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PART I

Item 1: Business

Unless the context requires otherwise in this Annual Report on Form 10-K, the terms “MTI,”"MTI," the “Company,” “we,” “us,”"Company," "we," "us," and “our”"our" refer to Mechanical Technology, Incorporated, and “MTI Instruments”"MTI Instruments" refers to MTI Instruments, Inc., and "EcoChain" refers to EcoChain, Inc. Other trademarks, trade names, and service marks used in this Annual Report on Form 10-K are the property of their respective owners.

Overview and Recent Developments 

Mechanical Technology, Incorporated, a New York corporation, was incorporated in 1961. The Company’s core business is conducted through MTI Instruments, Inc., a wholly-owned subsidiary incorporated in New York in 1961 as a developer and manufacturer of energy-efficient rotating machinery and instrumentation. Mechanical Technology, Incorporated became a Nevada corporation on March 8, 2000. The Company’s operations are headquartered29, 2021. Headquartered in Albany, New York, where it designs, manufactures, and markets its products globally.

Thethe Company also owns a 47.5% interest, which as of December 31, 2017 has a fair valuerich history of $0,technological experience in MeOH Power, Inc. (formerly MTI MicroFuel Cells, Inc.),providing technical advances to support American industry and defense agencies, and in developing related proprietary products, including gas-lubricated bearings, sensors, compressors, steam turbines, high-efficiency engines, and fuel cells for industrial equipment and hand-held devices. During the last four years we have undertaken a process to streamline our product offerings in order to re-focus on our core business and key product lines and limit the amount of customer-specific customization of our products, which has resulted in the Company operatedreturning to profitability. We remain, however, as a subsidiary until December 31, 2013, at which timewe have throughout the majority interest was transferred to oneCompany's history, highly dependent on the financial expertise of our directors. We do not expectworkforce given the highly-technical nature of our current interest in MeOH Power, Inc. to have a material impact on our results of operations or financial condition going forward.products and businesses.

Today, the Company's core businesses are conducted through its wholly-owned subsidiaries MTI Instruments and EcoChain.

MTI Instruments, incorporated in New York in 2000, is a supplierengaged in the design, manufacture, and sale of precision linear displacement solutions, vibration measurement and system balancing solutions, precision linear displacement sensors, instruments and system solutions, and wafer inspection tools. These tools, and solutions are developed forserving markets that require 1) engine balancing and vibration analysis systems for both military and commercial aircraft, 2) the precise measurements and control of products and processes for the development and implementation ofin automated manufacturing, assembly, and consistent operation of complex machinery. machinery, and 3) metrology tools for semiconductor and solar wafer characterization. We continue to work on ways to increase our sales reach, including expanded worldwide sales coverage and enhanced internet marketing, with respect to this business.

EcoChain, a Delaware corporation incorporated in January 2020, is engaged in cryptocurrency mining powered by renewable energy. Related to this new core business, we made a strategic investment, and hold an equity position, in Soluna Technologies, Ltd. ("Soluna"), a Canadian company that develops vertically-integrated, utility-scale computing facilities focused on cryptocurrency mining and cutting-edge blockchain applications, as further discussed below.

AsOur website is http://www.mechtech.com. Information contained on our website does not constitute part of and is not incorporated into this Annual Report.

The current corporate organizational structure of MTI appears below.

The Company had previously been subject to the reporting requirements of the Securities Exchange Act of 1934 ("Exchange Act") and filed reports and other documents with the Securities and Exchange Commission (the "SEC") thereunder, but had ceased doing so in 2018. The Company filed with the SEC a Form 10 Registration Statement to re-register its strategy, common stock under Section 12 of the Exchange Act initially in March 2020, which was withdrawn and then re-filed in September 2020 and that became effective in November 2020, making the Company once again subject to the Exchange Act's reporting requirements.

In addition, on March 23, 2020, our common stock commenced trading on the Nasdaq Stock Market LLC ("Nasdaq").

On March 29, 2021, the Company re-incorporated from New York to Nevada (the "Redomestication"). To effect the Redomestication, the Company organized a wholly-owned subsidiary in Nevada named Mechanical Technology, Incorporated ("MKTY-NV") and the Company merged with and into MKTY-NV with MKTY-NV as the surviving entity, succeeding to and assuming all rights and obligations of the Company in accordance with Nevada law. Upon consummation of the Redomestication, the Company's state of incorporation as a practical matter changed from New York to Nevada, and each outstanding share of Company common stock was converted into one share of MKTY-NV common stock.  We believe that reincorporation in Nevada will give us a greater measure of flexibility and simplicity in corporate governance than is available under New York law and will increase the marketability of our securities. The Nevada Revised Statutes are generally recognized as one of the most comprehensive and progressive state corporate statutes. We believe that by reincorporating the Company in Nevada, it will be better suited to take advantage of business opportunities as they arise and to provide for its ever-changing business needs. We believe that the Company's growth can be conducted to better advantage if the Company is able to operate under Nevada law. 

In addition, on March 10, 2021, the Company filed with the SEC a Registration Statement on Form S-1 with respect to its anticipated sale of up to $11.5 million worth of its common stock in a firm underwritten offering. We intend to use the net proceeds of the offering primarily for the acquisition, development, and growth of two additional cryptocurrency mining facilities, including cryptocurrency miners, other computer processing equipment, data storage, electrical infrastructure, software and real property (i.e. land and buildings), but we also may use a portion of the proceeds to acquire other entities or businesses in the future that complement our businesses or are otherwise consistent with our business plan. We may also use a portion of the net proceeds to pay for the costs associated with our Nasdaq listing application, which was approved on March 18, 2021.

In connection with our Nasdaq listing application, our Board of Directors approved (subject to shareholder approval, which was obtained at the special meeting of shareholders held on March 25, 2021) a grant of discretionary authority permitting the Board, at any time prior to the Company's 2022 annual meeting of shareholders, to effect a reverse split of the Company's outstanding shares of common stock (either before or after the Redomestication) at a specific whole number ratio within a range from 1-for-2to 1-for-10. Subject to shareholder approval, we intend for the Board to effect such reverse stock split only if and to the extent necessary to remain in compliance with Nasdaq's continued listing requirements.

In February 2021 we added two new independent directors to our Board of Directors, William Hazelip and Alykhan Madhavji, who bring to the Board expertise that will support EcoChain's cryptocurrency mining business. Mr. Hazelip is an accomplished leader in the energy industry, with deep experience in utility project development, financing, regulation, and operations. Mr. Madhavji is the Managing Partner at Blockchain Founders Fund, an early-stage investment fund specialized in investing in blockchain and emerging technology projects and venture-builder of top-tier start-ups headquartered in Beijing, China. To support EcoChain's cryptocurrency mining business, the Company intends to bolster the Board's expertise in areas vital to this business, including power generation and transmission business, as well as project finance, as it continues to grow EcoChain. Messrs. Hazelip and Madhavji have a wealth of knowledge and experience in these important areas.

Test and Measurement Instrumentation Segment 

MTI Instruments, provides its customers with enabling sensors and sensing technologies that help advance manufacturing processes and new product development efforts. The demand for higher quality and lower cost products ranging from semiconductor chips to electronics and large items such as automobiles continues to drive Original Equipment Manufacturers (OEMs) and their suppliers to invest in technology and the capability to rapidly produce high quality products. The industry has moved towards flexible manufacturing doctrines around mass customization and production incorporating lean principles to reduce labor and waste, while increasing quality. Modern manufacturing advances at a very rapid pace with the help of automation controls and precision sensing technologies for operating equipment, processes in factories, and other applications with minimal or reduced human intervention. OEMs find that using automation helps them not only improve on quality, but also can save labor, energy and materials while significantly improving accuracy and precision. In some industries like semiconductors, fabrication facilities are fully automated and are aided by humans on a low frequency basis. 

Using a combination of integrated smart robotics, manufacturing lines, and a myriad of sensors that measure ongoing equipment performance, monitoring and drive controls have resulted in significant advancements in productivity and quality in manufacturing. There is no question that the world is moving from classic manufacturing and assembly towards automation and measurement.

Inc.

MTI Instruments has decades of experience in working with OEMs and their subcontractorsengages in the supplydesign, manufacture, sale, marketing, and support of sensor, instrumentsmetrology, or measurement, products that provide analytical data to help customers monitor and systems technology to incorporate into OEMs’ equipment and major companies’ manufacturinganalyze processes as they develop and implement new process, quality and automation controls. The Company has moved to a customer and market-based approach by targeting leading companies in specific market segmentsareas including the industrial and consumer electronics, automotive and other precision automated manufacturing industries, turbo machinery and the research and development, aspects within these marketsmanufacturing, process control, quality control, and troubleshooting of third-party equipment. In research and development, our products can help customers collect empirical data that they can use to develop new products or processes. In manufacturing, our sensors can help engineers understand whether or not a process is under control. In the quality control area, our products can help determine if parts in a manufacturing line pass or fail an applicable quality test. With respect to troubleshooting, our products can provide diagnostic, and potential solution, information. 

Because of the large number of applications and uses for bothour products, MTI Instruments' product mix varies from a single sensor to a large multi-channel system that contains many different sensors and process improvements. software, we can provide our customers a complete solution. In addition, MTI Instruments sells components to original equipment manufacturers ("OEMs") who, in turn, incorporate our components into their own products. 

MTI Instruments' operations are headquartered in Albany, New York.

This same approachInstrumentation Products

MTI Instruments manufactures a line of products capable of diagnosing vibration and balancing problems of an aircraft engine and generating a visual map of where metal weights should be placed for the customer to balance the engine, also known as "trim balancing." MTI Instruments also specializes in non-contact, highly-accurate metrology products. The measurements are carried from a distance while the sensor is drivingtracking the demandobject's movement. These types of measurement sensors are commonly referred to in the industry as non-contact, linear displacement measurement sensors. Additionally, MTI Instruments manufactures a portable signal generator as well as quality control tools for the semiconductor industry.

Balancing Systems: MTI Instruments manufactures computer-based portable balancing systems ("PBS") products that automatically collect and record aircraft engine vibration measurementdata, identify vibration or balance trouble in an engine, and balancing. Ongoing effortscalculate a solution to improvethe problem on-wing, which means that customers do not have to disassemble the engine performanceoff the plane to perform this test and lower fuel consumption drive bothcorrect for the problem, resulting in a significant reduction of downtime. Major aircraft engine manufacturers and the U.S. Air Force, other military and commercial axial turbo-machinery operatorsairlines, and gas turbine manufacturers use these products. MTI instruments also manufactures a product with similar characteristics for test cells. Test cells are dedicated engine facilities outfitted with instruments to maintain their equipment at peak performance.

These market drivers are also providing opportunity and demand for MTI to enhance current and develop new products and technologies. This has become a central theme in our supporting a larger, more complex customer base. Our efforts to become more capable and competitive in operations and quality are being met by our well defined approach to lean manufacturing principles and the achievement of International Organization for Standardization (ISO) ISO 9001:2015 certification in 2017.

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Automated Monitoring and Precision Automation Manufacturing Automated monitoring allows companies and engineers to rectify system problems before they become costly repairs and maintenance costs. MTI’s latest system has a non-magnetic paper-thin probe that allows users to measure and monitor gaps in high power generators, wind turbines, and other auxiliary equipment. Its Ethernet interface supports remote access to this critical information. Meanwhile, MTI is also supporting the world-wide need for OEMs to drive continuous improvement efforts through use of the most innovative manufacturing and assembly techniques in products and processes. Due to the level of precision required, these products or processes are managed through automated systems (Piezo positioners, robot guide, dielectric material/LED wafer inspection, etc.) and require precise measurement, data transmission, analysis and management.

MTI Instruments provides advanced linear displacement solutions for OEMs that can be incorporated into a tool or equipment manufactured by a company to monitor performance and/or achieve control (“in product application”) or into a process to control the manufacture of parts or measure critical parameters of parts as they enter or leave a process (“in process applications”). 

MTI Instruments is a preferred supplier for applications that require complex and extremely precise measurement of intricate targets and assemblies. MTI Instruments uses its significant track record and experience in capacitance, laser and fiber optic technologies to make products that range from basic sensors to complete, fully integrated measurement systems. Applications include precision positioning, material surface measurements, off-center vibration measurements, and pattern recognition analysis.

test aircraft engines when taken off aircrafts. 

Listed below are selected MTI Instruments’ automated monitoringInstruments' Balancing Systems product offerings and precision automation manufacturing product offerings:technologies:

PBS products are used by major aircraft engine manufacturers, the U.S. and foreign militaries, and commercial airlines, as well as gas turbine manufacturers.

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Listed below are selected MTI Instruments’ axial turbo machinery product offerings and technologies:

Precision Instruments Products:

Industrial and Academic Research and Development (R&D) Present-day research and process development is a core part of the modern business world; critical decisions are made from data and discoveries made through these efforts. As companies understand and profit from the benefits of organized R&D efforts, they also make further commitments and investments into new R&D cycles making internal R&D budgets reach higher and higher levels. R&D is also a tool for modern companies to proactively leapfrog competition and keep pace with trends, enhance manufacturing processes, and develop products to meet new customer demands. MTI Instruments has a long track record of working with private sector companies as well as academic institutions on their R&D efforts. We have a dedicated line of tabletop linear displacement instruments, material testers, and wafer metrology tools that help provide valuable information to enhance products and processes. Our family of R&D related products are used widely in applications including wafer surface metrology, nano-material testing, and precision linear displacement and positioning. Our customers include testing and R&D departments in large industry and academia as well as process development laboratories focused in automotive, electronics, semiconductor, solar, and material development.

MTI Instruments' precision instruments products are designed to address the needs of process engineers, researchers, designers, product developers, and others who need to measure and monitor what they are working on with precisions down to a nanometer or 1 billionth of a meter - essential to some industries like the semiconductor market, which uses such precision in the manufacturing of products including computer chips and smartphones. These products are also used in general industrial manufacturing applications including measuring dimensions, monitoring thickness, and the vibration of products.

Listed below are selected MTI Instruments’ industrial and academic R&DInstruments' precision instruments product offerings and technologies:

Marketing, Sales and SalesDistribution 

MTI Instruments markets its products and services using selected and specific channels of distribution. In the Americas, for precision automated manufacturing and the R&D sectors, MTI Instruments uses a combination of direct sales and representatives. Overseas, particularly in Europe and Asia, MTI Instruments uses distributors and agents specific to our targeted end markets.markets and has our sales staff frequently (at least once per quarter) visitdistributors and customers in these territories to increase our exposure and sales, although during the current COVID-19 pandemic these visits are taking place virtually, either through videoconferences or via webinars. For axial turbo machinery,our balancing systems, MTI Instruments primarily sells directly to end users.

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To supplement theseMTI Instruments supplements sales efforts we use both commercial and industrialwith marketing activities across different media including search engines, targeted newsletters, and purchased customer lists, and participationparticipates in trade shows related to identifyour business in hopes to increase lead generation, resulting in new customer sales. The Company also maintains strong working relationships with our existing key customers to continually promote new product sales.

In addition, the Company works with existing OEMs and expandseeks to work with new OEMs to incorporate our customer base.

products into their own products or retrofit existing components with our products. In most cases, these OEMs are looking for a semi-custom sensor using our products and technologies as the base for development. While the sales cycle of a new MTI Instruments' product at an OEM can be long, so is the potential for recurring revenue once an OEM adopts our product. 

Product Development

MTIInstruments continuously conducts research and development efforts to support its existing products and develop new ones according to its sales and marketing plans. Management believes that our success in our current business depends to a large extent upon innovation, technological expertise, and new product development, and in some cases, seeking a technological advantage in the market. In addition, as noted above MTI Instruments seeks to work with OEMs to develop new and advance existing technologies in supportsemi-custom product solutions.  Below are our most recent product development efforts, all of its business strategy. Along with innovation as a key hallmark to our efforts, we carefully consider a number of factors including customer needs, product or technology uniqueness, market trends, costs, the competitive landscape, and creative marketing and communications plans in developing our products. We take a customer-centered approach in order to find new ways to solve customer needs, engage with customers directly, and create a loyal customer base while offering a more compelling value proposition.

In 2017, we launched two different series of The Protrak^™ 2D/3D, which isare part of our Accumeasure ™ Series product line:

• In the Microtrak PRO-2Dfirst quarter of 2020, MTI Instruments launched our D200 HD, a high-definition product line;targeting customers looking for a linear displacement sensor capable of achieving a resolution in picometers. Resolution is the G series Protrak^™ 2D/3D has a speedminimum detectable change in the position of up to 4000 hertz (Hz) or a capture rate of 3.6 million measurement points per second and resolutionsthe object being studied. For reference, one inch can be divided into 25.4 billion picometers. This product can detect small distance changes as low as 3.3 microns. The HD series Protrak^™ 2D/3D can achieve high speeds of up to 6000Hz and even better resolution - as low as 2.5 microns. Both products come in a variety of different measurement ranges and are offered with either red or blue visible laser light. The blue laser light20 picometers. This product feature is particularly usefulrelevant to companies working in nano-science and nano-technology applications including the semiconductor, medical instrumentation, and electronics industries.

• In 2019, we launched the Digital Accumeasure D Series, Gen 3- the third generation of this product platform with translucent materialsimprovements in linearity down to 0.01%, while improving resolution. Linearity is a large component of how an instrument performs and how accurate it is. This product is targeted to customers looking for a linear displacement sensor with both high accuracy and high resolution. This product appeals to companies working on tracking positioning or movement including liquid crystal displays, quartztwo-directional moving platform manufacturers, lens positioning developers, and, glass.in general, the semiconductor industry.

• In 2016, MTI Instruments introduced a paper-thin capacitance probe that is non-magnetic, a feature that allows the probe to conform to and be bonded in a thin gap and also provideprovides accurate measurement within surrounding magnetic fields. This paper-thin probe, together with the recently launched Accumeasure D, is designed to be used to measure and monitor gaps in high power generators, wind turbines, and other auxiliary equipment. In addition, its Ethernet interface supports remote access to critical information.

  We launched an additional line of SEMtester products to support the growing AFM users in the R&D market. The MTI Tensile MicroStage is designed with a reduced height to fit under AFMs or other adjustable lens microscopes. This new MicroStageThat year, we also uses lightweight materials to meet air table and motorized stage requirements.

  We also launched, during 2016, a line of Accumeasure D capable of measuring the thickness of non-conductive materials such as glass, plastic sheet and sapphire wafer (used in white light-emitting diode (LED) manufacturing). Additionally, we continue to invest in the development of a system to measure defects in industrial tool and internal thread inspection that utilizes our Accumeasure D series of products. 

  Also during 2016, we enhanced the PBS 4100+PBS-4100+ to accommodate the latest generation of fuel-efficient aircraft engines.

With investments in research and product development, we seek to achieve a competitive position by continuously advancing our technology, producing new state-of-the-art precision measurement equipment, expanding our worldwide distribution, and providing a high level customer support based on our in-depth understanding and knowledge of our customers’ businesses and needs. Management believes that MTI Instruments’ success depends to a large extent on identifying market requirements, innovation, and utilizing our technological expertise to develop and implement new products.

Product Manufacturing & Operations

We conduct research, product development and innovation, and manufacture our products, in the United States. While many companies in the sensor, instrument, and systems markets have manufacturing operations overseas, MTI Instruments (and its predecessors) is and has always been a U.S.-based manufacturing company. Products are conceived, developed, tested, and shipped out from our headquarters in Albany, New York.

ManagementOur management believes that there are inherent advantages in keeping manufacturingmaintaining our operations in the U.S.,United States, including reducing the risk of inadvertent technology transfer, the ability to control manufacturing quality, and a much more effective customer management and satisfaction process. We have long-term vendor relationships and believe that most raw materials usedthat we use in our products are readily available from a variety of vendors. These advantages were particularly acute during the last 12 months as we experienced minimal supply chain interruptions or other negative effects on our manufacturing processes as a result of the coronavirus pandemic.

To prepare for future growth, we have also made strides in bringingWe employ a more flexible approach to manufacturing. While cross-training our employees in operations in different functional areas, management has also implemented and has kept up-to-date lean principles on the manufacturing floor to increase capacity and productivity and throughput, eliminate waste, and quickly adapt to larger customers’ demands while continuing to keep inventory levels under control. MTI has additional capabilities in its existing, flexible manufacturing space as production volumes increase.when experiencing high sales volumes. 

In April 2017,2020, the Company receivedwas re-certified ISO certification 9001:2015.2015 compliant. The certification was authorized by TÜVRheinland^®V Rheinland®,an independent testing agency. To initially obtain this certification, which we did in 2017, we underwent a rigorous five stepfive-step process including preparation, documentation, implementation, internal audit, and final certification. TheWe believe that operational changes we implemented in accordance with ISO 9001:2015 certification confirms our commitment to an effective management system and continuous improvement, a practice that management believes is important for continuous growth. 

Competition

We compete with a number of companies, several of which are substantially larger than MTI Instruments.

In the axial turbo machinery market, MTI Instruments' PBS product line competes with products from companies including ACES Systems and Meggitt Sensing Systems (Vibrometer) in the diagnostics of engine vibration and trim balancing.

In the precision automated manufacturing market, MTI Instruments faces competition from companies including Omron Corporation, Turck Inc., Pepperl+Fuchs Inc., Keyence Corporation, Micro-Epsilon Messtechnik GmbH & Co. KG, Schmitt Industries Inc., Capacitec, Inc., Microsense LLC, and Motion Tech Automation Inc.

In the R&D and semiconductor markets, we compete with companies involved in wafer inspection including KLA Corporation, Micro-Epsilon Messtechnik GmbH & Co. KG, and E+H Metrology GmbH. Competitors in precision linear displacement include Keyence Corporation, Micro-Epsilon Messtechnik GmbH & Co. KG, Schmitt Industries Inc., Capacitec, Inc., Microsense LLC, and Motion Tech Automation Inc.

The primary competitive considerations in MTI Instruments' markets are product quality, performance, price, timely delivery, responsiveness, and the ability to identify, pursue, and obtain new customers. MTI Instruments believes that its employees, product development skills, sales and marketing systems, and reputation are competitive advantages.

Raw Materials

Our products are made from a wide variety of raw materials and certain subassemblies that are generally available from multiple sources. While we seek to have several sources of supply for our raw materials and subassemblies, however, we do obtain certain materials from a single source or a limited group of suppliers or from suppliers in a single country. While we believe that we have established strong vendor relationships to mitigate the risks associated with single-source suppliers and have not experienced disruptions in our supply chain to date, disruptions in supply remain a possibility and could result in delays, increased costs, or reduced operating profits or cash flows.

Dependence on Certain Customers

All of our product revenues (which constituted 93.8% of our total revenues) during 2020, and all of our revenues during 2019, 2018, and 2017, were earned through MTI Instruments. While we also have strong relationships with companies in the electronics, aircraft, aerospace, automotive, and semiconductor industries, MTI Instruments' largest customer is the U.S. Air Force. The U.S. Air Force accounted for 42.9%, 20.8%, 28.0%, and 20.1%, respectively, of our total product revenues during 2020, 2019, 2018, and 2017, respectively. While we depend on a relatively small number of commercial customers for the majority of the balance of our product revenues, sales to the largest commercial customer during each of the last three fiscal years accounted for between 9.1% and 11.1% of total product revenue and our largest commercial customer in each of the last three years was a different company than in each of the other three years. While we continue to endeavor to maintain and further expand our customer base, we expect that sales to a limited number of customers will continue to account for a high percentage of our revenues for the foreseeable future, and as a result the loss of or significant reduction in sales to our current customer base could have a material adverse effect on our business, revenues, ability to remain profitable, and financial condition.

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Intellectual Property and Proprietary Rights

We rely on trade secret and copyright laws to establish and protect the proprietary rights of our products. In addition, we enter into standard confidentiality agreements with our employees and consultants and seek to control access to and distribution of our proprietary information. Even with these precautions, however, it may be possible for a third party to copy or otherwise obtain and use our products or technology without authorization or to develop similar technology independently. In addition, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries.

Significant CustomersRoyalty Agreement; Sale of Business

Pursuant to an Asset Purchase Agreement by and between MTI Instruments’ largest customerInstruments and 5 Twenty-Two Systems, LLC, dated as of May 10, 2019, we sold all assets related to our former tensile stage product line to 5 Twenty-Two Systems for an aggregate purchase price comprised of $28 thousand plus $9 thousand for certain inventory, plus future royalty payments and 5 Twenty-Two Systems' assumption of certain liabilities. Pursuant to the Asset Purchase Agreement, 5 Twenty-Two Systems' is required to pay MTI Instruments, through May 10, 2022, a royalty equal to 3% of 5 Twenty-Two Systems' gross sales from its sale of products, equipment, or other assets containing, incorporating, or making use of the U.S. Air Force.assets purchased from MTI Instruments pursuant to the Asset Purchase Agreement. We have received some royalty payments under this agreement but to date such amounts have been immaterial.

Cryptocurrency Segment 

EcoChain, Inc. 

EcoChain engages in cryptocurrency mining, a process by which transactions between cryptocurrency users are verified and added to the blockchain public ledger. Cryptocurrency mining also have strong relationshipsintroduces new cryptocurrency coins into the existing circulating supply, facilitating a peer-to-peer decentralized network without the need for a third-party central authority.

In connection with companiesthis business line, EcoChain has established a facility located in East Wenatchee, Washington to mine cryptocurrencies and integrate with the blockchain network. Pursuant to the January 2020 Operating and Management Agreement between EcoChain and Soluna, Soluna assisted us in developing, and is now operating, the cryptocurrency mining facility. The Operating and Management Agreement requires, among other things, that Soluna provide developmental and operational services, as directed by EcoChain, with respect to the cryptocurrency mining facility in exchange for EcoChain's payment to Soluna of a one-time management fee of $65,000 and profit-based success payments in the electronics, aircraft, aerospace, automotive, semiconductorevent EcoChain achieves explicit profitability thresholds. Pursuant to the Operating and research industries. The U.S. Air Force accounted for 20.1%Management Agreement, during the developmental phase of the cryptocurrency mining facility, which ended on March 14, 2020, Soluna gathered and 18.1%analyzed information with respect to EcoChain's cryptocurrency mining efforts and produced budgets, financial models, and technical and operational plans, including a detailed business plan, that it delivered to EcoChain in March 2020, (the "Deliverables"), respectively, of total product revenues during 2017 and 2016. The largest commercial customer in 2017 was a manufacturer of semiconductor equipment in Asia, which accounted for 10.0% of total product revenue during 2017. The largest commercial customer in 2016 was an Asian distributor, which accounted for 8.1% of total product revenue during 2016. 

Competition

We compete with several companies, severalall of which are substantially larger than MTI Instruments.

was designed to assist with the efficient implementation of a cryptocurrency mine. The agreement provided that, following EcoChain's acceptance of the Deliverables, which occurred on March 23, 2020, Soluna, on behalf of EcoChain, would commence operations of the cryptocurrency mine in a manner that will allow EcoChain to mine and sell cryptocurrency. In that regard, on May 21, 2020, EcoChain acquired the precision automated manufacturing market, MTI Instruments faces competition from companies including Keyence, Micro Epsilon, Schmitt Industries, Capacitec, Microsenseintellectual property of Giga Watt, Inc. ("GigaWatt") and Lion Precision Instruments.

Incertain other property and rights of GigaWatt associated with GigaWatt's operation of a crypto-mining operation. The acquired assets form the axial turbo machinery market, MTI Instruments competes with companies including ACES Systems and Meggitt Sensing Systems.

In the R&D market, we compete with companies involved in material testing, including Gatan, Deben, and E+H Metrology GmbH.  Competitors in precision linear displacement include Keyence, Micro Epsilon, Schmitt Industries, Capacitec, Microsense and Lion Precision Instruments.cornerstone of EcoChain's new cryptocurrency mining operation.

The primary competitive considerationsmining facility has electrical capacity of between 1.5 megawatts and 3 megawatts depending on whether the Company decides to upgrade certain electrical infrastructure within the facility. The Company has upgraded its electrical capacity at the facility to 2.2 megawatts and will continue to assess the economics of further investing in MTI Instruments’ markets are product quality, performance, price, timely delivery, responsiveness and the abilityfacility upgrades to identify, pursue and obtain new customers. MTI Instruments believes that its employees, product development skills, sales and marketing systems and reputation are competitive advantages.

Research and Development

MTI Instruments conducts research and develops technology to support its existing products and develop new products. MTI incurred research and development costs of approximately $1.1 million and $1.2 million for the years ended December 31, 2017 and 2016, respectively. We expectreach 3 megawatts. The Company intends to continue to invest in research and developmentrigorously evaluate increasing its investment in the futureBlockchain and dense computing sector.  

The Operating and Management Agreement with Soluna provides EcoChain with the management expertise in the cryptocurrency industry that is necessary to operate the mining facility. Soluna handles the operational management of the mine including making decisions regarding miner purchases (as further described below), including the make and model thereof, and management of execution of daily activities. Several members of the Soluna management team have deep experience in the cryptocurrency industry, including leveraging energy-efficient power and cutting-edge technology advancements. EcoChain has engaged a third-party service provider to handle the day-to-day operational tasks of the mine, including remedial and preventative maintenance, mine operations and general upkeep of the facility. The team handling these matters, which works on-site at the mining facility, has 10 years' experience in the daily management of the mining facility as this same team handled these matters for the facility when it was being operated by GigaWatt and by its bankruptcy trustee prior to EcoChain's purchase of the mine. The Company handles the general and administrative functions of the mine through its corporate office, but otherwise there are no synergies between this business and MTI Instruments as part of our growth strategy.

Employees

As of December 31, 2017, we had 27 employees including 23 full-timeInstruments' metrology business. EcoChain has no employees.

Recent DevelopmentsCryptocurrency Mining Operations

On March 19, 2018, the Company filed a Form 15 with the Securities and Exchange Commission (“SEC”) terminating the registration of its common stock, par value $0.01 per share, thereby suspending its obligations to file periodic and current reports and other filings with the SEC, including annual reports on Form 10-K and quarterly reports on Form 10-QEcoChain's cryptocurrency mining operation, operated by Soluna as provided for years beginning after December 31, 2017. We expect the deregistration of our common stock to result in significant cost savings to MTI in the near term from the elimination of complying with SEC reporting requirements. Also, the deregistrationOperating and Management Agreement, commenced operations and immediately began mining several cryptocurrencies, including BitCoin, Ethereum, and LiteCoin, upon consummation of the common stock will allowGigaWatt transaction on May 21, 2020, using the Companymining equipment we acquired in that transaction. The mine, which is powered by renewable energy, is housed in approximately 19,000 square feet of leased space in four separate buildings. Since commencing its mining operations, EcoChain has acquired additional equipment and initiated improvements to avoid the substantial additionalacquired facilities to increase the mine's capacity. To maximize space utilization at the facility and cut down on our operating costs associated with the compliancefacility, EcoChain has entered into a co-location agreement to share both unused space and auditing requirementsfacility costs with Navier Incorporated. EcoChain sells on a daily basis all cryptocurrencies mined for U.S. dollars, as it is not in the business of accumulating cryptocurrency on its balance sheet for speculative gains. 

On January 14, 2021, EcoChain established a subsidiary, EcoChain Wind, LLC, a Nevada limited liability company, for the purpose of acquiring real property in the Southeastern United States for purposes of building cryptocurrency mining operations at an energy-efficient cryptocurrency mining facility. EcoChain signed an agreement, dated January 21, 2021, relating to the acquisition of this property, and closed the acquisition on March 4, 2021.

On February 22, 2021, EcoChain Wind entered into an Industrial Power Contract with a power-providing cooperative pursuant to which the cooperative will provide electric power and energy to this new mining facility.  This agreement, and the electric power and energy to be provided to EcoChain pursuant thereto, will commence upon the completion of the Securities Exchange Actfacility, which is expected to occur in the third or fourth quarter of 1934,2021, for an initial term of five years, with successive automatic five-year renewals unless EcoChain provides notice that it does not wish to renew the agreement. The agreement provides that EcoChain will pay the cooperative for the electric power and energy it provides the new mining facility in accordance with the applicable monthly rates, charges, and provisions agreed to from time to time between the cooperative and the Tennessee Valley Authority ("TVA"), which is subject to modification or adjustment, from time to time, as amended (the “Exchange Act”agreed to between the power provider and the TVA.

On March 24, 2021, EcoChain established a subsidiary, EcoChain Block, LLC, a Nevada limited liability company, for the purpose of acquiring or leasing additional assets in the Southeastern United States.

Cryptocurrency Assets

Cryptocurrency assets, known as miners, consist of hardware and software that perform the computations needed to mine cryptocurrencies, as discussed under "Cryptocurrency Revenue" below, and as such are the source of the associated revenues generated by a cryptocurrency mine, including EcoChain's. EcoChain has approximately 900 miners in service, mostly Bitmains, that generate Bitcoin. For a number of reasons, including the fact that EcoChain purchases miners in the secondary market from a number of different sellers, and that the price fluctuates because of demand and supply fluctuations as well as fluctuations in the price of the specific cryptocurrency that can be mined by the miner purchased, which drives the cost of the miners, the cost of purchasing these assets fluctuates regularly. As a result, EcoChain uses dollar cost averaging to flatten the overall cost of purchasing the miners so that it can consistently purchase miners regardless of the cost on the date of purchase. This allows EcoChain to replace the miners more consistently with newer models, which is important because, as miners age, their speed degrades, usually resulting in decreased computations over the same period and, as a result, fewer mined cryptocurrencies. In addition, miners are subject to ongoing technical obsolescence.

Cryptocurrency Revenue

EcoChain recognizes revenue when the related cryptocurrencies are converted to U.S. dollars through its account with Coinbase, a cryptocurrency exchange (i.e. a platform that facilitates the exchange of cryptocurrencies for other assets, such as conventional money or other digital currencies). EcoChain chooses to exchange cryptocurrency to U.S. dollars through the Coinbase account daily. The primary cryptocurrencies that EcoChain mines are Bitcoin and, to a lesser degree, Ethereum and LiteCoin. The type of cryptocurrency mined is based specifically on the installed miner, as each miner can mine only one type of cryptocurrency. The miners perform complex computations at a speed referred to as the "hash rate." EcoChain participates in mining pools where our miners' computations and those of other miners owned by other persons and entities are combined to place blocks on the blockchain, which generates the relevant cryptocurrency (in other words, it is at this point that more of the relevant cryptocurrency is created, which is memorized in the blockchain by being represented by new "blocks"). The mining pool operator uses software to track contributions made by all the miners and allocates the newly-minted cryptocurrency to the miners based on their pro rata contributions. EcoChain monitors its inputs into these pools and the resulting distribution of the resulting cryptocurrency, which allows the Soluna management team to ensure that EcoChain is being allocated the amounts of cryptocurrency it is entitled to based on the number of computations it contributes to the pools and the hash rate thereof. The cryptocurrencies allocated to EcoChain are automatically issued to its Coinbase account, which Coinbase exchanges for U.S. dollars based on standard exchange rates.  

Crypto Currency Mining Market Overview

According to Global Coin Research,[1] Bitcoin miners achieved an aggregate of more than $6 billion in revenues through July 2019 on an annualized basis. According to Glassnode, Bitcoin miner revenue hit a new all-time high of $52.3 million per day during the week of March 11, 2021.[2] The Company believes that cryptocurrency mining has seen a growing demand due to, among other things, the continuous adoption of cryptocurrency worldwide. For example, in October 2020 PayPal announced that its customers can now buy, sell, and hold Bitcoin in their PayPal accounts.[3] Crypto.com estimates that there are approximately 106 million cryptocurrency users globally as of January 2021.[4] According the registration statement it recently filed with the SEC to become a public company, Cryptocurrency exchange Coinbase alone has approximately 43 million users as of December 31, 2020, whereas only eight years ago, on December 31, 2012, it had an estimated just 13,000 users. These increases are being fueled by, among other things, the growing adoption of cryptocurrency by a number of industries including, among others, online gaming, online gambling, remittances, and digital commerce.[5] Research estimates that from 2018 through 2028, the compound annual growth rate (return on investment over a period of time) of the market capitalization for the crypto asset market will be 36%.[6] Further, according to Gartner, IDC, and Forrester, the total addressable market (total estimate of value based on available population of users) is estimated to grow from $63 billion in 2020 to $86 billion in 2028.[7] Based on the estimated growth in the total addressable market, the Company expects continued demand downstream to the mining level of cryptocurrencies.

Mining Ecosystem and Competitive Landscape

There are number of methods that individuals and organizations use to engage in cryptocurrency mining, and mining operations run the gamut from individuals using one or more systems to run mining operations to industrial-scale mining farms with thousands of systems.  The Company believes that the high demand for cryptocurrency is fueling innovation in all aspects of the mining hardware and the mining process. This includes the creation of mining pools, discussed above, that permitted the initial mining operators, which were generally small or individually-owned operations, to pool their resources to compete with larger entities that entered the mining market as cryptocurrencies gained wider use and acceptance and, as a result, mining them became more profitable. The mining business is global and is not dominated by any particular individual or organization. EcoChain considers Marathon Patent Group, Riot Blockchain, Inc. CleanSpark, Inc., HIVE Blockchain Technologies, Ltd., and Hut 8 Mining Corp. to focusbe among its closest competitors.

Equity investment - Soluna 

Simultaneously with entering into the January 2020 Operating and Management Agreement with Soluna, the Company, pursuant to a purchase agreement it entered into with Soluna, made a strategic investment in Soluna by purchasing 158,730 Class A Preferred Shares of Soluna for an aggregate purchase price of $500,000. After acceptance of the Deliverables, as required by the terms of the purchase agreement, the Company purchased an additional 79,365 Class A Preferred Shares of Soluna for an aggregate purchase price of $250,000. The Company also has the right, but not the obligation, to purchase additional equity securities of Soluna and its subsidiaries (including additional Class A Preferred Shares of Soluna) if Soluna secures certain levels or types of project financing with respect to its own wind power generation facilities. The Company has additionally entered into a Side Letter Agreement, dated January 13, 2020, with Soluna Technologies Investment I, LLC, a Delaware limited liability company that owns, on a fully diluted basis, 61.5% of Soluna and is controlled by a Brookstone Partners-affiliated director of the Company. The Side Letter Agreement provides for the transfer to the Company of additional Class A Preferred Shares of Soluna in the event Soluna issues additional equity below agreed-upon valuation thresholds.

Several of Soluna's equity holders are affiliated with Brookstone Partners, the investment firm that holds an equity interest in the Company through Brookstone Partners Acquisition XXIV, LLC. One of our Brookstone-affiliated directors serves as a director and as Secretary and Treasurer of Soluna, and the other Brookstone-affiliated director has an ownership interest in Soluna. In light of these relationships, the various transactions by and between the Company and EcoChain, on the one hand, and Soluna, on the other hand, were negotiated on behalf of the Company and EcoChain via an independent investment committee of our Board of Directors and separate legal representation. The transactions were subsequently unanimously approved by both the independent investment committee and the full Board.

Existing or Probable Governmental Regulations

Cryptocurrency Segment

While the United States and a number of other countries are considering how to regulate cryptocurrencies, very little action has been taken in that regard to date. While we expect that regulation, particularly in the United States, governing the cryptocurrency arena will be adopted at some point, there is no certainty at this time when such regulations may be adopted, what form such regulation will take, or the parts of the cryptocurrency sector that such regulations will impact. As a result, we cannot at this time determine or even estimate what the impact of such regulations may be on EcoChain's operations and financial condition and, as a result, the Company's financial condition and results of operations.

Human Capital Resources

At March 26, 2021, we had 33 employees including 29 full-time employees. Of these employees 10 are engaged in product development, nine in manufacturing, and the remainder in sales and general and administrative functions. The manufacturing personnel include both individuals directly involved in the manufacturing of our products as well as warehouse and operations supervisory personnel. Certain positions within our organization require industry-specific technical knowledge. We have been successful in attracting and retaining qualified technical personnel for these positions. None of our employees are covered by any collective bargaining agreement.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, engaging, incentivizing, and integrating our existing and additional employees. The Company supports its employees through a generous benefits package and has recently expanded human resource activities to include wellness activities.  In response to the COVID-19 global pandemic, the Company has implemented procedures to support flexible working arrangements for its workforce based on increasing long-term growth. Althoughbusiness needs.  In particular, all employees that can perform work remotely have been provided with a laptop and remote access, and the Company regularly holds meetings virtually.

Insurance 

The Company maintains insurance policies with reputable insurers against such risks and in such amounts as management has determined to be prudent for our operations and that we will not be requiredbelieve are similar in scope and coverage in all material respects to do so, following deregistration we plan to continue to provide stockholders with annual audited financial statements and quarterly unaudited financial statements through the OTC Markets Group (“OTC Markets”) website. insurance policies maintained by other similarly-situated businesses.

Item 1A: Risk Factors

Factors Affecting Future Results

This Annual Report on Form 10-K, including the discussion in this section, contains forward-looking statements that involve risks and uncertainties within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.uncertainties. Any statements contained, or incorporated by reference, in this Annual Report on Form 10-Kherein that are not statements of historical fact may be forward-looking statements. When we use the words “anticipate,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “management"anticipate," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "management believes,” “we" "we believe,” “we" "we intend,” “should,” “could,” “may,” “will”" "should," "could," "may," "will," and similar words or phrases, we are identifying forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding:

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• anticipated growth, including in revenues and cash flows;

• statements with respect to management’smanagement's strategy and planned initiatives;initiatives, including anticipated growth;

• management’s

  management's belief that it will have adequate resources to fund the Company’sCompany's operations and capital expenditures for the year ending December 31, 20182021 and through at least the end of the first quarter of 2019;2022;

• the expected impact of recent and pending accounting standards or updates;
• the expectation that future cost-cutting measures will be avoided;

• future capital expenditures and spending on research and development;

• expected funding of future cash expenditures;

• our expectations with respect to pending legal proceedings;

• statements regarding the expected operations of EcoChain and the impact on our business, operating results, and financial condition as a result thereof;

• our expectations regarding increases in certain selling, general and administrative expenses;

• the expected timing of the completion of EcoChain's second cryptocurrency mining facility;

• statements regarding potential acquisitions;

• our expected use of proceeds from our anticipated common stock offering and the expected net proceeds therefrom;

• our expectations regarding the renewal of our contract with the U.S. Air Force that is set to expire on June 30, 2021;

• the expected impact of pending accounting updates; and

• the expected impact of our investmentinvestments in MeOH Power, Inc.Soluna.

Forward-looking statements involve risks, uncertainties, estimates, and assumptions that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by forward-looking statements. Important factors that could cause these differences include the following:

• sales revenue growth may not be achieved or maintained;  

• the dependence of our business on a small number of customers and potential loss of government contracts - particularly in light of potential cuts that may be imposed as a result of U.S. government budget appropriations;
• our lack of long-term purchase commitments from our customers and the ability of our customers to cancel, reduce, or delay orders for our products;  

• our inability to build and maintain relationships with our customers;  
• our inability to develop and utilize new products and technologies that address the needs of our customers;  
• our inability to retain existing or obtain new credit facilities;
• the cyclical nature of the electronics and military industries;  
• the uncertainty of the U.S. and global economy;  
• the impact of future exchange rate fluctuations;  
• failure of our strategic alliances to achieve their objectives or perform as contemplated and the risk of cancellation or early termination of such alliance by either party;  
• the loss of services of one or more of our key employees or the inability to hire, train, and retain key personnel;

• risks related to protection and infringement of intellectual property;  
• our occasional dependence on sole suppliers or a limited group of suppliers;

• our ability to generate income to realize the tax benefit of our historical net operating losses;

• risks related to the limitation of the use, for tax purposes, of our net historical operating losses in the event of certain ownership changes;
• EcoChain's development efforts with respect to its current cryptocurrency mining facility may not lead to construction of additional operational cryptocurrency mines;
• even if EcoChain's development of an operational cryptocurrency mine is successful, it still may not achieve profitability in our expected timeframe or at all depending on numerous uncertainties, including the costs of operation, the future price of cryptocurrencies and fluctuations in such prices, government and quasi-government regulation of cryptocurrencies and their use, restrictions on or regulation of access to and operation of blockchain networks or similar systems, and the availability and popularity of other forms or methods of buying and selling goods and services, including government-backed cryptocurrencies;
• general economic conditions;
• risks related to scaling the EcoChain cryptocurrency mine to larger-scale cryptocurrency mining operations;
• the general risk that the EcoChain business may not be successful;
• uncertainty regarding EcoChain's ability to consistently monetize cryptocurrency;
• fluctuating valuations of cryptocurrency; and

• other risks discussed below.in this Annual Report on Form 10-K.

Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements and we assume no obligation to update any forward-looking statements contained in or incorporated by reference into, this Annual Report on Form 10-K as a result of new information or future events or developments.registration statement. Thus, assumptions should not be made that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements.

Risk Factors

You should consider carefully the following risks, along with other information contained in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones that may affect us. Additional risks and uncertainties also may adversely affect our business and operations including those discussed in the heading “Factors"Factors Affecting Future Results”Results" above. Any of the following events, should they actually occur, could materially and adversely affect our business and financial results.

If we are unsuccessful at addressingAdverse changes in economic or other market conditions in the United States and globally may have serious implications for the growth and stability of our business challenges,and could otherwise adversely affect our business, results of operations, and financial condition.

Our business is affected by general economic conditions, both inside and outside the U.S. Adverse changes to and uncertainty in the global economy may lead to decreased demand for our products, revenue fluctuations, and increased price competition for our products, and may increase the risk of excess and obsolete inventories and higher overhead costs as a percentage of revenue. It could also result in a decline in business forecasts, which could adversely affect our sales in future periods. Additionally, the financial strength of our customers and suppliers and their ability to obtain and rely on credit financing may affect their ability to fulfill their obligations to us and have an adverse effect on our financial results.

Revenue growth and continued profitability of our business will continue to depend significantly on the overall demand for test and measurement instrumentations in key markets including research and development, automotive, semiconductor, cryptocurrencies and electronics. If the global economy and financial markets continue to be unstable (including as a result of the COVID-19 pandemic) or significantly decline, it may cause consumers, businesses, and governments to defer purchases in response to tighter credit, decreased cash availability and declining consumer confidence. Accordingly, demand for our products could decrease and differ materially from their current expectations. Further, some of our customers may require substantial financing in order to fund their operations and make purchases from us. The inability of these customers to obtain sufficient credit to finance purchases of our products and meet their payment obligations to us or possible insolvencies of our customers could result in decreased customer demand, an impaired ability for us to collect on outstanding receivables, significant delays in receivable payments, and significant write-offs of accounts receivable, any or all of which could adversely impact our business and financial results.

The long-term effects of the coronavirus pandemic, or the impacts of any future pandemics or other health crises, are unknown and may adversely affect our business, results of operations, financial condition, liquidity and cash flow.

Our overall performance generally depends upon domestic and worldwide economic and political conditions. The global spread of COVID-19 has created volatility, uncertainty, and economic disruption. The pandemic has caused and may continue to cause a slowdown in worldwide economic activity, decreased demand for products and services, and disruptions to global supply chains and financial markets.

While the COVID-19 pandemic, and the changes to our operations necessitated by governmental and societal actions to contain it, including social distancing and the closing and/or limits on the business operations, required us to make certain changes to the way we conduct our business and operations during the last 12 months, we have been fortunate that, to date, the pandemic has had a limited impact on our supply chains, distribution systems, and ability to continue to conduct our business and operations. We cannot, however, predict the longer-term impacts of the pandemic, or future health emergencies, on our business, operations, revenues, results of operations, or financial condition. The ultimate extent of the impact of the current coronavirus pandemic, or any future epidemic, pandemic, or other outbreak, will depend on future developments, including how fast effective (or with respect to the current pandemic, additional) vaccines and treatments are developed, the length of time before such vaccines are sufficiently distributed (both in the United States and worldwide), new or continued government actions in response, including with respect to successive waves or variants of the virus (as well as the extent to which such variants are more contagious and/or lethal), the extent to which then-current vaccines and treatments are less effective against any such variants, and whether delays in such vaccinations allow vaccine-resistant variants to develop and spread, all of which will impact the current or any future pandemic's or similar outbreak's ultimate duration and severity as well as and how fast the economy recovers afterwards. Actions we took to mitigate the impact of the current pandemic may not be ablesuccessful if the pandemic continues for a longer period than expected or in future pandemics or similar emergencies. For example, beginning in March 2020 we replaced our in-person sales meetings with meetings held by videoconference, telephone calls, webinars, and additional informational website content geared towards addressing our customers' questions and concerns for both domestic and overseas customers. Nevertheless, we believe that our inability to maintain profitability,hold in-person meetings, while not significant, did have a negative impact on our product sales over the last 12 months, and our efforts to mitigate the effects of the pandemic restrictions on our sales model may not be a viable alternative to in-person meetings on a longer-term basis or during any future health or other emergency that engender similar restrictions. 

Further, the long-term social and economic impact of the pandemic, or the acceleration of pre-existing trends as a result thereof, are still uncertain. It is also unknowable what impacts future pandemics or health emergencies may bring. In either case, any such developments could materially and adversely affect our customer base or the demand for our products, which would have a negative effect on our business, andprospects, results of operations, and financial condition, may be adversely affected and our ability to invest in and grow our business could be limited. 

We have incurred significant operating and net losses since our inception. Although we had net income of $582 thousand during the year ended December 31, 2017, we incurred a net loss for the three prior fiscal years and had an accumulated deficit of $120.4 million at December 31, 2017. In order to consistently maintainprofitability and improve liquidity, we must successfully achieve all or some combination of the following initiatives: increasing sales, developing new products, controlling operating expenses, managing our cash flows, successfully obtaining new credit facilities, improving operational efficiencies and estimating and projecting accurately our liquidity and capital resources. In “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Management’s Plan, Liquidity and Capital Resources” in this Annual Report on Form 10-K, we have made estimates regarding our cash flow and results of operations for the year ending December 31, 2018 and through the end of the first quarter of 2019. If our cash flow or results of operations are less favorable than we have estimated, we may not be able to make all of our planned operating or capital expenditures or fully execute all of our other plans. Our financial success depends in part on management’s ability to execute our growth strategy. We expect that we will depend primarily on cash generated by our operations for funds to pay our expenses and any other indebtedness we may incur. Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our business may not generate sufficient cash flows from operations in the future and our currently anticipated growth in revenues and cash flows may not be realized, either or both of which could resulthave a negative effect on the market price of our common stock.

General Business Considerations

Our business depends on a small number of customers and the U.S. Air Force.

Historically, we have had a small number of customers representing a large percentage of our total revenue. Although we endeavor to maintain and further expand our customer base, we expect that sales to a limited number of customers will continue to account for a high percentage of our revenues in our being unable to repay indebtednessany given period for the foreseeable future, and the loss of even just a couple of customers, or to fund other liquidity needs. If we do not have enough money, we may be required to sell assets or borrow money,a significant reduction in each case on terms that may not be acceptable to us. In addition, the terms of any future debt agreements, including new lines of credit, may restrict us from adopting any of these alternatives. Further, any significant levels of indebtedness in the future could place us at a competitive disadvantage comparedsales to our competitors that may have access to additional resources or proportionately less debt and could make us more vulnerable to economic downturns and adverse developments in our business. Any future loss incurred by the Companyexisting customer base, could have a material adverse effect on our business. In addition, our revenues are largely dependent upon the ability of our customers to continue to grow or need services or to develop and sell products that incorporate our services and products. We also depend on purchases by the U.S. Air Force for a significant portion of our revenues and the loss of the U.S. Air Force as a customer or a delay or decline in funding of our existing or future contracts with them, particularly in light of the potential for declines in military spending that may accompany the new Presidential administration, could decrease our backlog or adversely affect our business and prospects, sales, cash flows, and our ability to generatefund our continued product development and growth.

We do not have long-term purchase commitments from our customers, and our customers are also able to cancel, reduce, or delay orders for our products. 

We generally do not obtain firm, long-term purchase commitments from our customers and frequently do not have visibility as to their future demand for our products and services. Customers also may cancel, change, or delay design, production or aftermarket service quantities and schedules, or fail to meet their forecasts for a number of reasons beyond our control. Customer expectations can also change rapidly, requiring us to take on additional commitments or risks, and requiring that we provide rapid product turnaround and respond to short lead times. A variety of conditions, both specific to individual customers and generally affecting the cash neededdemand for OEMs' products, may cause customers to operatecancel, reduce, or delay orders. Conversely, if our business. Althoughcustomers unexpectedly and significantly increase product orders, we generatedmay be required to rapidly increase production, which could strain our resources and reduce our margins. We typically plan production and inventory levels based on internal forecasts of customer demand, which can be highly unpredictable and can fluctuate substantially, leading to excess inventory write-downs and resulting negative impacts on gross margin and net income in 2017, 2014, 2013income. Additionally, and 2011, we incurredas a net loss during each of 2016, 2015 and 2012 and priorresult, our revenues may be volatile from period to 2011 we had incurred net losses since 1998,period, and we may not be able to sustain consistent profitability inachieve the future. If we do achieve consistent profitability in the future, the level of any profitability cannot be predicted andanticipated revenues or may vary significantly from quarter to quarter and from year to year. Failure to continue to successfully implement these initiatives could prevent us from maintaining profitability and otherwise have a material adverse effect on our business plans, liquidity, results of operations and financial condition and may result in a downsize to the business. Further, even if implemented successfully there is no guarantee that our efforts in this regard would result in sustained and improving profitability.  

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We currently derive all of our product revenue from our MTI Instruments business.

All of our revenue is currently derived from our MTI Instruments business. We do not have a broad portfolio of other products we could rely on to support operations if we were to experience a substantial slowdown in our MTI Instruments business, which is subject to a number of risks, including:

• dependence on a limited number of customers;
• the potential for a slowdown or cancellation of sales to the militaryincur non-recoverable costs as a result of a potential redeployment of,the work we did to address our customers' anticipated or cuts in, government funding; 

• our ability to maintain, improve, or expand our channels of distribution; 

• the potential failure to expand or maintain our business as a result of competition, a lack of brand awareness, or market saturation; and

• an inability to launch new products as a result of intense competition, uncertainty of new technology development, or limited or unavailable resources to fund development. 

In addition, revenues from the sale of MTI Instruments’ products can vary significantly from one period to the next. We may sell a significant amount of our products to one or a few customers for various short term projects in one period, and then have markedly decreased sales in following periods as these projects end or customers have the products they require for the foreseeable future. The fact that we sell a significant amount of our products to a limited number of customers also results in a customer concentration risk. The loss of any significant portion of such customers or a material adverse change in the financial condition of any one of these customers could have a material adverse effect on our revenues, our business and our ability to generate the cash needed to operate our business. changed requirements.

We may not be able to enhance our product solutionsOur annual and develop new product solutions in a timely manner.

Our future operating results will depend to a significant extent on our ability to provide new products that compare favorably with alternative solutions on the basis of time to introduction, cost, performance, and end-user preferences. Our success in attracting and retaining customers and developing business will depend on various factors, including the following:

• innovative development of new products for customers;  

• utilization of advances in technology;  

• maintenance of quality standards;  

• efficient and cost-effective solutions; and  

• timely completion of the design and introduction of new products.

Our inability to develop new product solutions on a timely basis could harm our operating results and impede our growth.

Recently enacted tariffs on certain imports to the United States and other potential changes to U.S. tariff and import/export regulations may have a negative effect on global economic conditions and our business, financial results and financial condition.

On March 8, 2018, President Trump implemented new tariffs on imports of steel and aluminum into the United States, although Canada and Mexico are temporarily exempt pending the outcome of certain trade negotiations and there is flexibility for other countries to be exempted at a later date. These tariffs went into effect on March 25, 2018.  Further, there has been ongoing discussions and activities regarding changes to other U.S. trade policies and treaties, including threats by the United States to withdraw from certain treaties and other countries signing new trade agreements without U.S. participation.  These developments may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on our business, financial condition and results of operations.

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In particular, the new tariffs could have a negative impact on MTI in a number of ways. While any steel and aluminum we use in our products in produced solely in the United States, the new tariffs may provide domestic steel and aluminum producers the flexibility to increase their prices, at least to a level where their products would still be priced below foreign competitors once the tariffs are taken into account. Any price increases, to the extent we did not pass such increases on to our customers, would likely increase our cost of product revenue and, as a result, decrease our gross margins, operating income and net income, which could have a material adverse effect on our financial condition. On the other hand, if we attempt to pass any such increases on to our customers, that may result in lower sales, which would likely decrease our net income and could have a material adverse effect on our financial condition. In addition, in response to the new tariffs, a number of other countries are threatening to impose tariffs on U.S. imports, which, if implemented, could increase the price of our products in these countries and may result in our customers looking to alternative sources for our products.  This would result in decreased sales, which could have a negative impact on our net income and financial condition.

We anticipate possible further changes to current policies by the U.S. government that could affect our business, including potentially through import tariffs on other materials or products and other changes in U.S. trade relations with other countries (e.g., China). Our suppliers source some of their raw materials from foreign countries, so other tariffs imposed by the U.S. government on imports into the United States may increase our cost of product revenue and, as a result, decrease our gross margins, operating income and net income, which could have a material adverse effect on our financial condition. Further, the imposition of such tariffs, and other recent and potential actions of the U.S. government with respect to other countries, may generate negative views of the United States in other countries and make persons in those countries less inclined to purchase products from U.S. companies like us.

The tariffs enacted on March 8 have just recently gone into effect and are subject to a number of uncertainties, including future adjustments and changes in the countries excluded from such tariffs. The ultimate reaction of other countries, and the impact of these tariffs on the United States, the global economy and our business, financial condition and results of operations, cannot be predicted at this time, nor can we predict the impact of any other actions, including U.S. withdrawal from or attempted renegotiation of trade treaties, that may be undertaken by the current administration with respect to global trade.

Ourquarterly operating results may experience significant fluctuations.fluctuations, which could adversely impact our operations, financial results, and stock price.

In addition to the variability resulting from the short-term nature of our customers’customers' commitments, other factors contribute to significant periodic fluctuations in our results of operations. These factors include:

• the cyclicality of the markets we serve;  

• the timing and size of orders;  

  orders and of recognizing revenue therefrom;  

• the volume of orders relative to our capacity;  

• product introductions and market acceptance of new products or new generations of products;  

• evolution in the life cycles of our customers’customers' products;

• timing of expenses in anticipation of future orders;

• changes in product mix;

• availability of manufacturing and assembly services;

• changes in cost and availability of labor and components;  

• timelythe timing of delivery of product solutionsproducts to customers;

• pricing and availability of competitive products;

• fluctuations in foreign currency exchange rates;

• introduction of new technologies into the markets we serve;

• pressures on reducing selling prices;

• our success in serving new markets; and

• changes in economic conditions.

The price of our common stock could decline substantially in the event that any of these risks result in our financial performance being below the expectations of analysts and investors, which are based on historical and predictive models that are not necessarily accurate representations of the future.

If we doWe may not be able to keep pace with technological innovations our products may not be competitive and our revenue and operating results may suffer.or develop new product solutions in a timely manner.

The electronic, semiconductor, solar, automotive, and general industrial segments are subject to constant technological change. Our future success will depend on our ability to respond appropriately to changing technologies and changes in product function and quality. If we rely on products and technologies that are not attractive to end users, we may not be successful in capturing or retaining market share. Technological advances, the introduction of new products, and new design techniques could adversely affect our business prospects unless we are able to adapt to the changing conditions. Technological advances could render our products obsolete, and we may not be able to respond effectively to the technological requirements of evolving markets. As a result, we will be required to expend substantial funds for and commit significant resources to:

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• continue research and development activities on all product lines;  

• hire additional engineering and other technical personnel; and  

• purchase advanced design tools and test equipment.

Our business could be harmed if we are unable to develop and utilize new technologies that address the needs of our customers, or our competitors do so more effectively than we do.

Our efforts to continue to develop new products and technologies may not result in commercial success, and/or may result in delays in development, which could cause a decline in our revenue and couldotherwise harm our business.

We regularly invest substantial amounts in research and development efforts that pursue advancements in our products and technologies. Our research and development efforts with respect to our products and technologies may not result in customer or market acceptance. Some or all of thosesuch products and technologies may not successfully make the transition from the research and development lab to cost-effective production as a result of technology problems, competitive cost issues, yield problems, and other factors. Even when we successfully complete a research and development effort with respect to a particular product or technology, our customers may decide not to introduce or may discontinue products utilizing the product or technology for a variety of reasons, including, the following:but not limited to:

• difficulties with other suppliers of components for the products;  

• superior technologies developed by our competitors and unfavorable comparisons of our solutions with these technologies;  

• price considerations; and  

• lack of anticipated or actual market demand for the products.

The nature of our business will require us to make continuing investments to develop new products and technologies. Significant expenses relating to one or more new products or technologies that ultimately prove to be unsuccessful for any reason could have a material adverse effect on us. In addition, any investments or acquisitions made to enhance our products and technologies may prove to be unsuccessful. If our efforts are unsuccessful, our business could be harmed.

Adverse changes in economic or other market conditions in the United States and globally Moreover, when we announce our development of new products, sales of current products may have serious implications for the growth and stability of our business anddecrease as customers delay making purchases until such new products are available, which could otherwise adversely affect our business, revenues, and results of operations and financial condition.

Revenue growth and continued profitability of our business will depend significantly on the overall demand for test and measurement instrumentations in key markets including research and development, automotive, semiconductor and electronics. The U.S. and global economy has been historically cyclical and market conditions continue to be challenging, which has resulted in individuals and companies delaying or reducing expenditures. Since the recession ended almost nine years ago, economic growth has been slow by historic standards and uneven.  Further, the current expansion is already the third longest in U.S. history, and many economists believe that the risk of a recession in the medium-term (2019-2020) is increasing. Softening demand in our target markets caused by a return to recessionary conditions or prolonged stagnant or deteriorating economic conditions, economic uncertainties even outside a recession, including concerns about U.S. debt levels and related governmental actions, new and potentially additional futuretariffs on imports into the United States, Congress’ inability to pass yearly budgets, and cuts in government spending, as well as technological developments, competitive changes or other factors, may result in decreased demand for our products and/or increased costs and, therefore, lower revenue and earnings. Delays or reductions in spending by our customers and potential customers resulting from these or other factors could have a material adverse effect on demand for our products, and consequently on our business, financial condition, results of operations, prospects, stock price, and ability to continue to operate.operations.

Variability of customer requirements resulting in cancellations, reductions, or delays may adversely affect our operating results.

We are required to provide rapid product turnaround and respond to short lead times. A variety of conditions, both specific to individual customers and generally affecting the demand for OEMs’ products, may cause customers to cancel, reduce, or delay orders. Cancellations, reductions, or delays by a significant customer or by a group of customers could adversely affect our operating results. Conversely, if our customers unexpectedly and significantly increase product orders, we may be required to rapidly increase production, which could strain our resources and reduce our margins.

The cyclical nature of the electronicsindustries of many of our existing and military industriestarget customers may result in fluctuations in our operating results.

Demand for our products and services in our target markets is cyclical, and revenues from the sale of our products and services can vary significantly from one period to the next as a result. We may sell a significant amount of our products to one or a few customers for various short-term projects in one period and then have markedly decreased sales in following periods as these projects end or customers have the products they require for the foreseeable future.

The electronics and military industries have experienced significant economic downturns at various times. These downturns are characterized by diminished product demand, accelerated erosion of average selling prices, and production overcapacity. We may seek to reduce our exposure to industry downturns by providing design and production services for leading companies in rapidly expanding industry segments. We may, however, experience substantial period-to-period fluctuations in future operating results because of general industry conditions or events occurring in the general economy.

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International sales risks could adversely affect our operating results. Furthermore, our operating results could be adversely affected by changes to U.S. policy and fluctuations in the value of the U.S. dollar against foreign currencies.

Sales outside of the United States accounted for approximately 25.9% of our total revenue in 2020 and 35.3% of our total revenue in 2019. Our international business may be adversely affected by changing political and economic conditions in foreign countries. Having a worldwide distribution network for our products exposes us to various economic, political, and other risks that could adversely affect our operations and operating results, including the following:including:

• unexpected changes in regulatory requirements;

  export restrictions and controls relating to technology;

• timing to meet regulatory requirements;  

• tariffs, duties and other trade barrier restrictions, as discussed further above;  

• greater difficulty in collecting accounts receivable;  

• the burdens and costs of compliance with a variety of existing and new foreign laws;  

  regulatory requirements and laws, including the General Data Protection Regulation (GDPR) in the European Union and similar laws in other jurisdictions, and unexpected changes in such regulatory requirements;

• laws and business practices favoring local companies, including tariffs imposed by other countries on U.S. goods;

• timing to meet regulatory requirements;  
• developments with respect to and any impact of tariffs and other trade barrier restrictions;  
• longer payment cycles and greater difficulty in enforcing agreements and collecting receivables through foreign legal systems;
• potentially reduced protection for, and difficulties in enforcing, intellectual property rights; and  

• political or economic instability in certain parts of the world.

If oneThese risks or moreany combination of these risks associated with internationalthem could increase our costs, lengthen our sales materialize, itcycle, and require significant management attention and could otherwise negatively affect our business, operating results.results, financial condition, and results of operations.

In addition, we transact our business in U.S. dollars and bill and collect our sales in U.S. dollars. In 2017, approximately 40.5%Approximately 25.9% and 35.3% of our revenue was from customers located outside of the United States. States in 2020 and 2019, respectively. It is possible that U.S. policy changes and uncertainty about policy could increase market volatility and currency exchange rate fluctuations. Market volatility and currency exchange rate fluctuations could impact our results of operations and financial condition related to transactions denominated in a foreign currency. A weakening of the dollar could cause our overseas vendors to require renegotiation of either the prices or currency we pay for their goods and services. Similarly, a strengthening of the dollar could cause our products to be more expensive for our international customers, which could impact price and margins and/or cause the demand for our products, and thus our revenue, to decline.

In the future, customers may negotiate pricing and make payments in non-U.S. currencies. If our overseas vendors or customers require us to transact business in non-U.S. currencies, fluctuations in foreign currency exchange rates could affect our cost of goods, operating expenses, and operating margins and could result in exchange losses. In addition, currency devaluation can result in a loss to us if we hold deposits of that currency. Hedging foreign currencies can be difficult, especially if the currency is not freely traded. We cannot predict the impact that future exchange rate fluctuations may have on our operating results.

We rely on the ability to secure funding via our credit facility when accepting large orders from certain customers, and if we are not able to retain our existing credit facility or obtain new ones we may not be able to accept these large orders, and our business, revenues, and financial condition could suffer.

For some large customer orders, particularly if the customer requires unusually long payment terms, we may need to rely on funding from our credit facility to meet our ongoing funding needs because we may have to pay for the raw materials needed to manufacture the products for the customer before the customer pays us. While we had historically not needed to do this, the possibility following the placement of a large order in 2020 was the reason we arranged for a credit facility last year. If we are unable to maintain the credit facility or arrange a replacement facility on satisfactory terms and conditions, we may not be able to accept these types of customer orders, which could have a material adverse effect on our business, prospects, revenues, and results of operations, as well as our ability to continue to fund our operations including our product development and customer growth activities. We may also need to obtain a new credit facility to fund our planned expansion of EcoChain's business. Our ability to maintain or replace our existing credit facility or obtain new or additional financing will depend on a variety of factors, many of which are beyond our control, and there can be no assurance that we will be able to do so in needed quantities, on terms favorable to us, or at all.

Our confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information, which could limit our ability to compete.

We rely on trade secrets to protect our proprietary technology and processes. TradeDespite such protection, it is possible that a third party could copy or otherwise obtain and use our proprietary information without our authorization; further, trade secrets arecan be difficult to protect. WePolicing unauthorized use of our intellectual property and trade secrets is difficult, particularly in light of the global nature of the Internet and because the laws of other countries may afford us little or no effective protection of our intellectual property. Potentially expensive litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity.  Additionally, we enter into confidentiality and intellectual property assignment agreements with our employees, consultants, and other advisors. These agreements generally require that the other party keep confidential and not disclose to third parties confidential information developed by the party under such agreements or made known to the party by us during the course of the party’sparty's relationship with us. However,Our employees, consultants, and other advisors, however, may not honor these agreements, may not be honored and enforcing a claim that a party illegally obtained and is using our trade secrets is difficult, expensive and time-consuming, and the outcome is unpredictable. Our failure to obtain and maintain trade secret protection could adversely affect our competitive position.

We rely on highly-skilled personnel and the continuing efforts of our Chief Executive Officer and, if we are unable to retain, motivate, or hire qualified personnel, our business may be severely disrupted.

We depend on key personnel who would be difficult to replace, and our business will likely be harmed if we lose their services or cannot hire additional qualified personnel.

Our successperformance largely depends substantially on the talents, knowledge, skills, know-how, and efforts of highly-skilled individuals, including our Chief Executive Officer, Michael Toporek. His absence, were it to occur, would materially and abilitiesadversely impact the continued development of our senior managementbusinesses. Our future success further depends on our continuing ability to identify, hire, develop, motivate, and key personnel.retain highly-skilled personnel for all areas of our organization. The competition for qualified management and key personnel, especially engineers, is intense. Although we maintain non-competitionOur continued ability to compete effectively depends on our ability to motivate and non-disclosure covenants with most ofretain our key personnel, we do not have employment agreements with most of them. The loss of services of one or more of ourexisting, and attract and hire new, engineers and certain other key employees, or the inability to hire, train, and retain key personnel, especially engineers,particularly technical support personnel and capable sales and customer-support employees outside the United States,employees. If Mr. Toporek or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. In such case, our business may be severely disrupted, we may incur additional expenses to recruit and retain new officers or other key personnel, and our financial condition and results of operations could delay the development and salebe materially adversely affected.  We do not currently maintain key life insurance policies on Mr. Toporek or any key employees.  In addition, if any of our key sales personnel joins a competitor or forms a competing company, we may lose customers.

We may not be successful in locating appropriate acquisition targets or in integrating any acquired companies into our businesses, which could materially and adversely affect our financial condition and operating results.

Part of our strategy to grow our businesses involves the acquisition of other entities or businesses in the future that complement our current products, disruptenhance our market coverage or technical capabilities, or offer growth opportunities. We may not be able, however, to identify and successfully negotiate suitable acquisitions, obtain any financing necessary for such acquisitions on satisfactory terms, or otherwise complete any such acquisitions. Further, any acquisition may require a significant amount of management's time and financial resources to complete the acquisition and integrate the acquired business into our existing operations. Even with this investment of management time and financial resources, an acquisition may not produce the revenue, earnings, or business synergies anticipated. Acquisitions involve numerous other risks, including:

• potential inability to successfully integrate acquired operations and products or to realize cost savings or other anticipated benefits from integration;
• loss of key employees or customers of acquired companies;
• difficulty of assimilating geographically dispersed operations and personnel of the acquired companies;
• potential disruption of our business or the acquired business;
• unanticipated expenses;
• unanticipated difficulties in conforming business practices, policies, procedures, internal controls, and interferefinancial records of acquisitions with our abilityown;
• impairment of relationships with employees, customers, vendors, distributors, or business partners of either an acquired business or our own;
• inability to executeaccurately forecast the performance of recently-acquired businesses, resulting in unforeseen adverse effects on our operating results;
• potential liabilities, including liabilities resulting from known or unknown compliance or legal issues, associated with an acquired business; and
• adverse accounting impact to our results of operations.

Any such effects from acquisitions could be costly and place a significant strain on our management systems and resources.

We cannot offer any assurance that we will be able to identify, complete, or successfully integrate any suitable acquisitions. Even if successfully negotiated and closed, any acquisitions may not yield expected synergies, may not advance our business plan.strategy as expected, may fall short of expected return-on-investment targets, or may not prove successful. Companies that we acquire may operate with different cost and margin structures, which could further cause fluctuations in our operating results and adversely affect our business, financial condition, and results of operations.

Brookstone’sBrookstone's ownership of 40.0%38.2% of the outstanding shares of our common stock gives it a controlling interest in the Company.

Brookstone Partners Acquisition, XXIV, LLC (“Brookstone”("Brookstone"), owns approximately 40.0%38.2% of ourthe Company's outstanding shares of common stock and has designated threetwo directors that sit on our six-member Board of Directors.eight-member Board. Accordingly, Brookstone has the ability to exert a significant degree of influence or actual control over our management and affairs and, as a practical matter, will continue to control corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including the election of directors, amendments to our certificateCertificate of incorporationIncorporation and bylaws,Bylaws, and the approval of mergers and other significant corporate transactions, including a sale of substantially all of our assets, and Brookstone may vote its shares in a manner that is adverse to the interests of our minority stockholders. For example, Brookstone will be able to prevent a merger or similar transaction, including a transaction in which stockholders will receive a premium for their shares, even if our other shareholders are in favor of such transaction.shareholders. This concentration of voting control could deprive our investors of an opportunity to receive a premium for their shares of our common stock as part of a sale of the Company. Further, Brookstone’sBrookstone's control position might adversely affect the market price of our common stock to the extent investors perceive disadvantages in owning shares of a company with a controlling shareholder.

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Brookstone and its director designees may acquire interests and positions that could present potential conflicts with our and our shareholders’shareholders' interests.

Brookstone and its director designees may make investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. Brookstone and its director designees may also pursue, for their own accounts, acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities might not be available to us. As part of our sale of 3,750,000 shares of our common stock to Brookstone in October 2016 and as required by Brookstone as a condition to purchasing the shares, our Board of Directors renounced, to the extent permitted by New York law, the Company's expectancy with respect to being offered an opportunity to participate in any business opportunity that is discovered by or presented to a director designee (a “Business Opportunity”"Business Opportunity"), whether in such director designee’sdesignee's capacity as a director of the Company or otherwise. Accordingly, the interests of Brookstone and the designated directors with respect to a Business Opportunity may supersede ours, and Brookstone or its affiliates or the Brookstone-designated directors may be involved with businesses that compete with us and may pursue opportunities for the sole benefit of Brookstone and its affiliates without our involvement, for which we have limited recourse. Such actions on the part of Brookstone or its director designees could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

In addition, Michael Toporek, our CEO, serves as the Managing General Partner of Brookstone. As a result of the potential conflicts inherent in his serving in both roles, it is possible that Mr. Toporek could make decisions that benefit Brookstone at the expense of the Company.

Insiders continue to have substantial control over the Company.

As of March 26, 2021, the Company's directors and executive officers hold the right to vote approximately 43.5% of the Company's outstanding voting stock, including the 38.2% of the outstanding common stock owned or controlled by Brookstone, for which Michael Toporek, the Company's CEO, serves as Managing General Partner. The Company's directors and executive officers have the right to acquire an aggregate of an additional 181,250 shares of our common stock by exercising outstanding stock options granted to them under our equity compensation plans. As a result, Mr. Toporek acting alone, and/or many of the Company's officers and directors acting together, may have the ability to exert significant control over the Company's decisions and control the management and affairs of the Company, and also to determine the outcome of matters submitted to shareholders for approval, including the election or removal of a director and any merger, consolidation, or sale of all or substantially all of the Company's assets. Accordingly, this concentration of ownership may harm the market price of our common stock by:

• Delaying, deferring, or preventing a change in control of the Company;
• Impeding a merger, consolidation, takeover, or other business combination involving the Company; or
• Discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company.

Our Rights Plan may limit the rights of our shareholders and decrease the trading price of our common stock; our CEO's role as Managing General Partner of Brookstone could provide Brookstone with further control in the event our Rights Plan is instituted.

We have adopted a Section 382 Rights Agreement, dated October 6, 2016, as amended ("Rights Plan"), that is intended to preserve the Company's net operating loss carryforwards and to act as a deterrent to any person (together with all affiliates and associates of such person) acquiring beneficial ownership of 4.99% or more of outstanding shares of our common stock without the approval of our Board of Directors. The Rights Plan, however, contains provisions and terms that may delay, defer, or prevent a tender offer or change in control of the Company that a shareholder might consider to be in his, her, or its best interests, including attempts that might result in a premium being paid over the market price for our shares of common stock. The Company expects that such provisions and terms will operate to discourage extraordinary corporate transactions with respect to the Company, such as takeover bids, and will instead encourage any potential acquiror of the Company to first correspond with the Board. Additionally, since our Chief Executive Officer is also the Managing General Partner of Brookstone, Brookstone could exert additional control over the Company, even with its minority equity interest held in the Company, in the event the rights to purchase common stock provided for in the Rights Plan become exercisable.

We may incur losses and liabilities in the course of business that could prove costly to defend or resolve.

We may become subject to a variety of claims and lawsuits in the ordinary course of business, including personal injury or property claims. Additionally, we are, at times, involved in commercial disputes with third parties, such as customers, distributors, vendors, and others. Any such litigation involving an adverse result could have a material adverse effect on our business and our financial condition. There is a risk of litigation generally in conducting a commercial business. These risks often may be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time. We may incur significant legal expenses in defending against litigation.

We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from selling our products, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief.

We may receive notices from third parties that the manufacture, use, or sale of any products we develop infringes upon one or more claims of their patents. Moreover, because patent applications can take many years to issue, there may be currently pending applications, unknown to us, that may later result in issued patents that materially and adversely affect our business. Third parties could also assert infringement or misappropriation claims against us with respect to our future product offerings, if any. We cannot be certain that we have not infringed the intellectual property rights of any third parties. Any infringement or misappropriation claim could result in significant costs, substantial damages, and our inability to manufacture, market, or sell any of our product offerings that are found to infringe another person’sperson's patent. Even if we were to prevail in any such action, the litigation could result in substantial cost and diversion of resources that could materially and adversely affect our business. If a court determined, or if we independently discovered, that our product offerings violated third-party proprietary rights, there can be no assurance that we would be able to re-engineer our product offerings to avoid those rights or obtain a license under those rights on commercially reasonable terms, if at all. As a result, we could be prohibited from selling products that are found to infringe upon the rights of others. Even if obtaining a license were feasible, it may be costly and time-consuming. A court could also enter orders that temporarily, preliminarily, or permanently enjoin us from making, using, selling, offering to sell, or importing our products that are found to infringe on third parties’parties' intellectual property rights, or could enter orders mandating that we undertake certain remedial actions. Further, a court could order us to pay compensatory damages for any such infringement, plus prejudgment interest, and could in addition treble the compensatory damages and award attorneys’attorneys' fees. Any such payments could materially and adversely affect our business and financial condition.

If we are unable to protect our information systems against service interruption or failure, misappropriation of data, or breaches of security, our operations could be disrupted, we could be subject to costly government enforcement actions and private litigation, and our reputation may be damaged.

Our business involves the collection, storage, and transmission of personal, financial, or other information that is entrusted to us by our customers and employees. Our information systems also contain the Company's proprietary and other confidential information related to our business. Our efforts to protect such information may be unsuccessful due to the actions of third parties, computer viruses, physical or electronic break-ins, catastrophic events, employee error or malfeasance, or other attempts to harm our systems. BecauseAs the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures in time. We could also experience a loss of critical data and delays or interruptions in our ability to manage inventories or process transactions. Some of our commercial partners, such as those that help us maintain our websites,website, may receive or store information provided by us or our users through our websites. website. If these third parties fail to adopt or adhere to adequate information security practices, or fail to comply with our policies in this regard, or in the event of a breach of their networks, our customers’customers' information may be improperly accessed, used, or disclosed.

If our systems are harmed or fail to function properly, we may need to expend significant financial resources to repair or replace systems or to otherwise protect against security breaches or to address problems caused by breaches. If we experience a significant security breach or fail to detect and appropriately respond to a significant security breach, we could be exposed to costly legal actions against us in connection with such incidents, which could result in orders or judgments forcing us to pay damages or fines or to take certain actions with respect to our information systems. Any incidents involving unauthorized access to or improper use of user information, or incidents that are a violation of our online privacy policies, could harm our brand reputation and diminish our competitive position. Any of these events could have a material and adverse effect on our business, reputation, or financial results. Our insurance policies carry coverage limits, which may not be adequate to reimburse us for losses caused by security breaches.

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In the future, we may experience an ownership change in the Company that would result in a limitation of tax attributes relating to the use of our net operating losses.

A corporation generally undergoes an “ownership change” when the ownership of its stock, by value, changes by more than 50 percentage points over any three-year testing period. In the event of an ownership change, Section 382 of the Internal Revenue Code of 1986 imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change net operating loss (“NOL”) carryforwards and certain recognized built-in losses.

We estimate that as of December 31, 2017, the Company and MTI Instruments have NOL carryforwards of approximately $52.0 million. Our ability to utilize these NOL carryforwards, including any future NOL carryforwards that may arise, may be limited by Section 382 if we undergo any further “ownership changes” as a result of subsequent changes in the ownership of our outstanding common stock pursuant to the exercise of MTI options outstanding, additional financings obtained, or otherwise. 

Our risk management process may not identify all risks that we are subject to and will not eliminate all risk.

Our Enterprise Risk Management (“ERM”("ERM") process seeks to identify and address significant risks. Our ERM process uses the most recent integrated risk framework in Internal Control —- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to assess, manage, and monitor risks. We believe that risk-taking is an inherent aspect of the pursuit of our growth and performance strategy. Our goals are to proactively manage risks in a structured approach in conjunction with strategic planning, with the intent to preserve and enhance shareowner value, and to manage prudently, rather than wholly avoiding, risks. We can mitigate risks and their impact on the Company, however, only to a limited extent, and no ERM process can identify all risks that we may face. Therefore, there may be risks that we are currently unaware of, that may develop in the future or that we currently consider immaterial. Further, our management of risks may prove inadequate. The emergence of risks of which we were unaware or are unable to manage could have a material adverse effect on our business, prospectus, financial condition and results of operations.

MTI Instruments' business operations and financial performance are occasionally reliant on a single supplier or vendor or a limited group of suppliers and vendors.

We depend on a limited number of suppliers and vendors for product and services relating to our MTI Instruments business. Specifically, for the year ended December 31, 2020, Spinnaker Contract Manufacturing, Inc. ("Spinnaker") supplied 15% of the PC boards used by almost all MTI Instrument products, and SYNNEX Corporation ("SYNNEX") supplied 26% of the military computers used by MTI Instruments. In the event it becomes necessary to seek alternative suppliers and vendors, we may be unable to obtain satisfactory replacement supplies or services on economically attractive terms, on a timely basis, or at all, which could increase costs or cause disruptions in the manufacturing of our products or delivery of our services.

Changes in tariffs and other trade policies could increase the cost of our products sold to our international customers, which could negatively impact our sales and profitability.

Our international sales operations are subject to extensive laws, governmental regulations, and policies, including but not limited to tariffs and other trade policies, including those governing exports. Trade tensions between the United States and China, as well as those between the U.S. and Canada, Mexico, and other countries, have been escalating in recent years, and there have been significant changes to U.S. trade policies, legislation, treaties, and tariffs during this time. Trade tensions have led to a series of tariffs imposed by the U.S. on imports from China, as well as retaliatory tariffs imposed by China on imports from the U.S. Changes in export regulations could increase the cost of our products sold as exports to our international customers.

While the tariffs put in place in March 2018 did not have a material impact on our business or operating results, currently it is unclear how the recent change in Presidential administrations may impact these issues, if at all, or what actions the current administration may take in this regard. Any further changes in U.S. trade policies, tariffs, taxes, export restrictions, or other trade barriers may decrease our profit margins, reduce the competitiveness of our products in foreign markets, or inhibit our ability to sell products, any which could have a material adverse effect on our business, results of operations, and financial condition.

Risks Related to the EcoChain Business and Cryptocurrency

Security breaches could result in a loss of our cryptocurrencies.

Security breaches including computer hacking or computer malware have been a consistent concern in the cryptocurrency industry. This could involve hacking in which an unauthorized person obtains access to the systems or information and can cause harm by the transmission of virus or the corruption of data.  These breaches may occur due to an action by an outside party, or by the error and negligence of an employee. We primarily rely on the Luxor mining pool and EcoChain's cryptocurrencies are stored with exchanges such as Coinbase prior to selling them. If any breach were to occur of our security system, operations or third party platforms, the result could cause a loss of our cryptocurrencies, loss of confidential or proprietary information, force the Company to cease operations, or could cause damage to the reputation of the Company. If an actual or perceived attack were to occur, the market perception of the Company may be damaged, which could adversely affect potential and current investments in the Company and reduce demand for our Common Stock and cause a reduction in our share price. 

EcoChain has a limited operating history and we may not recognize incomefrom the EcoChainline of business in the future.

EcoChain, though a wholly-owned subsidiary of MTI, remains responsible for its own financing and operations and therefore is subject to all the risks inherent in a newly-established business venture. EcoChain began operations in January 2020 and has a limited operating history. It has not yet been able to confirm that its business model can or will be successful over the long-term. Our projections for its growth have been developed internally and may not prove to be accurate. As such, given its start-up status with an unproven business model, there is a substantial uncertainty regarding EcoChain's ability to succeed.

Valuations of cryptocurrencies in U.S. dollars are extremely volatile, and if our mined cryptocurrencies are converted into dollars when such values are low, we may not recognize the income from the conversion of the mined cryptocurrencies that we were expecting.

The fluctuating values of cryptocurrencies represent significant uncertainties for the EcoChain business. The value in U.S. dollars of Bitcoin, Ether, and other cryptocurrencies have been, and continue to be, subject to dramatic fluctuations. A variety of factors, known and unknown, may affect price and valuation, including, but not limited to: (i) the supply of such cryptocurrencies; (ii) global blockchain asset demand, which can be influenced by the growth of retail merchants' and commercial businesses' acceptance of blockchain assets like cryptocurrencies as payment for goods and services, the security of online cryptocurrency exchanges and networks and digital wallets that hold blockchain assets, the perception that the use and holding of blockchain assets is safe and secure, and the regulatory restrictions on their use; (iii) investors' expectations with respect to the rate of inflation; (iv) changes in the software, software requirements, or hardware requirements underlying a blockchain network; (v) changes in the rights, obligations, incentives, or rewards for the various participants in a blockchain network; (vi) currency exchange rates; (vii) fiat currency withdrawal and deposit policies of cryptocurrency exchanges and networks and liquidity on such exchanges and networks; (viii) interruptions in service from or failures of major cryptocurrency exchanges and networks; (ix) investment and trading activities of large subscribers, including private and registered investment funds, that may directly or indirectly invest in blockchain assets; (x) monetary policies of governments, trade restrictions, and currency devaluations and revaluations; (xi) regulatory measures, if any, that affect the use of blockchain assets; (xii) the maintenance and development of the open-source software protocol of the cryptocurrency networks; (xiii) global or regional political, economic, or financial events and situations; and (xiv) expectations among blockchain participants that the value of blockchain assets will soon change. If our mined cryptocurrencies are converted into dollars when their values are low, we may not recognize the income from the conversion of the mined cryptocurrencies that we were expecting. Further, the extreme swings in value can make it difficult for us to develop reasonable financial plans and projections with respect to EcoChain's business.

AcquisitionsEcoChain has an evolving business model that is subject to various uncertainties.

As cryptocurrency assets and blockchain technologies become more widely available, we expect the services and products associated with them to evolve. In order to stay current with the industry, our business model may need to evolve as well. From time to time, we may modify aspects of the EcoChain business relating to its models and strategies. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to EcoChain's business. We may not be able to manage growth effectively, which could damage EcoChain's reputation, limit its growth, and negatively affect our operating results. Further, we cannot provide any assurance that we will successfully identify all emerging trends and growth opportunities in this business sector, and we may lose out on certain opportunities as a result. Such circumstances could have a material adverse effect on EcoChain's business, prospects, operations, or financial condition.

If EcoChain fails to keep pace with technological innovations it will be unable to continue operating its business.

The pace of development with respect to the computing power of miners has been extraordinary. Within the space of a few years, the small mining operations that were once common in the cryptocurrency mining industry have been replaced almost entirely by larger-scale operations that have the ability to scale and the resources to invest in the much more powerful mining equipment that is necessary to successfully operate in the industry today. We may not be able to compete successfully against present or future competitors, including the various high-profile and well-established operators that the industry has attracted, some of which have substantially greater liquidity and financial resources than we do. If we are not able to scale our operations and do not keep up with technological developments in the industry, we risk our miners becoming so far less powerful than our competitors' that they become obsolete. We do not have the resources to compete with the larger cryptocurrency mining operators at this time. With the limited resources we have available, we may experience great difficulties in expanding and improving our network of miners to remain competitive, and we may not be in a position to construct additional operational cryptocurrency mines. 

Competition from existing and future competitors, particularly the many other North American companies that have access to more competitively-priced energy, could result in our inability to secure acquisitions and partnerships that we may need to expand EcoChain's business in the future. This competition from other entities with greater resources, experience, and reputations may result in our failure to maintain or expand EcoChain's business, as we may never be able to successfully execute our business plan. If we are unable to expand and remain competitive, it could have a negative effect on our business, results of operations, and financial condition, which would have an adverse effect on our business.

We expect to continue searching for acquisitions as part of our long-term business strategy. Any such acquisitions will involve significant challenges and risks including that the transaction does not advance our business strategy, that we don’t realize a satisfactory return on the investment we make, that we may experience difficulty in the integration of new employees, business systems, and technology, or diversion of management’s attention from our ongoing businesses. If one or more of these risks materialize in connection with any future acquisitions, it could adversely affect our operating results or financial condition.

The deregistration of our shares of our common stock under the Exchange Act and our suspension of our periodic reporting obligations thereunder is likely to decrease the liquidity of our common stock and may result in a decrease in the trading price of our common stock.

We may be unable to obtain additional funding to scale the EcoChain cryptocurrency business to a larger-scale cryptocurrency mining operations.

We are considering further increasing the processing power of our cryptocurrency mining operations as we seek to leverage our experience and expertise in this area of operations. To do so, however, we will need to raise additional financing, and these attempts may not be successful. Failure to generate adequate cash from our operations or find sources of funding would require us to scale back or curtail our operations or expansion efforts, including limiting our ability to expand the EcoChain cryptocurrency business to a larger-scale cryptocurrency mining operation, and would have an adverse impact on our business and financial condition.

Regulatory changes or actions may alter the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects EcoChain's business, prospects, or operations.

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies. Some governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as in the U.S., cryptocurrencies are subject to extensive, and in some cases overlapping, unclear, and evolving regulatory requirements. Governments may in the future curtail or outlaw the acquisition, use or redemption of cryptocurrencies. Ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. Even if EcoChain's development of an operational cryptocurrency mine is successful, government and quasi-government regulation of cryptocurrencies and their use, restrictions on or regulation of access to and operation of blockchain networks or similar systems, and the availability and popularity of other forms or methods of buying and selling goods and services, including government-backed cryptocurrencies, may result in EcoChain still not achieving profitability in our expected timeframe or at all. Ongoing and future regulatory actions may impact EcoChain's ability to continue to operate, which could affect our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations.

Facebook's proposed development of a cryptocurrency, as well as the eventual likely development of government-backed digital currencies and the development of cryptocurrencies by other tech companies, may adversely affect the value of Bitcoin and other existing, or even future, cryptocurrencies.

In May 2019, Facebook announced its plans for a cryptocurrency then called Libra, now Diem, which has faced significant objections and concerns from governments, legislatures, and regulators. The massive social network and a number of other partners are estimating that the Diem digital coin and Facebook's corresponding digital wallet would be a way to make sending payments around the world as easy as it is to send a photo. Facebook's significant resources and ability to engage the world via social media may enable it to bring Diem to market rapidly and to deploy it across industries more rapidly and successfully than previous cryptocurrencies. Facebook's size and market share may cause its cryptocurrency to succeed to the detriment and potential exclusion of existing cryptocurrencies.  Further, in the event that government-backed digital currencies, which regulators in several countries are already considering or even developing, are developed and widely adopted, it is likely to have a negative impact on the existing currencies including larger widespread adoption and potentially impacting the market share by non-government digital currency. Additional cryptocurrencies are introduced to the market frequently, and although some have gained popularity as some features have been different than Bitcoin, Bitcoin remains the market leader.  As cryptocurrency adoption grows the likelihood that additional cryptocurrencies will be introduced increases and will gain popularity against Bitcoin, potentially negatively impacting the value of Bitcoin.

Our mining operations may experience damages, including damages that are not covered by insurance.

Our current mining operation in East Wenatchee, Washington is, and any future mines we establish will be, subject to a variety of risks relating to physical condition and operation, including:

• the presence of construction or repair defects or other structural or building damage;
• any noncompliance with or liabilities under applicable environmental, health, or safety regulations or requirements or building permit requirements; and
• any damage resulting from natural disasters, such as hurricanes, earthquakes, fires, floods, and windstorms.

For example, our mine could be rendered inoperable, temporarily or permanently, as a result of a fire or other natural disaster or by a terrorist or other attack on the mine. The security and other measures we take to protect against these risks may not be sufficient. Additionally, our mine could be materially adversely affected by a power outage, loss of access to the electrical grid, or loss by the grid of cost-effective sources of electrical power-generating capacity. Given the amount of power required to operate a cryptocurrency mine, it would not be feasible to run miners on back-up power generators in the event of a power outage. Our insurance covers the replacement cost of any lost or damaged miners but does not cover any interruption of our mining activities; our insurance therefore may not be adequate to cover the losses we suffer as a result of any of these events, dependent on the amount of downtime that is experienced.  In the event of an uninsured loss, including a loss in excess of insured limits, at our current or any future mines, such mines may not be adequately repaired in a timely manner or at all and we may lose some or all of the future revenues anticipated to be derived from such mines. At this time the potential impact of such a loss on our business is magnified as we are operating only a single mine.

Reliance on Soluna to operate mining machines may cause delays in production and mining and could have an impact on our business and financial condition.

EcoChain relies on Soluna to operate its cryptocurrency mining machinery. While we hold a 2% equity interest in Soluna and certain principals of the Company have roles in Soluna, we do not control Soluna or have control over their employees and, except for restrictions imposed by our contracts with Soluna, we have limited ability to control the amount or timing of resources that Soluna devotes to our programs. Although we rely on Soluna to operate our mining machinery, we remain responsible for the overall mining operations. Soluna may, over time, have relationships with entities that compete with us. If Soluna does not perform its contractual duties or obligations, we may need to enter into new arrangements with alternative third parties. This could be costly, and mining operations may be delayed or terminated. If our relationship with Soluna terminates, we may not be able to enter into arrangements with alternative third-party contractors or to do so on commercially-reasonable terms. Though we carefully manage our relationship with Soluna, there can be no assurance that we will not encounter challenges or delays resulting from this arrangement or that any such delays or challenges will not have a material adverse impact on our business, financial condition, and prospects.

EcoChain's reliance on a third-party mining pool service provider for our mining revenue payouts may have a negative impact on EcoChain's operations.

As discussed above, in "Item 1. Busines," EcoChain participates in mining pools whereby our miners' computations and those of other, unrelated miners are combined to place blocks on March 19, 2018,the blockchain, which generates the applicable cryptocurrency. Should any such mining pool suffer downtime due to a cyber-attack, software malfunction, or other problems, it will negatively impact our ability to mine and receive revenue from our mining activities.

We face risk of failure of our strategic alliances to achieve their objectives or perform as contemplated and the risk of cancellation or early termination of such alliance by either party.  

We may need to make acquisitions or form strategic alliances or partnerships in order to remain competitive in our market, and recent acquisitions, strategic alliances or partnerships could be difficult to integrate, disrupt our business and dilute shareholder value.

For example, in January 2020, the Company formed EcoChain as its wholly-owned subsidiary to pursue a new business line focused on cryptocurrency and the blockchain ecosystem. In connection with this new venture, we filedentered into a Form 15strategic relationship with Soluna, which has assisted us in developing, and which is now operating, the cryptocurrency mining facility. In the future, we may acquire or form strategic alliances or partnerships with other businesses in order to remain competitive or to acquire new technologies. Acquisitions, alliances, and investments involve numerous risks, including:

• The potential failure to achieve the expected benefits of the combination or acquisition;
• Difficulties in and the cost of integrating operations, technologies, services and personnel;
• Diversion of financial and managerial resources from existing operations;
• Risk of entering new markets in which we have little or no experience or where competitors may have stronger market positions;
• Potential write-offs of acquired assets or investments, and potential financial and credit risks associated with acquired customers;
• Inability to generate sufficient revenue to offset acquisition or investment costs;
• Potential unknown liabilities associated with the SECacquired businesses;
• Unanticipated expenses related to deregisteracquired technology and its integration into the existing business; and
• Negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation, and the loss of acquired deferred revenue and unbilled deferred revenue.

Our failure to successfully manage our strategic relationship with Soluna, or other future acquisitions, strategic alliances or partnerships could seriously harm our operating results. In addition, our shareholders would be diluted if we finance the future acquisitions, strategic alliances or partnerships by incurring convertible debt or issuing equity securities.

Risks Related to our Common Stock

The market price of our common stock under the Exchange Act, thereby suspendingis likely be volatile, which may cause investment losses for our Exchange Act reporting obligations.  Subsequent to the filingshareholders.

The market price of the Form 15, our common stock was removed from the OTCQB venture stage marketplace of the OTC Markets quotation systemhas been and is now quoted on the on the OTC Pink – Current Information tier of the OTC Markets. As a lower-tier market than the OTCQB, trading volumeslikely to continue to be volatile, and investors in our common stock may experience a decrease, which could be lower than they were previously, which can impactsubstantial, in the liquidityvalue of their common stock or the loss of their entire investment in the Company for a number of reasons, including reasons unrelated to our operating performance or prospects. The market price of our common stock could be subject to wide fluctuations in response to a broad and diverse range of factors, including those described elsewhere in this "Risk Factors" section as well as the following:

• announcements by us regarding liquidity, significant acquisitions, equity investments and divestitures, addition or loss of significant customers and contracts, capital expenditure commitments, and litigation;
• our issuance of securities or debt, particularly if in connection with acquisition activities;
• the sale of a significant number of shares of our common stock by shareholders;
• recent changes in financial condition or results of operations, such as in earnings, revenues or other measure of company value;
• general market and economic conditions; and
• announcements of technological innovations or new product introductions by us or our competitors.

Further, broad market and industry factors may have a material adverse effect on the market price of our common stock regardless of our actual operating performance.

In addition, stock markets have experienced in the past and may in the future experience a high level of price and volume volatility, and the market prices of equity securities of many companies have experienced in the past and may in the future experience wide price fluctuations not necessarily related to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of our common stock.

Finally, our relatively small public float and daily trading volume have in the past caused, and may in the future result in, significant volatility in our stock price. At December 31, 2020, we had approximately 5,549,005 million shares outstanding held by non-affiliates. Our daily trading volume for the year ended December 31, 2020 averaged approximately 13,488 shares.

If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our common stock or broker-dealers may be discouraged from effecting transactions in shares of our common stock.

As previously discussed our common stock became listed and commenced trading on Nasdaq on March 23, 2020. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders' equity, minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able to comply with such applicable listing standards. If we fail to do so, Nasdaq may delist our common stock, which would likely have an adverse impact on the market price and liquidity of our common stock.  Further, while we intend

In addition, our shares of common stock have in the past constituted, and may again in the future constitute, "penny stock" within the meaning of Section 3(a)(51) of the Exchange Act and Rule 3a-51-1 thereunder, and so will be subject to continue to provide stockholders with annual audited financial statements and quarterly unaudited financial statements through the OTC Markets Group website, there can be no guarantee that we will do so, and even if we do stockholders and potential investors will have access to much less information about us than they did when we were required to file reports with the SEC pursuant to"penny stock" rules adopted under Section 15(g) (now 15(h)) of the Exchange Act. The lackpenny stock rules generally apply to companies whose common stock is not listed on a national securities exchange and trades at less than $5.00 per share, other than companies that have had average revenue of publiclyat least $6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stocks to persons other than "established customers" complete certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If our common stock is subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our common stock. If the common stock is subject to the penny stock rules, investors will find it more difficult to dispose of their shares of our common stock.

Raising additional funds through debt or equity financing could be dilutive and may cause the market price of our common stock to decline. We still may need to raise additional funding which may not be available information abouton acceptable terms, or at all. Failure to obtain additional capital may force us to delay, limit, or terminate our product development efforts or other operations.

To the Companyextent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may alsobe diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Furthermore, any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products and services. In addition, the sale of a significant number of our shares of common stock, either by us or by our shareholders (in particular Brookstone, our largest shareholder) could depress the price of our common stock.

We estimate that our current cash and cash equivalents, along with the net proceeds of our contemplated common stock offering, will be sufficient for us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. We may continue to seek funds through equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Additional funding may not be available to us on acceptable terms, or at all. Any failure to raise capital as and when needed, as a result of insufficient authorized shares or otherwise, could have a negative impact on the liquidityour financial condition and market price ofon our common stock.ability to pursue our business plans and strategies.

Item 1B: Unresolved Staff Comments

Not applicable.

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