DUKE Robotics Corp.

NOTE 1 – GENERAL

On March 9, 2020, the Company closed on the Share Exchange Agreement (as defined hereunder), pursuant to which, Duke Robotics, Inc. (“Duke Inc.”) a corporation incorporated under the laws of the state of Delaware, became a majority-owned subsidiary of the Company. Duke Inc. has a wholly-owned subsidiary, Duke Airborne Systems Ltd. (“Duke Israel,” and collectively with Duke Inc., “Duke”), which was formed under the laws of the State of Israel in March 2014 and became the sole subsidiary of Duke after its incorporation.

On April 29, 2020, the Company, Duke Inc., and UAS Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company (“UAS Sub”), executed an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which UAS Sub merged with and into Duke Inc., with Duke Inc. 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. surviving as a wholly-owned subsidiary of the Company.

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

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).

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.

NOTE 1 – 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.

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.

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. Israel, 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.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The accompanying consolidated financial 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.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, certain revenues and expenses, and disclosure of contingent assets and liabilities as of the date of the financial statements. 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 equivalents are short-term highly liquid investments which include short term bank deposits (up to three months from date of deposit), that are not restricted as to withdrawals or use that are readily convertible to cash with maturities of three months or less as of the date acquired.

Most of the Group’s costs are denominated and determined in dollars. Management believes that the dollar is the currency in the primary economic environment in which the Group operates. Thus, the functional and reporting currency of the Group is the U.S. dollar.

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.

The Group’s long-lived assets are reviewed for impairment in accordance with ASC Topic 360, “Property, Plant and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. No impairment expenses were recorded during the years ended December 31, 2025 or 2024.

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.

The Group provides services to customers and has related performance obligations and recognizes revenue in accordance with ASC 606. Revenues are recognized when the Group satisfies performance obligations under the terms of its contracts, and control of its services or products is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products. This process involves identifying the customer contract, determining the performance obligations in the contract, determining the transaction price, allocating the transaction price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it (a) provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and (b) is separately identified in the contract. The Company considers a performance obligation satisfied once it has transferred control of a good or product 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. (see note 12).

Research and development expenses are charged to operations as incurred.

Basic loss per share is computed by dividing the loss for the period applicable to shareholders, by the weighted average number of shares of common stock outstanding during the period.

In computing diluted loss per share, basic loss per share is adjusted to reflect the potential dilution that could occur upon the exercise of potential shares. Accordingly, in 2025 and 2024, no potential shares are considered.

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.

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.

The Company records accruals for loss contingencies arising from claims, litigation and other sources when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Fair value of certain of the Company’s financial instruments including cash, accounts receivable, account payable, accrued expenses, accounts payable, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” (“ASC 820”) defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.

Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of non-performance, which includes, among other things, the Company’s credit risk.

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3: Unobservable inputs for the asset or liability that are supported by little or no market activity, and that are significant to the fair values.

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of 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:

The Company determines if an arrangement is or contains a lease at contract inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and operating lease liabilities in Company’s consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Group’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company generally uses the incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. 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.

Recently Adopted Accounting Standards

Income Taxes: In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU (“Accounting Standard Update”) 2023-09, Income Taxes (Topic 740): 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. 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. The guidance 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 ASU No. 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. Early adoption is permitted. 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. ASU 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.

NOTE 3 – OTHER CURRENT ASSETS

NOTE 4 – LEASES

NOTE 4 – LEASES (continued)

NOTE 5 – PROPERTY AND EQUIPMENT, NET

NOTE 5 – PROPERTY AND EQUIPMENT, NET (continued)

In the years ended December 31, 2025 and 2024, depreciation expenses amounted to $68 and $29 respectively, and additional property and equipment were purchased for cash in an amount of $216 and $77 during the years ended December 31, 2025 and 2024, respectively. During 2025, the Company sold fixed assets with a cost of $24 and with accumulated depreciation in the amount of $3.

NOTE 6 – OTHER LIABILITIES

NOTE 7 – RELATED PARTIES LOANS

The Company has outstanding loans with related parties. The loans bear an annual fixed interest rate of 3% and shall be repaid (principal and interest) at the date upon which the Company raises at least $15 million and has achieved earnings before interest, tax, depreciation and amortization of $3 million.

NOTE 8 – CONTINGENCIES

On March 23, 2025, a complaint was filed against Duke Israel, by LOOL T.V. Ltd. (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.

NOTE 9 –SHAREHOLDERS’ EQUITY

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. 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, 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 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 includesone share andone warrant with an exercise price of $10 per share) equal to 6% of the investment amount received, divided by $10.

In the event that the investors that participated in the Offering exercise their Warrants, the service provider shall be entitled to receive an additional payment of (1)6% of the investment amounts received (2)6% of the warrants exercised amounts received and (3) options to receive a number of units equal to 6% of the warrants exercised amounts received, divided by $10.

On April 5, 2022, the Company and the investors executed a warrant amendment 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 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. On March 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 used:

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:

Fair Value Proportional Allocation

Based on the above, the fair value proportion allocation as of December 31, 2025 was as follows:

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 includesone share andone 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 ASC 718. 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.

NOTE 10 – 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”). 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 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 used:

NOTE 10 – SHARE BASED COMPENSATION (continued)

The following table presents the Company’s stock option activity:

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 December 31, 2025, have been separated into exercise prices, as follows:

The stock options outstanding as of December 31, 2024, have been separated into exercise prices, as follows:

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.

NOTE 11 –GENERAL AND ADMINISTRATIVE EXPENSES

NOTE 12 – AGREEMENTS

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. 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 Agreement.

NOTE 12 – 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.

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 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 agreement. This contract primarily accounts for the revenues recognized during 2025. On May 27, 2025, IEC extended the agreement for an additional year.

NOTE 13 –INCOME TAX

U.S. 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.

Income of the Israeli company is taxable from 2018 onwards, at corporate tax rate of 23%.

The Company and subsidiaries have not received final tax assessments since their inceptions although the tax reports of Duke Israel for the years ended by December 31, 2019 are deemed to be final.

NOTE 13 – 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.

NOTE 13 –INCOME TAX (continued)

NOTE 14 –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, 2025 and 2024, are as follows:

NOTE 15 –RELATED PARTIES

NOTE 15 –RELATED PARTIES (continued)

(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 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 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.

NOTE 16 –SEGMENT INFORMATION

The Company hasone 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 about the Company’s reportable segment for the year ended December 31, 2025 and 2024:

Revenue related to the Company’s reportable segments is as follows:

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.

NOTE 17 –SUBSEQUENT EVENTS