DUKE Robotics Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Readers are advised to review the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2025. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements”. You should review the “Risk Factors” section of our Annual Report for the fiscal year ended December 31, 2025 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis . We are a robotics company developing advanced robotic and drone-based systems. Our technologies include an advanced robotic stabilization system that enables remote, real-time, pinpoint-accurate firing of small arms and light weapons, as well as civilian drone-based solutions focused on infrastructure maintenance, which is a drone technology for conducting routine maintenance of critical infrastructure for electric utility insulator cleaning. Although our stabilization technology was initially designed for use on unmanned aerial systems (“UAS”), our robotic solutions are adaptable to other military platforms and civilian applications. On January 29, 2021, we, through Duke Airborne Systems Ltd. (“Duke Israel”), and Elbit Systems Land 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 by Elbit of our developed advanced robotic system mounted on a UAS armed with lightweight firearms, which we then marketed under the commercial name “TIKAD.” On April 2, 2025, we and Elbit executed a supplement letter (the “Supplement Letter”) to the Collaboration Agreement relating to the stabilized weapons drone system technology that Elbit has been marketing and deploying under the brand name “Bird of Prey”. Pursuant to the Supplement Letter, we and Elbit have agreed to expand our collaboration to allow us to market the system to military, defense, home-land security and para-military customers, in coordination with Elbit. We will be entitled to a commission fee, in the mid-single figure percentage range, from any proceeds resulting from our marketing activities, in addition to the royalties we will receive as part of the Collaboration Agreement. On August 15, 2022, Duke Israel introduced the Insulator Cleaning (“IC”) Drone, a drone technology for conducting routine maintenance of critical infrastructure, and has signed an agreement with Israel Electric Corporation Ltd. (the “IEC”) to provide drone-enabled systems for cleaning electric utility cable insulators. During October 2023, we completed our obligations under the agreement with the IEC. This was followed in August 2024, by a new agreement with the IEC to utilize our innovative IC Drone system for cleaning electric utility cable insulators. On May 12, 2025, we announced the successful commencement of our 2025 insulator cleaning activity in Israel with the IEC under our previously announced service agreement. On June 10, 2025, we announced the launch of our next-generation IC Drone System - the ICDS2 - representing a significant technological advancement in our innovative utility maintenance drone solution. The ICDS2 features several key technological advancements over its predecessor, featuring extended flight time, higher payload capacity, enhanced stability, advanced radar and improved cleaning durability. It has been successfully deployed at the start of the insulator cleaning season in May 2025, marking a full-season operational timeline compared to 2024’s mid-season commencement. On June 2, 2026, we announced the successful commencement of our 2026 IC Drone season with the IEC, under the expanded service agreement. The 2026 cleaning season is being executed with a materially broader operational footprint than any prior season, encompassing a substantially larger volume of high-voltage insulators serviced and an increased number of active field crews deploying the Company’s ICDS2. 21 In February 2026, we announced the introduction of AEROTRACE™, an aerial monitoring and intelligence solution integrating a combination of capabilities and developments in the fields of hardware, sensors, software and artificial intelligence (“AI”), including through collaboration with other parties, designed to support infrastructure operators in assessing asset conditions and enhancing situational awareness. AEROTRACE™ integrates aerial data capture with software-driven analytics, including AI-assisted image analysis, to help identify areas of interest and potential anomalies across large-scale and distributed infrastructure assets. AEROTRACE™ is designed to be deployed as a standalone monitoring solution and may also complement our existing robotic IC Drone services by informing maintenance planning and prioritization. The introduction of AEROTRACE™ reflects our ongoing efforts to expand its technology portfolio beyond robotic hardware to include data- and intelligence-driven solutions. On May 14, 2026, we entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC, as representative of the several underwriters identified therein (the “Underwriters”), relating to the public offering (the “Offering”) of 1,125,000 units, with each unit consisting of one share of our common stock, par value $0.0001 (the “Shares”), and warrants to purchase one share of our common stock (the “Warrants”) at an exercise price of $8.60 per share, exercisable for a period of five years, subject to certain adjustments and cashless exercise provisions. The combined price public offering price per unit was $8.20. Under the terms of the Underwriting Agreement, we granted the Underwriters an option, exercisable for 45 days following the closing of the Offering, to purchase up to an additional 168,750 shares of common stock and/or Warrants to purchase 168,750 shares of common stock to cover over-allotments, if any. On May 15, 2026, the Underwriter partially exercised its over-allotment option with respect to Warrants to purchase 168,750 shares of common stock. On May 18, 2026, we closed the Offering, as well as the partial exercise of the over-allotment option, and issued the Shares and Warrants, resulting in aggregate gross proceeds of approximately $9,225,000, before deducting underwriting discounts and commissions and estimated offering expenses. On May 14, 2026, our common stock and Warrants were approved for listing on the Nasdaq Capital Market, and on May 15, 2026, our common stock and Warrants began trading on the Nasdaq Capital Market under the symbols “DUKR” and “DUKRW,” respectively. On June 7, 2026, our Board of Directors (the “Board”) approved the appointment of Mr. Yiftach Kleinman as our Chief Executive Officer, effective upon the commencement of his employment with the Company, which is expected to occur no later than September 8, 2026. Upon effectiveness, the Board will relieve Mr. Yossi Balucka from his role as Chief Executive Officer of the Company. Mr. Balucka will continue serving as the Company’s President. 22 Critical Accounting Policies In connection with the preparation of our financial statements, we were required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our assumptions, estimates, and judgments on historical experience, current trends, and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. Regularly, management reviews the accounting policies, assumptions, estimates, and judgments to ensure that our financial statements are presented fairly and by accounting principles generally accepted in the United States of America. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Please see Note 2 of Part I, Item 1, of this Quarterly Report on Form 10-Q for the summary of significant accounting policies. In addition, reference is made to Part I, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report on Form 10-K for the year ended December 31, 2025 (filed on March 12, 2026) concerning our Critical Accounting Policies and Estimates. Results of Operations Comparison of the three months ended June 30, 2026 and 2025 Revenues . Revenues for the three months ended June 30, 2026, amounted to $149,000, compared to $143,000 in revenues during the three months ended June 30, 2025. The increase in revenues is attributable to an increase in revenues from our IC Drone insulator cleaning activities. Cost of revenues. Our cost of revenues for the three months ended June 30, 2026, amounted to $91,000, compared to $55,000 in cost of revenues for the three months ended June 30, 2025. The cost of revenues mainly consists of depreciation expenses and other operational costs associated with our agreements with the IEC as detailed above. The increase in cost of revenues was primarily attributed to an increase in depreciation expenses and operational readiness costs incurred in advance of the 2026 cleaning season. Research and Development. Our research and development expenses for the three months ended June 30, 2026, amounted to $32,000 compared to $24,000 for the three months ended June 30, 2025. The increase in research and development expenses was mainly due to continued improvements to our insulator washing system. General and Administrative. Our general and administrative expenses for the three months ended June 30, 2026, which consisted primarily of professional services, such as accounting, auditing, stock-based compensation expenses, insurance costs, consulting and legal services, amounted to $954,000, compared to $314,000 for the three months ended June 30, 2025. The increase in general and administrative expenses for the three months ended June 30, 2026 was mainly due to an increase of approximately $445,000 in professional services attributable to one-time expenses related to our Nasdaq uplisting and the associated Offering described below, as well as an increase in other professional services, such as strategic consulting and advisory board compensation expenses and stock-based compensation expenses, attributable to equity awards granted in March 2026. Financial Income (expenses), net. For the three months ended June 30, 2026, we had financial income of $202,000 compared to financial expenses of $9,000 for the three months ended June 30, 2025.The increase in financial income for the three months ended June 30, 2026, was mainly attributable to a $195,000 gain resulting from the change in fair value of certain warrants due their make-whole provision included in the warrants, which resulted in a change in the warrant liability. Following our Offering, such provision was eliminated and the Company does not anticipate additional change in the warrants fair value. Net Loss. We incurred a net loss of $726,000 for the three months ended June 30, 2026, as compared to a net loss of $269,000 for the three months ended June 30, 2025, for the reasons set forth above. 23 Comparison of the six months ended June 30, 2026 and 2025 Revenues . Revenues for the six months ended June 30, 2026 amounted to $149,000, compared to $143,000 in revenues during the six months ended June 30, 2025. The increase in revenues is attributable to an increase in revenues from our IC Drone insulator cleaning activities. Cost of revenues. Our cost of revenues for the six months ended June 30, 2026, amounted to $124,000, compared to $63,000 for the six months ended June 30, 2025. The cost of revenues mainly consists of depreciation expenses and other operational costs associated with our agreements with the IEC as detailed above. The increase in cost of revenues was primarily attributable to an increase in depreciation expenses and operational readiness costs incurred in advance of the 2026 cleaning season. Research and Development. Our research and development expenses for the six months ended June 30, 2026, amounted to $61,000 compared to $45,000 for the six months ended June 30, 2025. The increase in research and development expenses was mainly due to continued improvements to our insulator washing system. General and Administrative. Our general and administrative expenses for the six months ended June 30, 2026, which consisted primarily of professional services, such as accounting, auditing, stock-based compensation expenses, insurance costs, consulting and legal services, amounted to $1,405,000, compared to $573,000 for the six months ended June 30, 2025. The increase in general and administrative expenses for the six months ended June 30, 2026 was mainly due to an increase of approximately $445,000 in professional services attributable to one-time expenses related to our Nasdaq uplisting and the associated Offering described below, as well as an increase in other professional services, such as strategic consulting and advisory board compensation expenses and stock-based compensation expenses, attributable to equity awards granted in March 2026. Financing expenses, net, were $206,000 for the six months ended June 30, 2026, compared to financing expenses, net, of less than $1,000 for the same period in 2025, primarily reflecting non-cash mark-to-market changes on the warrant liability issued in the Company's December 2025 private placement. Following the March 2026 amendment extending the term of those warrants to May 2031, the warrant liability was remeasured upward during the first quarter of 2026, resulting in a mark-to-market loss. Upon completion of the Company's May 2026 underwritten public offering, the warrants were remeasured a final time and reclassified from liability to equity, resulting in a mark-to-market gain in the second quarter that partially offset the first-quarter loss. Net Loss. We incurred a net loss of $1,647,000 for the six months ended June 30, 2026, as compared to a net loss of $548,000 for the six months ended June 30, 2025, for the reasons set forth above. Liquidity and Capital Resources We had $6,951,000 in cash on June 30, 2026 versus $581,000 in cash on June 30, 2025. The primary reason for the increase in our cash balance was due to net proceeds received from our May 2026 public offering of $7,263,000, as well as proceeds from issuance of shares under our December 30, 2025, securities purchase agreements partially offset by operating expenses described above. Cash used in operations for the six months ended June 30, 2026 was $1,283,000 as compared to cash used in operations of $578,000 for the six months ended June 30, 2025. The reason for the increase in cash used in operations is mainly related to one-time expenses related to our Nasdaq uplisting and the associated Offering and increase in our operating expenses described above. Net cash used in investing activities was $0 for the six months ended June 30, 2026, as compared to net cash used in investing activities of $96,000 for the six months ended June 30, 2025. Net cash provided by financing activities was $7,524,000 for the six months ended June 30, 2026, compared to net cash used in investing activities of $0 for the six months ended June 30, 2025. The reason for the increase is related to proceeds received from our May 18, 2026 public offering of $7,263,000 as well as proceeds from issuance of shares under our December 30, 2025, securities purchase agreements. Since our inception we and Duke have funded our operations through equity and debt financing, bank loans, loans provided by shareholders, demonstration projects of its technology to potential customers and providing our ICD services to the IEC. 24 Since Duke’s inception and until 2017, certain Duke affiliates provided loans to Duke from time to time, as needed. Before entering into the Share Exchange, Duke entered into debt cancellation letters (the “Debt Cancellation Letters”) with regard to the Stockholders Loans. Pursuant to the Debt Cancellation Letters the accumulated interest on the Stockholders’ Loans was waived and 842,135 shares of Duke’s common stock were issued in exchange for the cancellation of $623,180 in debt, leaving $280,000 of outstanding Stockholders Loans (the “Outstanding Stockholders’ Loans”). The Outstanding Stockholders’ Loans, including the accumulated interest amount, shall be repaid on the later of the following: (i) three years after the Effective Date (March 9, 2020); or (ii) Duke raised capital amounting to at least $15 million following the Effective Date and the Earnings before interest, tax, depreciation and amortization of Duke has reached an amount of $3 million. As of June 30, 2026 and June 30, 2025, the outstanding balances of such stockholders’ loans were $334,000 and $326,000, respectively. On May 11, 2021, we entered into securities purchase agreements with eight (8) non-U.S. investors, pursuant to which we, in a private placement offering, agreed to issue and sell to investors an aggregate of: (i) 500,000 shares of our Common Stock at a price of $10.00 per share; and (ii) warrants to purchase 500,000 of our Common Stock. The warrants were 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 $5,000,000 and the offering closed on May 11, 2021. On April 5, 2022, we entered into an agreement with the Investors pursuant to which we extended the term of the warrants, to expire on November 11, 2023. On November 1, 2023, we and the Investors executed a second extension agreement, such that the term of the warrants was extended to expire on November 11, 2024. On June 20, 2024, we entered into a Warrant Amendment Agreement with the Investors to amend the terms of the warrants issued in connection with the May 11, 2021 securities purchase agreements. Under the Warrant Amendment Agreement, we and the Investors agreed to: (i) extend the warrant exercise term to May 11, 2026; (ii) amend the warrant exercise price, increasing it from $10.00 per share to $16.25 per share; and (iii) 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 the Company’s common stock immediately following the exercise. 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 December 30, 2025, we entered into securities purchase agreements with seven (7) non-U.S. investors, pursuant to which we, in a private placement offering, agreed to issue and sell to the investors an aggregate of: (i) 83,338 shares of our common stock at a price of $9.00 per share); and (ii) warrants to purchase 83,338 shares of common stock. The warrants have an exercise price of $16.25 per share, 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 $2,500,000 has not occurred prior to such date. In addition, the securities purchase agreement contains a make whole provision that provides for the investors to receive additional shares of Common Stock in the event that we consummate 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 offering were approximately $750,000 and the offering closed on January 6, 2026. Proceeds from the offering were used for general corporate purposes and working capital, including supporting our operational and commercialization initiatives. 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 May 14, 2026, we entered into the Underwriting Agreement with the Underwriters relating to the Offering of 1,125,000 units, with each unit consisting of one share of our common stock and warrants to purchase one share of our common stock at an exercise price of $8.60 per share, exercisable for a period of five years, subject to certain adjustments and cashless exercise provisions. The combined price public offering price per unit was $8.20. Under the terms of the Underwriting Agreement, we granted the Underwriters an option, exercisable for 45 days following the closing of the Offering, to purchase up to an additional 168,750 shares of common stock and/or Warrants to purchase 168,750 shares of common stock to cover over-allotments, if any. On May 15, 2026, the Underwriter partially exercised its over-allotment option with respect to Warrants to purchase 168,750 shares of common stock. 25 On May 18, 2026, we closed the Offering, as well as the partial exercise of the over-allotment option, and issued the Shares and Warrants, resulting in aggregate gross proceeds of approximately $9,225,000, before deducting underwriting discounts and commissions and estimated offering expenses. Concurrently with the closing of the Offering, we also issued warrants to purchase an aggregate of up to 90,000 shares of common stock to the representative of the Underwriters, with an exercise price of $10.25 per share (the “Representative’s Warrants”). The Representative’s Warrants are exercisable beginning on November 14, 2026, and expire on November 14, 2031, pursuant to the terms and conditions of the Representative’s Warrants. As a result of the Offering, we issued 22,595 shares of common stock as a result of the make whole provision contained in the warrants issued to investors in the December 2025 private placement. We currently believe that our existing capital resources will be sufficient to support our operating for beyond the next twelve months. Off-Balance Sheet Arrangements As of June 30, 2026, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K. Item 3. Quantitative and Qualitative Disclosures About Market Risk. We are a smaller reporting company and therefore are not required to provide the information for this item of Form 10-Q.