Duke Robotics (DUKR) Risk Analysis

In general, our Board may issue, without a vote of our shareholders, one or more additional series of preferred stock that have more than one vote per share, although the Company's ability to designate and issue preferred stock is currently restricted by covenants under our agreements with prior investors. Without these restrictions, our Board could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for shareholders to sell their common stock. This could also cause the market price of our common stock shares to drop significantly, even if our business is performing well.

In addition to the "penny stock" rules described above, FINRA has adopted Rule 2111 that requires a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer before recommending the investment. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy the Company's common stock, which may limit your ability to buy and sell the Company's stock and have an adverse effect on the market for our shares.

Trading in our common stock is subject to the "penny stock" rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer that recommends our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser's written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our common stock.

The market price of our common stock could fluctuate substantially due to a variety of factors, including quarterly operating results of other companies in the same industry, changes in general conditions in the economy and the financial markets, or other developments affecting the Company's competitors. In addition, the OTCQB is subject to extreme price and volume fluctuations in general. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock. In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

Out of the currently 2,252,151 outstanding shares of our common stock of which only 834,681 were registered pursuant to a registration statements on Form S-1 with the SEC on June 5, 2020, the rest of our shares of common stock that are currently outstanding are "restricted securities" within the meaning of Rule 144 under the Securities Act. Restricted securities may be sold only pursuant to an effective registration statement under the Securities Act, in compliance with Rule 144, or under another available exemption from registration, and in each case in compliance with applicable state securities laws. In general, once the applicable holding period and other requirements of Rule 144 are satisfied, a person who is not an "affiliate" of our company and has not been an affiliate during the preceding three months may resell restricted shares without limitation. Affiliates may resell restricted shares in accordance with the volume, manner of sale and other limitations of Rule 144, which, among other things, generally limit the number of shares that may be sold within any three-month period to the greater of 1% of the then-outstanding shares of our common stock or the average weekly trading volume of our common stock on the principal trading market during the four calendar weeks immediately preceding the sale. If our existing stockholders, particularly our affiliates or significant stockholders, sell substantial amounts of our common stock in the public market, or the perception exists that such sales may occur, the market price of our common stock could decline. Any such sales, or the perception that they may occur, could also impair our ability to raise additional capital through the sale of equity or equity-linked securities in the future.

While we may seek the listing of our common stock on a national or other securities exchange at some time in the future, we currently do not satisfy the initial listing standards and cannot ensure that we will be able to satisfy such listing standards or that our common stock will be accepted for listing on any such exchange. Should we fail to satisfy the initial listing standards of such exchanges, or our common stock is otherwise rejected for listing, the trading price of our common stock could suffer, the trading market for our common stock may be less liquid, and our common stock price may be subject to increased volatility.

Our common stock is traded on the over-the-counter market with quotations published on the OTC Markets Group, Inc.'s OTCQB tier Venture Market, under the symbol "DUKR." The trading volume of our common stock historically has been limited and sporadic, and the stock prices have been volatile. As a result of the limited and sporadic trading activity, the quoted price for our common stock on the over-the-counter market is not necessarily a reliable indicator of its fair market value. The price at which our common stock will trade in the future may be highly volatile and may fluctuate as a result of a number of factors, including, without limitation, any potential business combination that we announce, as well as the number of shares available for sale in the market. The trading volume of our common stock may be limited and sporadic. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained. As a result of such trading activity, the quoted price for our common stock on the OTCQB may not necessarily be a reliable indicator of our fair market value. In addition, if our shares of common stock cease to be quoted, holders would find it more difficult to dispose of or to obtain accurate quotation as to the market value of, our common stock and as a result, the market value of our common stock likely would decline. Other factors that could have a similar impact include, but are not limited to: - the increased concentration of the ownership of our shares by a limited number of affiliated stockholders following the Share Exchange may limit interest in our securities;- limited "public float" in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;- variations in quarterly operating results from the expectations;- revisions in securities analysts' estimates or reductions;- our ability to obtain working capital financing;- announcements of new products or services by us or our competitors and changes in our industry;- reductions in the market share of our products;- announcements by us or our competitors of significant strategic acquisitions;- loss of any strategic relationship;- regulatory developments;- general technological, market or economic trends;- investor perception of our industry or prospects;- insider selling or buying;- investors entering into short sale contracts;- regulatory developments affecting our industry; and - additions or departures of key personnel. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain current market prices, or as to what effect that the sale of shares or the availability of common stock for sale at any time will have on the prevailing market price.

We originally became a public company through a reverse merger, rather than through a traditional underwritten initial public offering. Companies that enter the public markets through reverse mergers often receive less attention from securities analysts and institutional investors, and such perceptions may persist notwithstanding our uplisting to a national securities exchange. Because no investment bank acted as an underwriter in connection with our becoming a public company, there is no broker-dealer with an inherent incentive to provide research coverage of our company. The absence or limited availability of research coverage may reduce the visibility of our business in the public markets, which could limit investor interest, reduce trading volume and adversely affect the market price and liquidity of our securities. Although our uplisting may increase our visibility and improve access to a broader investor base, there can be no assurance that analysts will initiate or maintain coverage of our company following the uplisting or that we will be able to attract institutional investors.