What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-15 compared with 2023-03-24 · 423 added, 451 removed, 850 unchanged (51% of the section changed)

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we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management,

including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), to allow timely decisions

regarding required disclosure.

Our management, with the participation of our CEO and CFO, as in place

as of December 31, 2022, evaluated, the effectiveness of our disclosure controls and procedures as of December 31, 2022, pursuant to paragraph

(b) of Rules 13a-15 and 15d-15 under the Exchange Act.

This evaluation included a review of the controls’ objectives and design,

the operation of the controls, and the effect of the controls on the information presented in this Annual Report.

Our management, including

the CEO and CFO, do not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any.

A control system,

no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to

be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time

periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures

designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and

communicated to management, including our CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions

regarding required disclosure.

Also, the projection of any evaluation of the disclosure controls and procedures to future periods is subject

to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of

compliance with the policies or procedures may deteriorate.

including the CEO and the CFO, to allow timely decisions regarding required disclosure.

Our management, with the participation

of our CEO and CFO, as in place as of December 31, 2023, evaluated, the effectiveness of our disclosure controls and procedures as of

December 31, 2023, pursuant to paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act.

This evaluation included a review of the

controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this

Annual Report.

Our management, including the CEO and CFO, do not expect that disclosure controls can or will prevent or detect all errors

and all fraud, if any.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance

that the objectives of the control system are met.

Disclosure controls and procedures are controls and other procedures that are designed

to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized

and reported within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without

limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under

the Exchange Act is accumulated and communicated to management, including our CEO and CFO, or persons performing similar functions, as

appropriate, to allow timely decisions regarding required disclosure.

Also, the projection of any evaluation of the disclosure controls

and procedures to future periods is subject to the risk that the disclosure controls and procedures may become inadequate because of changes

in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on their review and

evaluation, and subject to the inherent limitations described above, our CEO and CFO concluded that our disclosure controls and procedures

(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of December 31, 2022, at the above-described

(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) were not effective as of December 31, 2023, at the above-described

reasonable assurance level.

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Changes in Internal Control over Financial

Other than the hiring of a full time CEO, there has been no change

in our internal control over financial reporting during the year ended December 31, 2022, that has materially affected, or is reasonably

There has been no change in

our internal control over financial reporting during the year ended December 31, 2023, that has materially affected, or is reasonably

likely to materially affect, our internal control over financial reporting.

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over Financial Reporting

Under 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, 2022.

In 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, 2022, determined that the Company’s internal control over financial reporting as of December 31,

2022, was not effective due to the material weakness previously identified as stated above.

Under 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, 2023.

In making this assessment, management

used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated

Based on this assessment, management, as in place as of December 31, 2023, determined that the Company’s internal control

over financial reporting as of December 31, 2023, was not effective due to the material weakness previously identified as stated above.

Other Information

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Mevo Carmel Science and Industrial Park, Israel

Delinquent Section 16(a) Reports

Section 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.

We 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.

Committees of the Board of Directors

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incentive plan

Yossef Bakula -CEO

Shlomo Zakai - CFO

Yossef Bakula -

Shlomo Zakai -

Restricted Stock Awards

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Grants of Plan-Based Awards for 2023

following table presents the outstanding equity awards held as of December 31, 2022 by our named executive officers and directors ,

all of which have been issued pursuant to our 2021 Equity Compensation Plan, or the 2021 Plan:

The following table presents

the outstanding equity awards held as of December 31, 2023 by our named executive officers and directors, all of which have been issued

pursuant to our 2021 Equity Compensation Plan, or the 2021 Plan:

Number of shares that have not vested

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Plan Category

securities to be

Weighted-average

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are counted as outstanding, while these shares are not counted as outstanding for computing the percentage ownership of any other person.

Unless otherwise indicated, the address of each person listed below is c/o Duke Robotics, 10 HaRimon Street, Mevo Carmel Science and Industrial

Park, Israel, Israel 2069203.

Unless otherwise indicated, the address of each person listed below is c/o Duke Robotics Ltd., 10 HaRimon Street, Mevo Carmel Science

and Industrial Park, Israel, Israel 2069203.

We relied on information received

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Afek Trading - Kadosh and Razi Ltd.

More Provident Fund Ltd (3)

Y.D More Investments Ltd.

Named Executive Officers:

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All directors and executive officers as a group (6 Persons)**

(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.

deemed to be the beneficial owner of securities that can be acquired by such person within sixty (60) days from March 23, 2023, 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 7, 2022.

(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 March 14, 2024, 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 14, 2024.

Zabotinsky 50, Givat Shmuel, Israel.

(3) Based solely on information contained

in Form 13D filed with the SEC on July 6, 2021.

Includes warrants to purchase 11,250,000 shares of common stock.

Including securities

held by Y.D More Investments Ltd., B.Y.M.

Mor Investments Ltd., Elldot Ltd., Benjamin Meirov and Yosef Levy.

(3) Based solely on information

contained in Form 13D filed with the SEC on January 29, 2024.

Includes (i) 10,000,000 shares of Common Stock and 10,000,000 warrants

exercisable into 10,000,000 shares of Common Stock held directly by More Provident Funds and Pension Ltd., an Israeli company controlled

by Y.D More Investments Ltd.

and (ii) 1,250,000 shares of Common Stock and 1,250,000 warrants exercisable into 1,250,000 shares of Common

Stock held directly by More Co-Invest (L.P.), Limited Partnership, an Israeli limited partnership, whose general partner, More Co-Invest

1 (G.P.) Ltd., is controlled by Y.D More Investments Ltd.

Y.D More Investments Ltd.

is an Israeli public company controlled through a

voting agreement among the following individuals:

(a) Yosef Meirov, directly and through B.Y.M.

Mor Investments Ltd., a company he controls

with Michael Meirov and Dotan Meirov, (b) Benjamin Meirov (c) Yosef Levy and (d) Eli Levy through Elldot Ltd., a wholly owned company.

Changes in Control

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Principal Accounting Fees and Services.

independent registered public accounting firm for the year ended December 31, 2021 was Halperin Ilanit CPA, an independent registered

public accounting firm, located in Tel Aviv, Israel, PCAOB ID 650100001 .The following

is a summary of the fees billed by Halperin Ilanit CPA during the calendar years ended December 31, 2022 and 2021:

Audit Fees (1)

Audit - related fees

All other fees

(1) 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.

Our independent registered

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Israel , PCAOB ID 1057 .The following is a summary of the fees billed by Somekh Chaikin, during the calendar years ended December 31, 2023

Audit Fees (1)

Audit - related fees

All other fees

(1) 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.

Audit fees - Consists of fees

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(b) Exhibits .

Exhibit Number

Share Exchange Agreement dated March 4, 2020, by and among UAS Drone Corp., Duke Robotics, Inc., and the shareholders of Duke Robotics, Inc.

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and the investors signatory thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 8, 2022).

Warrant Extension Agreement, dated November 1, 2023, between UAS Drone Corp.

and the investors signatory thereto (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on November 3, 2023).

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).

Exhibit Number

List of Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2021.

Consent of Independent Registered Public Accounting Firm

Consent of Halperin Ilanit, Independent Registered Public Accounting Firm

Certification of Chief Executive Officer pursuant to Sec.

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Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

(Principal Financial Officer and

Principal Accounting Officer)

Pursuant to the requirements

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Yossef Balucka

Chief Executive Officer (Principal Executive Officer)

Chief Executive Officer

(Principal Executive Officer)

March 15, 2024

/s/ Shlomo Zakai

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)

March 15, 2024

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1057/ Location:

Tel Aviv, Israel)

CONSOLIDATED FINANCIAL STATEMENTS:

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Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

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We have audited the accompanying consolidated

balance sheet of UAS Drone Corp., and its subsidiary (the Company) as of December 31, 2022, the related consolidated statements of

comprehensive loss, changes in stockholders’ equity, and cash flow for the year ended December 31, 2022, and the related notes

(collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material

respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for

the year ended December 31, 2022 in conformity with U.S.

balance sheets of UAS Drone Corp., and its subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated

statements of comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended

December 31, 2023 and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and

the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023 in conformity

generally accepted accounting principles.

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Our responsibility is to express an opinion on these consolidated financial statements

based on our audit.

based on our audits.

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

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

We conducted our audit in accordance with the

We conducted our audits in accordance with the

standards of the PCAOB.

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engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding

As part of our audits, 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

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Accordingly, we express no such opinion.

Our audit included performing procedures to assess

Our audits included performing procedures to assess

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

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consolidated financial statements.

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

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

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

We believe that our audit provides

We believe that our audits provide

a reasonable basis for our opinion.

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We determined that there are no critical audit matters.

/s/ Somekh Chaikin

Somekh Chaikin

Member Firm of KPMG International

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March 15, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF

UAS DRONE, CORP.

Opinion on the Financial Statements

We have audited the accompanying balance sheet

of UAS Drone Corp.

(the “Company”) as of December 31, 2021, the related statements of operations and comprehensive loss, changes

in stockholders’ equity (deficit) and cash flows for the year in the period ended December 31, 2021, 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, 2021 and the results of its operations and its cash flows for the year in the

period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

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

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.

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

Critical audit matters are matters arising from

the current period audit of the 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 financial statements and (ii) involved our especially challenging,

subjective, or complex judgments.

We determined there are no critical audit matters.

/s/ Halperin Ilanit .

Certified Public Accountants (Isr.)

Tel Aviv, Israel

March 7, 2022

We have served as the Company’s auditor since 2019 to 2022

UAS DRONE, CORP.

BALANCE SHEETS

in thousands)

(USD in thousands except share and per share data)

Current Assets

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Other current assets (Note 3)

T o t a l Current assets

Lease deposit

and equipment, net (Note 4)

T o t a l assets

Total Current Assets

Operating lease right-of-use asset and lease deposit (Note 4)

Property and equipment, net (Note 5)

Liabilities and Shareholders’ Equity

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Accounts payable

Operating lease liability

Other liabilities (Note 6)

T o t a l current liabilities

Loans (Note 6)

T o t a l liabilities

Shareholders’

Equity (Note 7)

Total current liabilities

Related parties loans (Note 7)

Operating lease liability (Note 4)

Total Liabilities

Stockholders’

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

100,000,000 shares authorized as of December 31, 2023 and 2022;

issued and outstanding 54,218,813 and 54,018,813 shares as of December 31, 2022 and 2021, respectively.

issued and outstanding 54,218,813 shares as of December 31, 2023 and 2022.

Additional paid-in capital

Accumulated deficit

T o t a l shareholders’ Equity

T o t a l liabilities and shareholders’ Equity

Total Stockholders’ Equity

Total liabilities and stockholders’ Equity

The accompanying notes are an integral part

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(USD in thousands)

(USD in thousands except share and per share data)

Revenues (Note 11(2))

Cost of revenues

Research and development expenses

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Operating loss

Financing expense

Financing income

Financial income, net

Loss per share (basic and diluted) (Note 13)

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

The accompanying notes are

an integral part of the consolidated financial statements.

UAS DRONE, CORP.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(USD in thousands)

shareholders’

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(USD in thousands, except share and per share data)

stockholders’

BALANCE AT DECEMBER 31, 2021

Issuance of shares in exchange for convertible loans

Issuance of shares for cash (net of issuance expenses) (**)

Share based compensation for services granted in respect of issuance of shares (note 7)

Share based compensation for services (note 8)

Issuance of shares to service provider (note 9)

Share based compensation for services

Warrants modification (note 8)

Net loss for the year

BALANCE AT DECEMBER 31, 2022

Issuance of shares to service provider (note 7)

Share based compensation for services (note 8)

Share based compensation for services

Warrants modification (note 8)

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BALANCE AT DECEMBER 31, 2023

(*) represents amount less than $1 thousand.

(**) Net of issuance expenses of $1,070.

(*) represents

amount less than $1 thousand.

The accompanying notes are an integral part

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(USD in thousands,

except share and per share data)

CASH FLOWS FROM OPERATING ACTIVITIES:

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Issuance of shares for services

Interest on loans

Expenses with respect to convertible loans and debentures

Interest on loans from related parties

Reduction in the carrying amount of right-of-use assets

Change in operating lease liability

Increase in lease deposit

Increase in other current assets

Increase (decrease) in accounts payable

Decrease (increase) in other current assets

Increase in accounts payable

Increase (decrease) in other liabilities

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Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of shares

Repayments of convertible loans

Repayments of long term banking institute

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

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 convertible loans

Issuance expenses

Initial recognition of operating lease right-of-use assets

Initial recognition of operating lease liability

The accompanying notes are an integral part

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

(USD in thousands, except share and per share

UAS Drone Corp.

(“the Company”

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

(“the Company” or “USDR”)

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

On March 9, 2020, the Company closed

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surviving as a wholly-owned subsidiary of the Company.

Following the above

transactions, Duke Israel is a wholly-owned subsidiary of Duke Inc., which is a wholly-owned subsidiary of the Company.

Following the above transactions, Duke

Israel became a wholly-owned subsidiary of Duke Inc., which is 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 as well as other civilian applications with an emphasis on

the field of infrastructure maintenance.

The Company’s advanced robotics system is able to achieve pinpoint accuracy regardless

of the movement of the weapons platform or the target.

the “Group”) is a robotics company focused on the development of an advanced robotics stabilization system that enables remote,

real-time, pinpoint accurate firing of small arms and light weapons as well as other civilian applications with an emphasis on the field

of infrastructure maintenance.

The Company’s advanced robotics system is able to achieve pinpoint accuracy regardless of the movement

of the weapons platform or the target.

Effective October 22, 2020, Company’s

common stock is quoted on the OTC Markets Group, Inc.’s OTCQB® tier Venture Market, under the symbol “USDR”.

In October 2023, Hamas terrorists infiltrated Israel’s

southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets.

Hamas also launched extensive

rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas

within the State of Israel.

These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers.

the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations

commenced in parallel to their continued rocket and terror attacks.

Following the attack by Hamas on Israel’s southern border, Hezbollah

in Lebanon also launched missile, rocket, drone and shooting attacks against Israeli military sites, troops and Israeli towns in northern

In response to these attacked, the Israeli army has carried out a number of targeted strikes on sites belonging to Hezbollah in

southern Lebanon.

It is possible that the hostilities with Hezbollah will escalate, and that other terrorist organizations, including

Palestinian military organizations in the West Bank, as well as other hostile countries, such as Iran, will join the hostilities.

hostilities may include terror and missile attacks.

Certain of our consultants in Israel may be called up for reserve duty,

in addition to employees of our service providers located in Israel, have been called, for service and such persons may be absent for

an extended period of time.

In the event that hostilities disrupt our ongoing operations, our ability to deliver or provide services in

a timely manner to meet our contractual obligations towards customers and vendors could be materially and adversely affected.

The intensity and duration of

Israel’s current war against Hamas is difficult to predict, as are such economic implications on the

Company’s business and operations and on Israel’s economy in general.

These events may be intertwined with wider

macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect on the

Company and its ability to effectively conduct its operations.

Since this is an event that is not

under the control of the Company, and matters such as the fighting continuing or stopping may affect the Company’s assessments,

as at the reporting date the Company is unable to assess the extent of the effect of the war on its business activities and on the business

activities of its subsidiaries, and on their medium and long term results.

The Company is continuing to regularly follow developments

on the matter and is examining the effects on its operations and the value of its assets.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

– SIGNIFICANT ACCOUNTING POLICIES

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are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Since inception, the Company has incurred losses and negative

cash flows from operations.

Since inception, the Company has incurred

losses and negative cash flows from operations.

The Company has financed its operations mainly through fundraising from various investors.

Based on the projected cash flows and

cash balances as of the date of these financial statements, management is of the opinion that its existing cash will be sufficient to

meet its obligations for a period which is longer than 12 months from the date of the approval of these consolidated financial statements.

Based on the projected cash flows

and cash balances as of the date of these financial statements, management is of the opinion that its existing cash will be sufficient

to meet its obligations for a period which is longer than 12 months from the date of the approval of these consolidated financial statements.

Use of estimates in the preparation of financial statements

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statements in conformity with U.S.

GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets

and liabilities as of the date of the financial statements.

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

and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements.

Actual results could differ from those estimates.

As applicable to these financial

statements, the most significant estimates and assumptions relate to share based compensation.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

– SIGNIFICANT ACCOUNTING POLICIES (continue)

As applicable to these financial statements, the most significant estimates and assumptions

relate to share based compensation.

Functional currency

A majority of the Group’s revenues is generated in

A majority of the Group’s revenues

is generated in U.S.

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

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

Transactions and monetary balances in other currencies are translated into the functional currency using the current

exchange rate.

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 U.S.

Transactions and monetary balances in other currencies are translated into the functional currency using

the current exchange rate.

Accordingly, monetary accounts maintained

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

Property and equipment, net

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

– SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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:

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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, 2022 or 2021.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

– SIGNIFICANT ACCOUNTING POLICIES (continue)

Income taxes are accounted for

under the asset and liability method.

The Group accounts for income taxes in accordance with ASC Topic

740, “Income Taxes”.

Accordingly, deferred income taxes are determined 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.

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

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, 2023 or 2022.

Income taxes are accounted for under the asset and liability

The Group accounts for income taxes in accordance with ASC Topic 740, “Income Taxes”.

Accordingly, deferred income

taxes are determined 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

6 unchanged sentences

statements and did not recognize any liability with respect to an unrecognized tax position in its balance sheets.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

NOTE 2 – SIGNIFICANT ACCOUNTING

POLICIES (continued)

Revenue recognition

The Group recognizes revenue when it

satisfies performance obligations under the terms of its contracts, and control of its products is transferred to its customers in an

amount that reflects the consideration the Company expects to receive from its customers in exchange for those products.

involves identifying the customer contract, determining the performance obligations in the contract, determining the transaction price,

allocating the transaction price to the distinct performance obligations in the contract, and recognizing revenue when the performance

The Group provides services to customers

and has related performance obligations and recognizes revenue in accordance with ASC 606.

Revenues are recognized when the

Group satisfies performance obligations under the terms of its contracts, and control of its services or products is transferred to its

customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products.

This process involves identifying the customer contract, determining the performance obligations in the contract, determining the transaction

price, allocating the transaction price to the distinct performance obligations in the contract, and recognizing revenue when the performance

obligations have been satisfied.

4 unchanged sentences

to a customer, meaning the customer has the ability to direct the use and obtain the benefit of the product.

(see note 11(2)).

Research and development expenses

15 unchanged sentences

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

The Company has expensed compensation costs, net

of estimated forfeitures, on a straight-line basis, over the requisite service period.

The Company has expensed compensation costs, net of

estimated forfeitures, over the requisite service period.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

– SIGNIFICANT ACCOUNTING POLICIES (continue)

(USD in thousands, except share and per share

– SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentrations of credit risk

15 unchanged sentences

Fair Value Measurements

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 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,

26 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

– SIGNIFICANT ACCOUNTING POLICIES (continue)

(USD in thousands, except share and per share

– SIGNIFICANT ACCOUNTING POLICIES (continued)

Unobservable inputs for the

10 unchanged sentences

is or contains a lease at contract inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities,

and operating lease liabilities in our consolidated balance sheets.

ROU assets represent the

Company’s right to use an underlying asset for the lease term and lease liabilities represent the Group’s obligation to

make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on

the present value of lease payments over the lease term.

As the Company’s leases do not provide an implicit rate, the Company

generally uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar

term of the lease payments at commencement date.

The operating lease ROU asset also includes any lease payments made and excludes

lease incentives.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain

that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Operating leases are included in operating

lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in our consolidated balance

ROU assets represent the Company’s

right to use an underlying asset for the lease term and lease liabilities represent the Group’s obligation to make lease payments

arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease

payments over the lease term.

As the Company’s leases do not provide an implicit rate, the Company generally uses the incremental

borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement

The operating lease ROU asset also includes any lease payments made and excludes lease incentives.

The Company’s lease terms

may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for

lease payments is recognized on a straight-line basis over the lease term.

The Company monitors for events or

5 unchanged sentences

balance is recorded in statement of comprehensive loss.

As detailed in note 10(2)

below, the property became available for Company’s use at February 2023, therefore commencement date of the lease agreement

has not yet been met as of the balance sheet date and therefore an ROU asset and liability have not been recorded.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

(USD in thousands, except share and per share

OTHER CURRENT ASSETS

1 unchanged sentence

Government Institutions

On April 4, 2022, the Company signed a lease agreement for an office space in Mevo Carmel Science and Industry Park, Israel for a term of 3 years, with an option to extend the term of the lease agreement for an additional 2 years.

The monthly lease payments under the lease agreement, for the first two years are NIS 16.5 (approximately $ 4.6 ) and for the third year NIS 17.2 (approximately $ 4.8 ).

The monthly lease payments for the option period will be agreed between the parties, with a minimum increase of 5 % above the third years monthly payments.

Lease payment are linked to the Israeli Consumer Price Index.

The property became available for Company’s use at February 2023.

Based on the lease agreement terms, the Company made a deposit of $ 15 as a guarantee for its lease commitments

The components of operating

lease expense for the period ended December 31, 2023 and 2022 were as follows:

Operating lease expense

Supplemental cash flow information related to operating leases

was as follows:

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Right-of-use assets obtained in exchange for lease obligations (non-cash):

Operating leases

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

LEASES (continued)

Amounts reported in the consolidated balance sheets related

to operating lease as of December 31, 2023 and 2022 are as follows:

Operating leases:

Operating leases right-of-use asset and lease deposit

Current operating lease liabilities

Non-current operating lease liabilities

Total operating lease liabilities

Weighted average remaining lease term (years)

Weighted average discount rate

Future minimum lease payments under non-cancellable leases

as of December 31, 2023 are as follows:

Total operating lease payments

imputed interest

Present value of lease liabilities

PROPERTY AND EQUIPMENT, NET

Furniture and office equipment

Leasehold improvements (see note 10(2))

Leasehold improvements

Less - accumulated depreciation

Total property and equipment, net

the years ended December 31, 2022 and 2021, depreciation was US$ 2 and US$ 3 respectively, a nd

additional property and equipment were purchased in an amount of US$ 35 during the year ended December 31, 2022 ( none during the year ended

December 31, 2021).

In the years ended December 31,

2023 and 2022, depreciation expenses amounted to $ 20 and $ 2 respectively, and additional property and equipment were purchased for

cash in an amount of $ 18 and $ 35 during the years ended December 31, 2023 and 2022, respectively.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

– OTHER LIABILITIES

1 unchanged sentence

Other (note 8)

NOTE 6 – LOANS

The loans are from related parties.

The loans bear an annual fixed interest rate of 3 % and shall be repaid (principal and interest) 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 March 9, 2023 (three year anniversary of the March 9, 2020 issuance date).

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

RELATED PARTIES LOANS

The Company has outstanding loans with

related parties.

The loans bear an annual fixed interest rate of 3 % and shall be repaid (principal and interest) 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.

SHAREHOLDERS’ EQUITY

2 unchanged sentences

Common stock:

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.

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 of directors out of legally available funds.

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.

redemption or sinking fund provisions applicable to the Common Stock.

All shares of Common Stock currently outstanding are fully paid

and non-assessable.

As of December 31, 2022, there were no outstanding preferred stock.

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.

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 of directors out of legally available funds.

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 is no redemption or sinking fund provisions applicable

to the Common Stock.

All shares of Common Stock currently outstanding are fully paid and non-assessable.

As of December 31, 2023, there

were no outstanding preferred stock.

Transactions :

On May 11, 2021,

the Company entered into Securities Purchase Agreements (the “Securities Purchase Agreements”) with eight (8) non-U.S.

pursuant to which the Company, in a private placement offering (the “Offering”), agreed to issue and sell to the investors

an aggregate of:

On May 11, 2021, the Company entered

into Securities Purchase Agreements (the “Securities Purchase Agreements”) with eight (8) non-U.S.

investors, pursuant to

which the Company, in a private placement offering (the “Offering”), agreed to issue and sell to the investors an aggregate

(i) 12,500,000 shares of the Company’s Common Stock, at a price of $ 0.40 per share;

6 unchanged sentences

of issuance costs.

On May 11, 2021,

the Company signed a service agreement with a non U.S.

third party pursuant to which the service provider agreed to provide the Company

with financial and project oversight services with respect to the Offering.

Pursuant to the service agreement, the Company agreed to pay

the service provider (1) 6% of the investment amounts received which amounted to $351 and (2) options to receive a number of units (each

unit for a price of $0.40 includes one share and one warrant with an exercise price of $0.40 per share) equal to 6% of the investment

amount received, divided by $0.40.

In the event that

the investors that participated in the Offering exercise their Warrants, the service provider shall be entitled to receive an additional

payment of (1) 6% of the investment amounts received (2) 6% of the warrants exercised amounts received and (3) options to receive a number

of units equal to 6% of the warrants exercised amounts received, divided by $0.40.

April 5, 2022, the Company and the investors executed an extension agreement, such that the term of the

Warrants was extended so that they now expire on November 11, 2023.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

SHAREHOLDERS’ EQUITY (continue)

The fair value of

such warrants as of the offering date was estimated at $ 686 using the Black-Scholes option-pricing model and is presented within the consolidated

statements of changes in shareholders equity.

(USD in thousands, except share and per share

SHAREHOLDERS’ EQUITY (continued)

On May 11, 2021, the Company signed

a service agreement with a non U.S.

third party pursuant to which the service provider agreed to provide the Company with financial and

project oversight services with respect to the Offering.

Pursuant to the service agreement, the Company agreed to pay the service provider

(1) 6% of the investment amounts received which amounted to $351 and (2) options to receive a number of units (each unit for a price of

$0.40 includes one share and one warrant with an exercise price of $0.40 per share) equal to 6% of the investment amount received, divided

In the event that the investors that

participated in the Offering exercise their Warrants, the service provider shall be entitled to receive an additional payment of (1) 6%

of the investment amounts received (2) 6% of the warrants exercised amounts received and (3) options to receive a number of units equal

to 6% of the warrants exercised amounts received, divided by $0.40.

On April 5, 2022, the Company and the

investors executed an extension agreement, such that the term of the Warrants was extended so that they expire on November 11, 2023.

On November 1, 2023, the Company and

the investors executed an addition extension agreement, such that the term of the Warrants was extended so that they expire on November

The Company accounted for the Warrants

extensions as a dividend component.

The fair value of the Warrants modifications were estimated using the Black-Scholes option-pricing

model and is presented within the consolidated statements of changes in shareholders equity as a credit to additional paid in capital

and a debit to the accumulated deficit.

The following are

2 unchanged sentences

Expected volatility (%)

105.25 - 149.49 %

128.44 - 184.22 %

Risk-free interest rate (%)

1.45 - 2.14 %

5.44 - 5.56 %

Expected term of options (years)

2 unchanged sentences

Fair value (USD in thousands)

The fair value of the expected cash

payments component as of December 31, 2022 was estimated at $ 16 .

2022, the Company signed an investor relations service agreement with a consultant pursuant to which the Company agreed to pay the

consultant a monthly retainer and in addition, to issue the consultant 300,000 restricted shares of common stock, to be issued in

three tranches.

In the event that the agreement is terminated prior to the issuance date, the remaining share obligation shall be

On March 17, 2022, the Company issued 100,000 restricted shares of Common Stock pursuant to the agreement.

On July 13, 2022

The fair value of

the expected cash payments component as of December 31, 2023 and 2022 was estimated at $ 13 and $ 16 , respectively.

On March 1, 2022,

the Company signed an investor relations service agreement with a consultant pursuant to which the Company agreed to pay the consultant

a monthly retainer and in addition, to issue the consultant 300,000 restricted shares of common stock, to be issued in three tranches.

In the event that the agreement is terminated prior to the issuance date, the remaining share obligation shall be void.

On March 17, 2022,

the Company issued 100,000 restricted shares of Common Stock pursuant to the agreement.

On September 22, 2022, the Company decided

to terminate the service agreement.

The Company determined the value of the shares issued based on Company’s shares price at the

agreement date, at $ 31 of which were recorded as share based compensation expenses in the year ended December 31, 2022.

On July 13, 2022 the Company issued 100,000 restricted

shares of Common Stock pursuant to the agreement.

On September 22, 2022, the Company decided to terminate the service agreement.

determined the value of the shares issued based on Company’s shares price at the agreement date, at $ 31 of which were recorded as

share based compensation expenses in the year ended December 31, 2022.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

SHARE BASED COMPENSATION

1 unchanged sentence

stock option activity:

Weighted Average Exercise Price

Outstanding at December 31, 2021

Forfeited or expired

( 1,013,631 )

Outstanding at December 31, 2022

2 unchanged sentences

Number of options exercisable on December 31, 2023

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

NOTE 8 – SHARE BASED COMPENSATION (continue)

The aggregate intrinsic value of the

5 unchanged sentences

Exercise price

Stock options outstanding

Weighted average remaining contractual life – years

Stock options

As of December, 31, 2023

2 unchanged sentences

Exercise price

Stock options outstanding

Weighted average remaining contractual life – years

Stock options vested

As of December 31, 2022

As of December

31, 2022, there was $ 137 of total unrecognized compensation cost related to non-vested options.

The cost is expected to be

recognized over a weighted average period of 2 years.

Compensation expense recorded by the Company in respect of its stock-based

compensation awards for the period ended December 31, 2022 and 2021 was $ 395 and $ 416 , respectively and are included in General and

Administrative expenses in the Statements of Operations.

In determining the fair value of the

options granted, the Company used the Black-Scholes option valuation method, with the following assumptions:

Dividend yield

Expected volatility (%) (*)

Risk-free interest rate (%) (**)

Expected term of options (years) (***)

Exercise price (US dollars)

0.0001 - 2.25

Share price (US dollars)

Fair value (USD in thousands)

(*) Due to the low trading volume

of the Company’s Common Stock and lack of historical information, the expected volatility was based on the historical volatility

of the share price of other public companies that operate in the same industry sector as the Company (agricultural chemical industry).

(**) The risk-free interest rate represented

the risk-free rate of $ zero – coupon US Government Loans.

(***) Due to the fact that the Company

does not have sufficient historical exercise data, the expected term was determined based on the “simplified method”.

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

(USD in thousands, except share and per share

SHARE BASED COMPENSATION (continued)

As of December 31, 2023 and 2022, there

was $ 28 and $ 137 , respectively of total unrecognized compensation cost related to non-vested options.

The cost is expected to be recognized

over a weighted average period of 0.38 years.

Compensation expense recorded by the Company in respect of its stock-based compensation

awards for the period ended December 31, 2023 and 2022, was $ 108 and $ 395 , respectively and are included in General and Administrative

expenses in the Statements of Operations.

GENERAL AND ADMINISTRATIVE EXPENSES

Year ended December 31

Professional services

4 unchanged sentences

Other expenses

On January 29, 2021, the Company, through its wholly owned subsidiary Duke Israel and Elbit Systems Land

Ltd., an Israeli corporation (“Elbit”), entered into a Collaboration Agreement (the “Agreement”) for the global

marketing and sales, and the production and further development of Duke Israel’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.”

On January 29, 2021, the Company, through its wholly owned

subsidiary Duke Israel and Elbit Systems Land Ltd., an Israeli corporation (“Elbit”), entered into a Collaboration Agreement

(the “Agreement”) for the global marketing and sales, and the production and further development of Duke Israel’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 Israel

11 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

– AGREEMENTS (continue)

(USD in thousands, except share and per share

– AGREEMENTS (continued)

Pursuant to the terms of the Agreement,

14 unchanged sentences

information to Elbit.

The upfront fee does not fall under the

scope of Topic 808, “Collaborative Arrangements” (“ASC 808”) nor Topic 606, “Revenue from Contracts

with Customers” (“ASC 606”).

The Company referred to ASC 606 for certain activities within the collaborative arrangement

for the delivery of a good or service and recorded the upfront fee as revenues for the year ended December 31, 2021.

On April 4, 2022, the Company signed a lease agreement for an office space in Mevo Carmel Science and

Industry Park, Israel for a term of 3 years, with an option to extend the term of the lease agreement for an additional 2 years.

lease payments under the lease agreement, for the first two years are approximately $ 5,200 and for the third year approximately $ 5,400 .

The monthly lease payments for the option period will be agreed between the parties, with a minimum increase of 5 % above the third years

monthly payments.

The property became available for Company’s use at February 2023, therefore commencement date of the lease agreement

has not yet been met as of balance sheet date.

Based on the lease agreement terms, the Company made a deposit of $ 15 as a guarantee for

its lease commitments.

On August 15, 2022 Duke Israel, signed a Collaboration and Development Agreement with the Israel Electric

Corporation Ltd.

(IEC), to implement and test during a pilot with IEC a robotic drone-enabled system for cleaning electric utility insulators, that is in development by Duke Israel.

ICE is a public and 99 % government-owned company that generates, transmits,

and supplies electricity to all sectors of the State of Israel.

The Company is entitled to be reimbursed

for a portion of its research and development expenses related to this agreement.

Such research and development expenses are recorded

in deferred expenses.

The income and deferred expense will be recorded in profit and loss when the Company satisfies its obligation according

to the agreement.

No royalties were accrued during the years

ended December 31, 2023 and 2022.

On August 15, 2022, Duke Israel, signed a Collaboration and Development Agreement with the Israel Electric Corporation Ltd.

(IEC), to perform a test pilot together with IEC of a robotic drone-enabled system for cleaning electric utility insulators to be developed by Duke Israel for a total amount of $ 300 .

ICE is a public utility and a 99 % government-owned company that generates, transmits, and supplies electricity to all sectors of the State of Israel.

During October 2023, the Company successfully completed its obligations under the agreement with IEC upon delivery of the robotic drone, and accordingly recorded revenues and corresponding expenses at that point in time.

As part of the agreement, Duke will be obligated to pay IEC percentage of earned revenues for all future transactions relating to the developed technology up to a maximum of $ 900 .

UAS DRONE, CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

(USD in thousands, except share and per share

resident companies are taxed on

11 unchanged sentences

As of December 31, 2023, the Company

and subsidiaries have carry forward losses for tax purposes of approximately $1,521 and $2,486, respectively, which can be offset against

future taxable income, if any.

The following

is a 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

and subsidiaries have carry forward losses for tax purposes of approximately $ 4,609 , which can be offset against future taxable income,

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:

Federal tax rate

1 unchanged sentence

Stock-based compensation

Non-deductible expenses

Non-deductible income

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

Losses and timing differences in respect of which no deferred taxes were

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:

Composition of deferred tax assets:

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

LOSS PER SHARE (BASIC AND DILUTED)

dollars, except share and per share data)

LOSS PER SHARE

Basic loss per share is computed by

2 unchanged sentences

stock used in computing basic and diluted loss per share for the years ended December 31, 2023 and 2022, are as follows:

Year ended December 31

Number of shares

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 and warrants, excluded from the calculations of diluted loss per share

Total weighted average number of shares of common stock related to outstanding options and warrants, excluded from the calculations of diluted loss per share

RELATED PARTIES

Transactions and balances with related parties

Year ended December 31

General and administrative expenses:

2 unchanged sentences

Financing expense

Balances with related

Balances with related parties:

As of December 31,

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands)

RELATED PARTIES (continue)

On March 25, 2021, the Board of Directors appointed Yossi Balucka to serve as its Chief Executive Officer.

Balucka is entitled to a monthly fee of NIS30,000 (approximately $9,650), reimbursement of expenses and discretionary performance

dollars, except share and per share data)

RELATED PARTIES (continued)

On March 25, 2021, the Board of Directors appointed Yossi Balucka to

serve as its Chief Executive Officer.

Balucka is entitled to a monthly fee of NIS 30,000 (approximately $ 9,650 ), reimbursement of

expenses and discretionary performance bonus.

In conjunction with the appointment of Mr.

Balucka, the Company issued to Mr.

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.

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 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.

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.

The fair value of the options was determined using the Black-Scholes

pricing model, assuming a risk free rate of 0.07 %, a volatility factor of 193.47 %, dividend yields of 0 % and an expected life of 5 years .

Total value of share based compensation were estimated to an amount of $ 189 .

Total share based compensation expenses during the Year

ended December 31, 2022 amounted to $ 61 .

In addition, in July 2021, the Board of Directors of the Company approved the issuance of options to purchase 490,000 shares of the Company’s Common Stock to its Vice Chairman, directors and CFO for exercise price of $ 0.38 .

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.

The fair value of the options was

determined using the Black-Scholes pricing model, assuming a risk free rate of 0.07 %, a volatility factor of 193.47 %, dividend yields

The fair value of the options

was determined using the Black-Scholes pricing model, assuming a risk free rate of 0.07 %, a volatility factor of 193.47 %, dividend yields

of 0 % and an expected life of 5 years.

Total value of share based compensation were estimated to an amounted of $ 176 .

Total value of share based compensation were estimated to an amount of $ 189 .

Total share based

compensation expenses during the Year ended December 31, 2023 amounted to $ 21 .

In addition, in July 2021, the Board of Directors of the

Company approved the issuance of options to purchase 490,000 shares of the Company’s Common Stock to its Vice Chairman, directors

and CFO for exercise price of $ 0.38 .

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.

The fair value of the options was determined

using the Black-Scholes pricing model, assuming a risk free rate of 0.07 %, a volatility factor of 193.47 %, dividend yields of 0 % and an

expected life of 3.38 years.

Total value of share based compensation were estimated to an amounted of $ 176 .

Total share based compensation

expenses during the year ended December 31, 2023 amounted to $ 26 .

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