company classified the anti-dilution to shareholders equity.

(v) A Registration Rights Agreement with GBC, Alpha, the Primary Lenders (as defined below) and certain

Duke shareholders.

The Company filed a Registration Statement on Form S-1 with the SEC, which was declared effective on June 19,

2020, in compliance with the requirements of the Registration Rights Agreement.

The deemed beneficial owners of the common stock,

or other securities, issuable under parties to the Convertible Loan Agreements and the Note Conversion are identical and, as such,

the Company refer to these parties as the “Primary Lenders.”

(vi) The Company’s former CEO’s outstanding accrued pay of $32 as well as the 25,000

options he held at the end of 2019, were converted into 45,968 shares of the post-transaction Company.

Pursuant to the terms of the

Share Exchange Agreement, at the Effective Time, the Company issued an aggregate of 28,469,065 shares of its common stock to the

stockholders in exchange for 22,920,107 shares of Duke’s Inc.

issued and outstanding shares of common stock, representing

approximately 99% of Duke’s Inc.

issued and outstanding shares of common stock.

Accordingly, each outstanding share of Duke

common stock was exchanged for the right to receive 1.2421 shares of the Company’s common stock (the “Exchange

Ratio”).

Of the shares of Duke Inc.

common stock that were exchanged for shares of the Company’s common stock, 51,410

(representing 63,856 shares of the Company’s common stock post-Share Exchange) were issued but remained in escrow until the

Company completed the Short-Form Merger (as defined hereunder).

On June 25, 2020, at the closing of the transaction contemplated

by the Merger Agreement, the Company released the shares in escrow.

As such, at the Effective Time,

the Duke stockholders owned an equivalent of approximately 71% of the Company’s common stock.

After giving effect to the

Share Exchange, Duke became a subsidiary of the Company.

Following the Share Exchange, the Company adopted the business plan of

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

GENERAL (continue)

The transaction was accounted

for as a reverse asset acquisition in accordance with generally accepted accounting principles in the United States of America

(“GAAP”).

Under this method of accounting, Duke was deemed to be the accounting acquirer for financial reporting purposes.

This determination was primarily based on the facts that, immediately following the Merger:

(i) Duke’s stockholders

owned a substantial majority of the voting rights in the combined company, (ii) Duke designated a majority of the members

of the initial board of directors of the combined company, and (iii) Duke’s senior management holds all key positions

in the senior management of the combined company.

As a result of the Recapitalization Transaction, the shareholders of Duke received

the largest ownership interest in the Company, and Duke was determined to be the “accounting acquirer”

in the Recapitalization

As a result, the historical financial statements of the Company were replaced with the historical financial statements

The number of shares prior to the reverse capitalization have been retroactively adjusted based on the equivalent number

of shares received by the accounting acquirer in the Recapitalization Transaction.

On April 29, 2020, the Company,

and UAS Sub, executed the Merger Agreement, pursuant to which UAS Sub merged with and into Duke, with Duke surviving

as a wholly-owned subsidiary of the Company (the “Short-Form Merger”).

Pursuant to the Merger Agreement, on June 25,

2020, the Company acquired the remaining outstanding shares of Duke held by those certain Duke shareholders that did not participate

in the Share Exchange.

The COVID-19 pandemic has caused

states of emergency to be declared in various countries, travel restrictions imposed globally, quarantines established in certain

jurisdictions and various institutions and companies being closed.

COVID-19 has also adversely affect the Group’s ability

to conduct its business effectively due to disruptions to its capabilities, availability and productivity of personnel, while the

Group simultaneously attempts to comply with rapidly changing restrictions, such as travel restrictions, curfews and others.

particular, on January 24, 2021, the Government of Israel announced that effective January 26, 2021, non-Israeli residents or citizens,

except for non-nationals whose lives are based in Israel, are not allowed to enter Israel, and the number of Israeli citizens permitted

to enter the country per day will be capped at 3,000.

In addition, the Ministry of Health in the State of Israel issued guidelines

on March 11, 2020, which were most recently updated in March 2021, recommending people avoid gatherings in one space and providing

that no gathering of more than 20 people should be held under any circumstances.

Employers (including the Group) are also required

to prepare and increase as much as possible the capacity and arrangement for employees to work remotely.

In addition, on January

25, 2021, the President of the United States issued a proclamation to restrict travel to the United States from foreign nationals

who have recently been in China, Iran, South Africa, and certain European and Latin America countries.

Although to date these restrictions

have not impacted the Group’s operations, the effect on its business, from the spread of COVID-19 and the actions implemented

by the governments of the State of Israel, the United States and elsewhere across the globe, may worsen over time.

The spread of

COVID-19 may also result in the inability of the Group’s manufacturers to deliver components or finished products on a timely

basis and may also result in the inability of the Group’s suppliers to deliver the parts required by its manufacturers to

complete manufacturing of components or finished products.

In addition, governments may divert spending from other budgeted resources

as they seek to reduce and/or stop the spread of COVID-19.

Such events may result in a period of business and manufacturing disruption,

and in reduced operations, any of which could materially affect the Group’s business, financial condition and results of

The extent to which COVID-19 impacts the Group’s business will depend on future developments, which are highly

uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions

to contain COVID-19 or treat its impact, among others.

The Group is actively monitoring the pandemic and it is taking any necessary

measures to respond to the situation in cooperation with the various stakeholders.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

GENERAL (continue)

Going Concern

Since inception, the Group has

devoted substantially all its efforts to research and development.

The Group is still in its development stage and the extent of

the Group’s future operating losses and the timing of becoming profitable, if ever, are uncertain.

As of December 31, 2020,

31, 2019, the balance of the borrowed amount was $4,963.

Company has 100,000,000 authorized shares of common stock, $0.0001 par value.

summary of the options activity for the years ended December 31, 2019 and 2018 are as follows:

For the Years Ended December 31, 2019 and 2018

Weighted Average Exercise Price

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

the Group had $105 in cash and cash equivalents, net losses of $1,368, an accumulated deficit of $5,131, and a negative working

capital of $1,176.

The Group will need to secure

additional capital in the future in order to meet its anticipated liquidity needs primarily through the sale of additional Common

Stock or other equity securities and/or debt financing.

Funds from these sources may not be available to the Group on acceptable

terms, if at all, and the Group cannot give assurance that it will be successful in securing such additional capital.

These conditions raise substantial

doubt about the Group’s ability to continue to operate as a “going concern.”

The Company’s ability to continue

operating as a going concern is dependent on several factors, among them is the ability to raise sufficient additional funding.

The financial statements do

not include any adjustments that might result from the outcome of this uncertainty.

The Group faces a number of

risks, including uncertainties regarding finalization of the development process, demand and market acceptance of the Group’s

products, the effects of technological changes, competition and the development of products by competitors.

Additionally, other

risk factors also exist, such as the ability to manage growth and the effect of planned expansion of operations on the Group’s

future results.

In addition, the Group expects to continue incurring significant operating costs and losses in connection

with the development of its products and marketing efforts.

The Group has not yet generated significant revenues from its

operations to fund its activities, and therefore the continuance of its activities as a going concern depends on the receipt of

additional funding from its current stockholders and investors or from third parties.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

SIGNIFICANT ACCOUNTING POLICIES

The financial statements were

prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

Use of estimates in the preparation of financial statements

The preparation of financial

statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets

and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported

amounts of expenses during the reporting periods.

Actual results could differ from those estimates.

As applicable to these financial

statements, the most significant estimates and assumptions relate to the going concern assumptions and convertible loans.

Functional currency

A majority of the Group’s

expected revenues is generated in dollars.

In addition, most of the Group’s costs are denominated and determined in

dollars and in new Israeli shekels.

Management believes that the dollar is the currency in the primary economic environment in

which the Group operates.

Thus, the functional and reporting currency of the Group is the dollar.

Accordingly, monetary accounts

maintained in currencies other than the dollar are remeasured into dollars in accordance with Accounting Standards Codification

(“ASC”) 830, “Foreign Currency Matters.”

All transaction gains and losses of the remeasured monetary balance

sheet items are reflected in the statements of operations as financial income or expenses, as appropriate.

Principles of consolidation

The consolidated financial statements

include the accounts of the Company and its subsidiaries Duke Inc., UAS Sub and Duke Israel.

All significant intercompany balances

and transactions have been eliminated on consolidation.

Cash and cash equivalents, and Restricted cash

Cash equivalents are short-term

highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted

as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.

Property, plant and equipment, net

Property and equipment are stated at cost, net of accumulated depreciation.

Depreciation is calculated

using the straight-line method over the estimated useful lives of the assets.

When an asset is retired or otherwise disposed of,

the related cost and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized

from disposition is reflected in the Statements of Operations and Comprehensive Loss.

Rates of depreciation:

Furniture and office equipment

Office improvements

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

SIGNIFICANT ACCOUNTING POLICIES (continue)

Impairment of long-lived assets

The Group’s long-lived

assets are reviewed for impairment in accordance with ASC Topic 360, “Property, Plant and Equipment”, whenever events

or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be

held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to

be generated by the asset.

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount

by which the carrying amount of the asset exceeds its fair value.

No impairment expenses were recorded during the years ended December

31, 2020 or 2019.

Deferred income taxes

The Group accounts for income

taxes in accordance with ASC Topic 740, “Income Taxes”

(“ASC Topic 740-10”).

Accordingly, deferred income

taxes are determined utilizing the asset and liability method based on the estimated future tax effects of differences between

the financial accounting and the tax bases of assets and liabilities under the applicable tax law.

Deferred tax balances are computed

using the enacted tax rates expected to be in effect when these differences reverse.

Valuation allowances in respect of deferred

tax assets are provided for, if necessary, to reduce deferred tax assets to amounts more likely than not to be realized.

The Group accounts for uncertain

tax positions in accordance with ASC Topic 740-10, which prescribes detailed guidance for the financial statement recognition,

measurement and disclosure of uncertain tax positions recognized in an enterprise’s financial statements.

According to ASC

Topic 740-10, tax positions must meet a more-likely-than-not recognition threshold.

The Company’s accounting policy is to

classify interest and penalties relating to uncertain tax positions under income taxes, however the Company did not recognize such

items in its fiscal 2020 and 2019 financial statements and did not recognize any liability with respect to an unrecognized tax

position in its balance sheets.

Research and development expenses

are charged to operations as incurred.

Basic and diluted loss per share

Basic loss per share is computed

by dividing the loss for the period applicable to shareholders, by the weighted average number of shares of common stock outstanding

during the period.

Securities that may participate in dividends with the shares of common stock (such as the convertible preferred)

are considered in the computation of basic loss per share under the two class method.

However, in periods of net loss, only the

convertible preferred shares are considered, since such shares have a contractual obligation to share in the losses of the Company.

In computing diluted loss per

share, basic loss per share is adjusted to reflect the potential dilution that could occur upon the exercise of potential shares.

Accordingly, in periods of net loss, no potential shares are considered.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

SIGNIFICANT ACCOUNTING POLICIES (continue)

Stock-based compensation

The Company measures and recognizes

the compensation expense for all equity-based payments to employees based on their estimated fair values in accordance with ASC

718, “Compensation-Stock Compensation.”

Share-based payments including grants of stock options are recognized in the

statement of comprehensive loss as an operating expense based on the fair value of the award at the date of grant.

The fair value

of stock options granted is estimated using the Black-Scholes option-pricing model.

The Company has expensed compensation costs,

net of estimated forfeitures, applying the accelerated vesting method, over the requisite service period or over the implicit service

period when a performance condition affects the vesting, and it is considered probable that the performance condition will be achieved.

Share-based payments awarded

to consultants (non-employees) are accounted for in accordance with ASC Topic 505-50, “Equity-Based Payments to Non-Employees.”

Concentrations of credit risk

Financial instruments that potentially

subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents as well as certain other current

assets that do not amount to a significant amount.

Cash and cash equivalents, which are primarily held in Dollars and New Israeli

Shekels, are deposited with major banks in Israel and the United States.

Management believes that such financial institutions are

financially sound and, accordingly, minimal credit risk exists with respect to these financial instruments.

The Company does not

have any significant off-balance-sheet concentration of credit risk, such as foreign exchange contracts, option contracts or other

foreign hedging arrangements.

Contingencies

The Company records accruals

for loss contingencies arising from claims, litigation and other sources when it is probable that a liability has been incurred

and the amount can be reasonably estimated.

These accruals are adjusted periodically as assessments change or additional information

becomes available.

Legal costs incurred in connection with loss contingencies are expensed as incurred.

Derivative Liabilities and Fair Value of Financial Instruments

Fair value accounting requires

bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement

of their fair value for accounting purposes.

In assessing the convertible debt instruments, management determines if the convertible

debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement.

If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation

process of these instruments as derivative financial instruments under ASC 815.

Once determined, derivative

liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being

recorded in results of operations as an adjustment to fair value of derivatives.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

SIGNIFICANT ACCOUNTING POLICIES (continue)

Fair value of certain of the

Company’s financial instruments including cash, accounts receivable, account payable, accrued expenses, notes payables, and

other accrued liabilities approximate cost because of their short maturities.

The Company measures and reports fair value in accordance

with ASC 820, “Fair Value Measurements and Disclosure”

(“ASC 820”) defines fair value, establishes a framework

for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.

Fair value, 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 between market

participants at the measurement date.

The fair value of an asset should reflect its highest and best use by market participants,

principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise.

The fair value of a liability should

reflect the risk of non-performance, which includes, among other things, the Company’s credit risk.

Valuation techniques are generally

classified into three categories:

the market approach;

the income approach;

and the cost approach.

The selection and application

of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset

or liability, and the quality and availability of inputs.

Valuation techniques used to measure fair value under ASC 820 must maximize

the use of observable inputs and minimize the use of unobservable inputs.

ASC 820 also provides fair value hierarchy for inputs

and resulting measurement as follows:

Quoted prices (unadjusted)

in active markets that are accessible at the measurement date for identical assets or liabilities.

Quoted prices for similar

assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset or liability;

and inputs that are derived principally from or

corroborated by observable market data for substantially the full term of the assets or liabilities;

Unobservable inputs

for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

Fair value measurements are

required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall.

Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements

including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to

the following:

total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings,

and a description of where those gains or losses included in earning are reported in the statement of income.

The Company records a debt discount

related to the issuance of convertible debts that have conversion features at adjustable rates.

The debt discount for the convertible

instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and

as a reduction to the carrying amount of the convertible instrument equal to the fair value of the conversion features.

discount will be accreted by recording additional non-cash gains and losses related to the change in fair values of derivative

liabilities over the life of the convertible notes.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

SIGNIFICANT ACCOUNTING POLICIES (continue)

The Company’s financial

assets and liabilities that are measured at fair value on a recurring basis by level within the fair value hierarchy are as follows:

Balance as of December 31, 2020

Fair Value of convertible component in convertible loan

Total liabilities

The following table presents

the changes in fair value of the level 3 liabilities for the Year ended December 31, 2020:

Fair value of Convertible

Outstanding at January 1, 2020

Fair value of issued level 3 liability

Changes in fair value

Outstanding at December 31, 2020

Exercisable at December 31, 2019

total intrinsic value of options as of December 31, 2019 was $0.

Intrinsic value is measured using the fair market value at the

date of exercise (for shares exercised) or at December 31, 2019 (for outstanding options), less the applicable exercise price.

During 2019 and 2018, the company recorded $0 and $0, respectively, of non-cash compensation expense related to the vested stock

options issued to a director.

TO FINANCIAL STATEMENTS

The Company accounts for income taxes in accordance with Financial

Accounting Standards Board Accounting Standards Codification Topic 740, Accounting for Income Taxes which requires the Company

to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences

between book and tax accounting and any available operating loss or tax credit carryforwards.

At December 31, 2019 and 2018, the

total of all deferred tax assets was $253,204 and $149,790, respectively, and the total of the deferred liabilities was $3,744

and $1,837, respectively.

The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes

is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of

which cannot be determined.

Because of the uncertainty surrounding the realization of the deferred tax assets the Company has established

a valuation allowance of $253,204 and $149,790 for the years ended December 31, 2019 and 2018.

The change in the valuation allowance

for the year ended December 31, 2019 and 2018 was $103,414 and $36,064, respectively.

December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law.

The Act decreases the U.S.

federal income tax rate from a maximum of 35% to a flat 21% effective January 1, 2018.

The impact of the re-measurement on the

Corporation’s net deferred tax asset, as of December 31, 2017, was an approximately $55,124 decrease in deferred tax assets,

with a corresponding decrease in the Company’s valuation allowance, and no impact on income tax expense.

The Act also includes

a number of other provisions including, among others, the elimination of net operating loss carrybacks and limitations on the

use of future losses, the repeal of the Alternative Minimum Tax regime and the repeal of the domestic production activities deduction.

These provisions are not expected to have a material effect on the Corporation.

components of income tax expense (benefit) for the years ended December 31, 2019 and 2018 consist of the following:

Deferred tax benefit:

Return to accrual adjustment

Increase in valuation allowance

Deferred tax benefit

reconciliation of income tax expense at the federal statutory rate to income tax expense at the company’s effective rate

for the years ended December 31:

Computed tax at the expected statutory rate

State and local income taxes, net of federal

Return to accrual adjustment

Other non-deductible expenses

Change in Valuation allowance

Income tax expense/(benefit)

TO FINANCIAL STATEMENTS

INCOME TAXES - Continued

temporary differences, and carryforwards gave rise to the following deferred tax assets at December 31, 2019 and 2018:

Deferred tax assets:

Allowance for obsolete inventory

Common stock awarded for services

Stock options granted for services

Accrued payroll

Net operating loss carryforward

Total deferred tax assets

Certain Financial Instruments with Down Round Features

The Company accounts Certain

Financial Instruments with Down Round Features based on ASU 2017-11, “Earnings per share:

Accounting for Certain Financial

Instruments with Down Round Features,”

which allows companies to exclude a down round feature when determining whether a

financial instrument is considered indexed to the entity’s own stock.

As a result, financial instruments with down round

features may no longer be required to be accounted classified as liabilities.

A company will recognize the value of a down round

feature only when it is triggered, and the strike price has been adjusted downward.

For equity-classified freestanding financial

instruments, such as warrants, an entity will treat the value of the effect of the down round, when triggered, as a dividend and

a reduction of income available to common shareholders in computing basic earnings per share.

Recent Accounting Pronouncements

Accounting Pronouncements

Adopted in 2020

In June 2016, the Financial

Accounting Standards Board (the “FASB”) issued an ASU that supersedes the existing impairment model for most financial

assets to a current expected credit loss model.

The new guidance requires an entity to recognize an impairment allowance equal

to its current estimate of all contractual cash flows the entity does not expect to collect.

The Group adopted this guidance effective

January 1, 2020, with no material impact on its consolidated financial statements

In June 2016, the FASB issued

ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.

This guidance

replaces the current incurred loss impairment methodology.

Under the new guidance, on initial recognition and at each reporting

period, an entity is required to recognize an allowance that reflects its current estimate of credit losses expected to be incurred

over the life of the financial instrument based on historical experience, current conditions and reasonable and supportable forecasts.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

SIGNIFICANT ACCOUNTING POLICIES (continue)

The guidance became effective

on January 1, 2020, including interim periods within that year and requires a modified retrospective transition approach through

a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.

Under the modified retrospective

method of adoption, prior year reported results are not restated.

The Company has performed its analysis of the impact on its financial

instruments that are within the scope of this guidance and has concluded that there was no material impact to its consolidated

financial statements.

In August 2018, the FASB issued

2018-13, “Fair Value Measurement (Topic 820):

Framework —

the Disclosure Requirements for Fair Value Measurement”

(“ASU No.

2018-13”) as part of the FASB’s broader

disclosure framework project.

2018-13 removes, modifies and adds certain disclosures, providing greater focus on requirements

that clearly communicate the most important information to the users of the financial statements with respect to fair value measurements.

The adoption of ASU No.

2018-13 as of January 1, 2020 did not have a material impact on the Company’s consolidated financial

Recently Issued Accounting

Pronouncements Not Yet Adopted

In December 2019, the FASB issued

ASU 2019-12, Income Taxes (Topic 740):

“Simplifying the Accounting for Income

Taxes.”

The amendments in this ASU simplify the accounting for income taxes, eliminates certain exceptions to the general

principles in Topic 740 and clarifies certain aspects of the current guidance to improve consistent application among reporting

ASU 2019-12 is effective for fiscal years beginning after December 15, 2021 and interim periods within annual periods

beginning after December 15, 2022, though early adoption is permitted, including adoption in any interim period for which financial

statements have not yet been issued.

This standard is not expected to have a material impact to the Company’s consolidated

financial statements after evaluation.

August 2020, the FASB issued ASU No.

2020-06, “Debt - Debt with Conversion and Other Options”

(Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for

Convertible Instruments and Contracts in an Entity’s Own Equity.

ASU 2020-06 will simplify the accounting for

convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible

preferred stock.

Limiting the accounting models results in fewer embedded conversion features being separately recognized

from the host contract as compared with current GAAP.

Convertible instruments that continue to be subject to separation

models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that

meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2)

convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital.

ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity

to reduce form-over-substance-based accounting conclusions.

ASU 2020-06 will be effective for public companies for

fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is

permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal

The Company is currently evaluating the impact that the adoption of ASU 2020-06 will have on the Company’s

consolidated financial statement presentation or disclosures.

Other new pronouncements issued

but not effective as of December 31, 2020 are not expected to have a material impact on the Company’s consolidated financial

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

OTHER CURRENT ASSTES

Loans to executive officers (1)

Prepaid expenses

Government Institutions

Investment in subsidiary

(1) On November 20, 2017, the Group made available to an

executive officer and a former executive officer, who are also stockholders, a loan in the amount of $10 each.

The loans bear

interest at a rate of approximately 3% per year.

The loans, including the accumulated interest amount, shall be repaid at the

earlier of the following dates:

(i) December 31, 2019;

or (ii) at the date of repayment of the loan made available by the stockholders

to the Company according to a loan agreement as stated in Note 5;

or (iii) from any dividend or other distribution to be made

by the Company to its shareholders.

The two stockholders are entitled to repay the outstanding amount of the loan at any time.

The loans to executive officers were extinguished in connection with and prior to the Share Exchange.

PROPERTY AND EQUIPMENT, NET

Furniture and office equipment

Leasehold improvements

Less - accumulated depreciation

Total property and equipment, net

ended December 31, 2020 and 2019, depreciation was US$ 5 and US$ 2 respectively.

5 –OTHER ACCOUNTS LIABILITIES

Accrued expenses

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

CONVERTIBLE LOANS

As detailed in Note 1 above, the New Debentures in the amount of $400, mature three years from

the Effective Date, bear interest at a rate of 8% per year and are only convertible into shares of the Company’s common stock,

at the Original Conversion Price ;

provided, however, that such Original Conversion Price shall be adjusted downward in the

event that the Company, as applicable, sells or grants any options to purchase or sells or grants any right to reprice, or otherwise

dispose or issues any common stock or common stock equivalents entitling any purchaser to acquire shares of the Company’s

common stock at Dilutive Event.

In the event of a Dilutive Event at any time from the Effective Time through the six (6) month

anniversary of the Effective Time, any such adjustment shall occur immediately after the completion of such period.

March 30, 2021, the New Debentures have an aggregate outstanding principal balance of $200 as a result of conversions of the New

Debentures (see note 15 below).

In accordance with ASC 815-15-25,

the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value as its fair value

can be separated from the convertible loan and its conversion is independent of the underlying note value.

The Company recorded

finance expenses in respect of the convertible component in the convertible loan in the excess amount of the convertible component

fair value over the face loan amount.

The conversion liability is then marked to market each reporting period with the resulting

gains or losses shown in the statements of operations.

fair value of the convertible component was estimated by third party appraiser using the Black-Scholes option pricing model,

to compute the fair value of the derivative and to mark to market the fair value of the derivative at each balance sheet

The Company has estimated the fair value of such derivative at a value of $132 at the date of issuance and at a value

of $26 as of December 31, 2020.

The following are the data and assumptions used as of the balance sheet date:

Common stock price

Expected volatility

Expected term

Risk free rate

Forfeiture rate

Expected dividend yield

The fair value allocated to

loans out of the New Debentures was estimated by third party appraiser based on the debentures’

and market interest’

rates and was estimated at a value of $332 at the issuance date.

The access of the calculated fair values of the loan and the convertible

components over the loan face amounted to $67, and was recorded as interest expenses.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

NOTE 6 –

CONVERTIBLE NOTES (continue)

In connection with the Share Exchange, immediately prior to the Effective Time, the Company entered

into several Convertible Loan Agreements, on the same terms, in the aggregate amount of $965.

The terms of the Convertible Loan

Agreements require repayment of the borrowed amount by the one-year anniversary of the Effective Time, unless, at Company’s

discretion, and subject to its compliance with any and all terms of the material terms of the Convertible Loan Agreements, the

term of such loans is extended for an additional twelve (12) month period.

The terms of the Convertible Loan Agreements also provide

that the Company may repay any portion of the remaining outstanding loan amount, without penalty, provided, however, that the Company

provides the specific lender with three business days’

written notice prior to such repayment, during which time the lender

may elect to convert any or all of the outstanding loan amount into shares of common stock of the Company.

The Convertible Loan

Agreements bear simple interest at a rate equal to 15% per annum, payable on the 15th day of each calendar month.

On December 9,

2020, the Company utilized its rights under the above agreement and extended the terms of the loans for additional twelve month.

The lenders will have the option

to convert the unpaid balance of their respective Convertible Loans into shares of Company’s common stock based on the lower

of (A) lowest effective price per share set in connection with any funds raised by the Company during the six (6) months following

the Effective Time.

“Effective price”

per share means (i) if only shares of Company’s common stock are sold in

a transaction, the amount actually received in cash by the Company, and (ii) if shares of Company’s common stock are sold

in a transaction and, in connection therewith additional securities or rights are sold or otherwise issued, the amount actually

received in cash by the Company, for the shares of Company’s common stock and such additional rights upon their issuance,

reduced by the aggregate fair market value of the additional rights (as determined using the Black-Scholes option pricing model

or another method determined by the Company in good faith), in each case divided by the number of shares of Company’s common

stock issued in such transaction;

(B) 80% of the lowest effective price per share set in connection with any funds raise by the

Company at any time subsequent to six (6) months following the Effective Time until such time as the loans outstanding under all

of the Convertible Loan Agreements are fully repaid or otherwise converted provided, however, that such price per share shall not

be available in the event of an issuance of Alternative Securities to the lender);

valuation of the Company of $15million following the next investment in the Company following the Effective Time;

or (D) the conversion

price, as adjusted for a Dilutive Event, under the New Debentures.

The conversion price is currently $0.374.

As of March 30, 2021,

the Convertible Loan Agreements have an aggregate outstanding principal balance of $835 as a result of the conversions of certain

Convertible Loan Agreements (see note 15 below).

In accordance with ASC 815-15-25,

the conversion feature was considered an embedded derivative instrument, and is to be recorded at its fair value as its fair value

can be separated from the convertible loan and its conversion is independent of the underlying note value.

The Company recorded

finance expenses in respect of the convertible component in the convertible loan in the excess amount of the convertible component

fair value over the face loan amount.

The conversion liability is then marked to market each reporting period with the resulting

gains or losses shown in the statements of operations.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

CONVERTIBLE NOTES (continue)

The fair value of the convertible

component was estimated by third party appraiser using the Black-Scholes option pricing model, to compute the fair value of the

derivative and to mark to market the fair value of the derivative at each balance sheet date.

The Company has estimated the fair

value of such derivative at a value of $144 at the date of issuance and at a value of $22 as of December 31, 2020.

The following

are the data and assumptions used as of the balance sheet date:

Common stock price

Expected volatility

Expected term

Risk free rate

Forfeiture rate

Expected dividend yield

The fair value allocated to

loans net of the convertible component was estimated at a value of $822 at the issuance date.

7 - STOCKHOLDERS LOANS

Since Duke’s inception and until 2017, certain Duke

affiliates provided loans to Duke from time to time, as needed.

Some of the Stockholders Loans bear an annual fixed interest at

3.00% and some of the Stockholders Loans bear an annual interest rate as defined in section 3(j) of the Israeli tax ordinance (the

interest rate 2019 was set on 2.56% per annum).

The Stockholders’

loans, including the accumulated interest amount, were

to be repaid in full within 7-15 days from any capital raised by the Company or related parties of the Company, whether by a stock

offering and / or loans in excess of NIS 10 million (approximately $2.5 million).

As detailed in note 1 above, before

entering into the Share Exchange Agreement:

(i) Duke entered into Debt Cancellation Letters with each of its Stockholders with

regard to the Stockholders Loans noted above.

Pursuant to the Debt Cancellation Letters, 842,135 shares of the Duke Inc.

stock (1,046,016 shares post Exchange Ratio) were issued in exchange for the cancellation of $623 in debt, waiving $83 of accrued

interest and leaving $280 of outstanding Stockholders Loans.

These Stockholders Loans, including interest (which shall bear an

annual fixed interest rate of 3% as of January 1, 2020), shall be repaid at the date upon which the Company raises at least $15

million and has achieved earnings before interest, tax, depreciation and amortization of $3 million, but not before the three year

anniversary of the Effective Time and the full repayment of the amounts outstanding under certain convertible loan agreements in

the aggregate amount of $965 (see additional information in Note 6B).

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

SHAREHOLDERS’

Description of the rights

attached to the Shares in the Company :

The holders of shares of Common

Stock vote together as one class on all matters as to which holders of Common Stock are entitled to vote.

Except as otherwise required

by applicable law and subject to the preferential rights of any outstanding preferred stock, all voting rights are vested in and

exercised by the holders of Common Stock with each share of our Common Stock being entitled to one vote, including in all elections

of directors.

The Company does not have a classified board of directors (the “Board”).

Subject to preferences that

may be applicable to any outstanding preferred stock, the holders of Common Stock are entitled to receive ratably such dividends,

if any, as may be declared from time to time by the Board out of legally available funds therefore.

In the event of the Company’s

liquidation, dissolution or winding up, holders of the Common Stock are entitled to share ratably in all assets remaining after

payment of liabilities, subject to prior liquidation rights of preferred stock, if any, then outstanding.

The Common Stock has

no cumulative voting rights and no preemptive or other rights to subscribe for shares of the Company.

There are no redemption or

sinking fund provisions applicable to the Common Stock.

All shares of Common Stock currently outstanding are fully paid and non-assessable.

Transactions :

1, 2018, the Company granted an aggregate of 200,000 shares of common stock to a consultant at a value of $3.00 per share of common

stock in exchange for consulting services.

The stock will be issued to the consultant over a 3-year vesting period.

2019 the Company issued to the consultant the first tranche of 66,667 shares of common stock.

During the year ended December 31,

2020 the Company recorded compensation expenses in regard to such offering in the amount of $108.

to notes 1 above regarding shares issued during 2020.

STOCK OPTIONS

The following table presents

Duke Inc.’s stock option activity the year ended December 31, 2020:

Exercise Price

Outstanding at December 31,2019

Forfeited or expired

Outstanding at December 31,2020

Number of options exercisable at December 31, 2020

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

STOCK OPTIONS (continue)

The aggregate intrinsic value

of the awards outstanding as of December 31, 2020 is $0.

These amounts represent the total intrinsic value, based on the Company’s

stock price of $0.374 as of December 31, 2020, less the weighted exercise price.

This represents the potential amount received

by the option holders had all option holders exercised their options as of that date.

The stock options outstanding

as of December 31, 2020, have been separated into exercise prices, as follows:

Exercise price

Weighted average

remaining contractual

Stock options vested

of December 31, 2020

The stock options outstanding

as of December 31, 2019, have been separated into exercise prices, as follows:

Exercise price

Weighted average

remaining contractual

Stock options vested

As of December 31, 2019

Compensation expense recorded

by the Company in respect of its stock-based compensation awards for the period ended December 31, 2020 was $108 and are included

in General and Administrative expenses in the Statements of Operations

UAS DRONE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands , except share and per

GENERAL AND ADMINISTRATIVE EXPENSES

Year ended December 31

Professional services

Share base compensation

Adverting and promotion

Rent and office maintenance

Levies and tolls

Other expenses

On February 14, 2018, a complaint

was filed against the:

(i) Duke Inc., (ii) Duke Israel, (iii) Aphek Trading Kadosh and Razi Ltd.

(“Aphek”) an Israeli

corporation owned by Raziel Atuar and Amir Kadosh, and (iv) Mr.

Aharon Sagiv, currently, the Chief Technology Officer and Director

of the Company, by Blackhawk Laboratories (the “Plaintiff”), a U.S.

based company, in the Tel Aviv District of Israel

31727-02-18).

The complaint asserts a claim for breach of contract, breach of duty, negligence and unjust enrichment

with regard to a services agreement dated June 13, 2014 between the Plaintiff and Duke.

The complaint asserts that Duke Israel

agreed to pay for certain services alleged to have been performed by the Plaintiff and that the Plaintiff was entitled to receive

8% of the issued and outstanding shares of common stock of, over a 12 month period from June 2014 to June 2015.

The Plaintiff’s

complaint seeks an order requiring either Duke Israel to issue to the Plaintiff 8% of its issued and outstanding shares of our

common stock;

or alternatively for Duke Inc.

to issue to the Plaintiff 4.8% of its issued and outstanding shares of our common

or alternatively for Aphek and Mr.

Aharon Sagiv to transfer 8% of their shareholdings in the Company to the Plaintiff.

The defendants believe the Plaintiff’s

complaint has no merit and they intend to vigorously defend the lawsuit.

The Company and Duke Inc.

do not believe the lawsuit will

have a material effect on the Company as all three co-founders of the Company (Raziel Atuar, Amir Kadosh and Sagiv Aharon) have

agreed to indemnify the Group for any losses resulting from the lawsuit, including taking responsibility for the issuance of any

shares of the Group’s common stock in the event the Plaintiff is successful in its lawsuit.

TO CONSOLIDATED FINANCIAL STATEMENTS

in thousands , except share and per share data)

resident companies are

taxed on their worldwide income for corporate income tax purposes at a statutory rate of 21% this reflect certain effects of the

Act which includes a reduction in the corporate tax rate from 35% to 21% as well as other changes.

No further taxes are payable

on this profit unless that profit is distributed.

If certain conditions are met, income derived from foreign subsidiaries is tax

exempt in the US under applicable tax treaties to avoid double taxation.

Income of the Israeli company

is taxable from 2018 onwards, at corporate tax rate of 23%.

The Company and subsidiaries

have not received final tax assessments since its inception.

As of December 31, 2020, the

Company and subsidiaries had carry forward losses for tax purposes of approximately $1,225 and $2,813, respectively, which can

be offset against future taxable income, if any.

The following is reconciliation between the theoretical tax on pre-tax income, at the tax rate

applicable to the Company (federal tax rate) and the tax expense reported in the financial statements:

Year ended December 31

Federal tax rate

Income tax computed at the ordinary tax rate

Stock-based compensation

Tax in respect of differences in corporate tax rates

Losses and timing differences in respect of which no deferred taxes were generated

Deferred taxes result primarily from temporary differences in the recognition of certain revenue

and expense items for financial and income tax reporting purposes.

Significant components of the Company’s future tax assets

are as follows:

Year ended December 31

Composition of deferred tax assets:

Non capital loss carry forwards

Valuation allowance

Net deferred tax assets

SUBSEQUENT EVENTS

September 17, 2019, the Company entered into a non-binding Term Sheet that outlines the

general terms and conditions upon which the Company may acquire 100% of the outstanding

securities of Duke Robotics Inc., a Delaware corporation (“Duke”) in exchange

for the issuance to the Duke’s shareholders, on a pro rata basis, of a controlling

interest of the outstanding post acquisition securities of the Company.

March 4, 2020, the Company consummated a Share Exchange Agreement with Duke and certain shareholders of Duke who executed

and delivered the Share Exchange Agreement (the “Share Exchange Agreement”), pursuant to which Duke became a majority-owned

subsidiary of the Company (the “Share Exchange”).

The Share Exchange closed on March 9, 2020.

Such closing date is

referred to as the “Effective Time.”

to the terms of the Share Exchange Agreement, at the Effective Time, the Company issued an aggregate of 28,469,065 shares of its

common stock to the Duke stockholders in exchange for 22,920,107 shares of Duke’s issued and outstanding shares of common

stock, representing approximately 99% of Duke’s issued and outstanding shares of common stock.

Accordingly, each outstanding

share of Duke common stock was exchanged for the right to receive 1.2421 shares of the Company’s common stock (the “Exchange

Ratio”).

Of the shares of Duke common stock that were exchanged for shares of the Company’s common stock, 51,410 (representing

63,856 shares of the Company’s common stock post-Share Exchange) shall be issued but remain in escrow until the Company

completes a short-form merger, or other similar transaction, pursuant to which, such shares will be issued to their respective

These Duke stockholders not receiving shares of the Company’s common stock in exchange for their shares of Duke

common stock at the Effective Time are referred to as the Non-Participating Duke Holders.

such, at the Effective Time, the Duke stockholders owned an equivalent of approximately 71% of the Company’s common stock.

After giving effect to the Share Exchange, Duke became a subsidiary of the Company.

Following the Share Exchange, the Company

adopted the business plan of Duke.

Duke is a robotics company dedicated to the development of an advanced robotics system that

enables remote, real-time, pinpoint accurate firing of small arms and light weapons.

the consummation of the Share Exchange, the Company intends to incorporate a wholly-owned subsidiary, which, according to the

Company’s current plan, would then merge into, and acquire, the remaining outstanding shares of Duke held by those certain

Duke shareholders that did not participate in the Share Exchange.

The proposed acquisition of the shares of Duke common stock

from the Non-Participating Duke Holders is expected to occur at the Exchange Ratio;

however, there is and can be no guarantee

that the Company is able to successfully conduct such second phase of the Share Exchange thereby causing Duke to become a wholly-owned

TO FINANCIAL STATEMENTS

SUBSEQUENT EVENTS - Continued

conjunction with the consummation of the Share Exchange, and as a condition thereof, the Company entered into the agreements listed below.

Several convertible loan agreements, on the same terms, in the aggregate amount of $965,000 (each, a “Convertible Loan Agreement”).

The terms of the Convertible Loan Agreements require repayment of the borrowed amount by the one-year anniversary of the Effective

Time, unless, at the Company’s discretion, and subject to its compliance with any and all terms of the material terms of

the Convertible Loan Agreements, the term of such loans is extended for an additional twelve (12) month period.

The terms of the

Convertible Loan Agreements also provides that the Company may repay any portion of the remaining outstanding loan amount, without

penalty, provided, however, that the Company provides the specific Primary Lender with three business days’

written notice

prior to such repayment, during which time the Primary Lender may elect to convert any or all of the outstanding loan amount into

shares of common stock of the Company.

The Convertible Loan Agreements bear simple interest at a rate equal to 15% per annum,

payable each calendar month.

(ii) Securities exchange agreements (each, an “Exchange

Agreement”) with outstanding debt holders of the Company, Alpha Capital Anstalt (“Alpha”) and GreenBlock Capital

LLC (“GBC”) to respectively cancel existing debentures or debt in the total amount of $658,323 and in exchange issue

new debentures in the aggregate amount of $400,000 and issue 698,755 and 65,198 shares of common stock to each of Alpha and GBC,

respectively.

The New Debentures mature three years from the Effective Date, bear interest at a rate of 8% per year and are only

convertible into shares of the Company’s common stock, at an original conversion price of $0.3740 (the “Original Conversion

Price”);

provided, however, that such Original Conversion Price shall be adjusted downward in the event that the Company,

as applicable, sells or grants any options to purchase or sells or grants any right to reprice, or otherwise dispose or issues

any common stock or common stock equivalents entitling any purchaser to acquire shares of the Company’s common stock at an

effective price per share that is lower than the Original Conversion Price (such issuance, a “Dilutive Event”).

the event of a Dilutive Event at any time from the Effective Time through the six (6) month anniversary of the Effective Time,

any such adjustment shall occur immediately after the completion of such period.

Several Securities Exchange Agreements, on the same terms, to exchange the Promissory Note for 9,623,621 shares of Company common

A Registration Rights Agreement with GBC, Alpha, the Primary Lenders (as defined below) and certain Duke shareholders.

beneficial owners of the common stock, or other securities, issuable under parties to the Convertible Loan Agreements and the

Note Conversion are identical and, as such, we refer to these parties as the “Primary Lenders.”

conjunction with the Share Exchange, the Company’s CEO’s outstanding accrued

pay of $32,500, as well as the 25,000 options he held at the end of 2019, were converted

into 45,968 shares of the post-transaction Company.

the Effective Time, Messrs.

Begley, Christopher Leith and Chris Nelson resigned

as directors and/or officers of the Company and Yariv Alroy, Erez Nachtomy, Eran Antebi

and Sagiv Aharon were appointed as directors of the Company and Sagiv Aharon as an officer

of the Company.

April 12, 2020, effective as of March 1, 2020, the Board of Directors

approved payment of certain fees to directors in the amounts of $4,980, $4,980 and $6,950 per month to directors, Yariv Alroy,

Sagiv Aharon and Erez Nachtomy (each, an “Active Director”), respectively.

On April 12, 2020, the Company also enacted

a policy to pay each director (that is not otherwise an Active Director) an amount of $1,500 for each calendar quarter and $400

for attendance of each meeting of the board of directors.

UAS DRONE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands , except share and per

LOSS PER SHARE

Basic loss per share is computed

by dividing net loss by the weighted average number of shares outstanding during the year.

The weighted average number of shares

of common stock used in computing basic and diluted loss per share for the years ended December 31, 2020 and 2019, are as follows:

Year ended December 31

Weighted average number of shares of common stock outstanding attributable to shareholders

Total weighted average number of shares of common stock related to outstanding options, excluded from the calculations of diluted loss per share (*)

(*) The effect of the inclusion of option and convertible

loans in 2020 and 2019 is anti-dilutive.

RELATED PARTIES

Transactions and balances with related parties

Year ended December 31

General and administrative expenses:

Directors compensation

Financing expense

Financing income

Balances with related parties:

As of December 31,

Other accounts liabilities

Stockholders loans

Convertible loans

On April 12, 2020, effective as of March 1, 2020, the Board of Directors approved the payment of

certain fees to directors in the amounts of $4.98, $4.98 and $6.95 per month to Yariv Alroy, Sagiv Aharon and Erez Nachtomy (each,

an “Active Director”), respectively.

On April 12, 2020, the Company also enacted a policy to pay each director (that

is not otherwise an Active Director) an amount of $1.5 for each calendar quarter and $0.40 for attendance of each meeting of the

board of directors.

These amounts are exclusive of Israeli VAT if applicable.

In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China.

This virus continues to spread globally and, as of April 2020, has spread to over 100 countries, including the United States and Israel.

The spread of COVID-19 from China to other countries has resulted in the World Health Organization declaring the outbreak of COVID-19 as a “pandemic,”

or a worldwide spread of a new disease, on March 11, 2020.

Many countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus.

On March 10, 2020, the Government of Israel announced that effective Thursday, March 12, 2020, at 20:00 (Israel time) foreign travelers arriving from any country will be required to remain in home quarantine until 14 days have passed since the date of entry into Israel;

non-Israeli residents will be required to prove they have the means to self-quarantine before being allowed entry into Israel and, in addition, non-Israeli residents or citizens traveling from certain countries may be denied entry into Israel.

In addition, the Ministry of Health in the State of Israel issued guidelines on March 11, 2020 recommending people avoid gatherings in one space and providing that no gathering of more than 100 people should be held under any circumstances.

Employers (including us) are also required to prepare and increase as much as possible the capacity and arrangement for employees to work remotely.

In addition, on March 11, 2020, the President of the United States issued a proclamation to restrict travel to the United States from foreign nationals who have recently been in certain European countries.

The spread of an infectious disease, including COVID-19, may also result in the inability of Company’s manufacturers to deliver components or finished products on a timely basis and may also result in the inability of Company’s suppliers to deliver the parts required by Company’s manufacturers to complete manufacturing of components or finished products.

In addition, governments may divert spending from other budgeted resources as they seek to reduce and/or stop the spread of an infectious disease, such as COVID-19.

Such events may result in a period of business and manufacturing disruption, and in reduced operations, any of which could materially affect the Company’s business, financial condition and results of operations.

The extent to which COVID-19 impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

in thousands)

SUBSEQUENT EVENTS

On January 29, 2021, the Company, through its wholly owned subsidiary Duke Israel

and Elbit, entered into a collaboration agreement (the “Agreement”) for the global marketing and sales, and the production

and further development of Duke’s developed advanced robotic system mounted on an Unmanned Aerial Solution (“UAS”),

armed with lightweight firearms, which the Company markets under the commercial name “TIKAD.”

Pursuant to the Agreement, Duke

has granted Elbit a worldwide exclusive license for the use of Duke’s know-how and intellectual property and the marketing,

sales, production, and further development of the TIKAD for military, defense, homeland security, and para-military uses.

As consideration

for granting the worldwide exclusive license, Elbit will pay Duke royalties from revenues received from worldwide sales of TIKAD,

with royalty rates ranging from low to mid-double-figure percentages, depending on the tiers of the selling price of TIKAD, for

a period starting from the date of the Agreement until 15 years following receipt of $5,000 in cumulative revenues from sales of

In addition, Duke agreed to pay Elbit similar rates of royalties for revenues received by Duke from sales of its advanced

robotic system for civil use, if such systems will include new know-how developed by Elbit.

Pursuant to the terms of the

Agreement, the parties also agreed to cooperate in continuing a project (the “Project”) that has already started with

a customer in the Asia Pacific region.

Elbit has agreed to invest, at its discretion and pursuant to certain milestones, in the

further development and setting up of serial production lines of TIKAD, and may elect to increase such investment subject to the

satisfaction of certain criteria, including Elbit’s right to terminate the Agreement if, for example, the Project is cancelled

by the customer.

Such investment amounts will be made into Elbit’s owned assets and production lines of TIKAD.

recoup 50% of its investment amount, up to $6,000, by offsetting 50% of royalty payments that may be due to Duke.

During February 2021, holder of Convertible Loan as detailed in note 6A above, converted $200 principal

amount ($215.066 including accrued interest) into 575,044 common stock of the Company.

On February 12, 2021 and March 2, 2021, the Company issued 171,246 common stock of the Company,

to several holders Security Exchange Agreement signed at March 9, 2020 between the Company and several debt holders (see note 1(iii)

above), according to which, such holders are entitled to an anti-dilution clause in the event that the Convertible Loans detailed

in notes 6B and 1(iii) above are converted such that such the number of shares held by such investors would not be lower than original

holding on a fully diluted basis prior to such conversions.

On March 5, 2021 holder of Convertible Loan as detailed in note 6B above, converted the principal

amount of $130 into 347,594 shares of the Company’s common stock.

On March 25, 2021, the Board of Directors appointed Yossef Balucka

to serve as its Chief Executive Officer and President.

In conjunction with the appointment of Mr.

Balucka, the Company issued to

Balucka options to purchase 450,000 shares of the Company’s commons stock at an exercise price of $0.0001 per share,

subject to and in accordance with the terms and conditions of an Option Plan to be set up and approved by the Company at the discretion

of the board of directors.

The options shall vest over a three year period, with 50% of the options to vest on the first anniversary

of the grant date, and the balance of 50% of the options to vest in equal parts on the second and third anniversary of the grant

date, respectively, subject to the Mr.

Balucka providing continued services to the Company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures