WISeKey International Holding Ltd Reports Strong Fiscal Year 2023 Financial Results and Provides Updates on Its Strategic Initiatives Conference Call Scheduled for May 21 at 10:00am ET (4:00pm CET) Zug, Switzerland – May 15, 2024 – – Ad-Hoc announcement pursuant to Art. 53 of SIX Listing Rules – WISeKey International Holding Ltd ("WISeKey") (NASDAQ: WKEY; SIX: WIHN), a leading global cybersecurity, Semiconductors and Web 3.0 company, today announced its audited financial results for the full year ended Dece ...

[Key Information](index=11&type=section&id=Item%203.%20Key%20Information) [Risk Factors](index=11&type=section&id=D.%20Risk%20Factors) The company faces diverse risks including industry cyclicality, financial losses, legal compliance, and share-related issues [Risks Related to Our Business and Industry](index=12&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) The company faces significant operational and industry risks, including market cyclicality, geopolitical instability, customer concentration, and supply chain dependencies - The semiconductor industry is highly cyclical and competitive, characterized by rapid technological change, short product lifecycles, and significant price erosion[87](index=87&type=chunk)[89](index=89&type=chunk)[93](index=93&type=chunk) - The company is heavily reliant on a small number of significant customers, with the **ten largest customers constituting 90% of revenue in fiscal year 2023**[108](index=108&type=chunk) - Geopolitical instability, including conflicts in Ukraine and between Israel and Hamas, presents risks of market disruption, supply chain interruptions, and adverse global economic effects[38](index=38&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk) - The business depends on third-party suppliers for critical functions like silicon manufacturing and testing, where disruptions can limit production capacity and lead to lost revenues[83](index=83&type=chunk)[84](index=84&type=chunk)[115](index=115&type=chunk) - A breach of the company's security systems could result in significant civil liability, diminish public perception, and negatively affect customer attraction and retention[73](index=73&type=chunk)[133](index=133&type=chunk) [Financial Risks](index=33&type=section&id=Financial%20Risks) The company faces financial risks from a history of losses, reliance on subsidiary cash flow, founder influence, and potential dilution from convertible debt - The company has a history of losses, with an accumulated deficit of **$281.0 million** as of December 31, 2023, an increase from **$265.6 million** at the end of 2022[158](index=158&type=chunk) - Founder Carlos Moreira holds **over 30% of the company's voting rights**, giving him significant influence over corporate matters[160](index=160&type=chunk) - The company has issued convertible notes and warrants to entities like L1 Capital and Anson Investments, which, upon conversion or exercise, will dilute existing shareholders' interests[168](index=168&type=chunk)[171](index=171&type=chunk)[173](index=173&type=chunk) - As a holding company, WISeKey has no direct cash-generating operations and relies on distributions from its subsidiaries to fund its activities and any potential dividends[182](index=182&type=chunk) [Legal Risks](index=41&type=section&id=Legal%20Risks) The company is subject to various legal and regulatory risks, including intellectual property claims, stringent employment laws, and the impact of its SEALSQ Corp spin-off - The company's dual-class share structure gives Class A shares greater relative voting power per unit of capital contribution on most matters[189](index=189&type=chunk) - The partial spin-off of SEALSQ Corp in May 2023 may not yield all expected strategic and financial benefits, as WISeKey retains a controlling interest[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - The company is subject to stringent employment laws in jurisdictions like Switzerland and France, which grant significant job protection to employees and could impact operational flexibility[186](index=186&type=chunk) [Risks Related to Our Shares and ADSs](index=45&type=section&id=Risks%20Related%20to%20Our%20Shares%20and%20ADSs) Investors in WISeKey's shares and ADSs face specific risks due to its foreign private issuer status, emerging growth company classification, and potential PFIC status - As a "foreign private issuer," WISeKey is exempt from certain NASDAQ corporate governance standards and SEC disclosure rules, potentially offering less protection to shareholders[209](index=209&type=chunk)[210](index=210&type=chunk)[214](index=214&type=chunk) - There is a risk the company will be classified as a Passive Foreign Investment Company (PFIC) for 2024 and future years, which could lead to adverse U.S. federal income tax consequences for U.S. holders of its ADSs[235](index=235&type=chunk)[236](index=236&type=chunk) - The company is an "emerging growth company" under the JOBS Act, allowing it to take advantage of reduced disclosure requirements, such as exemption from auditor attestation on internal controls[216](index=216&type=chunk) - Voting rights for ADS holders are limited by the deposit agreement, where timely instructions are required, otherwise the depositary will vote according to Board recommendations[226](index=226&type=chunk)[227](index=227&type=chunk) [Information on the Company](index=51&type=section&id=Item%204.%20Information%20on%20the%20Company) [History and Development of the Company](index=51&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) WISeKey International Holding AG, established in 2015, has undergone significant restructuring, including the sale of arago GmbH and the partial spin-off of SEALSQ Corp - Acquired a **51% controlling interest in AI company arago GmbH** in February 2021, but completed its sale on June 24, 2022, to refocus on core operations[239](index=239&type=chunk)[240](index=240&type=chunk) - Incorporated SEALSQ Corp in 2022 to hold its semiconductor business, which was partially spun off (**20%**) and listed on the Nasdaq Global Market in May 2023[241](index=241&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) - In June 2023, shareholders approved a reverse stock split of **25:1 for Class A Shares** and **50:1 for Class B Shares**[246](index=246&type=chunk) [Business Overview](index=52&type=section&id=B.%20Business%20Overview) WISeKey operates through four key verticals: Semiconductors (SEALSQ), Satellites (WISeSat), Digital Art (WISe.ART), and Trust Services, focusing on digital trust and IoT connectivity [Our Semiconductor Vertical (SEALSQ)](index=52&type=section&id=Our%20Semiconductor%20Vertical) The SEALSQ semiconductor business integrates digital trust into physical objects for the IoT market, focusing on secure microcontrollers and post-quantum cryptography - SEALSQ's mission is to integrate digital trust into the physical world by combining Cybersecurity, Semiconductors, and Post-Quantum IoT[249](index=249&type=chunk)[250](index=250&type=chunk) - The global IoT cybersecurity market is projected to grow from **$14.9 billion in 2021 to $40.3 billion by 2026**, at a CAGR of **22.1%**[260](index=260&type=chunk) - In 2023, SEALSQ launched new secure elements, **VaultIC292™** for IoT devices and **VaultIC408™** for highly sensitive applications like Smart Meters and Medical Devices[318](index=318&type=chunk)[319](index=319&type=chunk) - The company is developing its next generation of secure microcontrollers under the QUASARS project, which will implement post-quantum cryptography and is expected to have engineering samples in **Q4 2024**[328](index=328&type=chunk)[329](index=329&type=chunk) - Strategic outlook for 2024 includes focusing on asset tracking through the Smart Container Consortium, establishing a Center of Excellence in Spain, and developing SEALCOIN, an IoT Machine-to-Machine token[345](index=345&type=chunk)[354](index=354&type=chunk)[370](index=370&type=chunk) [Our Satellite Vertical (WISeSat)](index=71&type=section&id=Our%20Satellite%20Vertical) The WISeSat.Space vertical is deploying an 80-satellite LEO constellation to provide global IoT connectivity, with 17 satellites launched to date - WISeSat.Space aims to deploy an **80-satellite LEO constellation** to provide global IoT connectivity, with **seventeen satellites launched to date**[389](index=389&type=chunk)[390](index=390&type=chunk) - The LEO satellite network offers lower latency than traditional GEO satellites, enabling applications in diverse sectors such as defense, healthcare, education, and logistics[392](index=392&type=chunk)[393](index=393&type=chunk) - A key initiative is the Smart Container Consortium, which equips shipping containers with IoT sensors for real-time global tracking via the WISeSat constellation[404](index=404&type=chunk)[405](index=405&type=chunk) [Our WISe.ART Vertical](index=73&type=section&id=Our%20WISe.ART%20Vertical) WISe.ART is a multi-blockchain digital ecosystem for fine arts and luxury goods, providing NFT-based digital certificates of ownership and planning for tokenization - WISe.ART is a multi-blockchain platform that creates NFTs as digital certificates of ownership for physical art and luxury items[407](index=407&type=chunk) - In 2023, the platform hosted **over 2000 artworks from 150+ artists**, with a total value exceeding **$30 million**[410](index=410&type=chunk) - The company plans to launch WISe.ART 3.0 in **Q3/Q4 2024**, which will involve tokenization and the introduction of a utility coin, supported by HEDERA and Google[413](index=413&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk) [Our Trust Services Vertical](index=75&type=section&id=Our%20Trust%20Services%20Vertical) The Trust Services Vertical offers managed cloud services for trusted digital identities, highlighted by its adoption as the national ID platform for the Seychelles - This vertical provides managed PKI and digital identity solutions through a high-security "Unified Trust Center"[418](index=418&type=chunk) - The WISeID platform was adopted by the Government of Seychelles as its national digital ID platform, "SeyID," which now includes a digital wallet for official documents[419](index=419&type=chunk)[420](index=420&type=chunk) - The company is evolving the WISeID platform to include Web 3.0 capabilities such as Distributed Identity[418](index=418&type=chunk) [Organizational Structure](index=76&type=section&id=C.%20Organizational%20Structure) WISeKey International Holding AG serves as the parent company, with its main operating subsidiaries including WISeKey Semiconductors SAS and WISeKey SA | Company Name | Country of Incorporation | Percentage Ownership (as at Dec 31, 2023) | | :--- | :--- | :--- | | WISeKey SA | Switzerland | 95.75% | | WISeKey Semiconductors SAS | France | 58.83 %* | - *WISeKey's ownership of WISeKey Semiconductors SAS is indirect through its majority stake in SEALSQ Corp[422](index=422&type=chunk) [Property, Plant, and Equipment](index=76&type=section&id=D.%20Property,%20Plants,%20and%20Equipment) The company's corporate headquarters are in Geneva, Switzerland, with its principal executive office in Zug, and its tangible fixed assets primarily consist of machinery and equipment | Asset category | Net book value (USD millions) | | :--- | :--- | | Machinery & equipment | 3.0 | | Office equipment and furniture | 0.2 | | Computer equipment and licenses | 0.2 | | **Total tangible fixed assets** | **3.4** | - The company does not own any facilities; its primary locations in Meyreuil, France, and Geneva, Switzerland, are operated under lease arrangements[424](index=424&type=chunk) [Operating and Financial Review and Prospects](index=77&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) [Operating Results](index=77&type=section&id=A.%20Operating%20Results) In fiscal year 2023, revenue grew **30% to $30.9 million**, driven by IoT demand, while net loss attributable to WISeKey significantly improved to **$15.4 million** | Financial Metric (USD thousands) | 2023 | 2022 | YoY Change | 2021 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | **30,918** | **23,814** | **+30%** | **17,646** | | Gross Profit | 14,744 | 10,094 | +46% | 7,452 | | *Gross Margin* | *48%* | *42%* | | *42%* | | Operating Loss | (13,299) | (10,436) | +27% | (21,160) | | Net Loss from Continuing Operations | (15,449) | (9,807) | +58% | (23,472) | | **Net Loss Attributable to WISeKey** | **(15,360)** | **(27,475)** | **-44%** | **(20,340)** | - The **30% revenue growth in 2023** was primarily driven by strong demand for IoT solutions, which saw a **30% increase in revenue to $30.1 million**[443](index=443&type=chunk)[444](index=444&type=chunk) - General & Administrative expenses rose by **51% in 2023 to $17.3 million**, largely due to costs associated with the formation and Nasdaq listing of its subsidiary, SEALSQ Corp[458](index=458&type=chunk) | Net Sales by Region (USD thousands) | 2023 | % of Total | 2022 | % of Total | | :--- | :--- | :--- | :--- | :--- | | North America | 16,646 | 54% | 13,677 | 57% | | Europe, Middle East & Africa | 10,695 | 35% | 7,264 | 30% | | Asia Pacific | 3,466 | 11% | 2,745 | 12% | | Latin America | 111 | 0% | 128 | 1% | | **Total Net Sales** | **30,918** | **100%** | **23,814** | **100%** | | Reconciliation to Adjusted EBITDA (Million USD) | 2023 | 2022 | | :--- | :--- | :--- | | Operating loss as reported | (13.3) | (10.4) | | Depreciation expense | 0.6 | 0.4 | | Amortization expense on intangibles | — | 0.1 | | **EBITDA** | **(12.7)** | **(9.9)** | | Listing-related professional fees | 0.3 | 0.1 | | **Adjusted EBITDA** | **(12.4)** | **(9.8)** | [Liquidity and Capital Resources](index=91&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) As of December 31, 2023, the company had **$15.3 million** in cash and cash equivalents and a positive working capital of **$11.2 million**, with management believing it has sufficient liquidity for the next 12 months - As of December 31, 2023, the company held **$15.3 million in cash and cash equivalents** and maintained a positive working capital of **$11.2 million**[511](index=511&type=chunk)[512](index=512&type=chunk) | Consolidated Cash Flows (USD thousands) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (14,206) | (17,144) | (21,791) | | Net cash used in investing activities | (3,021) | (484) | (2,525) | | Net cash provided by financing activities | 11,850 | 4,185 | 36,975 | - The company utilizes several convertible note facilities for funding, including agreements with L1 Capital and Anson Investments, with **L1 converting $1.2 million** and **Anson converting $3.5 million** of their notes into WISeKey Class B shares in 2023[540](index=540&type=chunk)[555](index=555&type=chunk) - In July 2023, subsidiary SEALSQ Corp entered into separate **$10 million convertible note agreements** with L1 Capital and Anson Investments to fund its operations[560](index=560&type=chunk)[568](index=568&type=chunk) | Contractual Obligations (USD thousands) as at Dec 31, 2023 | Total | Less than 1 year | 1-3 years | 3-5 years | | :--- | :--- | :--- | :--- | :--- | | Operating and short-term lease obligations | 2,269 | 641 | 1,176 | 452 | | Debt and convertible note obligations | 6,398 | 4,100 | 2,298 | - | | **Total contractual obligations** | **8,667** | **4,741** | **3,474** | **452** | [Research and Development, Patents and Licenses, Etc.](index=101&type=section&id=C.%20Research%20and%20Development,%20Patents%20and%20Licenses,%20Etc.) The company invested **$4.4 million** in R&D in 2023, focusing on new secure chips with RISC-V architecture and post-quantum cryptography, protected by **117 patents** | R&D Spending (USD millions) | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Amount | 4.4 | 3.9 | 5.6 | - Key R&D initiatives include developing a new generation of secure chips based on RISC-V architecture and offering protection against quantum computing attacks[578](index=578&type=chunk) - The company currently holds **117 individual patents** to protect its technology[581](index=581&type=chunk) [Trend Information](index=101&type=section&id=D.%20Trend%20Information) The company is adapting to industry trends by developing RISC-V based processors, complying with new FIPS 140-3 standards, and implementing hybrid post-quantum cryptographic solutions - The company is adapting to the industry trend of adopting RISC-V based processors by developing its own secure core on this architecture for its next-generation hardware[583](index=583&type=chunk) - To comply with the new FIPS 140-3 standard, which mandates side-channel attack resistance, the company has developed the VaultIC408 secure element[583](index=583&type=chunk)[584](index=584&type=chunk) - In response to the threat from quantum computers, the company is developing hybrid cryptographic solutions that incorporate post-quantum algorithms, aligning with recommendations from cybersecurity agencies like ANSSI[586](index=586&type=chunk) [Critical Accounting Estimates](index=102&type=section&id=E.%20Critical%20Accounting%20Estimates) The company's financial statements rely on critical accounting estimates for inventory valuation, income taxes, and impairment assessments of goodwill and intangible assets - Critical accounting estimates involve significant management judgment and include[590](index=590&type=chunk) - **Inventory Valuation:** Assessing obsolescence and future demand for semiconductor products with long manufacturing cycles - **Accounting for Income Taxes:** Determining the recoverability of deferred tax assets based on future profitability projections - **Impairment Assessment:** Evaluating goodwill and other intangible assets based on assumptions of future cash flows and discount rates[591](index=591&type=chunk)[593](index=593&type=chunk)[597](index=597&type=chunk) [Directors, Senior Management and Employees](index=103&type=section&id=Item%206.%20Directors,%20Senior%20Management%20and%20Employees) [Directors and Senior Management](index=103&type=section&id=A.%20Directors%20and%20Senior%20Management) The company is led by a seven-member Board of Directors, including two executive and five non-executive directors, supported by a senior management team - The Board of Directors consists of seven members: two executive directors (Carlos Moreira, CEO and Peter Ward, CFO) and five non-executive directors[598](index=598&type=chunk)[599](index=599&type=chunk) - Key senior management roles are held by experienced individuals in security, sales, finance, and semiconductor operations[599](index=599&type=chunk) [Compensation](index=108&type=section&id=B.%20Compensation) In 2023, the aggregate compensation for the board and executive officers was **CHF 4.1 million (USD 4.6 million)**, with the highest-paid executive receiving **CHF 2.3 million (USD 2.6 million)** | Compensation Summary (FY 2023) | Amount (CHF thousands) | Amount (USD thousands) | | :--- | :--- | :--- | | Aggregate Board & Executive Compensation | 4,107 | 4,571 | | Highest Paid Executive (Carlos Moreira) | 2,348 | 2,613 | - Shareholders must annually approve the maximum aggregate compensation for both the Board of Directors and the executive management[616](index=616&type=chunk) - The company maintains an Employee Stock Option Plan (ESOP) for directors, employees, and consultants, granting options on Class A and Class B shares[630](index=630&type=chunk) [Board Practices](index=110&type=section&id=C.%20Board%20Practices) The Board of Directors, with five independent members, has established audit, nomination and compensation, and strategy committees, while adhering to Swiss corporate governance practices as a foreign private issuer - The board has seven directors, with five being independent, thus complying with the NASDAQ majority independence requirement[634](index=634&type=chunk) - Key board committees include the Audit Committee, Nomination and Compensation Committee, and Strategy Committee[638](index=638&type=chunk) - As a foreign private issuer, the company follows home country (Swiss) practices which differ from NASDAQ rules regarding quorum, proxy solicitation, and shareholder approval for certain transactions[633](index=633&type=chunk)[643](index=643&type=chunk)[644](index=644&type=chunk) [Employees](index=114&type=section&id=D.%20Employees) As of December 31, 2023, WISeKey had **102 employees** in continuing operations, primarily in France and Switzerland, with the largest groups in R&D and general administration | Headcount by Activity | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cost of sales | 6 | 6 | | Research and development | 41 | 21 | | Selling and marketing | 26 | 25 | | General and administrative | 29 | 29 | | **Total** | **102** | **81** | - The majority of the company's employees are located in France (**57**) and Switzerland (**24**)[652](index=652&type=chunk) [Share Ownership](index=114&type=section&id=E.%20Share%20Ownership) CEO Carlos Moreira is the principal shareholder, beneficially owning **99.5% of Class A Shares** and **2.3% of Class B Shares** as of December 31, 2023, translating to significant voting power - CEO Carlos Moreira beneficially owns **1,593,461 Class A shares (99.5%)** and **67,434 Class B shares (2.3%)** as of December 31, 2023[655](index=655&type=chunk) - As of December 31, 2023, there were **148,039 options on Class B Shares** and **392,720 options on Class A Shares** outstanding under the company's share ownership plans[665](index=665&type=chunk) [Major Shareholders and Related Party Transactions](index=118&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) [Major Shareholders](index=118&type=section&id=A.%20Major%20Shareholders) As of May 8, 2024, CEO Carlos Moreira is the only major shareholder, beneficially owning **99.6% of Class A Shares** and **3.5% of Class B Shares**, granting him **37.7% of total voting power** | Name of beneficial owner | Total Class A Shares | Total Class B Shares | % of Outstanding Class A Shares | % of Outstanding Class B Shares | % Voting Power | | :--- | :--- | :--- | :--- | :--- | :--- | | Carlos Moreira | 1,811,641 | 116,099 | 99.6% | 3.5% | 37.7% | - The ownership figures for Carlos Moreira include shares issuable upon the exercise of options that are exercisable within **60 days of May 8, 2024**[669](index=669&type=chunk)[673](index=673&type=chunk) - As of December 31, 2023, approximately **20.3% of outstanding Class B Shares** were held by record holders residing in the U.S., including those held by the ADS depositary bank[677](index=677&type=chunk) [Related Party Transactions](index=120&type=section&id=B.%20Related%20Party%20Transactions) The company has engaged in significant related-party transactions, including its formation, financing, and ongoing operational agreements with the OISTE foundation and SEALSQ Corp - The company was formed through contributions of shares from WiseTrust SA and WISeKey SA, with CEO Carlos Moreira playing a central role in the initial structuring[679](index=679&type=chunk)[681](index=681&type=chunk)[685](index=685&type=chunk) - WISeKey has a perpetual license agreement with the OISTE foundation to use its cryptographic rootkey, involving annual fees; in 2023, OISTE invoiced WISeKey **CHF 288,168** and WISeKey charged OISTE **CHF 105,224**[711](index=711&type=chunk)[716](index=716&type=chunk)[720](index=720&type=chunk) - Following the spin-off of SEALSQ, there are ongoing intercompany loan and service agreements between WISeKey entities and SEALSQ's subsidiary, WISeKey Semiconductors SAS, to support working capital and provide management services[692](index=692&type=chunk)[693](index=693&type=chunk)[702](index=702&type=chunk) - The son and daughter-in-law of CEO Carlos Moreira are employed by a company subsidiary, with aggregate remuneration of **CHF 267,325 in 2023**[724](index=724&type=chunk)[1311](index=1311&type=chunk) [Financial Information](index=132&type=section&id=Item%208.%20Financial%20Information) [Consolidated Financial Statements and Other Financial Information](index=132&type=section&id=A.%20Consolidated%20Financial%20Statements%20and%20Other%20Financial%20Information) The company's consolidated financial statements are appended to the annual report, which also discloses an ongoing investigation by French customs authorities into an indirect subsidiary - The company's consolidated financial statements as of December 31, 2023, are included starting on page F-1 of the report[729](index=729&type=chunk) - An indirect subsidiary, WISeKey Semiconductors SAS, is under investigation by French customs authorities for errors in export forms for dual-use goods, which could result in a fine, though the potential loss cannot be reasonably estimated at this time[730](index=730&type=chunk)[731](index=731&type=chunk) [Significant Changes](index=133&type=section&id=B.%20Significant%20Changes) Several significant corporate actions occurred in 2023, including the partial spin-off and Nasdaq listing of SEALSQ Corp, and reverse stock splits for both Class A and Class B shares and ADSs - On May 24, 2023, subsidiary SEALSQ Corp was listed on the Nasdaq following a partial spin-off where **20% of its shares** were distributed to WISeKey shareholders[733](index=733&type=chunk)[734](index=734&type=chunk) - On June 22, 2023, a reverse stock split was effected: **50:1 for Class B Shares** and **25:1 for Class A Shares**[735](index=735&type=chunk) - On July 5, 2023, a **1-for-2.5 reverse split** was applied to the company's American Depositary Shares (ADSs)[735](index=735&type=chunk) [Additional Information](index=134&type=section&id=Item%2010.%20Additional%20Information) [Memorandum and Articles of Association](index=134&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) The company's capital structure features dual-class shares with differing par values but equal voting rights, a board-authorized capital band, and an "opting-out" provision for mandatory takeover bids - The company has a dual-class share structure where Class A shares have a par value of **CHF 0.25** and Class B shares have a par value of **CHF 2.50**, but each share has one vote[744](index=744&type=chunk)[745](index=745&type=chunk) - The Board of Directors has authority to increase or decrease share capital within a "capital band" until **June 21, 2028**[754](index=754&type=chunk) - The company has an "opting-out" provision in its Articles, exempting an acquirer from the mandatory takeover bid requirement under Swiss law[818](index=818&type=chunk) - Dividends can only be paid from distributable profits or reserves and require shareholder approval; the company has not paid cash dividends and does not intend to in the foreseeable future[776](index=776&type=chunk)[781](index=781&type=chunk) [Material Contracts](index=156&type=section&id=C.%20Material%20Contracts) The company has several material contracts, including COVID-19 credit facilities, convertible note agreements with L1 Capital and Anson Investments, and a perpetual license with the OISTE foundation - The company has convertible note facilities with L1 Capital and Anson Investments, allowing it to draw funds in tranches that are mandatorily convertible into Class B Shares, which will dilute existing shareholders[878](index=878&type=chunk)[881](index=881&type=chunk) - A collaboration agreement with the OISTE foundation grants WISeKey a worldwide license to use and commercialize OISTE's cryptographic Root of Trust in exchange for license and royalty fees[885](index=885&type=chunk)[886](index=886&type=chunk) - Subsidiary SEALSQ Corp entered into separate Securities Purchase Agreements with L1 Capital and Anson Investments in July 2023 for up to **$10 million each** in convertible notes, whose conversions have already begun to dilute WISeKey's ownership in SEALSQ[888](index=888&type=chunk)[891](index=891&type=chunk)[893](index=893&type=chunk) [Taxation](index=162&type=section&id=E.%20Taxation) This section outlines material U.S. federal and Swiss tax considerations for ADS holders, including the risk of PFIC classification and Swiss withholding tax on dividends - There is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, particularly for 2024, which could lead to adverse tax consequences for U.S. shareholders[908](index=908&type=chunk) - Dividends paid by the company are subject to a **35% Swiss federal withholding tax**, though eligible U.S. Holders may be able to claim a partial refund to reduce the effective rate to **15%** under the U.S.-Switzerland tax treaty[924](index=924&type=chunk)[926](index=926&type=chunk) - For U.S. Holders, distributions are generally treated as dividends, and gains on the sale of ADSs are treated as capital gains, assuming the company is not a PFIC[904](index=904&type=chunk)[906](index=906&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=170&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) [Market Risk Disclosures](index=170&type=section&id=Market%20Risk%20Disclosures) The company's primary market risks stem from foreign currency exchange rates, commodity prices, and investment securities, with no exposure to interest rate risk - The company's main market risks are foreign currency exchange rates, commodity prices, and changes in the value of investment securities[941](index=941&type=chunk) - The company is not exposed to interest rate risk as all its financial instruments have fixed interest rates[941](index=941&type=chunk) - As of December 31, 2023, the company held investments in equity securities, including one at cost valued at **$475,673** and another that was fully impaired in 2020[946](index=946&type=chunk) [Controls and Procedures](index=174&type=section&id=Item%2015.%20Controls%20and%20Procedures) [Controls and Procedures Evaluation](index=174&type=section&id=Controls%20and%20Procedures%20Evaluation) As of December 31, 2023, the CEO and CFO concluded that the company's disclosure controls and internal control over financial reporting were effective - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal year 2023[958](index=958&type=chunk) - Management assessed internal control over financial reporting using the COSO framework (2013) and concluded it was effective as of December 31, 2023[961](index=961&type=chunk) [Cybersecurity](index=175&type=section&id=Item%2016K.%20Cybersecurity) [Cybersecurity Governance and Risk Management](index=175&type=section&id=Cybersecurity%20Governance%20and%20Risk%20Management) WISeKey maintains a comprehensive cybersecurity strategy overseen by its Board and managed by a Global Security Director, with **35% of its IT budget** dedicated to cybersecurity in 2023 - Cybersecurity governance is overseen by the Board of Directors, with a Global Security Director managing security processes under the supervision of a Security Board[984](index=984&type=chunk)[985](index=985&type=chunk) - The company is certified ISO 27001 and its products are certified Common Criteria EAL5+, maintaining over **55 procedures and policies** for IT and security[987](index=987&type=chunk)[991](index=991&type=chunk) - Approximately **35% of the IT budget** was spent on cybersecurity in 2023, with a planned increase to **over 37% in 2024**[990](index=990&type=chunk) - The company conducts annual training for all employees and subcontractors to foster a cybersecurity-aware culture[993](index=993&type=chunk) [Financial Statements](index=178&type=section&id=Item%2018.%20Financial%20Statements) [Consolidated Financial Statements](index=186&type=section&id=Consolidated%20Financial%20Statements) For the year ended December 31, 2023, the company reported a net loss attributable to WISeKey of **$15.4 million** on revenues of **$30.9 million**, with total assets of **$47.8 million** | (USD thousands) | 2023 | 2022 | | :--- | :--- | :--- | | **Net Sales** | 30,918 | 23,814 | | **Operating Loss** | (13,300) | (10,436) | | **Net Loss Attributable to WISeKey** | (15,360) | (27,475) | | **Loss per Class B Share (Basic)** | (5.06) | (12.22) | | (USD thousands) | As at Dec 31, 2023 | As at Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | 47,801 | 49,496 | | Cash and cash equivalents | 15,311 | 20,706 | | **Total Liabilities** | 26,717 | 25,471 | | **Total Shareholders' Equity** | 21,084 | 24,025 | | Consolidated Cash Flows (USD thousands) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | (14,206) | (17,144) | | Net cash used in investing activities | (3,021) | (484) | | Net cash provided by financing activities | 11,850 | 4,185 | [Notes to the Consolidated Financial Statements](index=193&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes detail accounting policies, the impact of the SEALSQ spin-off, revenue recognition by segment, and information on loans, pension plans, and stock-based compensation - The company adopted the two-class method for calculating earnings per share in 2023 due to a dividend-in-kind distribution, and restated prior period EPS figures accordingly[1044](index=1044&type=chunk)[1045](index=1045&type=chunk) - Revenue from the IoT segment was **$30.1 million in 2023**, while the mPKI segment generated **$0.86 million**[1243](index=1243&type=chunk) - The company has a defined benefit pension plan with a projected benefit obligation of **$14.1 million** and plan assets of **$11.1 million**, resulting in a net liability of **$3.0 million** as of December 31, 2023[1220](index=1220&type=chunk) - As of December 31, 2023, the company had outstanding convertible notes with L1 Capital and Anson Investments, as well as similar instruments at its subsidiary SEALSQ, which are detailed in Note 22[1170](index=1170&type=chunk)[1184](index=1184&type=chunk)[1199](index=1199&type=chunk)

Exhibit 1.1 WISeKey International Holding Ltd Half-year Report January – June 2023 Condensed Consolidated Financial statements of WISeKey International Holding AG (unaudited) | Contents | | | --- | --- | | 1. Condensed Consolidated Statements of Comprehensive Income/(Loss) | 3 | | 2. Condensed Consolidated Balance Sheets | 5 | | 3. Condensed Consolidated Statements of Changes in Shareholders' Equity | 7 | | 4. Condensed Consolidated Statements of Cash Flows | 8 | | 5. Notes to the Condensed Consolidated Fin ...

Exhibit 1.1 WISeKey Reports Full Year 2022 Audited Consolidated Financial Results Copy LinkTwitterMore Schedules conference call for May 2 at 3:00 pm CET (9:00 am ET) Geneva, Switzerland, April 28, 2022 – Ad-Hoc announcement pursuant to Art. 53 of SIX Listing Rules– WISeKey International Holding Ltd. (NASDAQ: WKEY / SIX: WIHN) ("WISeKey" or the "Company" or the "Group"), a leading cybersecurity and IoT company, announced today its audited consolidated financial results for full year (FY) 2022 (period ended ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ____________________________________________________________________________________________________ (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 or ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ____________________________________________________________________________________________________ (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F | (Mark One) | | | --- | --- | | ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 or | | ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | For the fiscal year ended December 31, 2020 | | | or | | ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | | | or | | ☐ | SHELL COMPANY REPORT PURSUA ...

[Report Cover Page](index=1&type=section&id=Cover%20Page) This document is an Annual Report on Form 20-F for the fiscal year ended December 31, 2019 - This document is an Annual Report on Form 20-F for the fiscal year ended December 31, 2019, filed by WISeKey International Holding AG[2](index=2&type=chunk)[3](index=3&type=chunk) - The company's American Depositary Shares (ADSs) are registered on The Nasdaq Stock Market LLC under the trading symbol **WKEY**[6](index=6&type=chunk) - As of the report date, the company had **40,021,988 Class A Shares** and **27,621,895 Class B Shares** outstanding[7](index=7&type=chunk) - The company is classified as an Emerging Growth Company[8](index=8&type=chunk) [Preliminary Statements](index=5&type=section&id=Preliminary%20Statements) [Introduction and Use of Certain Terms](index=5&type=section&id=INTRODUCTION%20AND%20USE%20OF%20CERTAIN%20TERMS) WISeKey, a security technology holding company, listed its Class B Shares on SIX in 2016 and ADSs on NASDAQ in 2019 - The company's ADSs, each representing five Class B Shares, have been listed on NASDAQ under the symbol **"WKEY"** since December 4, 2019[15](index=15&type=chunk) [Special Note Regarding Forward-Looking Statements](index=6&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD%20LOOKING%20STATEMENTS) This report contains forward-looking statements subject to risks and uncertainties detailed in the Risk Factors section - The report includes forward-looking statements regarding growth strategies, profitability, customer attraction, and product development[18](index=18&type=chunk)[21](index=21&type=chunk) - Investors are cautioned not to place undue reliance on these forward-looking statements as they are subject to significant risks and uncertainties detailed in **"Item 3D. Risk Factors"**[19](index=19&type=chunk) [Part I](index=7&type=section&id=Part%20I) [Item 3. Key Information](index=7&type=section&id=Item%203.%20Key%20Information) This section presents key financial data for 2017-2019 and outlines significant business risks, including competition and dilution [A. Selected Financial Data](index=7&type=section&id=A.%20Selected%20Financial%20Data) Selected consolidated financial data for 2017-2019 shows a 2019 net income driven by discontinued operations gain | USD'000 (except earnings per share) | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Net sales** | 22,652 | 34,280 | 33,674 | | **Operating income / (loss)** | (20,504) | (9,060) | (7,869) | | **Income/ (loss) from continuing operations, net** | (23,030) | (9,908) | (10,126) | | **Income / (loss) on discontinued operations** | 30,484 | (6,357) | (14,624) | | **Net income / (loss)** | 7,454 | (16,265) | (24,750) | | **Net income / (loss) attributable to WISeKey** | 8,187 | (16,278) | (24,267) | | **Basic Earning per share (USD)** | 0.23 | (0.48) | (0.82) | | USD'000 | As at Dec 31, 2019 | As at Dec 31, 2018 | As at Dec 31, 2017 | | :--- | :--- | :--- | :--- | | **Total current assets** | 23,584 | 32,118 | 26,071 | | **TOTAL ASSETS** | 49,904 | 78,453 | 67,156 | | **Total current liabilities** | 20,150 | 34,875 | 23,716 | | **TOTAL LIABILITIES** | 29,460 | 74,478 | 53,550 | | **Total shareholders' equity** | 20,444 | 3,975 | 8,726 | - The company adopted the new lease accounting standard ASC 842 as of January 1, 2019, making 2019 financial data not directly comparable to prior years prepared under ASC 840[25](index=25&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) [D. Risk Factors](index=9&type=section&id=D.%20Risk%20Factors) The company faces significant business, financial, legal, and share-related risks, including intense competition and dilution - The company faces intense competition from larger, better-known global security companies such as VeriSign, DigiCert, NXP Semiconductors, and STMicroelectronics, which have greater financial resources and name recognition[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - WISeKey has a history of losses, with 2019 being its first profitable year, driven by a **$31.1 million** gain on the disposal of a business, and an accumulated deficit of **$189.2 million** as of December 31, 2019[73](index=73&type=chunk) - The company has multiple financing agreements, including a Share Subscription Facility (SFF) with GEM, a Standby Equity Distribution Agreement (SEDA) with Yorkville, and several convertible loans, which could lead to substantial issuance of new shares and dilute existing shareholders' interests[84](index=84&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - As a foreign private issuer and an emerging growth company, WISeKey is exempt from certain NASDAQ corporate governance and SEC disclosure requirements applicable to U.S. domestic companies, which may afford less protection to shareholders[120](index=120&type=chunk)[123](index=123&type=chunk)[125](index=125&type=chunk) - The company's founder, Carlos Moreira, holds over **50%** of the company's voting rights, giving him significant influence over corporate matters, including the election of directors[76](index=76&type=chunk) [Item 4. Information on the Company](index=32&type=section&id=Item%204.%20Information%20on%20the%20Company) WISeKey, a Swiss cybersecurity firm, divested QuoVadis to focus on IoT, secure semiconductors, and digital identity [A. History and Development of the Company](index=32&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) WISeKey, established in 2015, sold its QuoVadis Group for $45 million in 2019 to focus on IoT and cybersecurity - In the first quarter of 2019, WISeKey completed the sale of its QuoVadis Group to DigiCert Inc. for **$45 million** in cash[154](index=154&type=chunk) - Following the sale, the company retained its ISTANA Platform to secure the connected car industry and focused its core business on Cybersecurity SaaS, secure semiconductor chips, IoT, AI, and Blockchain services[154](index=154&type=chunk) [B. Business Overview](index=32&type=section&id=B.%20Business%20Overview) WISeKey offers a unified cybersecurity platform for IoT, leveraging RoT and PKI, with a focus on customer expansion - WISeKey's cybersecurity platform integrates secure semiconductors, cybersecurity software, and a globally recognized Root of Trust (RoT) to protect IoT devices and digital identities[156](index=156&type=chunk)[162](index=162&type=chunk) - The company's core technology is based on Digital Identities, Public Key Infrastructure (PKI), and a unique Root of Trust (RoT) endorsed by the neutral, Swiss-based OISTE Foundation[181](index=181&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk) - Key growth strategies include expanding within the existing **3,500+ customer base**, acquiring new customers, expanding geographic coverage with a focus on the U.S., and selectively pursuing strategic acquisitions[163](index=163&type=chunk)[204](index=204&type=chunk) - The company's product portfolio includes secure microchips (VaultIC, Nanoseal), PKI software suites (CertifyID), digital identity management (WISeID), and brand protection solutions (WISeAuthentic)[189](index=189&type=chunk)[191](index=191&type=chunk) [C. Organizational Structure](index=43&type=section&id=C.%20Organizational%20Structure) WISeKey International Holding AG is the parent company, with key subsidiaries in France and Switzerland | Company Name | Country of incorporation | Percentage ownership (as at Dec 31, 2019) | | :--- | :--- | :--- | | WISeKey SA | Switzerland | 95.58% | | WISeKey Semiconductors SAS | France | 100.00% | [D. Property, Plants, and Equipment](index=43&type=section&id=D.%20Property%2C%20Plants%2C%20and%20Equipment) The company operates from leased facilities in France and Switzerland, with $1.8 million in tangible assets | Asset category | Net book value (USD millions) | | :--- | :--- | | Machinery & equipment | 1.5 | | Office equipment and furniture | 0.2 | | Computer equipment and licenses | 0.1 | | **Total tangible fixed assets** | **1.8** | - The company's most significant facilities are leased properties in Meyreuil, France (**1,498 sq. meters**) and Geneva, Switzerland (**693 sq. meters**)[210](index=210&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=44&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section details financial performance, liquidity, and capital resources, heavily influenced by the QuoVadis divestiture [A. Operating Results](index=44&type=section&id=A.%20Operating%20Results) 2019 operating results show a 34% revenue decrease for continuing operations, offset by a $31.1 million divestiture gain | USD'000 | 12 months ended Dec 31, 2019 | 12 months ended Dec 31, 2018 | Year-on-Year Variance | | :--- | :--- | :--- | :--- | | **Net sales** | 22,652 | 34,280 | -34% | | **Gross profit** | 9,456 | 15,961 | -41% | | **Operating income / (loss)** | (20,504) | (9,060) | 126% | | **Income/ (loss) from continuing operations, net** | (23,030) | (9,908) | 132% | | **Income / (loss) on discontinued operations** | 30,484 | (6,357) | 580% | | **Net income / (loss)** | 7,454 | (16,265) | 146% | - The **34% decrease** in total revenue for 2019 was primarily attributed to the sale of the QuoVadis Group, a downturn in the global semiconductor industry, and the end-of-life cycle for an older MicroPass product[232](index=232&type=chunk) - The company achieved a net income of **$7.5 million** in 2019, a significant improvement from a net loss of **$16.3 million** in 2018, driven by a **$31.1 million** gain on the disposal of the QuoVadis business[256](index=256&type=chunk)[257](index=257&type=chunk) | (Million USD) | 12 months ended December 31, 2019 | 12 months ended December 31, 2018 | | :--- | :--- | :--- | | **Operating loss as reported** | (20.5) | (9.1) | | **EBITDA** | (19.2) | (7.7) | | **Adjusted EBITDA** | (12.6) | (2.7) | [B. Liquidity and Capital Resources](index=59&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) Liquidity improved in 2019 due to the QuoVadis sale, with $12.1 million cash and access to various financing facilities - As of December 31, 2019, the company held cash and cash equivalents of **$12.1 million**, bolstered by the sale of the QuoVadis Group[310](index=310&type=chunk) | USD'000 | 12 months ended Dec 31, 2019 | 12 months ended Dec 31, 2018 | 12 months ended Dec 31, 2017 | | :--- | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | (13,891) | (8,492) | (4,931) | | **Net cash provided by (used in) investing activities** | 36,626 | (4,244) | (12,852) | | **Net cash provided by (used in) financing activities** | (17,284) | 11,876 | 25,509 | - The company has multiple financing facilities available as of year-end 2019, including **CHF 56.1 million** from the GEM Facility, **CHF 47.1 million** from the Yorkville SEDA, and **CHF 30 million** from the LSI Convertible Facility[321](index=321&type=chunk)[346](index=346&type=chunk)[381](index=381&type=chunk) [C. Research and Development, Patents and Licenses, Etc.](index=68&type=section&id=C.%20Research%20and%20Development%2C%20Patents%20and%20Licenses%2C%20Etc.) R&D spending increased to $6.4 million in 2019, supported by a portfolio of 88 patents - Research and development spending increased to **$6.4 million** in 2019, up from **$5.3 million** in 2018 and 2017[382](index=382&type=chunk) - The company owns **88 individual patents** to protect its proprietary technology[382](index=382&type=chunk) [F. Tabular Disclosure of Contractual Obligations](index=69&type=section&id=F.%20Tabular%20Disclosure%20of%20Contractual%20Obligations) Total contractual obligations were $11.0 million as of December 31, 2019, with $8.3 million due within one year | Contractual obligations (USD'000s) | Total | Less than 1 year | 1-3 years | 3-5 years | more than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating and short-term lease obligations | 3,132 | 591 | 910 | 588 | 1,043 | | Finance lease obligations | 285 | 114 | 171 | | | | Debt and convertible note obligations | 7,596 | 7,596 | - | - | - | | **Total contractual obligations** | **11,013** | **8,301** | **1,081** | **588** | **1,043** | [Item 6. Directors, Senior Management and Employees](index=69&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section covers leadership, compensation, board structure, and employee base, noting a headcount decrease [A. Directors and Senior Management](index=69&type=section&id=A.%20Directors%20and%20Senior%20Management) This section lists the company's non-executive and executive directors and senior management, including key figures - The board of directors includes Carlos Moreira as Chairman & CEO, Dourgam Kummer as Vice-Chairman, and Peter Ward as CFO[388](index=388&type=chunk) [B. Compensation](index=73&type=section&id=B.%20Compensation) Compensation practices follow Swiss 'say on pay' rules, with total 2019 compensation for executives at CHF 7.9 million - Aggregate compensation paid to members of the board of directors and executive officers for the year ended December 31, 2019, was **CHF 7,865,000**[407](index=407&type=chunk) - The highest-paid executive, CEO Carlos Moreira, received total compensation of **CHF 3,588,000** in 2019[407](index=407&type=chunk) - The company is subject to Swiss 'say on pay' rules, requiring annual shareholder votes on the maximum aggregate compensation for the board of directors and executive management[406](index=406&type=chunk) [C. Board Practices](index=75&type=section&id=C.%20Board%20Practices) The six-member board, with three independent directors, follows Swiss governance practices differing from NASDAQ - The board has six members, of which three are independent, which does not comply with the NASDAQ requirement for a majority-independent board, an exemption available to foreign private issuers[419](index=419&type=chunk) - The board has three committees: an Audit Committee, a Nomination and Compensation Committee, and a Strategy Committee[420](index=420&type=chunk) [D. Employees](index=79&type=section&id=D.%20Employees) Employee headcount decreased to 84 in 2019, primarily in France and Switzerland, with agreeable employee relations | Area of Activity | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Cost of sales | 4 | 13 | 14 | | Research and development | 29 | 42 | 49 | | Selling and marketing | 23 | 45 | 36 | | General and administrative | 28 | 54 | 47 | | **Total** | **84** | **154** | **146** | [E. Share Ownership](index=79&type=section&id=E.%20Share%20Ownership) CEO Carlos Moreira holds a controlling 58.4% voting interest, with an ESOP for Class B share options - CEO Carlos Moreira beneficially owns **38,508,733 Class A Shares** (**96.2%** of the class) and has rights to Class B shares, giving him a total of **58.4%** of the company's voting power[440](index=440&type=chunk)[455](index=455&type=chunk)[456](index=456&type=chunk) - The company has an Employee Share Option Plan (ESOP) for granting options on Class B shares to directors, employees, and consultants, with **2,727,594 options** outstanding as of December 31, 2019[415](index=415&type=chunk)[450](index=450&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=81&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details ownership, with CEO Carlos Moreira as major shareholder, and related party transactions with OISTE [A. Major Shareholders](index=81&type=section&id=A.%20Major%20Shareholders) CEO Carlos Moreira is the major shareholder, controlling 58.4% of total voting power as of December 31, 2019 | Name of beneficial owner | Total Class A Shares | Total Class B Shares*** | % Voting Power** | | :--- | :--- | :--- | :--- | | Carlos Moreira | 38,508,733 | 1,019,179 | 58.4% | [B. Related Party Transactions](index=83&type=section&id=B.%20Related%20Party%20Transactions) Key related party transactions involve the OISTE foundation, which licenses its cryptographic rootkey to WISeKey - WISeKey has a perpetual license agreement with the OISTE foundation to exclusively use its cryptographic rootkey, a critical component of its technology, in return for royalties and fees[486](index=486&type=chunk)[488](index=488&type=chunk) - A conflict of interest potential exists as three members of WISeKey's board of directors (Carlos Moreira, Philippe Doubre, and Dourgam Kummer) are also members of the foundation board of OISTE[481](index=481&type=chunk) - In 2019, OISTE invoiced WISeKey **USD 219,332** for fees, and WISeKey charged OISTE **USD 139,506** for hosting facilities and personnel[489](index=489&type=chunk) [Item 8. Financial Information](index=91&type=section&id=Item%208.%20Financial%20Information) This section refers to consolidated financial statements and notes no material legal proceedings - The company is not aware of any legal or arbitration proceedings against it, other than a claim for breach of contract from a former employee which is not expected to have a significant financial effect[494](index=494&type=chunk) [Item 9. The Listing](index=92&type=section&id=Item%209.%20The%20Listing) Details on the company's stock listings, including Class B Shares on SIX and ADSs on NASDAQ - The company's Class B Shares are traded on the SIX Swiss Exchange under the symbol **"WIHN"**[498](index=498&type=chunk) - The company's American Depositary Shares (ADSs) are traded on the NASDAQ Capital Market under the symbol **"WKEY"**[498](index=498&type=chunk) [Item 10. Additional Information](index=92&type=section&id=Item%2010.%20Additional%20Information) This section details corporate structure, material contracts, and U.S. and Swiss tax considerations for shareholders [B. Memorandum and Articles of Association](index=92&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) Details on governance and capital structure under Swiss law, including dual-class shares and an opting-out provision - The company has a dual-class share structure where both Class A (**CHF 0.01** par value) and Class B (**CHF 0.05** par value) shares carry one vote each, giving Class A shareholders greater voting power relative to their capital contribution[518](index=518&type=chunk) - The company's Articles of Association contain an **"opting-out"** provision, meaning an acquirer who surpasses the **33 1/3%** voting rights threshold is not obligated to make a mandatory public takeover offer to all shareholders[576](index=576&type=chunk) - The board is authorized to issue new shares through authorized and conditional share capital, and under certain circumstances, can limit or withdraw the pre-emptive rights of existing shareholders to facilitate strategic transactions or capital raising[505](index=505&type=chunk)[507](index=507&type=chunk) [C. Material Contracts](index=112&type=section&id=C.%20Material%20Contracts) Outlines significant financing agreements with Yorkville, GEM, and LSI, and the critical OISTE Root of Trust license - The company has a Standby Equity Distribution Agreement (SEDA) with Yorkville, providing up to **CHF 50 million** in equity financing, with **CHF 47.1 million** remaining available as of Dec 31, 2019[631](index=631&type=chunk)[632](index=632&type=chunk) - A Share Subscription Facility (SFF) with GEM provides up to **CHF 60 million**, with **CHF 56.1 million** remaining available as of Dec 31, 2019[645](index=645&type=chunk)[646](index=646&type=chunk) - The company has entered into multiple convertible loan agreements, including with Crede (**USD 3M**), Yorkville (**USD 3.5M**, later replaced), and a new facility with Long State Investment (LSI) for up to **CHF 30M**[635](index=635&type=chunk)[641](index=641&type=chunk)[650](index=650&type=chunk) - A collaboration agreement with the OISTE foundation grants WISeKey a worldwide license to commercialize its cryptographic Root of Trust in exchange for license and royalty fees[652](index=652&type=chunk)[653](index=653&type=chunk) [E. Taxation](index=117&type=section&id=E.%20Taxation) Describes U.S. federal income tax consequences for ADS holders and relevant Swiss tax laws, including PFIC status - The company does not believe it was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes in 2019, but notes that this determination is uncertain and subject to change[670](index=670&type=chunk) - Dividends paid by the company are subject to a **35%** Swiss federal withholding tax, which U.S. holders may be eligible for a partial refund, reducing the rate to **15%**, under the U.S.-Switzerland tax treaty[686](index=686&type=chunk)[688](index=688&type=chunk) - Distributions paid out of reserves from capital contributions are not subject to Swiss federal withholding tax[686](index=686&type=chunk) [Item 11. Quantitative and Qualitative Disclosures about Market Risk](index=123&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from foreign currency exchange rates, commodity prices, and investment securities - The company is exposed to foreign currency exchange rate risk due to its international operations but does not currently hedge against these fluctuations[701](index=701&type=chunk)[302](index=302&type=chunk) - The company has limited exposure to commodity price risk and does not use futures or other instruments to manage it[705](index=705&type=chunk) - As of December 31, 2019, the company held two investment securities: one at fair value (**$0.76M**) and one at cost (**$7.0M**), and does not hedge against fluctuations in their value[706](index=706&type=chunk) [Item 15. Controls and Procedures](index=126&type=section&id=Item%2015.%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls and internal control over financial reporting were effective in 2019 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[718](index=718&type=chunk) - Management assessed the internal control over financial reporting using the COSO framework and concluded that it was effective as of December 31, 2019[721](index=721&type=chunk) [Financial Statements](index=133&type=section&id=Financial%20Statements) [Report of Independent Registered Public Accounting Firm](index=135&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) BDO AG issued an unqualified audit opinion on the consolidated financial statements for 2017-2019, conforming to GAAP - BDO AG issued an unqualified audit opinion on the consolidated financial statements for the fiscal years 2017, 2018, and 2019[748](index=748&type=chunk) - The audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB)[750](index=750&type=chunk) [Consolidated Financial Statements](index=136&type=section&id=Consolidated%20Financial%20Statements) This section presents the consolidated financial statements for 2017-2019, including income, balance sheet, and cash flows - The Consolidated Statement of Comprehensive Income/(Loss) shows a net income of **$7.5 million** for 2019, compared to a net loss of **$16.3 million** in 2018[754](index=754&type=chunk) - The Consolidated Balance Sheet as of December 31, 2019, shows total assets of **$49.9 million** and total shareholders' equity of **$20.4 million**[756](index=756&type=chunk) - The Consolidated Statement of Cash Flows for 2019 shows net cash used in operating activities of **($13.9) million**, net cash provided by investing activities of **$36.6 million**, and net cash used in financing activities of **($17.3) million**[761](index=761&type=chunk) [Notes to the Consolidated Financial Statements](index=143&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes detail accounting policies, going concern, segment info, QuoVadis divestiture, financing, and related parties - The company's going concern assessment indicates a need for approximately **$2.1 million** to fund operations and financial commitments through March 31, 2021, which it expects to cover through available financing facilities like the GEM Facility and Yorkville SEDA[769](index=769&type=chunk)[775](index=775&type=chunk) - Note 37 details the divestiture of the QuoVadis Group, which was completed in January/February 2019 and resulted in a gain on disposal of **$31.1 million**, reported within discontinued operations[1017](index=1017&type=chunk)[1027](index=1027&type=chunk)[1031](index=1031&type=chunk) - Note 24 provides extensive details on the company's various financing instruments, including convertible loans and equity lines of credit with GEM, ExWorks, Yorkville, Crede, and LSI, outlining their terms and accounting treatment[891](index=891&type=chunk)[894](index=894&type=chunk)[910](index=910&type=chunk) - Note 35 breaks down financial performance by the company's two reportable segments: IoT and mPKI. In 2019, the IoT segment generated **$20.5 million** in revenue, while the mPKI segment generated **$2.1 million**[1007](index=1007&type=chunk)[1009](index=1009&type=chunk)