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Item 9A. Controls and Procedures

2026-03-12 compared with 2025-03-20 · 1051 added, 790 removed, 819 unchanged (69% of the section changed)

7 unchanged sentences

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, 2024, evaluated, the effectiveness of our disclosure controls and procedures

as of December 31, 2024, 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, 2024, at the above-described reasonable assurance level.

During the years ended December

31, 2024 and 2023, management identified the following weaknesses, which were deemed to be material weaknesses in internal controls:

Due to the size of the Company and available resources, there is a lack of sufficient segregation of duties.

The Company does not have an

Independent Audit Committee that can provide management oversight.

Remediation Measures

plan to remediate these material weaknesses by enhancing our segregation of duties and internal control over financial reporting and by

electing an additional independent director (as defined under Nasdaq Listing Rules) to the board of directors and establish an Audit Committee,

which will assist our board of directors in overseeing our accounting and financial reporting processes, the audits of our financial statements

and internal control over financial reporting.

The Audit Committee will also assist the board of directors in overseeing our compliance

with legal and regulatory requirements.

We believe the actions described

above, once put in place, will be sufficient to remediate the identified material weakness and strengthen our internal control over financial

However, the new and enhanced controls have not yet been put in place and therefore we cannot conclude that the material weakness

will be remediated.

We will continue to monitor the effectiveness of these controls and will make any further changes management determines

Our management, with the participation

of our CEO and CFO, as in place as of December 31, 2025, evaluated, the effectiveness of our disclosure controls and procedures as of

December 31, 2025, pursuant to paragraph (b) of Rules 13a-15 and 15d-15(e) 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 effective as of December 31, 2025, at the above-described reasonable

assurance level.

Internal Control over Financial Reporting

23 unchanged sentences

Changes in Internal Control over Financial

There has been no change in

our internal control over financial reporting during the year ended December 31, 2024, that has materially affected, or is reasonably

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

On March 18, 2025, the Board

of directors elected an additional independent director (as defined under Nasdaq Listing Rules) to the board of directors.

2025, our Board of Directors approved the establishment of an Audit Committee of the Board of Directors that will assist the board of

directors in overseeing our compliance with legal and regulatory requirements, as well as a Compensation Committee of the Board of Directors.

In addition, the Company designed and implemented additional controls and procedures such that together with the additional director and

committees remediated the material weaknesses by enhancing our segregation of duties and improving our internal control over financial

Management’s Report on Internal Control

7 unchanged sentences

Based on this assessment, management, as in place as of December 31, 2025, determined that the Company’s

internal control over financial reporting as of December 31, 2024, was not effective due to the material weakness previously identified

as stated above.

internal control over financial reporting as of December 31, 2025, was effective.

Other Information

On May 27, 2021, our

board of directors approved the 2021 Plan pursuant to which the Company may issue awards, from time to time, consisting of

non-qualified stock options, restricted stock grants and restricted stock units.

In addition, stock option awards that qualify under

Section 102 of the Israeli Tax Ordinance (New Version) 1961 (the “ITO”), and/or under Section 3(i) of the ITO, may be

On March 18, 2025, our board of directors approved an increase in the amount of shares of Common Stock available under the

2021 Plan from 4,800,000 to 9,000,000.

In addition, as further elaborated below, the board of directors approved the following

(i) 1,000,000 options to purchase shares of Common Stock to Mr.

Yossef Balucka, our CEO;

(ii) 500,000 options to purchase

shares of Common Stock to Mr.

Vadim Maor, our CTO, (iii) 120,000 options to purchase shares of Common Stock to Ms.

Keren Gousman Golan,

our newly appointed Director (iv) 400,000 options to purchase shares of Common Stock to Mrs.

Alexandra Papaconstantinou the

appointed Managing Director of Duke Greece, and (v) 50,000 options to purchase shares of Common Stock to Mr.

Shlomo Zakai, our

On March 18, 2025, our board

of directors appointed Mr.

Vadim Maor to serve as our CTO.

In conjunction with his appointment, we executed a consulting agreement, dated

March 18, 2025, with Mr.

Maor (the “Consulting Agreement”) to provide the company CTO services, pursuant to which he will

be subject to standard confidentiality, intellectual property assignment, non-solicitation and non-compete provisions.

In addition, in

consideration for his services, Mr.

Maor receives a monthly payment of NIS 25,000 (approx.

Under the Consulting Agreement,

Maor will also receive a grant of 500,000 options to our Common Stock, at an exercise price of $0.21 per share.

The options have the

following vesting schedule:

33% of the options will vest after 12 months and the remaining portion will vest in eight equal installments

over eight quarters.

The options expire after six (6) years from the date of grant, and such other terms and conditions set forth in our

Maor , age 53, has

been proving research and development (“R&D”) services to the Company since 2024.

Maor is an experienced head of R&D

and technology operations in the computer software industry, possessing strong professional skills in product and technology development

(IT & SaaS) and enterprise architecture design.

Since 2019 Mr.

Maor has been the CEO of OSYM Technologies Ltd., a private technology

consulting and services company.

Between 2011 to 2018 he has been co-founder and CEO of WiseSec, a private company that developed advanced

mobile platform micro-location solutions.

From 2001 to 2010 Mr.

Maor was a director at Rafael Advanced Defense Systems, and prior to that

he worked at the MOD - Israeli Ministry of Defense and at IMI - Israeli Military Industries.

Moar holds a B.A.

in Near and Middle

Eastern Studies from the Hebrew University of Jerusalem, Israel.

Except as set forth above,

there are no other arrangements or understandings between Mr.

Maor and any other persons pursuant to which he was named as CTO of the

Company and Mr.

Maor has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of

Regulation S-K.

There are no family relationships between Mr.

Maor and any director or executive officer of the Company.

On March 18, 2025, the board

of directors of the Company, appointed Ms.

Keren Gousman Golan to serve as a director, effective as of March 31, 2025.

serve until her earlier removal or resignation.

The board of directors has determined that Ms.

Gousman is an independent director as defined

under Rule 10A-3 under the Securities Exchange Act of 1934, as amended and as defined under Nasdaq Listing Rules.

In accordance with our

board of directors resolution dated April 12, 2020 and in consideration of her service, Ms.

Gousman will receive a quarterly fee of $1,500.

In addition, Ms.

Gousman will be paid $400 for each board of directors meeting attended or written resolution.

Gousman will be granted

120,000 options to purchase shares of Common Stock at an exercise price of $0.21 per share and will vest pursuant to three equal installments

of 33% at the end of each year.

The options expire after six (6) years from the date of grant, and such other terms and conditions set

forth in our 2021 Plan.

Gousman, age 50, has 25

years of extensive experience in managing operations and multi-disciplinary task teams.

Until 2022 Ms.

Gousman served as Head of the Field

Unit at the Israeli Prime Minister Office.

Following retirement from the Israeli Prime Minister Office and until 2024 she served as CEO

of AIRNETTRESS, a baby mattress company that markets and sells the “numu® air™”.

In 2024 she served as sales and

business development executive for BARIKS, a company that developed portable and foldable oxygen pressure chamber for Hyperbaric Oxygen

Therapy (HBOT).

Gousman holds dual-major B.A., from Faculty of Social Sciences from the Tel Aviv University and M.B.A in Business

Administration, specializing in Strategy and Business Entrepreneurship from the Ono Academic College.

On February 24, 2025, we

executed a consulting agreement with Mrs.

Alexandra Papaconstantinou to provide management services as the Managing Director of Duke Robotics

Hellas M I.K.E, our wholly owned Greek subsidiary, pursuant to which she will be subject to standard confidentiality, intellectual property

assignment, non-solicitation and non-compete provisions.

Papaconstantinou, age

47, is based in Athens Greece and is an experienced manager.

Between 2004 to 2019 Ms.

Papaconstantinou was a managing director of an industrial

engineering company.

Since 2006 she is an agent in Greece of an Israeli engineering company and from 2019 she serves as the general manager

of a real estate company.

Papaconstantinou holds a BS in Business Administration from the American College of Greece and M.B.A,

major in Finance from the University of Sheffield, UK.

On May 27, 2021, our board of directors approved the 2021 Plan pursuant

to which the Company may issue awards, from time to time, consisting of non-qualified stock options, restricted stock grants and restricted

In addition, stock option awards that qualify under Section 102 of the Israeli Tax Ordinance (New Version) 1961 (the “ITO”),

and/or under Section 3(i) of the ITO, may be granted.

On March 10, 2026, the board of directors approved the following grants:

to purchase 16,000 shares of our common stock to each of Yossef Balucka, our Chief Executive Officer, and Erez Nachtomy, our Vice Chairman;

(ii) options to purchase 10,000 shares of our common stock to Shlomi Zakai, our Chief Financial Officer;

and (iii) options to purchase

4,000 shares of our common stock to each of Vadim Maor, our Chief Technology Officer, Eran Antebi, a member of our board of directors,

and Keren Gousman, a member of our board of directors.

Each of the aformentioned options have an exercise price of $7.88 per share, a

term of six (6) years from issuance and vest over a three (3) year period, with one third vesting on each of the first three anniversaries

of the dates of grant.

On March 9, 2026, Mr.

Aharon resigned from the Board of Directors, effective as of such date.

Aharon’s resignation did not result from any disagreement

with the Company on any matter relating to the Company’s operations, policies or practices.

Effective March 10, 2026, Mr.

will sit on our Advisory Board and we have entered into a consulting agreement with him and have agreed to pay him a fee of $5,000 per

On March 10, 2026, our board of directors approved the appointments

Yehoshua Abramovich and Mr.

Ran Ben Yehuda to our Advisory Board, and we have entered into consulting agreements with each of them,

effective February 1, 2026, and have agreed to grant them options to purchase 16,000 shares of our common stock and pay each of them a

fee of $4,000 per month.

Disclosure Regarding Foreign Jurisdictions

2 unchanged sentences

Corporate Governance.

Our directors and executive

officer and their ages as of March 20, 2025, are as follows:

Our directors and executive officer and their ages as of March 12,

2026, are as follows:

Chairman of the Board of Directors

Yossef Balucka

2 unchanged sentences

Vice Chairman

Keren Gousman Golan

Chief Financial Officer

2 unchanged sentences

and Chairman.

Yariv Alroy is the Managing Director of T.N.S.A Consulting and Management LTD., a private consulting services and investments

Alroy has been serving as a Director and Chairman since March 10, 2020.

Yariv Alroy is the Managing Director of

T.N.S.A Consulting and Management LTD., a private consulting services and investments firm.

From 1989 to 1993 Mr.

Alroy worked for an Israeli law firm, with his last position as a partner.

Alroy worked for an

Israeli law firm, with his last position as a partner.

From 1993 to 1997, Mr.

as COO of SHAHAL Medical Services, and from 1997 to 2000 as Managing Director of SHL International Ltd.

Alroy served as COO of SHAHAL Medical Services, and from

1997 to 2000 as Managing Director of SHL International Ltd.

From 2000 until January 2016 Mr.

Alroy served as Co-CEO of SHL Telemedicine LTD a company in the field of medical technology development and provision of global telemedicine

services, including in the United States, Germany, India, Japan and Israel, traded in the Swiss Stock exchange (SWX:SHLTN).

From December

2018 to August 2024 Mr.

Alroy also served as member of the board of directors and Chairman of SHL Telemedicine.

Yariv Alroy holds an LL.B

from Tel Aviv University, Israel.

Alroy served as Co-CEO of SHL Telemedicine

LTD a company in the field of medical technology development and provision of global telemedicine services, including in the United States,

Germany, India, Japan and Israel, traded in the Swiss Stock exchange (SWX:SHLTN).

From December 2018 to August 2024 Mr.

Alroy also served

as member of the board of directors and Chairman of SHL Telemedicine.

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

Alroy was selected to

serve as Director and Chairman of our Board because of his senior leadership experience in global operations, publicly traded companies

and capital markets, as well as his legal background, which the Board believes positions him to provide strategic oversight and corporate

governance leadership.

Yossef Balucka , CEO

17 unchanged sentences

an MA in Social Sciences from the Haifa University, and MA in Public Administration from the Bar Ilan University.

Sagiv Aharon , Director.

Sagiv Aharon is the Vice President of Development and Engineering of UVision Air Ltd.

that develops aerial loitering systems.

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.

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.

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 holds a B.Sc.

in mechanical engineering

with specialty in control and robotics from the Technion - Israel Institute of Technology.

Erez 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.

From May 2020 until September 2024 Mr.

Nachtomy has been serving as a Director and Vice Chairman of the Board since March 10, 2020.

Nachtomy is the Managing Director of Ermi Nachtomy Assets Ltd., a private consulting services and investments firm.

From May 2020 until

September 2024 Mr.

Nachtomy served as CEO of SHL Telemedicine Ltd.

From 1989 until

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.

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 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.

(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.

From December 2018 to February 2024 Mr.

is active in the field of medical technology development and

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

From December 2018 to February 2024

Nachtomy also served as Member of the Board of SHL Telemedicine.

Nachtomy holds an LL.B.

Tel Aviv University, Israel.

from Tel Aviv University, Israel.

Nachtomy was selected

to serve as Director and Vice Chairman of our Board because of his managerial and board-level experience and his expertise in strategic

matters and publicly traded companies, which the Board believes strengthens its oversight of operations, capital markets matters and corporate

Eran Antebi , Director.

Antebi is the Senior Finance Director, Global End to End Surgery Supply Chain at Johnson & Johnson.

From 2017 to 2022 he served

as Finance Director Biosurgery Supply Chain at Johnson & Johnson.

Prior to that he was CFO of SHL Telemedicine Ltd.

Antebi has been serving as a Director since March 10, 2020.

Antebi is the Senior Finance Director, Global End to End Surgery Supply

Chain at Johnson & Johnson.

From 2017 to 2022 he served as Finance Director Biosurgery Supply Chain at Johnson & Johnson.

to that he was CFO of SHL Telemedicine Ltd.

(SWX:SHLTN) since 2008.

Antebi joined SHL in May 2004 as CFO of Shahal Israel.

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

Antebi was a manager with

Ernst & Young in Israel.

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

in Accounting and Economics

from Tel Aviv University, Israel.

joining SHL, from 2000 to 2004, Mr.

Antebi was a manager with Ernst & Young in Israel.

Antebi is a certified public accountant

(CPA) in Israel and holds a B.A.

in Accounting and Economics from Tel Aviv University, Israel.

Antebi was selected to

serve on our Board because of his relevant financial experience and qualifications, including his expertise in areas the Board believes

are important to the Company’s technology, product development and defense-related markets and operations.

Keren Gousman Golan.

Gousman has been serving as a Director since March 18, 2025.

Gousman has 25 years of extensive experience in managing operations

and multi-disciplinary task teams.

Until 2022 Ms.

Gousman served as Head of the Field Unit at the Israeli Prime Minister Office.

retirement from the Israeli Prime Minister Office and until 2024 she served as CEO of AIRNETTRESS, a baby mattress company that markets

and sells the “numu® air™”.

In 2024 she served as sales and business development executive for BARIKS, a company

that developed portable and foldable oxygen pressure chamber for Hyperbaric Oxygen Therapy (HBOT).

Gousman holds dual-major B.A.,

from Faculty of Social Sciences from the Tel Aviv University and M.B.A in Business Administration, specializing in Strategy and Business

Entrepreneurship from the Ono Academic College.

Gousman Golan was selected

to serve on our Board because of her relevant business and leadership experience and her contributions to Board oversight, including as

a member of our independent committees.

Shlomo Zakai , Chief

5 unchanged sentences

(OTC:SAFO) (August

2017 to December 2021), Sonovia Ltd.

(NNTTF:OTC) (October 2014 to August 2020) and of Todos Medical Ltd.

TOMDF) (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.

2017 to December 2021.

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.

Vadim Maor, Chief Technology

in accounting

from the College of Management in Rishon Le’Zion, Israel.

Vadim Maor, Chief

Technology Officer .

Maor was appointed as CTO of our Company, Duke and Duke Israel on March 18, 2025.

Prior to that he provided research

and development (“R&D”) services to the Company during 2024.

Maor is an experienced head of R&D and technology

operations in the computer software industry, possessing strong professional skills in product and technology development (IT & SaaS)

and enterprise architecture design.

Prior to that he

provided research and development (“R&D”) services to the Company during 2024.

Maor is an experienced head of R&D

and technology operations in the computer software industry, possessing strong professional skills in product and technology development

(IT & SaaS) and enterprise architecture design.

Since 2019 Mr.

Maor has been the CEO of OSYM Technologies Ltd., a private technology consulting and

services company.

Between 2011 to 2018 he has been co-founder and CEO of WiseSec, a private company that developed advanced mobile platform

micro-location solutions.

Maor has been the CEO of OSYM Technologies Ltd., a private technology

consulting and services company.

Between 2011 to 2018 he has been co-founder and CEO of WiseSec, a private company that developed advanced

mobile platform micro-location solutions.

From 2001 to 2010 Mr.

Maor was a director at Rafael Advanced Defense Systems, and prior to that he worked at

the MOD - Israeli Ministry of Defense and at IMI - Israeli Military Industries.

Maor was a director at Rafael Advanced Defense Systems, and prior to that

he worked at the MOD - Israeli Ministry of Defense and at IMI - Israeli Military Industries.

Moar holds a B.A.

in Near and Middle Eastern Studies

from the Hebrew University of Jerusalem, Israel.

in Near and Middle

Eastern Studies from the Hebrew University of Jerusalem, Israel.

There are no arrangements

or understandings between any of our directors or executive officers and any other person pursuant to which such director or executive

officer was selected as a director or officer.

Family Relationship

49 unchanged sentences

Committees of the Board of Directors

We do not have an audit or

compensation committee and have no independent directors that examines transactions of the nature described herein this item.

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.

Our Board has established

three standing committees the Audit Committee, the Compensation Committee, and the Governance and Nominating Committee.

Each of these

committees consist solely of independent directors.

We have adopted written charters for the Audit Committee, the Compensation Committee,

and the Governance and Nominating Committee, which are available on our website, www.dukeroboticsys.com.

Our Board may establish other

committees as it deems necessary or appropriate from time to time.

Audit Committee

The Audit Committee is composed

of three independent directors:

Eran Antebi (Chairman of the Audit Committee and the Company’s audit committee financial expert

as such term is defined in Item 407(d)(5) of Regulation S-K), Keren Gousman and Erez Nachtomy.

Each member of the Audit Committee

is an independent director as defined by the rules of the SEC and Nasdaq.

The Audit Committee has the sole authority and responsibility

to select, evaluate and engage independent auditors for the Company.

The Audit Committee reviews with the auditors and with the Company’s

financial management all matters relating to the annual audit of the Company.

The Audit Committee monitors

the integrity of our financial statements, monitors the independent registered public accounting firm’s qualifications and independence,

monitors the performance of our internal audit function and the auditors, and monitors our compliance with legal and regulatory requirements.

The Audit Committee also meets with our auditors to review the results of their audit and review of our annual and interim financial statements.

The Audit Committee meets

at least on a quarterly basis to discuss with management the annual audited financial statements and quarterly financial statements and

meets from time to time to discuss general corporate matters.

Compensation Committee

Compensation Committee is composed of three independent directors:

Eran Antebi, Keren Gousman and Erez Nachtomy.

Among other things, the

Compensation Committee reviews, recommends and approves salaries and other compensation of the Company’s executive officers, and

administers the Company’s equity incentive plans (including reviewing, recommending and approving stock option and other equity

incentive grants to executive officers).

Compensation Committee meets in executive session to determine the compensation of the Chief Executive Officer of the Company.

In determining

the amount, form, and terms of such compensation, the Committee considers the annual performance evaluation of the Chief Executive Officer

conducted by the Board in light of company goals and objectives relevant to Chief Executive Officer compensation, competitive market data

pertaining to Chief Executive Officer compensation at comparable companies, and such other factors as it deems relevant, and is guided

by, and seeks to promote, the best interests of the Company and its shareholders.

In addition, subject to existing

agreements, the Compensation Committee determines the salaries, bonuses, and other matters relating to compensation of the executive officers

of the Company using similar parameters.

It sets performance targets for determining periodic bonuses payable to executive officers.

also reviews and makes recommendations to the Board regarding executive and employee compensation and benefit plans and programs generally,

including employee bonus and retirement plans and programs (except to the extent specifically delegated to a Board appointed committee

with authority to administer a particular plan).

In addition, the Compensation Committee approves the compensation of non-employee directors

and reports it to the full Board.

Governance and Nominating

Governance and Nominating Committee consists of Eran Antebi, Keren Gousman and Erez Nachtomy, each of whom meets the independence requirements

of all other applicable laws, rules and regulations governing director independence, as determined by the Board.

The Governance and Nominating

Committee identifies individuals qualified to become members of the Board, consistent with criteria approved by the Board;

to the Board the director nominees for the next annual meeting of stockholders or special meeting of stockholders at which directors are

to be elected;

recommends to the Board candidates to fill any vacancies on the Board;

develops, recommends to the Board, and reviews the

corporate governance guidelines applicable to the Company;

and oversees the evaluation of the Board and management.

recommending director nominees for the next annual meeting of stockholders, the Governance and Nominating Committee ensures the Company

complies with its contractual obligations, if any, governing the nomination of directors.

It considers and recruits candidates to fill

positions on the Board, including as a result of the removal, resignation or retirement of any director, an increase in the size of the

Board or otherwise.

The Committee conducts, subject to applicable law, any and all inquiries into the background and qualifications of

any candidate for the Board and such candidate’s compliance with the independence and other qualification requirements established

by the Committee.

The Committee also recommends candidates to fill positions on committees of the Board.

selecting and recommending candidates for election to the Board or appointment to any committee of the Board, the Governance and Nominating

Committee will not select nominees through mechanical application of specified criteria.

Rather, the Governance and Nominating Committee

will consider such factors at it deems appropriate, including, without limitation, the following:

personal and professional integrity,

ethics and values;

experience in corporate management, such as serving as an officer or former officer of a publicly-held company;

in the Company’s industry;

experience as a board member of another publicly-held company;

diversity of expertise and experience

in substantive matters pertaining to the Company’s business relative to other directors of the Company;

practical and mature business

and composition of the Board (including its size and structure).

Governance and Nominating Committee develops and recommends to the Board a policy regarding the consideration of director candidates recommended

by the Company’s stockholders and procedures for submission by stockholders of director nominee recommendations.

appropriate circumstances, the Governance and Nominating Committee, in its discretion, will consider and may recommend the removal of

a director, in accordance with the applicable provisions of our Articles of Incorporation, as amended, and amended bylaws.

If the Company

is subject to a binding obligation that requires director removal structure inconsistent with the foregoing, then the removal of a director

shall be governed by such instrument.

The Governance and Nominating

Committee oversees the evaluation of the Board and management.

It also develops and recommends to the Board a set of corporate governance

guidelines applicable to the Company, which the Governance and Nominating Committee shall periodically review and revise as appropriate.

In discharging its oversight role, the Governance and Nominating Committee will be empowered to investigate any matter brought to its

Nominees to the Board of Directors

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

Number of shares that have not vested

Market value of shares that have not vested

Number of shares that have not vested

Market value of shares that have not vested

incentive plan

of shares that

Yossef Bakula

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available under the 2021 Plan from 192,000 to 360,000.

To the extent that an award lapses or is forfeited, the shares subject to such

Award will again become available for grant under the terms of the 2021 Plan.

On March 10, 2026, the board approved an increase in the number

of shares available under the plan from 360,000 to 440,000 shares, and also approved to adjust the number of shares under the 2021

Equity Incentive Plan and the numbers of options and per-option exercise price of the options that were already granted according to the

Reverse Stock Split ratio of 25:1.

To the extent that an award lapses or is forfeited, the shares subject to such Award will again become

available for grant under the terms of the 2021 Plan.

We do not have any formal

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as an executive officer’s commencement of employment or promotion effective date).

On March 18, 2025, our board

of directors approved the following grants:

(i) 1,000,000 options to purchase shares of Common Stock to Mr.

Yossef Balucka, our CEO;

500,000 options to purchase shares of Common Stock to Mr.

Vadim Maor, our CTO, (iii) 120,000 options to purchase shares of Common Stock

Gousman, our newly appointed Director, (iv) 400,000 options to purchase shares of Common Stock to Mrs.

Alexandra Papaconstantinou

the appointed Managing Director of Duke Greece, (v) 50,000 options to purchase shares of Common Stock to Mr.

Shlomo Zakai, our CFO.

The following table summarizes

certain information regarding our equity compensation plans as of December 31, 2024:

On March 10, 2026, our board of directors approved the following grants:

(i) options to purchase 16,000 shares of our common stock to each of Yossef Balucka, our Chief Executive Officer, and Erez Nachtomy, our

Vice Chairman;

(ii) options to purchase 10,000 shares of our common stock to Shlomi Zakai, our Chief Financial Officer;

and (iii) options

to purchase 4,000 shares of our common stock to each of Vadim Maor, our Chief Technology Officer, Eran Antebi, a member of our board of

directors, and Keren Gousman, a member of our board of directors.

Each of the aformentioned options have an exercise price of $7.88 per

share, a term of six (6) years from issuance and vest over a three (3) year period, with one third vesting on each of the first three

anniversaries of the dates of grant.

The following table summarizes certain information regarding our equity

compensation plans as of December 31, 2025:

Plan Category

Weighted-average

securities remaining

available for

future issuance under equity

future issuance

compensation plans

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for attendance of each meeting of the board of directors.

On May 12, 2024, the board of directors

approved an increase of $3,050 per month, in the compensation received by Mr.

Erez Nachtomy, from $6,950 per month to $10,000 per month,

for his service as a member of the board of directors.

On May 12, 2024, the board of directors approved an increase of $3,050 per month,

in the compensation received by Mr.

Erez Nachtomy, from $6,950 per month to $10,000 per month, for his service as a member of the board

of directors.

These amounts are exclusive of Israeli VAT, if applicable.

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during the fiscal year ended December 31, 2025:

Earned or Paid in Cash

Erez Nachtomy

Keren Gousman

Security Ownership of Certain Beneficial

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Security Ownership of Certain Beneficial Owners

The following table sets forth

certain information as of March 20, 2025 regarding the beneficial ownership of our common stock, for:

The following table sets forth certain information as of March 10,

2026 regarding the beneficial ownership of our common stock, for:

● each person (or group of affiliated

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owned, subject to applicable community property laws.

In 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 prospectus

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 Ltd., 10 HaRimon Street, Mevo Carmel Science

and Industrial Park, Israel, Israel 2069203.

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.

March 18, 2025, there were 54,218,813 shares of common stock issued and outstanding.

In computing the number and percentage of shares beneficially owned

by a person, shares that may be acquired by such person within 60 days of March 10, 2026, 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 Corp., 10 HaRimon Street, Mevo Carmel Science and Industrial Park, Israel, Israel 2069203.

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.

As of March 10, 2026, there were 2,252,151 shares

of common stock issued and outstanding.

Name and Address of Beneficial Owner

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Named Executive Officers:

Yariv Alroy (4)

Yossef Balucka

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All directors and executive officers as a group (7 Persons)**

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 20, 2025, 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 20, 2025.

Zabotinsky 50, Givat Shmuel, Israel.

(3) Based solely on information

contained in Form 13D filed with the SEC on June 20, 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 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.

(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 10, 2026, 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 10, 2026.

Rimon 8, Sha’ar

Shomron, Israel, 4481800.

Based on information contained in Form 13D filed with the SEC on June 20, 2024.

Includes (i) 400,000 shares of Common Stock and 400,000 warrants exercisable into 400,000 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:

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.

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 and (ii) include a beneficial ownership blocker that limits the exercise of such warrants if the exercise would result in the holder beneficially owning more than 19.99% of our common stock immediately following the exercise.

Includes 208,673 shares of common stock held by Mr.

Alroy directly

and 23,858 shares of common stock held by IKI Alroy Investments Ltd., of which Mr.

Alroy has control over voting and investment power.

Includes 49,684 shares of common stock held by Mr.

Nachtomy directly

and 2,989 shares of common stock held by ERMI Nachtomy Assets Ltd., of which Mr.

Nachtomy has control over voting and investment power.

Changes in Control

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determined that Mr.

Eran Antebi and Mr.

Erez Nachtomy are “independent” directors, as defined by SEC rules and under the Nasdaq

Listing Rules.

Eran Antebi, Mr.

Erez Nachtomy and Ms.

Keren Gousman are “independent” directors, as defined by SEC rules

and under the Nasdaq Listing Rules.

Principal Accounting Fees and Services.

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(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, 2020).

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).

Company’s Articles of Incorporation as amended on October 15, 2024 (incorporated by reference to Exhibit 3.2 to the Company’s quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2025).

Bylaws, as amended, on March 4, 2020 (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020).

Certificate of Amendment to the Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 29, 2024)

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).

Certificate of Amendment to the Articles of Incorporation of DUKE Robotics Corp., as filed with the Nevada Secretary of State on October 15, 2025 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 16, 2025).

Description of Securities.

Form of Warrant (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 12, 2021).

Form of Warrant (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2026).

Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 12, 2021).

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(translation from Hebrew) (incorporated by reference to Exhibit 10.8 to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2021).

Supplement Letter to the Collaboration Agreement dated April 2, 2025 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 3, 2025).

Services Agreement, dated March 25, 2021, between the Company and Yossef Balucka.

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Yossef Balucka, dated August 4, 2024 (incorporated by reference to Exhibit 10.1 to our quarterly report on Form 10-Q filed with the SEC on August 7, 2024).

Consulting Agreement, dated March 18, 2025, between the Company and Vadim Maor.

Extension Agreement, dated April 5, 2022, between the Company and the investors signatory thereto (incorporated by reference to Exhibit

10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 8, 2022).

Consulting Agreement, dated March 18, 2025, between the Company and Vadim Maor (incorporated by reference to Exhibit 10.6 to our Annual Report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2025).

Warrant Extension Agreement, dated April 5, 2022, between the Company and the investors signatory thereto (incorporated by reference to Exhibit 10.1 to our 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 the Company 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).

Form of Warrant Amendment Agreement, dated June 20, 2024, between the Company and certain warrant holders (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2024).

Amended and Restated Code of Business Conduct and Ethics.

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

Insider Trading Policy

List of Subsidiaries of the Company.

Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 5, 2026).

Amendment No.

1 to 2021 Equity Incentive Plan, as of March 10, 2026.

Amended and Restated Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020).

Insider Trading Policy (incorporated by reference to Exhibit 19.1 to our Annual Report on Form 10-K filed with the SEC on March 20, 2025).

List of Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to our Annual Report on Form 10-K filed with the SEC on March 20, 2025).

Consent of Independent Registered Public Accounting Firm

Certification of Chief Executive Officer pursuant to Sec.

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March 12, 2026

/s/ Sagiv Aharon

March 20, 2025

/s/ Eran Antebi

March 12, 2026

/s/ Keren Gousman

Keren Gousman

DUKE ROBOTICS CORP.

(FORMERLY UAS DRONE CORP.)

CONSOLIDATED FINANCIAL STATEMENTS

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AS OF DECEMBER 31, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Firm Name:

Somekh Chaikin / PCAOB ID No.

1057 / Location:

Tel Aviv, Israel )

Tel Aviv, Israel ) F-2

CONSOLIDATED FINANCIAL STATEMENTS:

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Notes to Consolidated Financial Statements F-8 – F-30

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

KPMG Somekh Chaikin

KPMG Millennium Tower

17 Ha’arba’a street, PO Box 609

Tel Aviv 6100601 Israel

+972 3 684 8000

To the Stockholders and Board of Directors

DUKE Robotics Corp.

UAS Drone Corp.):

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of Duke Robotics Corp.

UAS Drone Corp.) and its subsidiaries (the Company) as of December 31, 2024 and

2023, 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, 2024, and the related notes (collectively, the consolidated financial statements).

audited the accompanying consolidated balance sheets of DUKE Robotics Corp.

and its subsidiaries (the Company) as of December 31, 2025

and 2024, 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, 2025, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period

ended December 31, 2024, in conformity with U.S.

as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two year period ended

December 31, 2025, in conformity with U.S.

generally accepted accounting principles.

Going Concern

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 incurred significant losses and negative cash flows from operations and has

an accumulated deficit that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard

to these matters are also described in Note 1.

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

from the outcome of this uncertainty.

Basis for Opinion

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a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters 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

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

KPMG Somekh Chaikin, an

Israeli partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International

Limited, a private English company limited by guarantee.

Critical Audit Matter

The critical audit matter communicated below is

a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated

to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter 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

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of warrant liability

As discussed in Note 9 to the consolidated financial

statements, as part of the private placement offering completed on December 30, 2025, the Company issued investors warrants to purchase

83,338 Company’s Common Stock.

The warrants have been classified as a liability instrument because of a make-whole provision.

warrants are recorded at fair value amounting to $189 thousand as of December 31, 2025 and will be remeasured at fair value at each reporting

The Company used both the Monte Carlo Simulation Model and Black-Scholes option-pricing model to value the warrant liability.

inputs to the models included the Company’s underlying share price, conversion price, risk-free interest rate, expected dividend

yield, expected term in years, expected offering date and expected volatility.

We identified the evaluation of the fair value

of the warrant liability as a critical audit matter.

A high degree of auditor judgment, and specialized skills and knowledge, were required

in the evaluation of the estimated fair value due to the degree of subjectivity associated with the expected volatility and its sensitivity

to variation.

The following are the primary procedures we performed

to address this critical audit matter.

We evaluated the design of certain internal controls over the Company’s warrant liability

valuation process, including controls related to the determination of the expected volatility.

We involved valuation professionals with

specialized skills and knowledge, who assisted in:

● assessing the expected volatility by comparing it against

publicly available market data of comparable companies.

● developing an independent range of the fair value of the

warrant liability, using independently developed assumptions, including expected volatility, and comparing the independently developed

ranges to the respective fair value of the warrant liability recorded by the Company as of December 31, 2025.

/s/ Somekh Chaikin

Member Firm of KPMG International

We have served as the Company’s auditor since 2023.

We have served as the Company’s

auditor since 2023.

Tel Aviv, Israel

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Other liabilities (Note 6)

Stock purchase warrants liability (Note 9B)

Total current liabilities

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

100,000,000 shares authorized as of December 31, 2024 and 2023;

350,000,000 and 100,000,000 shares authorized as of December 31,

2025 and 2024, respectively;

issued and outstanding 2,168,813 shares as of December 31, 2025 and 2024.

Additional paid-in capital

Foreign currency translation adjustments

Accumulated deficit

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Total liabilities and stockholders’ Equity

The accompanying notes

are an integral part of the consolidated financial statements.

(*) Less than $1 thousand.

(**) Adjusted to reflect one (1) for twenty five (25) reverse stock split on March 10, 2026 (see note 1B).

The accompanying notes are an integral part

of the consolidated financial statements.

DUKE ROBOTICS CORP.

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Operating loss

Financial income, net

Financing income (expenses), net

Other comprehensive gain (loss) - Foreign currency translation adjustments

Comprehensive loss

Loss per share (basic and diluted) (*) (Note 14)

Basic and diluted weighted average number of shares of Common Stock outstanding (*)

The accompanying notes are

an integral part of the consolidated financial statements.

(*) Adjusted to reflect one (1) for twenty five (25) reverse stock split

on March 10, 2026 (see note 1B).

The accompanying notes

are an integral part of the consolidated financial statements.

DUKE ROBOTICS CORP.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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

stockholders’

(USD in thousands, except share and per share

Additional paid-in capital

Accumulated deficit

Total stockholders’

equity (deficit)

BALANCE AT DECEMBER 31, 2023

Stock-based compensation for services

Share based compensation for services

Warrants modification (note 9)

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BALANCE AT DECEMBER 31, 2024

Stock-based compensation for services

Warrants modification (note 8)

Share based compensation for services

Commitment to issue shares under private placement securities purchase agreement (“PIPE Agreement”)

Foreign currency translation adjustments

Net loss for the year

BALANCE AT DECEMBER 31, 2025

(*) Less than $1 thousand.

(**) Adjusted to reflect one (1) for twenty five (25) reverse stock split

on March 10, 2026 (see note 1B).

The accompanying notes are an integral part

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Adjustments required to reconcile net loss for the year to net cash used in operating activities:

Stock-based compensation

Share based compensation

Interest on loans from related parties

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

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

Change in operating lease liability

Loss from sale of property and equipment

Increase in trade receivable

Decrease in other current assets

Decrease (increase) in other current assets

Increase (decrease) in accounts payable

Increase (decrease) in other liabilities

Increase in other liabilities

Net cash used in operating activities

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Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from PIPE Agreement

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

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Initial recognition of operating lease

Purchase of fixed assets in trade in transaction

The accompanying notes are an integral part

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

DUKE ROBOTICS CORP.

(USD in thousands, except share and per share

ROBOTICS CORP.

( FORMERLY UAS DRONE CORP .)

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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 Inc., with Duke

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

surviving as our wholly-owned subsidiary (the “Short-Form Merger”).

Upon closing of the Short-Form Merger, 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.

Upon closing of the Short-Form Merger, 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.

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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 developing 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 in the field of routine infrastructure maintenance.

The Company offers high-voltage insulator washing abilities using

its innovative Insulator Cleaning (“IC”) Drone system.

This technology provides an efficient and safe method for

cleaning high-voltage insulators, improving their performance, enhancing safety, and reducing maintenance costs.

On October 28, 2024, the Company

filed a certificate of amendment to its Articles of Incorporation with the Nevada Secretary of State to change the Company’s

corporate name from UAS Drone Corp.

On February 18, 2025, the Company established

Duke Robotics Hellas M I.K.E (“Duke Greece”), a wholly owned subsidiary, formed under the laws of Greece, to support the

ongoing global commercialization efforts of the Company’s Insulator Cleaning (“IC”) Drone system.

The Company (collectively with Duke,

the “Group”) is a robotics company dedicated to developing 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 in the field

of routine infrastructure maintenance.

The Company offers high-voltage insulator washing abilities using its innovative Insulator Cleaning

(“IC”) Drone system.

This technology provides an efficient and safe method for cleaning high-voltage insulators, improving

their performance, enhancing safety, and reducing maintenance costs.

On October 28, 2024, the Company filed

a certificate of amendment to its Articles of Incorporation with the Nevada Secretary of State to change the Company’s corporate

name from UAS Drone Corp.

to DUKE Robotics Corp.

effective as of November 4, 2024.

The Company’s Common Stock

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

(“USDR” prior to November 4, 2024).

The Company’s Common Stock is quoted

on the OTC Markets Group, Inc.’s OTCQB® tier Venture Market, under the symbol “DUKR” (“USDR” prior

to November 4, 2024).

Reverse stock split

On February 15, 2026, the Company’s

Board of Directors approved a 25-for-1 reverse stock split Stock (the “Reverse Stock Split”) of the Company’s issued

and outstanding shares of common stock, par value $ 0.0001 per share, and on August 12, 2025 the majority of the Company’s stockholders

approved the Reverse Stock Split.

On March 4, 2026 the Company filed a Certificate of Amendment (the “Amendment”) to its Amended

and Restated Certificate of Incorporation in Nevada to effect the Reverse Stock Split.

The Amendment became effective on March 6, 2026.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

GENERAL (continue)

October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of horrific

terrorist attacks on civilian and military targets.

Following the attack, Israel’s security cabinet declared war and commenced

a military campaign in Gaza against Hamas.

Since the commencement of these events, there have been additional active hostilities,

including military operations focused in southern Lebanon against Hezbollah, air force operations against the Houthi movement in

Yemen and multiple airstrikes in Iran, in response to Iranian missile attacks.

In October 2024, Israel began ground operations

against Hezbollah in Lebanon culminating in a 60-day cease fire agreed to between Israel and Lebanon on November 27, 2024.

January 27, 2025, the ceasefire between Israel and Lebanon was extended to February 18, 2025.

Following February 18,

2025, Israeli forces retained control over strategic positions in southern Lebanon while seeking for diplomatic

efforts to resolve the dispute.

On January 19, 2025, a temporary ceasefire between Israel and Hamas went into effect, the result of

which is uncertain.

While ceasefire agreements have been reached, there is no guarantee that the parties will continue to comply

with the terms of the agreements and, accordingly, it is possible that these hostilities will resume with little to no warning and

that additional terrorist organizations and, possibly, countries will actively join the hostilities.

Such clashes may escalate in

the future into a greater regional conflict.

Due to the fact that most of our operations are

conducted in Israel and all members of the Company’s board of directors, management, as well as a majority of its employees and consultants, including

employees of its service providers, are located in Israel, the Company’s business and operations are directly affected by economic, political, geopolitical

and military conditions affecting Israel.

Although the current war has not materially impacted the Company’s business or operations as of the date

of this report, any escalation or expansion of the war could have a negative impact on both global and regional conditions and may adversely

affect the Company’s business, financial condition, and results of operations.

(USD in thousands, except share and per share

– GENERAL (continued)

As a result of the Reverse Stock Split,

every 25 shares of the Company’s outstanding shares of common stock prior to the effect of the Amendment were combined and reclassified

into one share of the Company’s common stock.

No fractional shares were issued in connection with or following the reverse split

and the shares were rounded to the nearest whole number.

The authorized capital and par value of the common stock remained unchanged.

All shares, stock option and per share

information in these consolidated financial statements have been restated to reflect the Reverse Stock Split on a retroactive basis.

Going concern uncertainty

Since inception, the Company has incurred

significant losses and negative cash flows from operations and has an accumulated deficit of $ 12 million.

The Company has financed its

operations mainly through financing by the issuance of the Company’s equity from various investors.

Based on the projected cash flows and cash balances as of December 31, 2025, management currently is of the opinion that its existing

cash will be sufficient to fund operations for at least the end of 2026.

As a result, there is substantial doubt regarding the Company’s

ability to continue as a going concern.

Management plans to continue securing

sufficient financing through the sale of additional equity securities or capital inflows from strategic partnerships.

Additional funds

may not be available when the Company needs them, on favorable terms, or at all.

If the Company is unsuccessful in securing sufficient

financing, it may need to cease operations.

The financial statements do not include

adjustments for measurement or presentation of assets and liabilities, which may be required should the Company fail to operate as a

going concern.

In October 2023, a large-scale terrorist

attack in southern Israel led to the outbreak of armed conflict between Israel and Hamas.

The conflict subsequently expanded to additional regional fronts and contributed to a period

of heightened geopolitical and security instability in the region.

During 2024 and 2025, hostilities included

military operations in Lebanon and direct confrontations involving Iran.

These developments increased regional uncertainty and, at times,

resulted in temporary disruptions to the Company’s operations in Israel, including limited interruptions to routine business activities.

In September 2025, a ceasefire agreement was reached between Israel

and Hamas, and all remaining living Israeli hostages were released and returned to Israel.

While the ceasefire has generally held as of

the date of these financial statements, the security situation remains sensitive, and the potential for renewed hostilities or broader

regional escalation cannot be ruled out.

More recently, on February 28, 2026, hostilities between Israel and Iran escalated again.

together with the United States, conducted a major joint military campaign of air and missile strikes against targets in Iran, which triggered

a broad Iranian response and contributed to significant regional instability.

The situation remains highly fluid, and we are unable to

predict when, or on what terms, this escalation will be resolved.

Accordingly, the extent of the continued impact on the Company’s

operations and financial results, if any, cannot be reasonably estimated at this time.

Given that the majority of the Company’s

operations are conducted in Israel, and that all members of the Company’s board of directors and management, as well as most employees,

consultants, and service providers, are located in Israel, the Company is directly affected by the economic, political, geopolitical,

and military conditions impacting the region.

As of December 31, 2025, while ceasefire arrangements with Hamas, Lebanon and Iran were

generally in effect and large-scale military operations had subsided, the overall security environment in Israel and the surrounding

region remained unstable and unpredictable.

The recent hostilities resulted in temporary disruptions to the Company’s operations,

resulting in a decrease in revenues during certain periods in 2025, and may continue to have an adverse impact on certain business activities.

Any further escalation or expansion of the conflict could negatively affect both regional and global conditions, and may adversely impact

the Company’s business, financial condition, and results of operations.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

– SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

The accompanying consolidated financial

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

All significant intercompany balances

and transactions have been eliminated on consolidation.

statements include the accounts of the Company and its subsidiaries Duke Inc., Duke Israel and Duke Greece.

All significant intercompany

balances and transactions have been eliminated on consolidation.

Use of Estimates in the preparation of financial statements

4 unchanged sentences

Actual results could differ from those estimates.

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

involve valuation of equity and liability classified stock purchase warrants.

Cash and cash equivalents

2 unchanged sentences

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

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

– SIGNIFICANT ACCOUNTING POLICIES (continue)

Functional currency

4 unchanged sentences

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

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 comprehensive loss as financial income or expenses, as appropriate.

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.

The functional currency of Duke Greece

is the Euro, which is the currency of the primary economic environment in which that subsidiary operates.

Transactions and monetary balances

in other currencies are translated into the functional currency using the current exchange rate.

Such remeasurement is performed in accordance

with Accounting Standards Codification (ASC) 830, “Foreign Currency Matters”, and remeasurement gains and losses are reflected

in the statements of comprehensive loss as financial income or expenses, as appropriate.

DUKE ROBOTICS 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 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 Comprehensive Loss.

Rates of depreciation:

7 unchanged sentences

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.

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, 2025 or 2024.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

– 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 taxes are determined

based on the estimated future tax effects of differences between the financial statement carrying amount 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.

Taxes on GILTI are accounted for as period costs similar to special deductions.

The Group accounts for tax

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

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

According to ASC Topic 740-10, tax

positions must meet a more-likely-than-not recognition threshold.

Recognized tax positions are measured as the largest amount of tax

benefit that is greater than 50 percent likely of being realized.

The Company’s accounting policy is to classify interest and

penalties relating to income taxes under income taxes, however the Company did not recognize such items in its fiscal

2024 and 2023 financial statements and did not record any unrecognized tax benefits in its balance

(USD in thousands, except share and per share

SIGNIFICANT ACCOUNTING POLICIES (continued)

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 taxes are determined based on the estimated future tax effects of differences between the financial statement carrying amount

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 tax positions

in accordance with ASC Topic 740-10, which prescribes detailed guidance for the financial statement recognition, measurement and disclosure

of tax positions in an enterprise’s financial statements.

According to ASC Topic 740-10, tax positions must meet a more-likely-than-not

recognition threshold.

Recognized tax positions are measured as the largest amount of tax benefit that is greater than 50 percent likely

of being realized.

The Company’s accounting policy is to classify interest and penalties relating to income taxes under income

taxes, however the Company did not recognize such items in its fiscal 2025 and 2024 financial statements and did not record any unrecognized

tax benefits in its balance sheets.

Revenue recognition

12 unchanged sentences

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

The Company has elected to use the practical expedient provided

in ASC 606-10-55-18, which allows revenue to be recognized in the amount to which the Company has a right to invoice.

This method is applied

to contracts where the invoicing aligns with the performance obligations satisfied over time.

The Company has elected

to use the practical expedient provided in ASC 606-10-55-18, which allows revenue to be recognized in the amount to which the Company

has a right to invoice.

This method is applied to contracts where the invoicing aligns with the performance obligations satisfied over

(see note 12).

Research and development expenses

Research and development expenses are

charged to operations as incurred.

Research and development expenses

are charged to operations as incurred.

Basic and diluted loss per share

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

– SIGNIFICANT ACCOUNTING POLICIES (continue)

(USD in thousands, except share and per share

SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock-based compensation

The Company measures and recognizes the compensation expense for all

equity-based payments to non employees directors and officers based on their estimated fair values in accordance with ASC 718, “Compensation-Stock

Compensation”.

Stock-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, over the requisite

service period.

The Company measures and recognizes

the compensation expense for all equity-based payments to non employees directors and officers 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 forfeitures, over the requisite service period.

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.

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.

Commitments and Contingencies

18 unchanged sentences

which includes, among other things, the Company’s credit risk.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

– SIGNIFICANT ACCOUNTING POLICIES (continue)

Valuation techniques are generally

11 unchanged sentences

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

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

SIGNIFICANT ACCOUNTING POLICIES (continued)

Quoted prices for similar

8 unchanged sentences

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 comprehensive loss.

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 comprehensive loss.

The Company’s financial liabilities

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

As of December 31, 2025

Stock purchase warrants liability

The Company determines if an arrangement

1 unchanged sentence

Operating leases are included in operating

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

lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in Company’s consolidated

balance sheets.

ROU assets represent the Company’s

1 unchanged sentence

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.

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

8 unchanged sentences

When a reassessment results in the remeasurement of a lease

liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying

amount of the ROU asset to an amount less than zero.

In that case, the amount of the adjustment that would result in a negative ROU asset

balance is recorded in statement of comprehensive loss.

liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the

carrying amount of the ROU asset to an amount less than zero.

In that case, the amount of the adjustment that would result in a negative

ROU asset balance is recorded in statement of comprehensive loss.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

– SIGNIFICANT ACCOUNTING POLICIES (continue)

(USD in thousands, except share and per share

SIGNIFICANT ACCOUNTING POLICIES (continued)

New Accounting Pronouncements

Recently Adopted Accounting

Segment Reporting:

In November 2023,

the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment

Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

It requires incremental disclosures related to an entity’s

reportable segments, including (i) significant segment expense categories and amounts for each reportable segment that are provided to

the chief operating decision maker (“CODM”), (ii) an aggregate amount and description of other segment items included in each

reported measure, (iii) all annual disclosures about a reportable segment’s profit or loss and assets required by Topic 280 to be

disclosed in interim periods, (iv) the title and position of the individual or the name of the group identified as the CODM and (v) an

explanation of how the CODM uses the reported measures of segment profit or loss to assess performance and allocate resources to the segment.

The standard improves transparency by providing disaggregated expense information about an entity’s reportable segments.

does not change the definition of a segment, the method for determining segments or the criteria for aggregating operating segments into

reportable segments.

This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting

periods beginning after December 15, 2024.

The Company adopted this guidance retrospectively, providing the additional disclosures as

See note 15, for more information.

Accounting Standards Not Yet

Recently Adopted Accounting Standards

Income Taxes:

2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

In December 2023, the

Financial Accounting Standards Board (“FASB”) issued ASU (“Accounting Standard Update”) 2023-09, Income Taxes

Improvements to Income Tax Disclosures (“ASU 2023-09”).

The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and

decision usefulness.

The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income

tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold.

addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal,

state, and foreign taxes and disaggregated by individual jurisdictions.

The ASU also includes other disclosure amendments related to

the disaggregation of income tax expense between federal, state and foreign taxes.

The guidance is effective for the Company for

annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been

issued or made available for issuance.

The amendments in this update should be applied on a prospective basis and retrospective

application is permitted.

The Company does not expect this ASU to have a material effect on its consolidated financial

In November 2024, the FASB issued ASU

The amendments in this ASU add specific requirements

for income tax disclosures to improve transparency and decision usefulness.

The guidance in ASU 2023-09 requires that public business

entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling

items that meet a quantitative threshold.

In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of

income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions.

The ASU also includes

other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes.

is effective for the Company for annual periods beginning after December 15, 2024.

The Company adopted this ASU effective January 1, 2025.

The amendments in this update were applied on a prospective basis, and did not have a material effect on the Company’s consolidated

financial statements, but resulted in enhanced income tax disclosures.

Accounting Standards Not Yet Adopted

In November 2024, the FASB issued

2024-03 Income Statement- Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40).

The ASU improves the

disclosures about a public business entity’s expenses and provides more detailed information about the types of expenses in commonly

presented expense captions.

The amendments require that at each interim and annual reporting period an entity will, inter alia, disclose

amounts of purchases of inventory, employee compensation, depreciation and amortization included in each relevant expense caption (such

as cost of sales, selling, general and administrative expenses, and research and development).

Amounts remaining in relevant expense captions that are not separately disclosed

will be described qualitatively.

Certain amounts that are already required to be disclosed under currently effective U.S GAAP will be

included in the same disclosure as the other disaggregation requirements.

The amendments also require disclosing the total amount of selling

expenses and, in annual reporting periods, the definition of selling expenses.

The ASU is effective for fiscal years beginning after December

15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

The ASU improves

the disclosures about a public business entity’s expenses and provides more detailed information about the types of expenses in

commonly presented expense captions.

The amendments require that at each interim and annual reporting period an entity will, inter alia,

disclose amounts of purchases of inventory, employee compensation, depreciation and amortization included in each relevant expense caption

(such as cost of sales, selling, general and administrative expenses, and research and development).

Amounts remaining in relevant expense

captions that are not separately disclosed will be described qualitatively.

Certain amounts that are already required to be disclosed

under currently effective U.S GAAP will be included in the same disclosure as the other disaggregation requirements.

The amendments also

require disclosing the total amount of selling expenses and, in annual reporting periods, the definition of selling expenses.

is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15,

Early adoption is permitted.

The Company is currently

evaluating this ASU to determine its impact on the Company’s disclosures.

The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.

In December 2025, the FASB issued

ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency

of interim financial reporting.

The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle

requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity.

2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early

adoption permitted.

The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

(USD in thousands, except share and per share

OTHER CURRENT ASSETS

3 unchanged sentences

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.

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

Lease payment are linked to the Israeli Consumer Price Index.

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

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

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

As of December 31, 2024, the Company estimates it will utilize the 2 years extension option under the above lease agreement.

The Company utilized the two years extension option under the above lease agreement.

The components of operating lease expense for the period ended December 31, 2025 and 2024 were as follows:

3 unchanged sentences

Operating cash flows from operating leases

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

Right-of-use assets obtained in exchange for lease obligations

Operating leases

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

LEASES (continue)

(USD in thousands, except share and per share

LEASES (continued)

Supplemental balance sheet information related to operating leases was as follows:

Year ended December 31,

Operating leases:

5 unchanged sentences

Weighted average discount rate 8.75 % 8.75 %

Future minimum lease payments under leases as of December 31, 2024 are as follows:

Future minimum lease payments under non-cancellable leases as of December 31, 2025 are as follows:

Total operating lease payments

6 unchanged sentences

Total property and equipment, net

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

PROPERTY AND EQUIPMENT, NET (continued)

In the years ended December 31, 2025

1 unchanged sentence

an amount of $ 216 and $ 77 during the years ended December 31, 2025 and 2024, respectively.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

During 2025, the Company sold fixed assets

with a cost of $ 24 and with accumulated depreciation in the amount of $ 3 .

– OTHER LIABILITIES

Accrued expenses

Other (note 8)

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 has raised at least

$ 15 million and has achieved earnings before interest, tax, depreciation and amortization of $ 3 million.

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.

CONTINGENCIES

On March 23, 2025, a complaint was

filed against Duke Israel, by LOOL T.V.

(the “Plaintiff”), an Israeli company, in the Tel Aviv-Yafo Magistrate’s

Court (the “Court”).

The complaint asserts that pursuant to an agreement of principles between Duke Israel and the Plaintiff,

Duke Israel is in breach of the agreement, specifically with respect to an allegation that the parties were required to set up a partnership

with respect to certain services provided to the Israel Electric Corporation (the “IEC”).

The complaint asserts a claim for

breach of contract, unlawful use of intellectual property that is not exclusively owned by Duke Israel and unjust enrichment with regards

to the agreement of principles.

In addition, the Plaintiff’s complaint seeks an order for a permanent injunction to prevent Duke

Israel from continuing providing these services to the IEC, and an order to enforce the agreement of principles ordering Duke Israel to

act as necessary to establish a partnership or joint venture.

The Company filed a statement of defense

against the complaint and denied the allegations and asserted that the complaint was without merit.

On February 26, 2026, following a notice

submitted by the Plaintiff, the Court ordered the deletion of the complaint without a ruling on the merits.

The Court further ordered

the Plaintiff to pay Duke Israel legal expenses and provided that, should the Plaintiff file a new claim, an additional expenses will

be payable as a condition for filing such new claim.

In light of the deletion of the complaint, the Company does

not believe that the matter will impact the continued performance of the agreement between Duke Israel and IEC or have a material effect

on its business, financial condition or results of operations.

No accrual was made in the financial statements as of December

31, 2025 in respect of the above complaint.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

NOTE 9 – SHAREHOLDERS’

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.

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, 2024 and 2023, there were no outstanding preferred stock.

Description of the rights attached

to the Shares in the Company :

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 Company’s common stock being entitled to one vote, including in all elections of directors.

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, 2025 and 2024, there were no outstanding preferred stock.

On October 15, 2025, the Company filed

a Certificate of Amendment to its Articles of Incorporation with the Nevada Secretary of State, to increase its authorized shares of common

stock, from 100,000,000 shares of common stock to 350,000,000 shares of common stock, as well as to permit the issuance of up to 10,000,000

shares of “blank check” preferred stock, par value $ 0.0001 per share.

The “blank-check” preferred stock may have

such rights and preferences as may be designated by the Company’s Board of Directors from time to time.

Transactions :

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 of:

(i) 12,500,000 shares of the Company’s

Common Stock, at a price of $ 0.40 per share;

and (ii) warrants (the “Warrants”) to purchase 12,500,000 Company’s Common

The Warrants were exercisable immediately at the time of issuance for a term of 18 months and have an exercise price of $ 0.40 per

On May 11, 2021, the Company entered into 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:

(i) 500,000 shares of the Company’s common stock, at a price of $ 10 per share;

and (ii) warrants (the “Warrants”)

to purchase 500,000 Company’s common stock.

The Warrants are exercisable immediately and for a term of 18 months and have an exercise

price of $ 10 per share.

The aggregate gross proceeds from the Offering were approximately $ 5,000 .

The Company recorded $ 1,070 of issuance costs.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

SHAREHOLDERS’ EQUITY (continue)

On May 11, 2021, the Company signed a service agreement with a non

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 (totaling to 3,000,000

The Company recorded $ 1,070 of issuance

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

$ 10 includes one share and one warrant with an exercise price of $ 10 per share) equal to 6 % of the investment amount received, divided

In the event that the investors that

3 unchanged sentences

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

On June 20, 2024, the Company

entered into a warrant amendment agreement with certain existing warrant holders (the “Holders”) of certain Common Stock

purchase warrants (the “June 2024 Amendment”).

According to the June 2024 Amendment agreement, the Company and Holders agreed to (i) extend the warrant exercise

term to May 11, 2026;

(ii) amend the warrant exercise price and increase it from $ 0.40 per share to $ 0.65 per share;

include a beneficial ownership blocker that limits the exercise of such warrants if such exercise would result in the holder

beneficially owning in excess of 19.99 % of the number of shares of the Company’s Common Stock immediately after giving effect

to the issuance of shares of Common Stock issuable upon exercise of the warrant.

The Company accounted for the

Warrants amendments as deemed dividends.

The fair value of the Warrants modifications was 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.

investors executed a warrant amendment agreement, such that the term of the Warrants was extended so that they expire on November 11,

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

NOTE 9 – SHAREHOLDERS’

EQUITY (continued)

On November 1, 2023, the Company and the investors executed an addition warrant amendment agreement, such that the term of the Warrants

was extended so that they expire on November 11, 2024 (see also Note 17(2)).

On June 20, 2024, the Company entered

into a warrant amendment agreement with the existing Warrant (the “June 2024 Amendment”).

According to the June 2024 Amendment

agreement, the Company and Holders agreed to (i) extend the warrant exercise term to May 11, 2026;

(ii) amend the warrant exercise price

and increase it from $ 10 per share to $ 16.25 per share;

and (iii) include a beneficial ownership blocker that limits the exercise of such

warrants if such exercise would result in the holder beneficially owning in excess of 19.99 % of the number of shares of the Company’s

Common Stock immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of the warrant.

10, 2026, we entered into an additional warrant amendment agreement with the holders pursuant to which we extended the term of the Warrants

such that they now expire on May 1, 2031 (See also note 17(2)).

The Company accounted for the Warrant

amendments as deemed dividends.

The fair value of the Warrant modifications was 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 the data and assumptions

10 unchanged sentences

Fair value (USD in thousands)

On December 30, 2025, the Company entered into Securities Purchase Agreements (each a “Securities Purchase Agreement”) with seven non-U.S.

investors (the “2025 Investors”), pursuant to which the Company, in a private placement offering (the “2025 Offering”), agreed to issue and sell to the 2025 Investors an aggregate of:

(i) 83,338 shares of the Company’s common stock at a price of $ 9.00 per share (the “Purchase Price”);

and (ii) warrants (the “ 2025 Warrants”) to purchase 83,338 shares of common stock.

The 2025 Warrants have an exercise price of $ 16.25 per share, are exercisable immediately and expire on November 30, 2026, subject to extension to May 30, 2028 if a public offering or other qualifying financing of at least $2,500 has not occurred prior to such date.

In addition, the Securities Purchase Agreement contains a make whole provision that provides for the 2025 Investors to receive additional shares of Common Stock in the event that the Company consummates a firm-commitment underwritten public offering on a major stock exchange by November 30, 2026 at a price per share (after giving effect to a 20 % discount) that is less than the Purchase Price.

The aggregate gross proceeds from the 2025 Offering were approximately $ 750 (of which $ 475 received as of December 31, 2025).

On March 10, 2026, we entered into an additional Warrant Amendment Agreement with the Investors pursuant to which we extended the term of the 2025 Warrants such that they expire on May 1, 2031 (See also note 17).

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

STOCK BASED COMPENSATION

(USD in thousands, except share and per share

NOTE 9 – SHAREHOLDERS’ EQUITY (continued)

The Company analyzed the 2025 Offering

in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging.

The make whole provision included

in the 2025 Offering provides the 2025 Investors option to adjust the 2025 Offering strike price with a 20 % discount also in circumstances

at which the price per share that would be determined at a future firm-commitment underwritten public offering on a major stock exchange,

to be higher than the strike price per share in the 2025 Offering and as a results such make whole provision do not met the criteria of

down-round feature under ASC-815 and the 2025 Warrants do not meet the criteria for equity classification.

The Company also concluded that the make-whole provision is not legally

detachable and cannot be separately exercised, and therefore cannot be considered as a freestanding instrument.

Accordingly, the 2025

Warrants, inclusive of the make-whole provision, are accounted for as a single liability-classified instrument.

The 2025 Warrants are

initially recorded at fair value and will be remeasured at fair value at each reporting date, with changes in fair value recognized in

the consolidated statements of operations until settlement or expiration.

The Company using a third-party specialist

allocated the total proceeds to the 2025 Warrants liability and to equity.

Warrant liability

The fair value of the 2025 Warrants liability was calculated as the

sum of the 2025 Warrants issued and the make-whole provision.

The fair value of the 2025 Warrants was calculated based on the probability

of the expected offering date, using the Black-Scholes option-pricing model and the make-whole provision was calculated using the Monte

Carlo Simulation Model.

The 2025 Warrants was estimated at $ 189 and recorded as current liability on the balance sheet.

The assumptions used to perform the calculations

are detailed below:

December 30, 2025

Expected volatility (%)

127.44 % - 179.34 %

Risk-free interest rate (%)

3.47 % - 3.48 %

Expected dividend yield

Expected term (years)

0.316 - 2.417

Conversion price (U.S.

Underlying share price (U.S.

Fair value (U.S.

dollars in thousands)

Fair Value Proportional Allocation

Based on the above, the fair value proportion

allocation as of December 31, 2025 was as follows:

Equity component

2025 Warrants Liability

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

NOTE 9 – SHAREHOLDERS’ EQUITY (continued)

On December 30, 2025, the Company signed a service agreement with a

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

with respect to the 2025 Offering.

Pursuant to the service agreement, the Company agreed to pay the service provider (1) 6 % of the aggregate

gross proceeds which amounted to $ 45 and (2) options to receive a number of units (each unit for a price of $ 9.00 includes one share and

one warrant with an exercise price of $ 16.25 per share) equal to 6 % of the investment amount received, divided by $ 9.00 .

In the event that the 2025 investors

that participated in the 2025 Offering exercise their 2025 Warrants, the service provider shall be entitled to receive an additional payment

of (1) 6 % of the 2025 Warrants exercised amounts received and (2) options to receive a number of units (each unit for a price of $ 9.00

includes one share and one warrant with an exercise price of $ 16.25 per share) equal to 6 % of the 2025 Warrants exercised amounts received,

divided by $ 9.00 .

As of December 31, 2025, aggregate gross proceeds of $ 475 had been received under the Securities Purchase Agreements described above and

were partially recorded as proceeds on account of shares and Stock purchase warrants liability (see note 17).

The Company recorded an

accrued cash fee of $ 28 of which approximately $ 17 was recorded as a reduction of additional paid-in capital and approximately $ 11 was

recorded as finance expenses.

The Company determined that the 2025 Warrants meet the criteria for equity classification in accordance with

The fair value of the warrants granted to the service provider, were estimated at approximately $ 13 , using a third-party appraiser

and were recorded $ 8 and $ 5 as issuance costs and share based compensation, respectively, with a corresponding increase to additional

paid-in capital.

– SHARE BASED COMPENSATION

On May 27, 2021, the board of directors

of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”) pursuant to which the Company may issue awards, from

time to time, consisting of non-qualified stock options, restricted stock grants and restricted stock units (“RSUs”).

stock option awards that qualify under Section 102 of the Israeli Tax Ordinance (New Version) 1961 (the “ITO”), and/or under

Section 3(i) of the ITO, may be granted.

On March 18, 2025, the board of directors of the Company approved an increase in the number of

shares of common stock available under the 2021 Plan from 192,000 to 360,000 (see also Note 17(3)

On March 18, 2025, the board of directors of the Company approved the

issuance of 82,800 options for employees, directors and consultants pursuant to the 2021 Plan (see also note 15 below).

The fair value

of options granted was estimated at the dates of grant using the Black-Scholes option pricing model.

The following are the data and assumptions

Dividend yield 0

Expected volatility (%) (*) 249.16 %

Risk-free interest rate (%) (**) 4.04 %

Expected term of options (years) (***) 4.00

Exercise price (US dollars) 5.25

Share price (US dollars) 5.5

Fair value (US dollars) 446

(*) The expected volatility was based on the historical volatility of the share price of the Company.

(**) 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”.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

– SHARE BASED COMPENSATION (continued)

The following table presents the Company’s

6 unchanged sentences

Number of options exercisable on December 31, 2025

The aggregate intrinsic value of the

awards outstanding as of December 31, 2024 is $ 67 .

These amounts represent the total intrinsic value, based on the Company’s stock

price of $ 0.15 as of December 31, 2024, less the weighted exercise price.

The aggregate intrinsic value of the awards outstanding as of December

31, 2025 is $ 183 .

These amounts represent the total intrinsic value, based on the Company’s stock price of $ 6.125 as of December

31, 2025, less the weighted exercise price.

The stock options outstanding as of

9 unchanged sentences

56.25 24,826 1.50 24,826

179,876 3.09 97,076

The stock options outstanding as of

9 unchanged sentences

97,076 2.28 97,076

As of December 31, 2025 and 2024,

there was $ 226 and $ 0 , respectively of total unrecognized compensation cost related to non-vested options.

Compensation expense recorded

by the Company in respect of its stock-based compensation awards for the period ended December 31, 2025 and 2024 was $ 219 and $ 28 , respectively

and are included in General and Administrative expenses in the Statements of Comprehensive Loss.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

STOCK BASED COMPENSATION (continue)

As of December 31, 2024 and 2023, there

was $ 0 and $ 28 , respectively of total unrecognized compensation cost related to non-vested options.

Compensation expense recorded by the

Company in respect of its stock-based compensation awards for the period ended December 31, 2024 and 2023 was $ 28 and $ 108 , respectively

and are included in General and Administrative expenses in the Statements of Comprehensive Loss.

The income tax benefit for the stock-based

compensation after the valuation allowance is 0 .

(USD in thousands, except share and per share

GENERAL AND ADMINISTRATIVE EXPENSES

Year ended December 31

Professional services

4 unchanged sentences

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.”

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

granted Elbit a worldwide exclusive license for the use of Duke Israel’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 $ 50,000 in cumulative revenues from sales of TIKAD units.

In addition, Duke Israel agreed to pay Elbit similar rates

of royalties for revenues received by Duke Israel from sales of its advanced robotic system for civil use, if such systems will include

new know-how developed by Elbit.

Duke Israel has requested information from Elbit regarding sales and royalties related to drone-mounted

remote weapon systems, as stipulated in the Agreement and it is in discussion with Elbit.

No royalties were accrued during the years ended

December 31, 2024 and 2023.

granted Elbit a worldwide exclusive license for the use of Duke Israel’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 $ 50,000 in cumulative revenues from sales of TIKAD units.

In addition, Duke Israel agreed

to pay Elbit similar rates of royalties for revenues received by Duke Israel from sales of its advanced robotic system for civil use,

if such systems will include new know-how developed by Elbit.

In addition to the above, Elbit paid Duke Israel an upfront fee at the

time of signing the Agreement for transfer of the engineering material and support for transferring the required information to Elbit.

In the second quarter of 2025, the

Company recognized revenues from royalties for sales of Elbit’s “Bird of Prey” stabilized weapons drone systems

(formerly marketed under Company’s commercial name “TIKAD”), pursuant to the Company’s Collaboration Agreement with

Elbit signed on January 29, 2021.

The Company analyzed such revenues under ASC 606, Revenue from Contracts with Customers.

In addition, on March 24, 2025, the Company and Elbit agreed to expand

the Collaboration Agreement to allow the Company to market the stabilized weapons drone system technology that Elbit has been marketing

and deploying under the brand name “Bird of Prey” to military, defense, home-land security and para-military customers, in

coordination with Elbit.

The Company will be entitled to a commission fee, in the mid-single figure percentage range, from transactions

resulting from its marketing activities, in addition to the royalties the Company is entitled to receive as part of the original Collaboration

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

– AGREEMENTS (continue)

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.

Per the agreement, Duke Israel shall be entitled to portion of the revenues generated in the Evaluation Phase of

In addition, 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.

Elbit will recoup 50 % of its investment amount, up to $ 6,000 ,

by offsetting 50 % of royalty payments that may be due to Duke Israel.

No revenues were generated during 2024 and 2023 or are expected to be generated under the Evaluation Phase of the Project.

In addition to the above, Elbit paid Duke

Israel an upfront fee at the time of signing the Agreement for transfer of the engineering material and support for transferring the required

information to Elbit.

On August 15, 2022 Duke Israel, signed a Collaboration and Development

Agreement with the Israel Electric Corporation Ltd.

(the “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 .

IEC is 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 Israel 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 .

Following the successful pilot program conducted with the IEC, in August

2024, the Company, through Duke Israel, entered into an agreement with the IEC to provide high-voltage insulator washing services using

the innovative IC Drone system.

(USD in thousands, except share and per share

– AGREEMENTS (continued)

Pursuant to the terms of the Collaboration

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.

Per the Collaboration Agreement, Duke Israel shall be entitled to portion of the revenues generated in the

Evaluation Phase of the Project.

In addition, 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 Collaboration 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.

Elbit will recoup

50 % of its investment amount, up to $ 6,000 , by offsetting 50 % of royalty payments that may be due to Duke Israel.

No revenues were generated

during 2025 and 2024 or are expected to be generated under the evaluation phase of the Project.

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

IEC is 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

Israel 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 .

Following the successful pilot program

conducted with the IEC, in August 2024, the Company, through Duke Israel, entered into an agreement with the IEC to provide high-voltage

insulator washing services using the innovative IC Drone system.

Under the terms of the agreement, the

IEC will receive washing services for its high-voltage electric insulators using the IC Drone system and Duke Israel will receive compensation

based on services provided, in New Israeli Shekels (NIS) in an amount totaling in the low seven figures (in NIS) during the period that

services are provided.

The Company accounts for the contract as a single performance obligation and recognizes revenue once it has a right

to issue an invoice for the services provided.

Additionally, as part of the agreement, the IEC has committed to a minimum guaranteed paid

utilization of the service, amounting to approximately half of the total contract value described above, within the first year of the

This contract accounts for all of the revenues recognized during the period.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

IEC will receive washing services for its high-voltage electric insulators using the IC Drone system and Duke Israel.

will receive compensation

in New Israeli Shekels (NIS) in an amount totaling in the low seven figures (in NIS) during the period that services are provided.

Company accounts for the contract as a single performance obligation and recognizes revenue once it has a right to issue an invoice for

the services provided.

Additionally, as part of the agreement, the IEC has committed to a minimum guaranteed paid utilization of the

service, amounting to approximately half of the total contract value described above, within the first year of the agreement.

This contract

primarily accounts for the revenues recognized during 2025.

On May 27, 2025, IEC extended the agreement for an additional year.

resident companies are taxed on

their worldwide income for corporate income tax purposes at a statutory rate of 21 %.

If certain conditions are met, income derived from foreign subsidiaries is tax exempt in the US under applicable

tax treaties to avoid double taxation.

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

1 unchanged sentence

The Company and subsidiaries have not

received final tax assessments since their inceptions although the tax reports of Duke Israel for the years ended by December 31, 2019 are

deemed to be final.

As of December 31, 2024, the

Company and subsidiaries have operating loss carry forwards of approximately $ 5,383 , of which $ 814 can be offset against taxable income generated until

2027 and $ 4,569 can be offset

against future taxable income, if any, indefinitely.

The following is reconciliation between the theoretical tax on the loss before income taxes, at the tax rate applicable to the Company (the U.S.

federal statutory income tax rate) and the income tax expense reported in the financial statements:

received final tax assessments since their inceptions although the tax reports of Duke Israel for the years ended by December 31, 2019

are deemed to be final.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

INCOME TAX (continued)

As of December 31, 2025, the Company and subsidiaries have operating

loss carry forwards of approximately $ 6,629 , of which $ 674 can be offset against taxable income generated until 2037, $ 66 can be offset

against taxable income generated until 2030 and $ 1,962 can be offset against future taxable income, if any, indefinitely limited to 80 %

of the annual taxable income and $ 3,926 can be offset against future taxable income, if any, indefinitely.

Loss before provision for income taxes was as follows:

Year ended December 31

United States

Income before income taxes

A reconciliation of the provision for income taxes to the amount computed by applying the 21 % statutory U.S.

federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:

Year ended December 31

Statutory Rate

State and Local Income Taxes

Foreign Tax Effects:

Changes in statutory tax rates

Other foreign jurisdictions

Effect of Cross-Border Tax Laws

Foreign tax credit for withholding taxes

Changes in Valuation Allowances

Changes in Unrecognized Tax Benefits

Remeasurement of deferred taxes for foreign currency effects

Effective Tax Rate

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(USD in thousands, except share and per share

INCOME TAX (continued)

A reconciliation of the provision for income taxes to the amount computed by applying the 21 % statutory U.S.

federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:

Loss before income taxes

1 unchanged sentence

Income tax computed at the statutory income tax rate

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

Nontaxable income

Impact of differences in statutory income tax rates

2 unchanged sentences

Change in valuation allowance

Deferred taxes result primarily from noncapital loss carry-forwards.

Deferred taxes result primarily from noncapital loss carryforwards.

Significant components of the Company’s deferred tax assets are as follows:

11 unchanged sentences

Valuation allowance

The net change during the year ended December

31, 2024 and 2023 in the total valuation allowance amounted to $ 477 and $ 136 , respectively.

DUKE ROBOTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

(USD in thousands, except share and per share

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, 2024 and 2023, are as follows:

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, 2025 and 2024, are as follows:

Year ended December 31

Number of shares

7 unchanged sentences

Financing expense

Balances with related parties:

Balances with related

As of December 31,

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 $ 8,200 ), 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 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 stock- based compensation were estimated to an amount of $ 189 .

Total stock-based compensation expenses during the Year ended December 31, 2024 and 2023 amounted to $ 3 and $ 21 , respectively.

On August 4, 2024, the Company entered

into a First Amendment to Service Agreement with Mr.

Balucka pursuant to which his monthly fee was increased, from NIS 30,000 (approximately

$ 8,200 ) to NIS 40,000 (approximately $ 11,000 ) effective August 1, 2024.

In addition, on August 4, 2024, the Company’s board of directors

approved an annual bonus of NIS 120,000 (approximately $ 32,900 ) for Mr.

(USD in thousands, except share and per share

RELATED PARTIES (continued)

On August 4, 2024, the Company entered into a first amendment to service agreement with Mr.

Balucka pursuant

to which his monthly fee was increased, from NIS 30,000 (approximately $ 8,200 ) to NIS 40,000 (approximately $ 11,000 ) effective August

In addition, on August 4, 2024, the Company’s board of directors approved an annual bonus of NIS 120,000 (approximately

$ 32,900 ) for Mr.

Balucka pursuant to the terms of his existing services agreement.

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 156.12 %, dividend yields of 0 % and an

expected life of 6 years.

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

Total stock-based compensation

expenses during the year ended December 31, 2024 and 2023 amounted to $ 8 and $ 26 , respectively.

SEGMENT INFORMATION

This segment structure reflects the financial information and reports

used by the Company’s management, specifically its Chief Operating Decision Maker (“CODM”), to make decisions regarding

the Company’s business, including resource allocations and performance assessments, as well as the current operating focus in compliance

with ASC 280, Segment Reporting.

The Company reports segment information based on the management approach,

which designates the internal reporting used by the CODM, the Company’s Chief Executive Officer and the Vice Chairman of the Board,

for making decisions and assessing performance as the source of the Company’s reportable segments.

The CODM allocate resources and

assesses the performance of each operating segment based on potential business opportunities, historical and potential future sales and

operating expenses.

The Company has one operating

and reportable segment, Drones isolators washing activity.

The Drones isolators washing activity

segment generates revenue by providing isolators washing services for electricity companies.

The Company’s method for measuring

profitability on a reportable segment basis is operating loss.

The Company adopted ASU 2023-07 in December 2024.

The most significant provision

was for the Company to disclose significant segment expenses that are regularly provided to the CODM.

The Company’s CODM periodically

reviews cost of revenues by segment and treats it as a significant segment expense.

On March 18, 2025,

the board of directors of the Company approved the following grants pursuant to the 2021

Plan (see also note 10 above):

(i) Options to

purchase 40,000 shares of common stock to Mr.

Yossef Balucka, CEO, at an exercise price of $ 5.25 per share, and vest in three equal installments

of 33 % at the end of each year.

The options expire after six ( 6 ) years from the date of grant, and such other terms and conditions set

forth in the 2021 Plan.

(ii) Options to

purchase 20,000 shares of common stock to Mr.

Vadim Maor, Company’s CTO nominated at March 18, 2025, at an exercise price of $ 5.25

The options have the following vesting schedule:

33 % of the options will vest after 12 months and the remaining portion will

vest in eight equal installments over eight quarters.

The options expire after six ( 6 ) years from the date of grant, and such other terms

and conditions set forth in the 2021 Plan.

(iii) Options

to purchase 4,800 shares of common stock to Ms.

Keren Gousman Golan, director at an exercise price of $ 5.25 per share and vest in three

equal installments of 33 % at the end of each year.

The options expire after six ( 6 ) years from the date of grant, and such other terms

and conditions set forth in the 2021 Plan.

(iv) Options to

purchase 2,000 shares of common stock to Mr.

Shlomo Zakai, CFO, at an exercise price of $ 5.25 per share, and vest in three equal installments

of 33 % at the end of each year.

The options expire after six ( 6 ) years from the date of grant, and such other terms and conditions set

forth in the 2021 Plan.

DUKE ROBOTICS CORP.

1 unchanged sentence

(USD in thousands, except share and per share

SEGMENT INFORMATION (continue)

SEGMENT INFORMATION

The Company has one operating and

reportable segment, drone insulators washing activity.

The chief operating decision maker

evaluates segment performance primarily based on segment operating loss.

The Company refined the name of the

segment previously referred to as ‘Revenue from drones insulators washing’ to ‘Revenues from civil applications segment’

to better reflect its nature.

The change had no impact on the composition or nature of the segment’s activities.

The following table presents information

2 unchanged sentences

segments is as follows:

Revenue from drones isolators washing

Cost of revenues from drones isolators washing

Revenue from civil applications segment

Cost of revenues from civil applications segment

Gross profit from other revenues

Research and development expenses

1 unchanged sentence

Share base compensation

Other general and administrative expenses (see note 10)

Other general and administrative expenses

Operating loss

1 unchanged sentence

Interest income

For the year ended December 31,

2024 and 2023, The Company’s operations were mostly confined to Israel.

As of December 31, 2024 and 2023, all of the fixed assets

of the Company were located in Israel.

Other expenses

For the year ended December 31, 2025 and

2024, the Company’s operations were mostly confined to Israel.

As of December 31, 2025 and 2024, all of the

fixed assets of the Company were located in Israel and Greece.

SUBSEQUENT EVENTS

On February 18, 2025, the Company established Duke Robotics Hellas M I.K.E

(“ Duke Greece”), our wholly owned subsidiary, formed under the laws of Greece, to support the ongoing global commercialization

efforts of our IC Drone.

On February 24, 2025, the Company executed a consulting agreement

Alexandra Papaconstantinou to provide management services as the Managing Director of Duke

On March 18, 2025, the board of directors of the Company approved an

increase in the amount of shares of Common Stock available under the 2021 Equity Incentive Plan (the “2021 Plan”) from 4,800,000

to 9,000,000 .

On March 18, 2025, the board of directors of the Company approved the following grants pursuant to the

(i) 1,000,000

options to purchase shares of Common Stock to Mr.

Yossef Balucka, CEO, at an exercise price of $ 0.21 per share, and vest in three equal

installments of 33 % at the end of each year.

The options expire after six ( 6 ) years from the date of grant, and such other terms and conditions

set forth in our 2021 Plan.

(ii) 500,000 options

to our Common Stock to Mr.

Vadim Maor, Company's CTO nominated at March 18, 205, at an exercise price of $ 0.21 per share.

have the following vesting schedule:

33 % of the options will vest after 12 months and the remaining portion will vest in eight equal installments

over eight quarters.

The options expire after six ( 6 ) years from the date of grant, and such other terms and conditions set forth in our

(iii) 120,000

options to purchase shares of Common Stock to Ms.

Keren Gousman Golan, director at an exercise price of $ 0.21 per share and vest in three

equal installments of 33 % at the end of each year.

The options expire after six ( 6 ) years from the date of grant, and such other terms

and conditions set forth in our 2021 Plan.

(iv) 400,000 options

to purchase shares of Common Stock to Mrs.

Alexandra Papaconstantinou, Managing Director of Duke Greece.

The options were granted at an

exercise price of $ 0.21 per share and vest in three equal installments of 33 % at the end of each year.

The options expire after six ( 6 )

years from the date of grant, and such other terms and conditions set forth in our 2021 Plan.

(v) 50,000 options

to purchase shares of Common Stock to Mr.

Shlomo Zakai, CFO, at an exercise price of $ 0.21 per share, and vest in three equal installments

of 33 % at the end of each year.

The options expire after six ( 6 ) years from the date of grant, and such other terms and conditions set

forth in our 2021 Plan.

In January 2026, the Company completed the issuance of 83,338 shares of common stock, $ 0.0001 par value per share, to the 2025 Investors,

pursuant to the Securities Purchase Agreements described in Note 9B.

Aggregate gross proceeds of $ 275 under these Securities Purchase

Agreements had been received in 2026.

On March 10, 2026, we entered into an additional warrant amendment agreement with the Investors pursuant to which we extended the

term of the Warrants, to expire on May 1, 2031.

On March 10, 2026, the board of directors of the Company approved the issuance of 140,000 options for employees, directors and consultants

pursuant to the 2021 Plan and in addition an increase in the number of shares of common stock available under the 2021 Plan from 360,000

On March 9, 2026, Sagiv Aharon resigned from the Board of the Directors of the Company.

On March 10, 2026 the Company’s Board

of directors approved a consulting agreement with Mr.

Sagiv according to which effective as for the same date he will join the Company’s

Advisory Board and be entitled for a monthly fee of $ 5 .

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