Risk Factors Summary 

In evaluating the Company, its business and any investment in the Company, readers should carefully consider the following factors:

Risks relating to the COVID-19 pandemic and global economic uncertainty

• Adverse changes in economic or other market conditions in the United States, including risks resulting from the continuing impact of COVID-19, could have a material adverse effect on our business and results of operations and curtail our ability to raise financing.

General corporate business considerations 

• We may be unable to achieve or maintain sales revenue growth.

• Our business depends on a small number of customers, many of which are in industries of a cyclical nature, and we risk potential loss of government contracts.

• 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.

• Our operating results may experience significant fluctuations.  

• We may not be able to keep pace with technological innovations, and our efforts may not result in commercial success and/or may result in delays in development.

• Many of our existing and target customers are in industries of a cyclical nature.

• We may not be able to retain existing credit facilities, or obtain new credit facilities.

• 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 are heavily dependent on our senior management, and a loss of a member of our senior management team could cause our stock price to suffer.

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

• Brookstone’s ownership of 38.2% of the outstanding shares of our common stock gives it a controlling interest in the Company, and it may acquire interests and positions that could present potential conflicts with our and our shareholders’ interests.

• Insiders continue to have substantial control over 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 may incur losses and liabilities in the course of business which could prove costly to defend or resolve, or 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, enforcement actions and injunctive relief.

• 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.

• The Company may not pay dividends on its common stock.

• Our financial controls and procedures may not be sufficient to accurately or timely report our financial condition or results of operations.

• Under the smaller reporting company rules we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results.

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

• We may not be able to utilize our net operating loss carry forwards.

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

• Changes in the U.S. tax and other laws and regulations may adversely affect our business.

• The Company’s officers and directors are indemnified against certain conduct that may prove costly to defend.

• We are subject to complex environmental, health and safety laws and regulations.

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Risks related to the EcoChain business and cryptocurrency

• EcoChain has a limited operating history and we may not recognize any operating income from the EcoChain line of business in the future.

• Prices and valuations of cryptocurrencies are extremely volatile.

• EcoChain’s cryptocurrency mining operating costs have historically outpaced our mining revenues, which - were it to occur again - could harm our business or increase losses.

• EcoChain has an evolving business model which is subject to various uncertainties.

• EcoChain may not be able to continue to develop its technology, expand its mining operations or otherwise compete with other companies.

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

• 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 our business, prospects or operations.

• Governmental regulation of cryptocurrencies may affect our profitability.

• The properties included in our mining network may experience damages, including damages that are not covered by insurance.

• Reliance on Soluna to operate mining machines may cause delays in production and mining, and reliance on a third-party mining pool service provider for our mining revenue payouts may have a negative impact on our operations.

• 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. 

Risks Related to this Offering

• Because of volatility in the stock market in general, the market price of our common stock will also likely be volatile.

• If our listing application for our common stock is not approved by Nasdaq, we will not be able to consummate the Offering and will terminate this Offering.

• If the shareholders do not approve the Redomestication, we will continue to be subject to New York laws, which may be less favorable to the Company than Nevada laws.

• If our 2021 Plan is not approved by shareholders, the limited number of shares we could issue may impact our ability to attract, retain and motivate key personnel. 

• Our shareholders may not approve a reverse stock split of our common stock; accordingly, the market price of our common stock may not remain high enough to comply with Nasdaq’s minimum listing requirements or continued listing requirements during our first year on Nasdaq.

• If our common stock is accepted for listing on Nasdaq, and we cannot thereafter comply with continued listing requirements or standards of Nasdaq, Nasdaq could delist our common stock.

• Compliance with public reporting requirements will affect the Company’s financial resources.

• If our common stock is accepted for listing on Nasdaq, and we cannot thereafter continue to maintain compliance with Nasdaq’s listing standards, U.S. broker-dealers may be discouraged from effecting transactions in shares of our common stock.

• We have broad discretion in the use of the net proceeds from this Offering and may not use them effectively.

• Upon exercise of our outstanding options or warrants, we will be obligated to issue a substantial number of additional shares of common stock which will dilute our present shareholders.

• Raising additional funds through debt or equity financing could be dilutive and may cause the market price of our common stock to decline.

Please see “Risk Factors” beginning on page 12 for more details.

Corporate Information

Our principal executive offices are located at 325 Washington Avenue Extension, Albany, New York 12205, and our telephone number is (518) 218-2550. Our website is http://www.mechtech.com. Information contained on our website does not constitute part of and is not incorporated into this prospectus.

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RISK FACTORS

An investment in our shares of common stock involves certain risks relating to our structure and investment objective. The risks set forth below are the risks we have identified and which we currently deem material or predictable. We also may face additional risks and uncertainties not currently known to us, or which as of the date of this registration statement we might not consider significant, which may adversely affect our business. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our net asset value and the price of our common stock could decline, and you may lose all or part of your investment.

In evaluating the Company, its business and any investment in the Company, readers should carefully consider the following factors:

Risks Relating to the COVID-19 Pandemic and Global Economic Uncertainty

Adverse 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 and could otherwise adversely affect our business, results of operations and financial condition.

Adverse changes to and uncertainty in the global economy, particularly in light of the impacts of COVID-19 and a potential global recession resulting therefrom, 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 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 depend significantly on the overall demand for test and measurement instrumentations in key markets including research and development, automotive, semiconductor, cryptocurrencies 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. Although recent trends point to continuing improvements, there is still lingering volatility and uncertainty. A change or disruption in the global financial markets for any reason 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 accounts receivable, significant delays in accounts receivable payments, and significant write-offs of accounts receivable, each of which could adversely impact our financial results.

General Corporate Business Considerations

We may be unable to achieve or maintain sales revenue growth.

Even if we succeed in continuing to improve and expand our business lines, we may never achieve sufficient sales revenue to achieve or maintain profitability. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Our business depends on a small number of customers and potential loss of government contracts.

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 any given period for the foreseeable future, and the loss of or significant reduction in sales to our 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 government contracts for a significant portion of our revenues and the loss of government contracts or a delay or decline in funding of existing or future government contracts, particularly in light of potential cuts that may be imposed as a result of U.S. government budget appropriations, could decrease our backlog or adversely affect our sales and cash flows and our ability to fund our growth.

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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 services. Customers also 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 demand for OEMs’ products, may cause customers to cancel, reduce, or delay orders. 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. 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. Additionally and as a result, our revenues may be volatile from period to period or we may not achieve the anticipated revenues from these efforts, or these efforts may result in non-recoverable costs.

Our operating results may experience significant fluctuations.

In addition to the variability resulting from the short-term nature of our 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;  

• 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’ 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;  

• timely delivery of product solutions to customers;

• pricing and availability of competitive products;

• 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.

We may not be able to keep pace with technological innovations or develop new product solutions in a timely manner.

The electronic, semiconductor, solar, automotive, cryptocurrency mining 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:

• continue research and development activities on all product lines;  

• hire additional engineering and other technical personnel; and  

• purchase advanced design tools and test equipment.

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

Our research and development efforts with respect to our technologies may not result in customer or market acceptance. Some or all of those 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 technology, our customers may decide not to introduce or may discontinue products utilizing the technology for a variety of reasons, including the following:

• 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 technologies. Significant expenses relating to one or more new 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 technologies may prove to be unsuccessful. If our efforts are unsuccessful, our business could be harmed.

Many of our existing and target customers are in industries of a cyclical nature.

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 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.

The electronics and military industries in particular 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.

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.

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:

•  unexpected changes in regulatory requirements;

• 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 foreign laws;  

• potentially reduced protection for intellectual property rights; and  

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

If one or more of these risks associated with international sales materialize, it could negatively affect our operating results.

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In addition, we transact our business in U.S. dollars and bill and collect our sales in U.S. dollars. In 2019, approximately 35.3% of our revenue was from customers located outside of the United States, and in 2020, approximately 25.9% of our revenue was from customers located outside of the United States. 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 may not be able to retain existing credit facilities, or obtain new credit facilities.

If we are unable to access capital on satisfactory terms and conditions, we may not be able to expand our business or meet our payment requirements under our existing credit facilities. Our ability to obtain new or additional financing will depend on a variety of factors, many of which are beyond our control. We may not be able to obtain new or additional financing for various reasons, including because we may not have sufficient cash flow to service or repay our existing or future debt. Additionally, we cannot assure that such funding will be available on a timely basis, in needed quantities, or on terms favorable to us, if 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 trademark and patent law, and trade secrets, to protect our proprietary technology and processes. Specifically, MTI Instruments holds the trademark “FOTONIC SENSOR®”, which was registered on July 10, 2007 in the United States, and the U.S. Patent No. 6,809,542, registered on October 26, 2004, for a wafer resistance measurement apparatus and method using capacitively coupled A/C excitation signals.  However, a third party may copy or otherwise obtain and use our USPTO-registered or other proprietary information without our authorization, and trade secrets can be difficult to protect. Policing 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’s relationship with us. However, 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 are heavily dependent on our senior management, and a loss of a member of our senior management team could cause our stock price to suffer.

If we lose the services of Michael Toporek, our Chief Executive Officer and a member of the Board, Jessica L Thomas, our Chief Financial Officer, David C. Michaels, our chairman of the Board, and/or certain key employees, we may not be able to find appropriate replacements on a timely basis, and our business could be adversely affected. We do not currently maintain key life insurance policies on these officers or key employees.  Our existing operations and continued future development depend to a significant extent upon the performance and active participation of these individuals and certain key employees. We will be successful in retaining the services of these individuals, and if we were to lose any of these individuals, we may not be able to find appropriate replacements on a timely basis and our financial condition and results of operations could be materially adversely affected.

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

Our performance largely depends on the talents, knowledge, skills, know-how and efforts of highly skilled individuals and in particular, the expertise held by our Chief Executive Officer, Michael Toporek. His absence, were it to occur, would materially and adversely impact development and implementation of our projects and businesses. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Our continued ability to compete effectively depends on our ability to attract, among others, new technology developers and to retain and motivate our existing contractors. If one or more of our executive officers 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. Therefore, our business may be severely disrupted, and we may incur additional expenses to recruit and retain new officers or other key personnel. In addition, if any of our executives or key personnel joins a competitor or forms a competing company, we may lose customers.

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

Brookstone Partners Acquisition, XXIV, LLC (“Brookstone”), owns approximately 38.2% of the Company’s outstanding shares of common stock and has designated two directors that sit on our 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 control corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including the election of directors, amendments to our Certificate of Incorporation and 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 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’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.

Brookstone and its director designees may acquire interests and positions that could present potential conflicts with our and our 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. Additionally, Michael Toporek, our CEO, also serves as the Managing General Partner of Brookstone. 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 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”), whether in such director designee’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.

Insiders continue to have substantial control over the Company.

As of March 5, 2021, the Company’s directors and executive officers hold the current right to vote approximately 43.5% of the Company’s outstanding voting stock. Of this total, 38.2% is owned or controlled by Brookstone, for which Michael Toporek, the Company’s CEO, also serves as Managing General Partner. Upon the sale of all [__________] shares of common stock offered in this offering, and no exercise by the underwriters of their over-allotment option or the exercise of the underwriters’ warrants by the underwriters, the Company’s directors and executive officers will hold the right to vote [  ]% of the Company’s outstanding voting stock, with [  ]% owned or controlled, directly by Mr. Toporek. In addition, the Company’s directors and executive officers have the right to acquire additional shares by exercising their respective grants under the Plans, which could increase their voting percentage significantly. 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 and removal of a director, the removal of any officer and any merger, consolidation or sale of all or substantially all of the Company’s assets. Accordingly, this concentration of ownership may harm a future market price of the shares by:

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• 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 of the Company, dated October 6, 2016, as amended (“Rights Plan”), which 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. The Rights Plan is additionally 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 common stock of the Company without approval of 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 our Rights Plan is instituted.

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

Companies that operate in one or more of the businesses that we operate face significant legal risks. There is a risk that we could become involved in litigation wherein 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’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’ 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’ fees. Any such payments could materially and adversely affect our business and financial condition.

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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. Because 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, may receive or store information provided by us or our users through our websites. 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’ 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.

The Company may not pay dividends on its common stock; you should not buy stock if you expect dividends.

We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We paid a special dividend during the year ended December 31, 2019 and did not pay any dividends during the nine months ended September 30, 2020 or the year ended December 31, 2018. The Board has not yet declared any dividends for any subsequent periods, and we do not anticipate paying any cash dividends in the foreseeable future.

The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our Board may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

Our financial controls and procedures may not be sufficient to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on internal control over financial reporting.

The effectiveness of our controls and procedures may in the future be limited by a variety of factors, including:

• faulty human judgements and simple errors, omissions or mistakes;

• fraudulent actions of an individual or collusion of two or more people;

• inappropriate management override of procedures; and

• the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial information.

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If we identify material weaknesses in our internal control over financial reporting in the future, if we are unable to comply with the requirements of Section 404 in a timely manner, and if we are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

We qualify as a smaller reporting company and, under the smaller reporting company rules, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects.

Currently, we qualify as a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act. We have elected to provide disclosure under the smaller reporting company rules and therefore we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects.

Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditors provide an attestation of our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period.

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”) 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 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.

We may not be able to utilize our net operating loss carry forwards.

At December 31, 2019, we had Federal net operating loss carry forwards (“NOLs”) for income tax purposes of approximately $50 million. Of these, approximately $300 thousand expired in 2020, with the remainder expiring through 2035. The Coronavirus Aid, Relief, and Economic Security Act signed into law on March 27, 2020 provided that NOLs generated in a taxable year beginning in 2018, 2019, or 2020, may now be carried back five years and forward indefinitely. In addition, the 80% taxable income limitation is temporarily removed, allowing NOLs to fully offset net taxable income. However, we do not know if or when we will have any earnings and capital gains against which we could apply these carry forwards. Furthermore, as a result of changes in the ownership of our common stock, our ability to use our federal NOLs will be limited under Internal Revenue Code Section 382. State NOLs are subject to similar limitations in many cases. As a result, our substantial NOLs may not have any value to us.

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MTI Instruments’ business operations, financial performance and liquidity 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, 2021, 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.

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, former 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.

In particular, the new tariffs could have a negative impact on us in a number of ways. While any steel and aluminum we use in our products are 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 in 2018 have gone into effect relatively recently, 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.

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The Company’s officers and directors are indemnified against certain conduct that may prove costly to defend.

The Company may have to spend significant resources indemnifying its officers and directors or paying for damages caused by their conduct. The Certificate of Incorporation indemnifies any person made, or threatened to be made, a party to an action or proceeding (including if in the right of the Company) by reason of the fact that such person was a director or officer of the Company against judgments, fines, amounts paid in settlement, and expenses, including attorneys’ fees actually incurred, if such director or officer acted in good faith for a purpose which he or she reasonably believed to be in or not opposed to the best interests of the Company and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his or her conduct was unlawful. Despite the foregoing, this specific indemnity from the Company is not available to such a director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his or her acts were in bad faith or were the result of active and deliberate dishonesty and were material to the applicable cause of action, or that he or she personally gained a financial profit or other advantage to which he or she was not legally entitled. The Certificate of Incorporation also states that director of the Company shall not be liable to the Company or its shareholders for any breach of duty unless (1) a judgement or other final adjudication establishes that his or her acts or omissions involved bad faith, intentional misconduct, a knowing violation of law, or the personal gain of a financial profit or other advantage to which he or she was not legally entitled or (2) the acts involved certain declaration of dividends, purchase of Company shares, distribution of Company assets, or making of loans prohibited by the New York Business Corporation Law (“NYBCL”). Furthermore, the NYBCL provides for broad indemnification by corporations of their officers and directors, if such director or officer acted in good faith, for a purpose which he or she reasonably believed to be in the best interests of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his or her conduct was unlawful. The NYBCL further provides that any such indemnifiable person who has been successful on the merits in the defense of an applicable action or proceeding shall be affirmatively entitled to the foregoing indemnity. The NYBCL additionally permits a corporation to advance expenses incurred by a director or officer in defending an action or proceeding prior to final disposition upon receipt of an undertaking by the applicable person to repay such advanced amount if the advancement is ultimately found to not be permitted by law or otherwise. Consequently, subject to the applicable provisions of the NYBCL and to certain limited exceptions in the Certificate of Incorporation, the Company’s officers and directors will not be liable to the Company or to its shareholders for monetary damages resulting from their conduct as an officer or director.

We are subject to complex environmental, health and safety laws and regulations.

We are subject to various federal, state, local and foreign environmental, health and safety laws and regulations. These laws and regulations govern matters such as the emission and discharge of hazardous materials into the ground, air or water; the generation, use, storage, handling, treatment, packaging, transportation, exposure to and disposal of hazardous and biological materials, including recordkeeping, reporting and registration requirements; and the health and safety of our employees.

Due to the nature of our business, we have been named as a party in the December 19, 2019 United States Environmental Protection Agency (“EPA”) Demand Letter regarding the Malta Rocket Fuel Area Superfund Site (“Site”) located in Malta and Stillwater, New York, in connection with an alleged release of hazardous materials into the environment. The EPA is seeking reimbursement of response costs from all named parties in the amount of approximately $358,000 plus interest in connection with the investigation and disposal activities associated with the various drum caches discovered at the Site, issuance of the Explanation of Significant Differences (“ESD”) of the Site, and implementation of the work contemplated by the ESD. While we consider the likelihood of a material adverse outcome with respect to this matter to be remote, we could be subject to liability for the investigation and remediation of environmental contamination caused by industrial activity associated with the Site.  Such liability could adversely affect our business, financial condition and results of operations.  See “Legal Proceedings” on page 58.

Risks Related to the EcoChain Business and Cryptocurrency

EcoChain has a limited operating history and we may not recognize operating income from the EcoChain line 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.  It has not had any significant revenue from inception through September 30, 2020. 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 risk regarding EcoChain’s ability to succeed.

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Prices and valuations of cryptocurrencies are extremely volatile.

The prices and valuations of cryptocurrencies represent significant uncertainties for the EcoChain business. The price of Bitcoin, Ether and other cryptocurrencies are 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 funds, that may directly or indirectly invest in blockchain assets; (x) monetary policies of governments, trade restrictions, 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; (xiv) expectations among blockchain participants that the value of blockchain assets will soon change; and (xv) a decrease in the price of blockchain assets that may have a material adverse effect on EcoChain’s financial condition and operating results.

EcoChain’s cryptocurrency mining operating costs have historically outpaced our mining revenues, which – were it to occur again - could seriously harm our business or increase our losses.

In the first three quarters of 2020, our mining operating costs outpaced our mining revenues. Our mining operations are costly and our expenses may increase in the future. This expense increase may not be offset by a corresponding increase in revenue. It is possible that our expenses may be greater than we anticipate, and our investments to make our business more efficient may not succeed and may outpace monetization efforts. While, as of the year ended 2020, our direct costs associated with mining operations do not exceed our mining revenues, the increases in our overall costs without a corresponding increase in our revenue would increase our losses and could seriously harm our business and financial performance.

EcoChain has an evolving business model which 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 our models and strategies. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to our business. We may not be able to manage growth effectively, which could damage our reputation, limit our 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 those opportunities. Such circumstances could have a material adverse effect on our business, prospects or operations.

EcoChain may not be able to continue to develop its technology, expand its mining operations or otherwise compete with other companies, some of whom have greater resources and experience.

We may not be able to compete successfully against present or future competitors. We do not have the resources to compete with larger providers of similar services at this time. The cryptocurrency industry has attracted various high-profile and well-established operators, some of which have substantially greater liquidity and financial resources than we do. With the limited resources we have available, we may experience great difficulties in expanding and improving our network of computers to remain competitive, and we may not be in a position to construct additional operational cryptocurrency mines. 

The mining equipment used in connection with our business may become obsolete, and our ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis will be a significant factor in our ability to remain competitive. We cannot provide assurance that we will be able to achieve the technological advances that may be necessary for us to remain competitive or that certain of our products will not become obsolete.

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 our business in the future. This competition from other entities with greater resources, experience and reputations may result in our failure to maintain or expand our business, as we may never be able to successfully execute our business plan. If we are unable to expand and remain competitive, our business could be negatively affected which would have an adverse effect on the trading price of our securities, which would harm investors in our Company.

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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 operations, 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 our business, prospects or operations.

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies; certain 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., subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. Ongoing and future regulatory actions may impact our ability to continue to operate, and such actions 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.

Governmental regulation of cryptocurrencies may affect our profitability.

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies, with certain governments deeming them illegal while others have allowed their use and trade. 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, it still may not achieve profitability in our expected timeframe or at all depending on numerous uncertainties, including not just the costs of operation, the future price of cryptocurrencies and fluctuations in such prices, but also 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. 

Facebook’s development of a cryptocurrency may adversely affect the value of bitcoin and other cryptocurrencies.

In May 2019, Facebook announced its plans for a cryptocurrency then called Libra, now Diem, which faced significant government intervention. The massive social network and 27 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.

The properties included in our mining network 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;

• any damage resulting from natural disasters, such as hurricanes, earthquakes, fires, floods and windstorms; and

• claims by employees and others for injuries sustained at our properties.

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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 or loss of access to the electrical grid or loss by the grid of cost-effective sources of electrical power generating capacity. Given the power requirement, 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. In the event of an uninsured loss, including a loss in excess of insured limits, at any of the mines in our network, 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. The potential impact on our business is currently magnified because we are only operating 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, financial condition and prospects.

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 (see the section entitled “Certain Relationships and Related Transactions”), Soluna is not our employee and, except for restrictions imposed by our contracts with Soluna, we have limited ability to control the amount or timing of resources that it 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 other commercial entities, some of which may 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 relationships with our contract machinery operator, there can be no assurance that we will not encounter challenges or delays in the future or that these 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.

We use a third–party mining pool to receive our mining rewards from the network. Cryptocurrency mining pools allow miners to combine their computing power, increasing their chances of solving a block and getting paid by the network. The rewards are distributed by the pool operator, proportionally to our contribution to the pool’s overall mining power, used to generate each block. Should the pool operator’s system suffer downtime due to a cyber-attack, software malfunction or other similar issues, it will negatively impact our ability to mine and receive revenue.

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.

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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 entered into a strategic 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 acquired businesses;

• Unanticipated expenses related to acquired technology and its integration into the existing business;

• 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; and

• The tax effects of any such acquisitions.

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 This Offering

Because of volatility in the stock market in general, the market price of our common stock will also likely be volatile.

The stock market in general, and the market for stocks of technology companies in particular, has been highly volatile. As a result, the market price of our common stock is likely to be volatile, and investors in our common stock may experience a decrease, which could be substantial, in the value of their common stock or the loss of their entire investment 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 and this prospectus and the following:

• recent price volatility and any known risks of investing in the stock under these circumstances;

• the market price of the stock prior to the recent price volatility;

• any recent change in financial condition or results of operations, such as in earnings, revenues or other measure of company value that is consistent with the recent change in stock price; and

• risk factors addressing the recent extreme volatility in stock price, the effects of a potential “short squeeze” due to a sudden increase in demand for the stock as a result of current investor exuberance associated with cryptocurrency-related stocks, the impact that the offering could have on the stock price and on investors where there is a significant number of shares being offered relative to the number currently outstanding and, to the extent the company expects to conduct additional offerings in the future to fund its operations or provide liquidity, the dilutive impact of those offerings on investors that purchase shares in the offering at a significantly higher price.

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If our listing application for our common stock is not approved by Nasdaq, we will not be able to consummate the Offering and will terminate this Offering.

An approval of our listing application by Nasdaq will be subject to, among other things, our fulfillment of the following conditions: (i) the Offering is completed and closed; and (ii) we have raised a sufficient amount of equity necessary to qualify for the minimum equity requirements necessary to list on Nasdaq. Currently there are two standards for admission onto Nasdaq that we are endeavoring to satisfy: either $5 million in stockholders’ equity and $15 million market value of publicly held shares of common stock; or $4 million in stockholders’ equity, $15 million market value of publicly held shares and $50 million market value of publicly listed securities. If we fail to meet the minimum requirements for listing on Nasdaq, we will not be able to consummate the Offering and will terminate this Offering. Failure to have our common stock listed on Nasdaq would make it more difficult for our shareholders to dispose of our common stock and more difficult to obtain accurate price quotations on our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange.

If the Company's shareholders do not approve the Redomestication, we will continue to be subject to New York law, which may be less favorable to the Company than Nevada law.

We currently operate as a New York corporation and, as such, the rights of our shareholders are governed by the NYBCL and by the Certificate of Incorporation and Bylaws of the Company currently in effect. Subject to shareholder approval, upon completion of the Redomestication, our shareholders will become stockholders of a Nevada corporation and their rights will be governed by the Nevada Revised Statutes, as amended, and by our to-be-formed Nevada corporation’s articles of incorporation and bylaws, which will provide more favorable terms to the Company and our shareholders.  For example, because we were formed prior to 1998 and have not amended our Certificate of Incorporation, certain actions such as merger transactions, the sale of substantially all of our assets and the dissolution of the Company, require the vote of the holders of 2/3 of our capital stock entitled to vote on any such matter.  In the event our shareholders cease to approve the Redomestication, we will continue to operate as a New York Corporation, such that our Company and the rights of our shareholders will continue to be governed by New York law, which may have less favorable consequences to our Company, its operations, and to our shareholders.

If our 2021 Plan is not approved by our shareholders, the limited number of shares we could issue may impact our ability to attract, retain and motivate key personnel. 

We have a limited number of shares of common stock available under the Company’s existing equity compensation plans. We are seeking shareholder approval for our 2021 Plan, including the reservation of the number of shares of common stock issuable under the 2021 Plan. We have historically used stock options as a significant component of our employee compensation program in order to align employees’ interests with the interests of our shareholders, encourage employee retention, and provide competitive compensation packages. If we are unable to implement the 2021 Plan, our ability to offer attractive equity incentive awards in the future may be limited or nonexistent and may make it more difficult for us to attract, retain and motivate key personnel.

Our shareholders may not approve a reverse split of our outstanding shares of common stock; accordingly, we cannot assure you that the market price of our common stock will remain high enough to comply with Nasdaq’s minimum listing requirements or continued listing requirements during our first year on Nasdaq.

As of the date of this prospectus, our common stock complies with Nasdaq’s requirements to approve our initial listing application to list our common stock on Nasdaq.  However, it may be necessary to effectuate a reverse split of our outstanding shares of common stock either to obtain Nasdaq approval for our listing of our common stock, or to comply with continued listing requirements or standards of Nasdaq. In the event our shareholders do not approve such reverse stock split, there can be no assurance that the market price of our common stock will remain high enough to comply with Nasdaq’s minimum listing requirements or its continued listing requirements during our first year on Nasdaq. We cannot provide any assurance that our common stock will not fall below such minimum bid price requirement, nor can we prevent future non-compliance with the listing requirements.

If our common stock is accepted for listing on Nasdaq, and we are not thereafter able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our common stock.

In conjunction with this Offering, we have applied to list our common stock on Nasdaq. Prior to this Offering, our common stock will have been quoted on OTCQB. There is no assurance that our common stock will ever be listed on Nasdaq. Should our common stock be listed on Nasdaq, 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.

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Compliance with public reporting requirements will affect the Company’s financial resources.

The Company is subject to certain public reporting obligations as required by federal securities laws, regulations and agencies. The compliance with such reporting requirements will require the company to incur significant legal, accounting and other administrative expenses. Additionally, in conjunction with this Offering, the Company has applied to list its shares on Nasdaq. If such application is approved, the Company will be subject to additional rules and disclosure obligations as required by Nasdaq, increasing compliance expenses further. The expenses the Company may incur will have a significant impact on the Company’s financial resources and may lead to a decrease in the value and price of our common stock.

If our common stock is accepted for listing on Nasdaq, and we cannot thereafter continue to maintain compliance with Nasdaq’s listing standards, U.S. broker-dealers may be discouraged from effecting transactions in shares of our common stock because they may be considered penny stocks and thus be subject to the penny stock rules.

Our shares of common stock have in the past constituted, and may again in the future constitute, “penny stock” within the meaning of the rules, and so will be subject to the “penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny 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 at 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 stock 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 we are subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.

We have broad discretion in the use of the net proceeds from this Offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section of this prospectus entitled “Use of Proceeds.” The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our shareholders.

Upon exercise of our outstanding options or warrants, we will be obligated to issue a substantial number of additional shares of common stock which will dilute our present shareholders. 

We are obligated to issue additional shares of our common stock in connection with our outstanding options. As of March 5, 2021, there were options and warrants, not including the underwriters’ warrants being issued in this offering, exercisable for an aggregate of 321,500 shares of common stock. The exercise of these options, will cause us to issue additional shares of our common stock and will dilute the percentage ownership of our shareholders. In addition, we have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other shareholders not participating in such exchange.

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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 on 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 extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be 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.

We estimate that our current cash and cash equivalents, along with the net proceeds from this Offering, will be sufficient for us to fund our operating expenses and capital expenditure requirements for the next 18 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 our financial condition and on our ability to pursue our business plans and strategies.

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