20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________________________________________________________________________________

FORM 20-F

____________________________________________________________________________________________________

(Mark One) 

o 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, 2019

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

o SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________.

Commission file number: 001-39115

____________________________________________________________________________________________________

WISEKEY INTERNATIONAL HOLDING AG

(Exact name of Registrant as specified in its charter)

____________________________________________________________________________________________________

WISEKEY INTERNATIONAL HOLDING LTD

(Translation of Registrant's name into English)

____________________________________________________________________________________________________

Canton of Zug, Switzerland

(Jurisdiction of incorporation or organization)

General-Guisan-Strasse 6

CH-6300 Zug, Switzerland

(Address of principal executive offices) ____________________________________________________________________________________________________

Peter Ward
Chief Financial Officer

WISeKey International Holding AG

General-Guisan-Strasse 6

CH-6300 Zug, Switzerland

Tel: +41-22-594-3000

Fax: +41-22-594-3001

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Copies to:

Herman H. Raspé, Esq.
Patterson Belknap Webb & Tyler LLP

1133 Avenue of the Americas
New York, New York 10036
Tel: (212) 336-2000

____________________________________________________________________________________________________

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbols	Name of each exchange and on which registered
American Depositary Shares, each representing five Class B Shares, par value CHF 0.05 per share Class B Shares, par value CHF 0.05 per share*	WKEY	The Nasdaq Stock Market LLC

____________________
* Not for trading, but only in connection with the registration of the American Depositary Shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 40,021,988 Class A Shares and 27,621,895 Class B Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or (15)(d) of the Securities Exchange Act of 1934. Yes o No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "accelerated filer," "large accelerated filer" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o	Accelerated Filer o	Non-Accelerated Filer o
		Emerging Growth Company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o

† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☒ International Financial Reporting Standards as issued by the International Accounting Standards Board o Other o

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

TABLE OF CONTENTS

INTRODUCTION AND USE OF CERTAIN TERMS	1
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS	2
Item 1.   Identity of Directors, Senior Management and Advisers	3
Item 2.   Offer Statistics and Expected Timetable	3
Item 3.   Key Information	3
A.   Selected Financial Data	3
B.   Capitalization and Indebtedness	5
Not applicable.	5
C.   Reasons for the Offer and Use of Proceeds	5
Not applicable.	5
D.   Risk Factors	5
Item 4.   Information on the Company	28
A.   History and Development of the Company	28
B.   Business Overview	28
C.   Organizational Structure	39
D.   Property, Plants, and Equipment	39
Item 4A.   Unresolved Staff Comments	40
Item 5.   Operating and Financial Review and Prospects	40
A.   Operating Results	40
B.   Liquidity and Capital Resources	55
C.   Research and Development, Patents and Licenses, Etc.	64
D.   Trend Information	64
E.   Off-Balance Sheet Arrangements	65
F.   Tabular Disclosure of Contractual Obligations	65
Item 6.   Directors, Senior Management and Employees	65
A.   Directors and Senior Management	65
B.   Compensation	69
C.   Board Practices	71
D.   Employees	75
E.   Share Ownership	75
Item 7.   Major Shareholders and Related Party Transactions	77
A.   Major Shareholders	77
B.   Related Party Transactions	79
C.   Interests of experts and counsel	86
Item 8.   Financial Information	86
A.   Consolidated Financial Statements and Other Financial Information	86
B.   Significant Changes	86
Item 9.   The Listing	87
A.   Listing Details	87
B.   Plan of Distribution	87
C.   Markets	87
D.   Selling Shareholders	87
E.   Dilution	87
F.   Expenses of the Issue	87
Item 10.   Additional Information	87
A.   Share Capital	87
B.   Memorandum and Articles of Association	87
C.   Material Contracts	107
D.   Exchange Controls	112
E.   Taxation	112
F.   Dividends and Paying Agents	117
G.   Statement by Experts	117
H.   Documents on Display	118
I.   Subsidiary Information	118
Item 11.   Quantitative and Qualitative Disclosures about Market Risk	118
Item 12.   Description of Securities Other than Equity Securities	119

i

A.   Debt Securities	119
B.   Warrants and Rights	119
C.   Other Securities	119
D.   American Depositary Shares	119
Item 13.   Defaults, Dividend Arrearages and Delinquencies	121
Item 14.   Material Modifications to The Rights of Security Holders and Use of Proceeds	121
Item 15.   Controls and Procedures	121
Item 16.   [RESERVED]	121
A.   Audit Committee Financial Expert	121
B.   Code of Ethics	121
C.   Principal Accounting Fees and Services	122
D.   Exemptions from the Listing Standards for Audit Committees	122
E.   Purchases of Equity Securities by the Issuer and Affiliated Purchasers	122
F.   Change in Registrant's Certifying Accountant	123
G.   Corporate Governance	123
H.   Mine Safety Disclosure	123
Item 17.   Financial Statements	124
Item 18.   Financial Statements	124
Item 19.   Exhibits	124
Index to Exhibits	124
SIGNATURES	127

ii

INTRODUCTION AND USE OF CERTAIN TERMS

We were formed in 2015 as a holding company to incorporate, acquire, hold, and dispose of interests in national and international entities, in particular entities active in the area of security technology and related areas. Our Class B Shares, as defined below, have been listed on the Swiss Exchange (SIX) since 2016 and our American Depositary Shares ("ADSs") have been listed on the Nasdaq Stock Market LLC under the symbol "WKEY" since December 4, 2019. The Bank of New York Mellon, acting as depositary, registers and delivers our ADSs, each of which represents five of our Class B Shares.

We have prepared this annual report using a number of conventions, which you should consider when reading the information contained herein. In this annual report, "we," "us," "our Company," "the Group," "WISeKey," "WISeKey International Holding Ltd" and "our" shall refer to WISeKey International Holding AG and its subsidiaries, affiliates, and predecessor entities. Additionally, this annual report uses the following conventions:

· "CHF" and "Swiss francs" refer to the legal currency of Switzerland

· "Class A Shares" refers to our Class A Shares, par value CHF 0.01 per share

· "Class B Shares" refers to our Class B Shares, par value CHF 0.05 per share

· "NASDAQ" refers to the Nasdaq Stock Market LLC

· "PKI" refers to Public Key Infrastructure

· "$," "US $," "USD" and "U.S. dollars" refer to the legal currency of the United States

· "SIX" refers to the Swiss Exchange (SIX)

· "Switzerland" refers to the Swiss Confederation

· "IoT" refers to Internet of Things

1

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This annual report contains forward-looking statements. Some of these forward-looking statements can be identified by terms and phrases such as "anticipate," "should," "likely," "foresee," "believe," "estimate," "expect," "intend," "continue," "could," "may," "plan," "project," "predict," "will," and similar expressions. Forward-looking statements appear in a number of places in this annual report and include, but are not limited to, statements contained in the sections entitled "Item 3. Key Information," "Item 4. Information on the Company" and "Item 5. Operating and Financial Review and Prospects."

These forward-looking statements include, but are not limited to, statements relating to:

· Our anticipated goals, growth strategies and profitability;

· Our ability to attract new customers and retain existing customer base;

· Our ability to attract and retain qualified employees and key personnel;

· Our ability to develop new products and enhancements to our existing products;

· Our ability to anticipate market needs and opportunities;

· Our ability to prevent security breaches and unauthorized access to confidential customer information;

· Our ability to maintain, protect and enhance our intellectual property;

· The sufficiency of our cash and cash equivalents to meet our liquidity needs;

· Our ability to comply with modified or new laws and regulations relating to our industries;

· The activities of our competitors and the introduction of competing products by our competitors;

· How long we will qualify as an emerging growth company or a foreign private issuer;

· The future growth of the information technology and cybersecurity industry;

· Assumptions underlying or related to any of the foregoing;

· Other risks and uncertainties, including those listed in this section of this Form 20-F titled "Item 3.D—Risk Factors."

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us and are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, levels of activity, performance or achievements to differ materially from the results, levels of activity, performance or achievements expressed or implied by these forward-looking statements which are set forth in "Item 3D. Risk Factors." Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results.

Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement included in this annual report should not be construed as exhaustive. You should read this annual report, and each of the documents filed as exhibits to the annual report, completely, with this cautionary note in mind, and with the understanding that our actual future results may be materially different from what we expect.

2

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. Selected Financial Data

The following tables set forth our selected consolidated financial and other data for the fiscal years ended December 31, 2019, December 31, 2018 and December 31, 2017 and are derived from our audited consolidated financial statements included elsewhere in this annual report. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this annual report, and the information contained in "Item 5. Operating and Financial Review and Prospects" and "Item 3D. Risk Factors." The historical financial and other data included here and elsewhere in this annual report should not be assumed to be indicative of our future financial condition or results of operations.

We note that, in 2019, the Group adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which, under its core principle, requires a lessee to recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. The Group also adopted ASU 2018-11, Leases (Topic 842), and ASU 2018-10, Codification improvements to Topic 842 ("ASC 842"), which provides a new transition method and a practical expedient for separating components of a contract intended to reduce costs and ease implementation of the lease standard for financial statement preparers. There have also been some practical expedients provided with the aim of simplifying adoption and the Group has elected to apply these. The practical expedients allow that an entity need not reassess any expired or existing contracts, nor reassess the lease classification for expired or existing leases, nor reassess initial direct costs for existing leases. They must all be applied as a package. Following on from ASU 2018-11, entities are permitted to elect not to restate comparative periods in the period of adoption. The Group has elected to follow this guidance.

As a result of the adoption of ASU 2016-02, the Group, as a lessee, recognized right-of-use assets and related lease liabilities on its balance sheet for all arrangements with terms longer than twelve months from January 01, 2019. In line with the practical expedients, WISeKey did not reassess any expired or existing contracts, nor reassess the lease classification for expired or existing leases, nor reassess initial direct costs for existing leases. The majority of leases held as at January 01, 2019 (the application date) were classified as operating leases in prior periods and should continue to be treated as such. There was no material impact on the Group’s results of operations in 2019 upon adoption of the new standard.

We adopted ASC 842 as of January 01, 2019 using the cumulative effect adjustment approach. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the new standard to all comparative periods presented. Financial statements for the years ended December 31, 2018 and 2017 have not been restated.

Therefore, our selected consolidated financial and other data for the fiscal year ended December 31, 2019 reflect the requirements of the new leasing standard ASC 842 and the related ASUs, whilst our selected consolidated financial and other data for the fiscal years ended December 31, 2018 and December 31, 2017 reflect the old leasing standard ASC 840. Accordingly, our selected consolidated financial and other data related to leasing for the fiscal year ended December 31, 2019 are not directly comparable to those presented for earlier periods.

3

Consolidated Statement of Comprehensive Income/(Loss)

	12 months ended December 31,
USD'000 (except earnings per share)	2019	2018	2017
Net sales	22,652	34,280	33,674
Cost of sales	(13,196)	(18,319)	(17,870)
Gross profit	9,456	15,961	15,804
Total operating expenses	(29,960)	(25,021)	(23,673)
Operating income / (loss)	(20,504)	(9,060)	(7,869)
Non-operating expenses	(2,513)	(795)	(2,186)
Income / (loss) from continuing operations before income tax expense	(23,017)	(9,855)	(10,055)
Income tax (expense)/recovery	(13)	(53)	(71)
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)
Less: Net income / (loss) attributable to noncontrolling interests	(733)	13	(483)
Net income / (loss) attributable to WISeKey International Holding AG	8,187	(16,278)	(24,267)
Earnings per share (USD)
Earnings from continuing operations per share - Basic	(0.64)	(0.29)	(0.34)
Earnings from continuing operations per share - Diluted	(0.64)	(0.29)	(0.34)
Earnings from discontinued operations per share - Basic	0.84	(0.19)	(0.50)
Earnings from discontinued operations per share - Diluted	0.81	(0.19)	(0.50)
Earning per share attributable to WISeKey International Holding AG
Basic	0.23	(0.48)	(0.82)
Diluted	0.23	(0.48)	(0.82)
Other comprehensive income / (loss)	(1,683)	395	1,071
Comprehensive income / (loss)	5,771	(15,870)	(23,679)
Comprehensive income / (loss) attributable to noncontrolling interests	(860)	(10)	(851)
Comprehensive income / (loss) attributable to WISeKey International Holding AG	6,631	(15,860)	(22,828)

4

Consolidated Balance Sheet

	As at December 31,
USD'000 (except share amounts)	2019	2018	2017
Cash and cash equivalents	12,121	9,146	9,583
Restricted cash, current	2,525	618	-
Other current assets	8,938	22,354	16,488
Total current assets	23,584	32,118	26,071
Total noncurrent assets	26,320	46,335	41,085
TOTAL ASSETS	49,904	78,453	67,156
Total current liabilities	20,150	34,875	23,716
Total noncurrent liabilities	9,310	39,603	29,834
TOTAL LIABILITIES	29,460	74,478	53,550
Redeemable preferred stock	-	-	4,880
Common stock - Class A CHF 0.01 par value Authorized - 40,021,988, 40,021,988 and 40,021,988 shares Issued and outstanding - 40,021,988, 40,021,988 and 40,021,988 shares	400	400	400
Common stock - Class B CHF 0.05 par value Authorized - 41,066,298, 41,063,901 and 35,517,168 Issued - 28,824,086, 28,769,797 and 24,590,918 Outstanding - 27,621,895, 26,681,736 and 24,590,918	1,475	1,472	1,261
Total shareholders' equity (deficit) attributable to WISeKey shareholders	22,015	4,858	9,609
Noncontrolling interests in consolidated subsidiaries	(1,571)	(883)	(883)
Total shareholders' equity	20,444	3,975	8,726
TOTAL LIABILITIES AND EQUITY AND REDEEMABLE PREFERRED SHARES	49,904	78,453	67,156

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risks Related to Our Business and Industry

Prolonged economic uncertainties or downturns could materially adversely affect our business.

Our business depends on our current and prospective customers' ability and willingness to spend money in security applications, which in turn is dependent upon the overall economic health. Negative economic conditions in the global economy, including conditions resulting from financial and credit market fluctuations, could cause a decrease in corporate spending on information security software. Continuing economic challenges may cause our customers to re-evaluate decisions to purchase our solution or to delay their purchasing decisions, which could adversely impact our results of operations.

5

The future growth of the information technology and cybersecurity industry is uncertain.

Information (including cybersecurity) technology companies are generally subject to the following risks: rapidly changing technologies; short product life cycles; fierce competition; aggressive pricing and narrow profit margins; the loss of patent, copyright and trademark protections; cyclical market patterns; evolving industry standards; and frequent new product introductions. Technology companies may be smaller and less experienced companies, with limited product lines, markets or financial resources and fewer experienced management or marketing personnel. Information technology company stocks, especially those which are Internet related, have experienced extreme price and volume fluctuations that are often unrelated to their operating performance.

Technological Change

WISeKey needs to keep pace with changing technologies in order to provide effective identification and authentication solutions. In order to be successful, WISeKey needs to anticipate, and quickly react to, rapid changes occurring in communications technologies and to the development of new and improved devices and services that result from these changes. If WISeKey is unable to respond quickly and cost-effectively to changing communications technologies and devices and evolving industry standards, the existing service offering could become non-competitive and WISeKey may lose market share. For example, if the Internet is rendered obsolete or less important by faster, more efficient technologies, WISeKey will have to offer non-Internet-based solutions or it will risk losing current and potential clients. In addition, to the extent that mobile phones, pagers, personal digital assistants or other devices become important aspects of digital communications solutions, WISeKey needs to have the technological expertise to incorporate them into its security solutions. Therefore, WISeKey's success will depend, in part, on its ability to effectively use leading technologies critical to the business, enhance its existing solutions, find appropriate technology partners, and continue to develop new solutions and technology that address the increasingly sophisticated and varied needs of its current and prospective clients and their customers and its ability to influence and respond to technological advances, emerging industry and regulatory standards and practices and competitive service offerings. WISeKey's ability to remain technologically competitive may require substantial expenditures and lead-time. If WISeKey is unable to adapt in a timely manner to changing market conditions or customer requirements, its business, financial condition and results of operations could be seriously harmed.

WISeKey faces intense competition from companies that are larger and better known than we are, and we may lack sufficient financial or other resources to maintain or improve our competitive position.

The digital security market in which we operate faces intense competition, constant innovation and evolving security threats. There are several global security companies with strong presence in this market, including VeriSign, Inc., DigiCert Inc., Entrust Datacard, Let's Encrypt, Symantec Corporation, FireEye, Inc., Red Hat Software, VASCO Data Security International, Inc., Zix Corp, NXP Semiconductors, Infineon Technologies, STMicroelectronics and Samsung Electronics.

Some of our competitors are large companies that have the technical and financial resources and broad customer bases needed to bring competitive solutions to the market and already have existing relationships as a trusted vendor for other products. Such companies may use these advantages to offer products and services that are perceived to be as effective as ours at a lower price or for free as part of a larger product package or solely in consideration for maintenance and services fees. They may also develop different products to compete with our current security solutions and respond more quickly and effectively than we do to new or changing opportunities, technologies, standards or client requirements. Additionally, we may compete with smaller regional vendors that offer products with a more limited range of capabilities that purport to perform functions similar to our security solutions. Such companies may enjoy stronger sales and service capabilities in their particular regions.

WISeKey's competitors may have competitive advantages, such as:

· greater name recognition, a longer operating history and a larger customer base;

· larger sales and marketing budgets and resources;

6

· broader distribution and established relationships with distribution partners and customers;

· greater customer support resources;

· greater resources to make acquisitions;

· larger intellectual property portfolios; and

· greater financial, technical and other resources.

Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources. Current or potential competitors may be acquired by third parties with access to greater available resources. As a result of such acquisitions, our current or potential competitors may be able to adapt more quickly to new technologies and customer needs, devote greater resources to the promotion or sale of their products and services, initiate or withstand substantial price competition, take advantage of other opportunities more readily or develop and expand their product and service offerings more quickly than we do. Larger competitors with more diverse product offerings may reduce the price of products that compete with ours in order to promote the sale of other products or may bundle them with other products, which would lead to increased pricing pressure on our products and could cause the average sales prices for our products to decline.

If WISeKey does not successfully anticipate market needs and enhance existing products or develop new products that meet those needs on a timely basis, WISeKey may not be able to compete effectively and WISeKey's ability to generate revenues will suffer.

Many of our customers operate in markets characterized by rapidly changing technologies and business plans, which require them to adapt to increasingly complex digital security infrastructures to protect internal and external corporate communications. As our customers' technologies and business plans grow more complex, we expect them to face new and increasingly sophisticated threats of security breach or counterfeiting. WISeKey faces significant challenges in ensuring that our security solutions effectively protect identities of individual customers, company information and their brands. As a result, we must continually modify and improve our products in response to changes in our customers' technology infrastructures.

WISeKey may not be able to successfully anticipate or adapt to changing technology or customer requirements on a timely basis or at all. If we fail to keep up with technological changes or to convince our customers and potential customers of the value of our security solutions even in light of new technologies, our business, results of operations and financial condition could be materially and adversely affected.

WISeKey cannot guarantee that it will be able to anticipate future market needs and opportunities or be able to develop product enhancements or new products to meet such needs or opportunities in a timely manner, if at all. Even if we are able to anticipate, develop and commercially introduce enhancements and new products, there can be no assurance that enhancements or new products will achieve widespread market acceptance.

Our product enhancements or new products could fail to attain sufficient market acceptance for many reasons, including:

· delays in releasing product enhancements or new products;

· failure to accurately predict market demand and to supply products that meet this demand in a timely fashion;

· inability to interoperate effectively with the existing or newly introduced technologies, systems or applications of our existing and prospective customers;

· defects in our products;

· negative publicity about the performance or effectiveness of our products;

7

· introduction or anticipated introduction of competing products by our competitors; and

· installation, configuration or usage errors by our customers.

If WISeKey fails to anticipate market requirements or fails to develop and introduce product enhancements or new products to meet those needs in a timely manner, that could cause us to lose existing customers and prevent us from gaining new customers, which would significantly harm our business, financial condition and results of operations.

Sometimes it will be necessary to make a product or product line obsolete and there may be negative impacts to sales or disruption to the customer base during the ramp down of that product.

All products have a natural lifecycle that includes the inevitable end-of-life ("EOL") process. During the ramping down of a product, or product family, there are many ways that our business operations can be challenged. Last time buys are a typical way for customers to deal with the EOL of a product that is still critical to one of their end products. These kinds of orders show an increase in short term sales but result in the abrupt drop off of revenue from that customer, for that product, after the last time buy is delivered. Discontinuing a product also comes with the risk that we may lose that customer for good if we do not have a replacement for the product or if they decide to look at alternative suppliers because of the change in supply.

WISeKey is subject to a number of risks associated with global sales and operations.

Business practices in the global markets that we serve may differ and may require us to include non-standard terms in customer contracts, such as extended payment or warranty terms. To the extent that we enter into customer contracts that include non-standard terms related to payment, warranties or performance obligations, our results of operations may be adversely impacted.

Additionally, our global sales and operations are subject to a number of risks, including the following:

· difficulty in enforcing contracts and managing collections, as well as long collection periods;

· costs of doing business globally, including costs incurred in maintaining office space, securing adequate staffing and localizing our contracts;

· management communication and integration problems resulting from cultural and geographic dispersion;

· risks associated with trade restrictions and foreign legal requirements;

· risk of unexpected changes in regulatory practices, tariffs, tax laws and treaties;

· compliance with anti-bribery laws;

· heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in, financial statements;

· social, economic and political instability, terrorist attacks and security concerns in general;

· reduced or uncertain protection of intellectual property rights in some countries; and

· potentially adverse tax consequences.

These factors could harm our ability to generate future global revenues and, consequently, materially impact our business, results of operations and financial condition.

8

Some of our larger opportunities depend on our customers’ ability to be awarded significant regional or national contracts in order to fulfil the volume predictions that were used in the pricing negotiations and forecasts.

The design of many industrial device comes with the risk that the product may not see the demand that was expected in that market, or the high-volume contracts may be awarded to competing suppliers. Our customers may be bidding against several other suppliers to win a government contract and if they lose the bid, we will not see the results that were originally expected during the forecasting of the opportunity size and profitability.

Our research and development efforts may not produce successful products or enhancements to our security solutions that result in significant revenue or other benefits in the near future, if at all.

Investing in research and development personnel, developing new products and enhancing existing products is expensive and time consuming, and there is no assurance that such activities will result in significant new marketable products or enhancements to our products, design improvements, cost savings, revenues or other expected benefits. If we spend significant time and effort on research and development and are unable to generate an adequate return on our investment, our business and results of operations may be adversely affected.

If WISeKey is unable to attract new customers, our future revenues and operating results will be harmed.

Our success depends in large part on our ability to attract new customers. The number of customers that WISeKey adds in a given period impacts both our short-term and long-term revenues. If WISeKey is unable to successfully attract a sufficient number of new customers, we may be unable to generate revenue growth.

A large amount of investment in sales and marketing and support personnel is required to attract new customers. If we are unable to convince these potential new customers of a need for our products or if we are unable to persuade them of our products' efficacy, we may be unable to achieve growth and there may be a meaningful negative impact on future revenues and operating results.

Software errors and non-compliance may affect our reputation and our financial results.

WISeKey's software applications are complex and there is a risk that defects or errors could arise, particularly where new versions or enhancements are released. Similarly, regulatory and industry requirements are continuously evolving and we may not be able to keep up with them. This could result in adverse consequences for us, such as lost revenue, a delay in market acceptance or customer claims.

If we experience security breaches, we could be exposed to liability and our reputation and business could suffer.

We operate sensitive public key infrastructure ("PKI") platforms, retain certain confidential customer information in our secure data centers and registration systems, and our digital certificates and electronic signatures may be used by customers in mission critical applications. It is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure. We may have to expend significant time and money to maintain or increase the security of our facilities and infrastructure. Despite our security measures, our infrastructure may be vulnerable to physical break-ins, computer viruses, attacks by hackers or similar disruptive problems. It is possible that we may have to expend additional financial and other resources to address such problems. In the event of a security breach, we could face significant liability, customers could be reluctant to use our services and we could be at risk for loss of various compliance certifications needed for the operation of our businesses.

WISeKey's reputation and business could be harmed based on real or perceived shortcomings, defects or vulnerabilities in our security solutions or the failure of our security solutions to meet customers' expectations.

Organizations are facing increasingly sophisticated digital security threats and threats of counterfeiting. If WISeKey fails to identify and respond to new and increasingly complex methods of counterfeiting products or hacking personal and corporate digital accounts, our business and reputation will suffer. In particular, WISeKey may suffer significant adverse publicity and reputational harm if any of our products fail to perform as advertised. An actual or perceived breach of our customers' sensitive business data, regardless of whether the breach is attributable to the failure of our products, could adversely affect the market's perception of the efficacy of our security solutions and current or potential customers may look to our competitors for alternatives to our security solutions. Similarly, an actual or perceived failure of our product to prevent counterfeit products from being detected, regardless of whether such failure is attributable to our products, could adversely affect the market's perception of the efficacy of our authentication solutions and could encourage current or potential customers to look to our competitors for an alternative to our products. The failure of our products may also subject us to product liability lawsuits and financial losses stemming from indemnification of our partners and other third parties, as well as the expenditure of significant financial resources to analyze, correct or eliminate any vulnerability. It could also cause us to suffer reputational harm, lose existing customers or deter them from purchasing additional products and services and prevent new customers from purchasing our security solutions.

9

International Expansion

WISeKey's strategy includes the international expansion of its business. The expansion into international markets may cause difficulties because of distance, as well as language and cultural differences. Other risks related to international operations include fluctuations in currency exchange rates, difficulties arising from staffing and managing foreign operations, legal and regulatory requirements of different countries, potential political and economic instability, and overlapping or differing tax laws. Management cannot assure that it will be able to market and operate WISeKey's services successfully in foreign markets, select appropriate markets to enter, open new offices efficiently or manage new offices profitably. If WISeKey is not successful in accessing new markets, its results of operations and financial condition could be materially and adversely affected.

If WISeKey is unable to hire, retain and motivate qualified personnel, our business will suffer.

Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. Any of our employees may terminate their employment at any time. Competition for highly skilled personnel is frequently intense. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or have divulged proprietary or other confidential information. Further, the training and integration of new employees requires allocation of a significant amount of internal resources and, even if we make this investment, there is no guarantee that existing or new personnel will remain or become productive members of our team. Our inability to attract or retain qualified personnel, or delays in hiring required personnel, particularly in sales & marketing and research & development, may seriously harm our business, financial condition and results of operations.

Furthermore, WISeKey's performance depends on favorable labor relations with our employees and compliance with labor laws in the countries where we have employees and plans to hire new employees. Any deterioration of current relations or increase in labor costs due to our compliance with labor laws could adversely affect our business.

Dependence on key personnel and loss of such key personnel may have a negative impact on the operations and profitability of WISeKey.

Our future success depends in part on the continued service of our key personnel, particularly, the members of our senior management. We have employment agreements with our key personnel, but these do not prevent such personnel from choosing to leave the Company.

One of the cryptographic rootkeys used by WISeKey is owned by the Organisation Internationale pour la Sécurité des Transactions Electroniques OISTE. The Organisation Internationale pour la Sécurité des Transactions Electroniques OISTE has granted us a perpetual license to exclusively use the cryptographic rootkey. A termination of the license agreement would present a threat to WISeKey's existing business model.

The cryptographic rootkey used by WISeKey is owned by the Organisation Internationale pour la Sécurité des Transactions Electroniques OISTE ("OISTE") acting as a trusted third party and not-for-profit entity in charge of ensuring that the Root of Trust (the "RoT") remains neutral and trusted. The name of the RoT is OISTE/WISeKey, as shown in all major current browsers that embed the rootkey. Three members of the three-member foundation board of OISTE are WISeKey board members. Members of the foundation board of OISTE are appointed by a policy authorizing authority (the "Policy Authorizing Authority" or "PAA"), whose members are international organizations, governments and large corporations that use the OISTE/WISeKey RoT. OISTE has granted us a perpetual license to exclusively use the cryptographic rootkey and develop technologies and processes based on OISTE's trust model. The perpetual license agreement can only be terminated under limited circumstances, including if WISeKey were to move from the trust model developed by OISTE and/or changing the location of the RoT from Switzerland to another country. A termination of the license agreement would present a threat to WISeKey's current trust model.

10

Services offered by our PKI business rely on the continued integrity of public key cryptography technology and algorithms that may be compromised or proven obsolete over time.

Services offered by our PKI business are based on public key cryptography technology. With public key cryptography technology, a user possesses a public key and a private key, both of which are required to perform encryption and decryption operations. The security afforded by this technology depends on the integrity of a user's private key and ensuring that it is not lost, stolen or otherwise compromised. Advances in attacks on cryptographic algorithms and technology may weaken their effectiveness, and significant new technology requirements may be imposed by root distribution programs that require us to make significant modifications to our systems or to reissue digital certificates to some or all of our customers, which could damage our reputation or otherwise harm our business. Severe attacks on public key cryptography could render PKI services in general obsolete or unmarketable.

We are dependent on the timely supply of equipment and materials from various sub-contractors and if any one of these suppliers fail to meet, or delays, their committed delivery schedules, we can suffer with lower or lost revenues.

We use various suppliers for silicon manufacturing and testing our parts. Any one of these suppliers could not meet their commitments for on-time delivery of our products. These kinds of supply disruptions can happen due to global shortages of silicon wafers or chemicals used in the processing of the silicon packaging or shortages in the labor force due to unrest or sicknesses. Our business and operating conditions can be at risk if we cannot deliver on our product demand as committed in our customer contracts.

Failure of our third-party suppliers to handle increased volume for their services could impact our ability to take advantage of upside business opportunities.

We outsource several critical functions in our supply chain to third-party suppliers, such as the manufacture of our semiconductors. They all have a number of risks that are present in their businesses that could limit their ability to meet increased demands if we see increased orders from our customers. If our suppliers cannot satisfy our demand, we may not be able to meet our customer demands. Also, if our suppliers add higher costs to cover their increased volume, we may see drops in our gross profit margins. Many of these costs are not fixed, even though there may be contracts in place, and may be at the discretion of the third-party vendor.

Financial Risks

WISeKey has entered, and expects to continue to enter, into joint venture agreements and these activities involve risks and uncertainties.

WISeKey has entered, and expects to continue to enter, into joint venture agreements in order to effectively grow its revenue and penetrate certain geographic regions. Entering into joint venture agreements or other similar forms of partnership involves risks and uncertainties, including the risk that the partners that we enter into joint ventures with will not have the market connections that we expect them to bring to the joint venture. Additionally, there is a risk that a given joint venture could fail to satisfy its obligations, which may result in certain liabilities to us for guarantees and other commitments. Further, since we may not exercise control over our current or future joint ventures, we may not be able to require our joint ventures to take the actions that we believe are necessary to implement our business strategy. Additionally, differences in views among joint venture participants may result in delayed decisions or failures to agree on major issues. If any of these difficulties cause any of our joint ventures to deviate from our business strategy, or if this leads any of our joint ventures to fail to attract the customer base that we project it to attract, our results of operations could be materially adversely affected.

11

WISeKey is exposed to risks associated with acquisitions and investments.

We may in the future make acquisitions of, or investments in, existing companies or existing or new businesses. Acquisitions and investments involve numerous risks that vary depending on their scale and nature, including, but not limited to:

· diversion of management's attention from other operational matters;

· inability to complete proposed transactions as anticipated or at all (and any ensuing obligation to pay a termination fee or other costs and expenses);

· the possibility that the acquired business will not be successfully integrated or that anticipated cost savings, synergies or other benefits will not be realized;

· the acquired business or strategic partnership may lose market acceptance or profitability;

· a decrease in our cash or an increase in our indebtedness, including security interests that may have to be constituted as part of the acquisition indebtedness, may limit our ability to access additional capital when needed;

· failure to commercialize purchased technologies, intellectual property rights or partnered solutions;

· initial dependence on unfamiliar supply chains or relatively small supply partners;

· inability to obtain and protect intellectual property rights in key technologies;

· incurrence of unexpected liabilities; and

· loss of key personnel and clients or customers of acquired businesses.

In addition, if WISeKey is unsuccessful at integrating such acquisitions or the technologies associated with such acquisitions, our revenues and results of operations could be adversely affected. Any integration process may require significant time and resources, and WISeKey may not be able to manage the process successfully. WISeKey may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. WISeKey may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could adversely affect our financial condition. The sale of equity or incurrence of debt to finance any such acquisitions could result in dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.

WISeKey has a history of losses and may not achieve profitability in the future.

WISeKey has invested substantial amounts of financial resources so far on its acquisitions, brand technology and market position. 2019 is our first profitable year since our inception with a gain on disposal of a business of USD 31.1 million and we had, on a consolidated level, an accumulated cumulative loss of USD 197,348,528 as at December 31, 2018 and USD 189,161,455 as at December 31, 2019. In the past, we made significant investments in our operations which have not resulted in corresponding revenue growth and, as a result, increased our losses. WISeKey expects to make significant future investments to support the further development and expansion of our business and these investments may not result in increased revenue or growth on a timely basis or at all.

WISeKey may also incur significant losses in the future for a number of reasons, including slowing demand for our products and services, increasing competition, weakness in the software and security industries generally, as well as other risks described herein, and we may encounter unforeseen expenses, difficulties, complications and delays, and other unknown factors. If WISeKey incurs losses in the future, we may not be able to reduce costs effectively because many of our costs are fixed. In addition, to the extent that we reduce variable costs to respond to losses, this may affect our ability to attract customers and grow our revenues. Accordingly, WISeKey may not be able to achieve or maintain profitability and we may continue to incur significant losses in the future.

12

Certain of the Company's large shareholders, including if acting in concert, may be able to exert significant influence on the Company and their interests may conflict with the interests of its other shareholders.

Our founder, Carlos Moreira, holds more than 50% of the Company's voting rights. Further, all holders of the Class A Shares represent approximately 57% of the Company's voting rights. Our founder, or if the holders of Class A Shares were to act in concert with each other, the holders of the Class A Shares would be able to exert significant influence over certain matters, including matters that must be resolved by the general meeting of shareholders, such as the election of members to the board of directors or the declaration of dividends or other distributions. To the extent that the interests of these shareholders may differ from the interests of the Company's other shareholders, the Company's other shareholders may be disadvantaged by any actions that these shareholders may seek to pursue.

The market for and price of Class B Shares and our ADSs may be highly volatile.

There has not been a public market in the United States for our Class B Shares, and an active market has not developed for the ADS since the listing of ADSs on NASDAQ on December 04, 2019. You may not be able to sell your ADSs quickly or at the market price if trading in the ADSs is not active.

The market price of Class B Shares and our ADSs may be highly volatile and may be affected negatively by events involving us, our competitors, the software and security industry, or the financial markets in general. Furthermore, investors might not be able to resell their Class B Shares and our ADSs at the price at which they were purchased or at a higher price or at all. Factors that could cause this volatility in the market price of Class B Shares and our ADSs include, but are not limited to:

· our operating and financial results;

· future announcements concerning our business;

· changes in revenue or earnings estimates and recommendations by securities analysts;

· changes in our business strategy and operations;

· changes in our senior management or board of directors;

· speculation of the press or the investment community;

· disposals of Class B Shares by shareholders;

· actions of competitors;

· our involvement in acquisitions, strategic alliances or joint ventures;

· regulatory factors;

· arrival and departure of key personnel;

· investment community views on technology stock;

· liquidity of the Class B Shares and our ADSs; and

· general market, economic and political conditions.

13

In addition, securities markets in general have from time to time, experienced significant price and volume fluctuations. Such fluctuations, as well as the economic environment as a whole, can have a substantial negative effect on the market price of our securities, regardless of our operating results or our financial position. Any such broad market fluctuations may adversely affect the trading price of our securities.

Our securities will be traded on more than one market or exchange and this may result in price variations.

Our Class B Shares have been trading on the SIX since March 2016. The ADSs have been listed on NASDAQ since December 2019. Trading in Class B Shares and ADSs, as applicable, on these markets will take place in different currencies (U.S. dollars on NASDAQ and Swiss francs on the SIX), and at different times (resulting from different time zones, trading days, and public holidays in the United States and Switzerland). The trading prices of our Class B Shares and ADSs on these two markets may differ due to these and other factors. Any decrease in the price of our Class B Shares on the SIX could cause a decrease in the trading price of the ADSs on NASDAQ, and vice versa.

Future sales or issuances, or the possibility or perception of future sales or issuances, of a substantial number of Shares could cause the market price of our Class B Shares or the ADSs to fall.

The market price of our Class B Shares or ADSs could decline as a result of sales of a large number of Class B Shares in the public market in the future or the possibility or perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for the Company to issue equity securities in the future at a time and price that it deems appropriate.

Further, the Company may choose to raise additional capital by issuing additional Class B Shares, depending on market conditions or strategic considerations. In particular, under our Articles of Association, the board of directors is authorized to issue up to 8,503,041 new Class B Shares at any time until May 25, 2020 and thereby increase the Company's share capital without further shareholder approval. After May 25, 2020 (and each subsequent two-year period), the shareholders may re-approve this authorization. Further, our Articles of Association provide for a conditional share capital based on which the Company is authorized to issue up to 11,840,090 new Class B Shares, corresponding to CHF 592,004.50 in par value. Since May 14, 2019, the date of reference for the last formal recording in the Articles and the commercial register of the Canton of Zug, Switzerland, an aggregate number of 1,228,838 Class B Shares has been issued out of the Company's conditional share capital as at December 31, 2019. As a result, the available conditional share capital of the Company, as at December 31, 2019, amounted to CHF 530,562.60, corresponding to the issuance of 10,611,252 Class B Shares. Among other things, the Company's conditional share capital could be used in connection with the issuance of securities that are convertible into Class B Shares. To the extent that additional capital is raised through the issuance of Class B Shares or other securities that are convertible into Class B Shares, the issuance of such securities could dilute the Company's shareholders' interest in the Company.

On January 19, 2016, the Company entered into a share subscription facility agreement (the "SFF") with GEM Global Yield Fund LLC SCS and GEM Investments America, LLC (collectively referred to as "GEM"), according to which the Company has the right, at any date after the date on which the Class B Shares are listed on the SIX, during the period expiring on the earlier of (i) January 19, 2021 and (ii) the date on which GEM has subscribed for Class B Shares with an aggregate subscription price of CHF 60,000,000, to request GEM, in one or several steps, to subscribe for Class B Shares up to an aggregate subscription amount of CHF 60,000,000. After drawdowns made under this facility in June, August and December 2017 in the aggregate amount of CHF 3,905,355, the remaining amount available for drawdown is CHF 56,094,645 as at December 31, 2019. The subscription price for each subscription request of the Company corresponds to 90% of the average of the closing bid prices for Class B Shares on the SIX (as adjusted for variations) as reported by Bloomberg during the respective pricing period. If the Company elects to exercise its rights under the SFF, the issuance of Class B Shares would dilute the Company's shareholders' interest in the Company. As at December 31, 2019, the remaining amount available for drawdown by the Company under the SFF is CHF 56,094,645 and the estimated maximum number of Class B Shares deliverable under the SFF is 28,855,270 Class B Shares at CHF 1.944 per Class B Share (calculated based on the closing price of a Class B Share on December 30, 2019 of CHF 2.16 per Class B Share, discounted by 10%). The actual price, at which the Company may drawdown under the SFF is subject to change, and, therefore, the number of Class B Shares deliverable to GEM may vary.

14

In connection with the SFF, on May 06, 2016, the Company granted to GEM 1,459,127 options (the "GEM Options") for the acquisition of an equal number of Class B Shares. As a result, the maximum total number of Class B Shares that are issuable under the GEM Options at December 31, 2019 is 1,459,127 Class B Shares. The GEM Options may be exercised by GEM at any time on or before May 6, 2021, at an exercise price per GEM Option initially set to CHF 8.85432 per Class B Share (the "GEM Initial Exercise Price"). The GEM Initial Exercise Price may be adjusted using certain agreed-upon formulae more fully described in Item 10.C -- Material Contracts – Options Issued to GEM. In application of adjustment provisions under the relevant warrant, the exercise price of the warrant has been adjusted from CHF 8.85342 to CHF 8.8264 and the number of Class B Shares that GEM is entitled to purchase upon exercise of the warrant has been increased by 4,612 Class B Shares to 1,463,739 as at December 31, 2019. The Class B Shares issued to GEM in connection with the GEM Options would be issued out of the Company's conditional share capital or authorized share capital without triggering the pre-emptive rights of the existing shareholders of the Company. The exercise of GEM Options will dilute the Company's shareholders' interests in the Company.

On February 8, 2018 the Company entered into a Standby Equity Distribution Agreement, as amended on September 28, 2018 (the "SEDA") with YA II PN, Ltd., a fund managed by Yorkville Advisors Global, LLC (collectively referred to as "Yorkville"). Pursuant to the SEDA, the Company has the right, at any time during a three-year period, to request Yorkville, in one or several steps, to subscribe for Class B Shares up to an aggregate subscription amount of CHF 50,000,000. After drawdowns made by WISeKey under the SEDA in June, November and December 2018, and January, August, September, October and November 2019, in the aggregate amount of CHF 2,857,922.71, the remaining amount available for drawdown is CHF 47,142,077 as at December 31, 2019. As long as a sufficient number of Class B Shares is provided through share lending, WISeKey has the right to make drawdowns under the SEDA at its discretion by requesting Yorkville to subscribe for (if the Class B Shares are issued out of authorized share capital) or purchase (if the Class B Shares are delivered out of treasury) Class B Shares worth up to CHF 5,000,000 each, subject to certain exceptions and limitations (including the exception that a drawdown request by WISeKey shall in no event cause the aggregate number of Class B Shares held by Yorkville to meet or exceed 4.99% of the total number of shares registered with the commercial register of the Canton of Zug). The subscription price for each subscription request of the Company corresponds to 93% of the lowest daily volume-weighted average share price (the "VWAP") of a Class B Share, as traded and quoted on the SIX, over the five trading days following the drawdown request by WISeKey. If the Company elects to exercise its rights under the SEDA, the issuance of Class B Shares would dilute the Company's shareholders' interest in the Company. As at December 31, 2019, the remaining amount available for drawdown by the Company under the SEDA is CHF 47,142,077 (USD 48,709,692 at closing rate) and, as at December 31, 2019, the estimated maximum number of Class B Shares deliverable under the SEDA is 23,467,780 Class B Shares at CHF 2.0088 per Class B Share (calculated based on the closing price of a Class B Share on December 30, 2019 of CHF 2.16 per Class B Share, discounted by 7%). The actual price, at which the Company may drawdown under the SEDA is subject to change, and, therefore, the number of Class B Shares deliverable to Yorkville may vary.

On September 28, 2018, WISeKey entered into a convertible loan agreement ("Crede Convertible Loan Agreement") with Crede CG III, Ltd., Hamilton, Bermuda ("Crede"), pursuant to which Crede committed to grant a loan to WISeKey in the amount of USD 3,000,000 (the "Crede Principal Amount"). The Crede Principal Amount will mature on October 30, 2020 ("Crede Maturity"). The Crede Principal Amount is to be repaid through the delivery of such number of Class B Shares, as corresponds to the quotient of the Crede Principal Amount then outstanding and a conversion price corresponding to 93% of the average of the two lowest daily VWAPs of a Class B Share, as traded and quoted on the SIX during the ten trading days immediately preceding the relevant conversion date, converted into USD at the relevant exchange rate. Crede may request a conversion of the Crede Principal Amount, in parts or in full, at any time before the Crede Maturity. The loan granted in accordance with the Crede Convertible Loan Agreement bears interest at a yearly rate of 10% (the "Crede Interest"). WISeKey has the right, at its discretion, to pay Crede Interest accrued on the outstanding Crede Principal Amount in cash or by delivery of such number of Class B Shares as corresponds to the quotient of the respective Crede Interest payment amount and a conversion price corresponding to 93% of the average of the two lowest daily VWAPs of a Class B Share, as traded and quoted on the SIX during the ten trading days immediately preceding the relevant conversion date, converted into USD at the relevant exchange rate. After conversions in January, February, July, September and December 2019, as requested by Crede, representing an aggregate repayment amount of USD 1,771,101, the remaining Crede convertible loan amount outstanding is USD 1,228,899 as at December 31, 2019. The conversion of the Crede Principal Amount and, if applicable, the Crede Interest, into Class B Shares will dilute the Company's shareholders' interest in the Company. The number of Class B Shares deliverable by the Company to Crede in connection with conversions of the Crede Principal Amount and the Crede Interest will depend on the applicable conversion price. As at December 31, 2019, the estimated maximum number of Class B Shares deliverable by the Company under the Crede Convertible Loan Agreement (for payment of Crede Principal Amount and maximum Crede Interest until maturity) is 636,803 Class B Shares (calculated based on the closing price of a Class B Share on the SIX on December 30, 2019 of CHF 2.16 per Class B Share discounted by 7% and converted into USD at the relevant exchange rate). Note that the actual price at which Crede may convert the Crede Principal Amount and at which the Company may convert the Crede Interest into Class B Shares is subject to change, and, as a consequence, the number of Class B Shares deliverable to Crede may vary. As at December 31, 2019, the Company holds 1,202,191 Class B Shares in treasury, either directly or through a subsidiary, in order to be able to comply with its obligations under the Crede Convertible Loan Agreement (including the conversion of the Crede Principal Amount and the Crede Interest into Class B Shares).

15

In connection with the Crede Convertible Loan Agreement, on September 28, 2018, the Company granted to Crede 408,247 options (the "Crede Options") for the acquisition of an equal number of Class B Shares. As a result, the maximum total number of Class B Shares that are issuable under the Crede Options as at December 31, 2019 is 408,247 Class B Shares. The Crede Options may be exercised by Crede at any time on or before October 29, 2021, at an exercise price per Crede Option equal to CHF 3.84 per Class B Share. The Class B Shares issued to Crede in connection with the Crede Options would be issued out of the Company's conditional share capital or authorized share capital without triggering the pre-emptive rights of the existing shareholders of the Company. The exercise of Crede Options will dilute the Company's shareholders' interests in the Company.

On June 27, 2019, WISeKey entered into a convertible loan agreement ("Yorkville Convertible Loan ") with YA II PN, Ltd., a fund managed by Yorkville, pursuant to which Yorkville committed to grant a loan to WISeKey in the amount of USD 3,500,000 (the "Yorkville Principal Amount"). The Yorkville Convertible Loan is repayable in monthly cash instalments starting August 01, 2019 up until its maturity on August 01, 2020. The loan granted in accordance with the Yorkville Convertible Loan bears interest at a yearly rate of 6% (the "Yorkville Interest"). Yorkville, at its sole discretion, may elect to request that any amount due and outstanding, be it principal or interests, be paid in Class B Shares using a conversion price of CHF 3.00 per Class B Share (the "Initial Conversion Price") and, as exchange rate, any publicly available spot rate of exchange selected by Yorkville in the New York foreign exchange market at the applicable date. The Initial Conversion Price may be adjusted using certain agreed-upon formulae in case of (a) an increase of capital by means of capitalization of reserves, profits or premiums by distribution of WISeKey shares, or division or consolidation of WISeKey shares; (b) an issue of WISeKey shares or other securities by way of conferring subscription or purchase rights; (c) spin-offs and capital distributions other than dividends; and (d) dividends. As at December 31, 2019, and as agreed with Yorkville, WISeKey has repaid an aggregate amount of USD 1,162,607, therefore the remaining Yorkville Convertible Loan amount outstanding is USD 2,337,393. The conversion of the Yorkville Principal Amount and, if applicable, the related interest, into Class B Shares will dilute the Company's shareholders' interest in the Company. The number of Class B Shares deliverable by the Company to Yorkville in connection with conversions of the Yorkville Principal Amount and the Yorkville Interest will depend on the applicable conversion price. Based on the Initial Yorkville Conversion Price on the date of execution of the Yorkville Convertible Loan (CHF 3.00) converted into USD at the relevant exchange rate, the estimated maximum number of Class B Shares deliverable under the Yorkville Convertible Loan (for the payment of Yorkville Principal Amount outstanding as at December 31, 2019 and Yorkville Interest until maturity) is 772,968 Class B Shares. Note that the actual price at which Yorkville may convert the Yorkville Principal Amount and Yorkville Interest into Class B Shares is subject to change, and, as a consequence, the number of Class B Shares deliverable to Yorkville may vary.

In connection with the Yorkville Convertible Loan, on June 27, 2019, the Company granted to Yorkville 500,000 options (the "Yorkville Options") for the acquisition of an equal number of Class B Shares. As a result, the maximum total number of Class B Shares that are issuable under the Yorkville Options as at December 31, 2019 is 500,000 Class B Shares. The Yorkville Options may be exercised by Yorkville at any time on or before June 27, 2022, at an exercise price per Yorkville Option initially set to CHF 3.00 per Class B Share (the "Yorkville Initial Exercise Price"). The Yorkville Initial Exercise Price may be adjusted using certain agreed-upon formulae more fully described in Item 10C – Contracts – Options Issued to Yorkville. The Class B Shares issued to Yorkville in connection with the Yorkville Options would be issued out of the Company's conditional share capital or authorized share capital without triggering the pre-emptive rights of the existing shareholders of the Company. The exercise of Yorkville Options will dilute the Company's shareholders' interests in the Company.

On December 16, 2019, WISeKey entered into a Convertible Term Loan Facility Agreement (the "LSI Convertible Facility") with Long State Investment Limited ("LSI"), a Hong Kong-based investment company, to borrow up to CHF 30,000,000 (the "LSI Principal Amount"). Under the terms of the LSI Convertible Facility, WISeKey is able to drawdown individual term loans of up to CHF 500,000 or, if so agreed between the parties, up to CHF 2,500,000 at an interest rate of 1.5% per annum (the "LSI Interest"), up to an aggregate amount of CHF 30,000,000 over a commitment period of 24 months. LSI have the right to convert a drawdown tranche into Class B Shares or, if so agreed among the parties and permitted by law, into ADSs, within a period of 21 SIX trading days after each individual drawdown at 95% of the higher of (i) the then prevailing market rate and (ii) the minimum conversion price of CHF 1.80. Any term loan not converted by LSI initially will automatically convert into Class B Shares, or ADSs, 20 SIX trading days before the expiration of the commitment period at the applicable conversion price. Under certain circumstances, interest payments may be “paid in kind” by capitalizing such interest and adding to it the aggregate principal balance of the loan outstanding. As at December 31, 2019, WISeKey has not made any drawdown under the LSI Convertible Facility, therefore the remaining amount available for drawdown is CHF 30,000,000. The conversion of the LSI Principal Amount and, if applicable, the LSI Interest, into Class B Shares will dilute the Company's shareholders' interest in the Company. The number of Class B Shares deliverable by the Company to LSI in connection with conversions of the LSI Principal Amount and the LSI Interest will depend on the applicable conversion price. As at December 31, 2019, the remaining amount available for drawdown by the Company under the LSI Convertible Facility is CHF 30,000,000 (USD 30,997,590 at closing rate) and, as at December 31, 2019, the estimated maximum number of Class B Shares deliverable under the LSI Convertible Facility is 14,619,883 Class B Shares at CHF 2.052 per Class B Share (calculated based on the closing price of a Class B Share on the SIX on December 30, 2019 of CHF 2.16 per Class B Share discounted by 5%). Note that the actual price at which LSI may convert each tranche under the LSI Convertible Facility is subject to change, and, therefore, the number of Class B Shares deliverable to LSI may vary.

16

Our financial results may be affected by fluctuations in exchange rates.

Due to the broad scope of our international operations, a portion of our revenue and our expenses are denominated in currencies other than USD, our reporting currency. As a result, our business is exposed to transactional and translational currency exchange risks caused by fluctuations in exchange rates among those different currencies.

The functional currency of most of our operating subsidiaries is the applicable local currency. The translation from the applicable functional currencies into our reporting currency is performed for balance sheet accounts using exchange rates in effect at the balance sheet date, and, for the statement of operations accounts, using average exchange rates prevailing during the relevant period. Functional currency exchange rates for our operating subsidiaries have in the past, and may in the future, fluctuate significantly against the USD. Because we prepare our consolidated financial statements in USD, these fluctuations may have an effect both on our results of operations and on the reported value of our assets, liabilities, revenue and expenses as measured in USD, which in turn may significantly affect reported earnings, either positively or negatively, and the comparability of period-to-period results of operations.

In addition to currency translation risks, we are exposed to currency transaction risks. Currency transaction risk is the risk that the domestic currency value of a future foreign currency denominated cash flow (payments or receipts from a committed or uncommitted contract or credit facility) varies as a direct result of changes in exchange rates. Fluctuations in currencies may adversely impact our ability to compete on a global basis and our results of operations and our financial condition.

Our operating results can vary significantly due to the impairment of goodwill and other tangible and intangible assets due to changes in the business environment.

Our operating results can also vary significantly due to impairments of intangible assets, including goodwill, and other fixed assets. As of December 31, 2019, the value of our goodwill as recorded on our balance sheet was USD 8,316,892 and the value of acquired technologies and other intangible assets was USD 600,123, net of impairment and amortization. Because the market for our products is characterized by rapidly changing technologies, our future cash flows may not support the value of goodwill and other intangibles recorded in our consolidated financial statements. According to U.S. GAAP, we are required to annually test our recorded goodwill and indefinite-lived intangible assets, if any, and to assess the carrying values of other intangible assets when impairment indicators exist. As a result of such tests, we could be required to book impairment charges in our statement of operations if the carrying value is greater than the fair value. The amount of any potential impairment is not predictable.

Factors that could trigger an impairment of such assets include, but are not limited to, the following:

· underperformance relative to projected future operating results;

· negative industry or economic trends, including changes in borrowing rates or weighted average cost of capital;

17

· applicable tax rates;

· changes in working capital;

· the market multiples utilized in our fair value calculations;

· changes in the manner or use of the acquired assets or the strategy for our overall business; and

· changes in our organization or management reporting structure, which could require greater aggregation or disaggregation in our analysis by reporting unit and potentially alternative methods/ assumptions of estimating fair values.

Any potential future impairment, if required, could have a material adverse effect on our business, financial condition and results of operations.

We may need additional capital in the future and it may not be available on terms favorable to us or at all.

We may require additional capital in the future to do, among other things, the following:

· fund our operations;

· finance investments in equipment and infrastructure needed to maintain our manufacturing capabilities;

· enhance and expand the range of products and services we offer;

· respond to potential strategic opportunities, such as investments, acquisitions and expansions; and

· service or refinance other indebtedness.

Our ability to obtain external financing in the future is subject to a variety of uncertainties, including: (i) our financial condition, results of operations and cash flows, and (ii) general market conditions for financing activities.

The terms of available financing may also restrict our financial and operating flexibility. If adequate funds are not available on acceptable terms, we may be forced to reduce our operations or delay, limit or abandon expansion opportunities. Moreover, even if we are able to continue our operations, the failure to obtain additional financing could have a material adverse effect on our business, financial condition and results of operations.

The Company is a holding company with no direct cash generating operations and relies on its subsidiaries to provide it with funds necessary to pay dividends to shareholders.

The Company is a holding company with no significant assets other than the equity interests in its subsidiaries. The Company's subsidiaries own substantially all the rights to its revenue streams. The Company has no legal obligation to, and may not, declare dividends or other distributions on its shares. The Company's ability to pay dividends to its shareholders depends on the availability of sufficient legally distributable profits from previous years, which depends on the performance of its subsidiaries and their ability to distribute funds to the Company, and/or on the availability of distributable reserves from capital contributions at the Company level, and on the need for shareholder approval.

The ability of a subsidiary to make distributions to the Company could be affected by a claim or other action by a third party, including a creditor, or by laws which regulate the payment of dividends by companies. In addition, the subsidiaries' ability to distribute funds to the Company depends on, among other things, the availability of sufficient legally distributable profit of such subsidiaries. The Company cannot offer any assurance that legally distributable profit or reserves from capital contributions will be available in any given financial year.

18

Even if there is sufficient legally distributable profit or reserves from capital contributions available, the Company may not be able to pay a dividend or distribution of reserves from capital contributions for a variety of reasons. Payment of future dividends and other distributions will depend on our liquidity and cash flow generation, financial condition and other factors, including regulatory and liquidity requirements, as well as tax and other legal considerations.

Legal Risks

We are subject to anti-takeover provisions.

Our Articles and Swiss law contain provisions that could prevent or delay an acquisition of the Company by means of a tender offer, a proxy contest or otherwise. These provisions may also adversely affect prevailing market prices for our Class B Shares and our ADSs. These provisions provide, among other things:

· an opting-out from the obligation of an acquirer of Shares to make a public offer pursuant to article 135 and 163 of the Swiss Financial Market Infrastructure Act, including its implementing directives, circulars and other regulations (the "FMIA");

· that the share capital is divided into different classes of shares, of which only Class B Shares are listed on the SIX, whereas Class A Shares are not listed and tradable;

· that the Board is currently authorized, at any time until May 25, 2020, to issue up to 8,881,829 new Class B Shares and to limit or withdraw the pre-emptive rights of existing shareholders in various circumstances;

· that any shareholder who is entitled to propose any business or to nominate a person or persons for election as member of the Board at an annual meeting may only do so if advance notice is given to the Company;

· that a merger or demerger transaction requires the affirmative vote of the holders of at least two-thirds of voting rights and an absolute majority of the par value of the shares, each as represented (in person or by proxy) at the general meeting of shareholders and the possibility of a so-called "cash-out" or "squeeze-out" merger if the acquirer controls 90% of the outstanding shares entitled to vote at a general meeting of shareholders; and

· that any action required or permitted to be taken by the holders of shares must be taken at a duly called annual or extraordinary general meeting of shareholders of the Company.

Each Class A Share and each Class B Share has one vote despite the difference in par value

Each Class A Share and each Class B Share carries one vote per share but our Class A Shares have a lower par value (CHF 0.01 per share) than our Class B Shares (CHF 0.05 per share). This means that, relative to their respective per share contribution to the Company’s capital, the holders of our Class A Shares have a greater relative per share voting power than the holders of our Class B Shares for matters that require approval on the basis of a specified majority of shares present at the shareholders meeting.

However, to the extent shareholder resolutions require as the relevant majority standard a majority of the par value of the shares present at the meeting, Class A Shares as a class have less votes than Class B Shares as a class (as the Class B Shares have a par value of CH 0.05 per Class B Share as compared to CH 0.01 per Class A Share). The majority of par value standard for approval of resolutions applies (i) to shareholder resolutions on certain specific matters (see Item 10B -Memorandum and Articles of Association - Dual Voting Rights) and (ii) to the extent that Swiss corporate law requires that a shareholder resolution be adopted with a majority of (A) two-thirds of the voting rights attached to, and (B) the absolute majority of the par value of, the shares, each as represented at the relevant meeting (see also Item 10B-Memorandum and Articles of Association - Voting Requirements). 

19

Assuming a total of approximately 68 million of our shares are outstanding, of which approximately 40 million are Class A Shares and approximately 28 million are Class B Shares, the Class A Shares as a class contribute 22% of the aggregate par value of the Company, have 58% of the total votes for matters that require approval on the basis of a specified majority of the number of shares present at the shareholders meeting, but 22% of the total votes for matters that require approval on the basis of a specified majority of the par value of the shares present at the shareholders meeting. Assuming the same total of approximately 68 million of our shares are outstanding, of which approximately 40 million are Class A Shares and approximately 28 million are Class B Shares, Class B Shares as a class contribute 78% of the aggregate par value of the Company, have 42% of the total votes for matters that require approval on the basis of a specified majority of the number of shares present at the shareholders meeting, but 78% of the total votes for matters that require approval on the basis of a specified majority of the par value of the shares present at the shareholders meeting.

A change in tax laws, treaties or regulations, or their interpretation, of any country in which we operate, including tax rules limiting the deductibility of interest expense, could result in a higher tax rate on our earnings, which could result in a significant negative impact on our earnings and cash flows from operations.

We operate in various jurisdictions. Consequently, we are subject to changes in applicable tax laws, treaties or regulations in the jurisdictions in which we operate, which could include laws or policies directed toward companies organized in jurisdictions with low tax rates. A material change in the tax laws or policies, or their interpretation, of any country in which we have significant operations, or in which we are incorporated or resident, including the limitation of deductibility of interest expense, could result in a higher effective tax rate on our worldwide earnings and such change could be significant to our financial results.

We may become exposed to costly and damaging intellectual property or liability claims, and our product liability may not cover all damages from such claims.

We are exposed to potential intellectual property or product liability claims. We currently have not been involved in any such legal proceedings. However, the current and future use of our products may expose us to such claims. Any claims made against us, regardless of their merit, could be difficult and costly to defend, and could compromise the market acceptance of our products and any prospects for future products. Such legal proceedings could have a material adverse effect on our business, financial condition, or results of operations.

If WISeKey is unable to adequately protect its proprietary technology and intellectual property rights, its business could suffer substantial harm.

Our intellectual property rights are important to our business. We rely on a combination of confidentiality clauses, trade secrets, copyrights and trademarks to protect our intellectual property and know-how. In addition, we have filed a number of applications for patents to protect our technologies and have been granted two patents in Switzerland for the company's verification and authentication of valuable objects on the Internet in connection with technology involving the internet of things ("IoT") when connecting to each other or to the cloud. Further, in connection with the acquisition of WISeKey Semiconductors SAS from Inside Secure SA, we have acquired 39 patent families.

The steps we take to protect our intellectual property may be inadequate. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create solutions and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our solutions may be unenforceable under the laws of certain jurisdictions.

We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. No assurance can be given that these agreements will be effective in controlling access to our proprietary information. Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our solutions. Additionally, we may from time to time be subject to opposition or similar proceedings with respect to applications for registrations of our intellectual property, including but not limited to our trademarks and patent applications. While we aim to acquire adequate protection of our brand through registrations in key markets, occasionally third parties may have already registered or otherwise acquired rights to identical or similar brands for solutions that also address the cybersecurity, authentication or mobile application markets. Additionally, the process of seeking patent protection can be lengthy and expensive. Any of our pending or future patent or trademark applications, whether challenged or not, may not be issued with the scope of the claims we seek, if at all.

20

From time to time, we may discover that third parties are infringing, misappropriating or otherwise violating our intellectual property rights. However, policing unauthorized use of our intellectual property and misappropriation of our technology is difficult and we may therefore not always be aware of such unauthorized use or misappropriation. Despite our efforts to protect our intellectual property rights, unauthorized third parties may attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop solutions with the same or similar functionality as our solutions. If competitors infringe, misappropriate or otherwise misuse our intellectual property rights and we are not adequately protected, or if such competitors are able to develop solutions with the same or similar functionality as ours without infringing our intellectual property, our competitive position and results of operations could be harmed and our legal costs could increase.

WISeKey may incur fines or penalties, damage to its reputation or other adverse consequences if its employees, agents or business partners violate, or are alleged to have violated, anti-bribery, competition or other laws.

WISeKey's internal controls may not always protect us from reckless or criminal acts committed by our employees, agents or business partners that would violate Swiss, U.S. or other laws, including anti-bribery, competition, trade sanctions and regulations and other related laws. Any such improper actions could subject WISeKey to administrative, civil or criminal investigations in the competent jurisdictions, could lead to substantial civil or criminal monetary and non-monetary penalties against WISeKey or our subsidiaries, and could damage our reputation. Even the allegation or appearance of WISeKey's employees, agents or business partners acting improperly or illegally could damage our reputation and result in significant expenditures in investigating and responding to such actions.

We could be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.

As WISeKey continues to expand products, partnerships, sales and distribution, the risk of being involved in legal proceedings will invariably increase. While WISeKey has successfully avoided being involved in legal proceedings in the past, it may not be able to do so in the future. Legal proceedings, especially when involving intellectual property rights and product liability, may have material adverse effects on WISeKey's financial condition, results of operations and cash flows.

We process and store personal information, which subjects us to data protection laws and contractual commitments, and our actual or perceived failure to comply with such laws and commitments could harm our business.

The personal information we process is subject to an increasing number of laws regarding privacy and data protection, as well as contractual commitments. Any failure or perceived failure by us to comply with such obligations may result in governmental enforcement actions, fines, or cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

Risks Related to Our Shares and ADSs

As a foreign private issuer, we are permitted to rely on exemptions from certain corporate governance standards.

As a foreign private issuer, we are permitted to, and we are relying on exemptions from certain NASDAQ corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our ordinary shares and the ADSs.

We are exempted from certain corporate governance requirements of NASDAQ by virtue of being a foreign private issuer. We are required to provide a brief description of the significant differences between our corporate governance practices and the corporate governance practices required to be followed by domestic U.S. companies listed on NASDAQ. The standards applicable to us are considerably different than the standards applied to domestic U.S. issuers. For instance, we are not required to:

· have a majority of the board be independent (although all of the members of the audit committee must be independent under the U.S. Securities Exchange Act of 1934, as amended, or the "Exchange Act");

21

· have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors; or

· have regularly scheduled executive sessions with only independent directors.

We have relied on and intend to continue to rely on some of these exemptions. As a result, you may not be provided with the benefits of certain corporate governance requirements of NASDAQ.

As a foreign private issuer, we are exempt from certain disclosure requirements under the Exchange Act, which may afford less protection to our shareholders and ADS holders than they would enjoy if we were a domestic U.S. company.

As a foreign private issuer, we are exempt from, among other things, the rules prescribing the furnishing and content of proxy statements under the Exchange Act. In addition, our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit and recovery provisions contained in Section 16 of the Exchange Act. We are also not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic U.S. companies with securities registered under the Exchange Act. As a result, our shareholders and ADS holders may be afforded less protection than they would under the Exchange Act rules applicable to domestic U.S. companies.

We may lose our foreign private issuer status, which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur significant legal, accounting and other expenses.

As a foreign private issuer, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. In order to maintain our current status as a foreign private issuer, either (a) a majority of our common shares must be either directly or indirectly owned of record by non-residents of the United States or (b)(i) a majority of our executive officers or directors may not be United States citizens or residents, (ii) more than 50 percent of our assets cannot be located in the United States and (iii) our business must be administered principally outside the United States. These criteria are tested annually. If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirements for foreign private issuers. We may also be required to make changes in our corporate governance practices in accordance with various SEC and stock exchange rules. The regulatory and compliance costs to us under U.S. securities laws if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase our legal and financial compliance costs and would make some activities highly time-consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers, it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified members of our board of directors.

We are an "emerging growth company", and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies may make the ADSs less attractive to investors and, as a result, adversely affect the price of the ADSs and result in a less active trading market for the ADSs.

We are an "emerging growth company" as defined in the U.S. Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. For example, we have elected to rely on an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act relating to internal control over financial reporting, and we will not provide such an attestation from our auditors. We may avail ourselves of these disclosure exemptions until we are no longer an emerging growth company. We cannot predict whether investors will find the ADSs less attractive because of our reliance on some or all of these exemptions. If investors find the ADSs less attractive, it may adversely affect the price of the ADSs and there may be a less active trading market for the ADSs.

We will cease to be an emerging growth company upon the earliest of:

· the last day of the fiscal year during which we have total annual gross revenues of USD 1,070,000,000 (as such amount is indexed for inflation every five years by the United States Securities and Exchange Commission, or SEC) or more;

22

· the last day of our fiscal year following the fifth anniversary of the completion of our first sale of common equity securities pursuant to an effective registration statement under the Securities Act;

· the date on which we have, during the previous three-year period, issued more than USD 1,070,000,000 in non-convertible debt; or

· the date on which we are deemed to be a "large accelerated filer", as defined in Rule 12b-2 of the Exchange Act, which would occur if the market value of our ordinary shares and ADSs that are held by non-affiliates exceeds USD700,000,000 as of the last day of our most recently-completed second fiscal quarter.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Depending on the circumstances, we may or may not take advantage of the extended transition period under Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards and therefore our financial statements may not be comparable to companies that comply with public company effective dates.

The requirements of being a public company may strain our resources and distract our management.

Following the listing of the ADSs on NASDAQ, we are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us, either or both of which could have a negative effect on our business, financial condition and results of operations.

As a public company, we are (subject to certain exceptions) subject to the reporting requirements of the Exchange Act and the other rules and regulations of the SEC, including the Sarbanes-Oxley Act and the listing and other requirements of NASDAQ. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual and current reports with respect to our business and financial performance. The Sarbanes-Oxley Act requires that we maintain disclosure controls and procedures and internal control over financial reporting. To improve the effectiveness of our disclosure controls and procedures and our internal control over financing reporting, we need to commit significant resources and provide additional management oversight. We are implementing additional procedures and processes for the purpose of addressing the U.S. standards and requirements applicable to public companies. These activities may divert management's attention from other business concerns and we will incur significant legal, accounting and other expenses that we did not have prior to the listing on NASDAQ, which could have a material adverse effect on our business, financial condition and results of operations.

We have never paid dividends on our share capital, and we do not anticipate paying cash dividends in the foreseeable future.

We have never declared or paid cash dividends on our share capital. We do not anticipate paying cash dividends on our shares in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to compliance with applicable laws and covenants under current or future credit facilities, which may restrict or limit our ability to pay dividends and will depend on our financial condition, operating results, capital requirements, distributable profits and/or distributable reserves from capital contributions, general business conditions and other factors that our board of directors may deem relevant. As a result, capital appreciation, if any, of our securities will be your sold source of gain for the foreseeable future.

ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiffs in any such action.

The deposit agreement governing the ADSs representing our Class B Shares provides that, to the fullest extent permitted by applicable law, ADSs holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our Class B Shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. The waiver to right to a jury trial of the deposit agreement is not intended to be deemed a waiver by any holder or beneficial owner of ADSs of our or the depositary's compliance with the U.S. federal securities laws and the rules and regulations promulgated thereunder.

23

If we or the depositary oppose a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. The enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.

If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcome than a trial by jury would have had, including results that could be less favorable to the plaintiffs in any such action.

Nevertheless, if this jury trial waiver is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or our ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

Your voting rights as a holder of our ADSs are limited by the terms of the deposit agreement.

You may exercise your voting rights with respect to the ordinary shares underlying your ADSs only in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions from you in the manner set forth in the deposit agreement, the depositary for our ADSs will endeavor to vote your underlying ordinary shares in accordance with these instructions. When a general meeting is convened, you may not receive sufficient notice of a shareholders' meeting to permit you to withdraw your ordinary shares to allow you to cast your vote with respect to any specific matter at the meeting. In addition, the depositary and its agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but you may not receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. As a result, you may not be able to exercise your right to vote.

The depositary for our ADSs will give a discretionary proxy to vote the ordinary shares underlying your ADSs if you do not give timely voting instructions, except in limited circumstances, which could adversely affect your interests.

Under the deposit agreement for our ADSs, the depositary will, to the extent permitted under applicable law, give a discretionary proxy to the independent proxy holder elected by the Company's shareholders to exercise the voting rights of the ordinary shares underlying your ADSs at shareholders' meetings if you do not give voting instructions to the depositary, unless:

· we have instructed the depositary that we do not wish a discretionary proxy to be given;

· we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; or

· a matter to be voted on at the meeting would have a material adverse impact on shareholders.

24

The effect of this discretionary proxy is that, if you fail to give voting instructions to the depositary, you cannot prevent the ordinary shares underlying your ADSs from being voted, absent the situations described above, and it may make it more difficult for shareholders to influence our management.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

You may not receive distributions on our Class B Shares or any value for them if it is illegal or impractical to make them available to you as an ADS holder.

The depositary of our ADSs has agreed to pay you the cash dividends or other distributions it or the custodian for the Class B Shares represented by ADSs after deducting its fees and expenses. You will receive these distributions in proportion to the number of our Class B Shares that your ADSs represent. However, the depositary is not responsible for making such payments or distributions if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to take any other action to permit the distribution of our ADSs, Class B Shares, rights or anything else to holders of our ADSs. This means that you may not receive the distributions we make on our Class B Shares or any value for them if it is illegal or impractical for us to make them available to you as an ADS holder. These restrictions may reduce the value of your ADSs.

The rights accruing to holders of our shares may differ from the rights typically accruing to shareholders of a U.S. corporation.

We are organized under the laws of Switzerland. The rights of holders of Class B Shares and, therefore, certain of the rights of ADSs, are governed by the laws of Switzerland and by our Articles of Association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations. See the sections entitled "Description of Share Capital and Articles of Association – Differences in Corporate Law" and "Description of Share Capital and Articles of Association – Articles of Association – Other Swiss Law Considerations" for a description of the principal differences between the provisions of Swiss law applicable to us and, for example, the Delaware General Corporation Law relating to shareholders' rights and protections.

Claims of U.S. civil liabilities may not be enforceable against us.

We are incorporated under the laws of Switzerland. Certain of directors reside outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce judgments obtained in U.S. courts against them or us, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. The United States and Switzerland do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Consequently, a final judgment for payment given by a court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized or enforceable in Switzerland. In addition, uncertainty exists as to whether Swiss courts would entertain original actions brought in Switzerland against us or our directors predicated upon the securities laws of the United States or any state in the United States. Any final and conclusive monetary judgment for a definite sum obtained against us in U.S. courts would be reviewed by the courts of Switzerland. Whether these requirements are met in respect of a judgment based upon the civil liability provisions of the U.S. securities laws, including whether the award of monetary damages under such laws would constitute a penalty, is an issue for the court making such decision. If a Swiss court gives judgment for the sum payable under a U.S. judgment, the Swiss judgment will be enforceable by methods generally available for this purpose. These methods generally permit the Swiss court discretion to prescribe the manner of enforcement. As a result, U.S. investors may not be able to enforce against us or certain of our directors, or certain experts named herein who are residents of Switzerland or countries other than the United States, any judgments obtained in U.S.

25

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of ADSs or our Class B Shares.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. Inadequate internal controls could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ADSs or our Class B Shares.

Management will be required to assess the effectiveness of our internal controls annually. However, for as long as we are an "emerging growth company", our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting. An independent assessment of the effectiveness of our internal controls could detect problems that our management's assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements requiring us to incur the expense of remediation and could also result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our ADSs or our Class B Shares and their respective trading volumes could decline.

The trading market for our ADSs and our Class B Shares depends in part on the research and reports that securities or industry analysts publish about us or our business. Since we have not undertaken an initial public offering of ADSs in connection with the listing of our ADSs on NASDAQ, we do not anticipate that many or any industry analysts in the United States will publish such research and reports in the United States about our Class B Shares or our ADSs. If no or too few securities or industry analysts commence or continue coverage on us, the trading price for our ADSs and our Class B Shares could be affected. If one or more of the analysts who may eventually cover us downgrade our ADSs or our Class B Shares or publish inaccurate or unfavorable research about our business, the trading price of our ADSs or our Class B Shares would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our ADSs or Class B Shares could decrease, which might cause the price of such securities and their respective trading volumes to decline.

Although we believe that we were not a "passive foreign investment company," or PFIC, for U.S. federal income tax purposes in 2019, there can be no assurance in this regard, and if we are a PFIC in any year, U.S. holders of our ADSs may be subject to adverse U.S. federal income tax consequences.

Under the Internal Revenue Code of 1986, as amended, or the Code, we will be a PFIC for any taxable year in which, after the application of certain look-through rules with respect to subsidiaries, either (i) 75% or more of our gross income consists of passive income or (ii) 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of, passive income. Based on our financial statements, business plan and certain estimates and projections, including as to the relative values of our assets, we do not believe that we were a PFIC for our 2019 taxable year and do not expect to be a PFIC in the foreseeable future. However, there can be no assurance that the Internal Revenue Service (the "IRS") will agree with our conclusion regarding our PFIC status, and whether we are or will be classified as a PFIC in any particular year is uncertain because we currently own a substantial amount of passive assets, including cash, and the valuation of certain of our assets is uncertain and may vary substantially over time. Accordingly, there can be no assurance that we will not be a PFIC for any taxable year.

If we are a PFIC for any taxable year during which a U.S. investor holds ADSs, we generally would continue to be treated as a PFIC with respect to that U.S. investor for all succeeding years during which the U.S. investor holds ADSs, even if we ceased to meet the threshold requirements for PFIC status. Such a U.S. investor may be subject to adverse U.S. federal income tax consequences, including (i) the treatment of all or a portion of any gain on disposition as ordinary income, (ii) the application of a deferred interest charge on such gain and the receipt of certain dividends and (iii) compliance with certain reporting requirements. We do not intend to provide the information that would enable investors to make a qualified electing fund election that could mitigate the adverse U.S. federal income tax consequences should we be classified as a PFIC.

26

For further discussion, see "Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders."

If a United States person is treated as owning at least 10% of our shares or ADSs, such holder may be subject to adverse U.S. federal income tax consequences.

If a U.S. investor owns or is treated as owning (indirectly or constructively) at least 10% of the value or voting power of our shares or ADSs, such investor may be treated as a "United States shareholder" with respect to each "controlled foreign corporation" in our group (if any). Because our group includes a U.S. subsidiary, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations (regardless of whether or not we are treated as a controlled foreign corporation). A United States shareholder of a controlled foreign corporation may be required to report annually and include in its U.S. taxable income its pro rata share of "Subpart F income," "global intangible low-taxed income," and investments in U.S. property by controlled foreign corporations, regardless of whether we make any distributions. Failure to comply with these reporting obligations may subject a United States shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such shareholder's U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether any of our non-U.S. subsidiaries is treated as a controlled foreign corporation or whether any investor is treated as a United States shareholder with respect to any such controlled foreign corporation or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult its advisors regarding the potential application of these rules to an investment in our ADSs.

27

Item 4. Information on the Company

A. History and Development of the Company

We are a Swiss stock corporation (Aktiengesellschaft) of unlimited duration with limited liability under the laws of Switzerland and registered in the Commercial Register of the Canton of Zug, Switzerland, on December 3, 2015 under the register number CHE-143.782.707. We are registered under the company name "WISeKey International Holding AG" and have our registered office and principal executive offices at General-Guisan-Strasse 6, 6300 Zug, Switzerland. WISeKey International Holding AG is the parent company of WISeKey SA, which was established in 1999. Our address on the Internet is http://www.wisekey.com. The information on our website is not incorporated by reference in this annual report.

In the first quarter of 2019, we completed the sale of the QuoVadis Group to DigiCert Inc, a leading global provider of TLS/SSL, IoT and other PKI solutions, for USD 45 million cash. The products and solutions of the QuoVadis Group sold to DigiCert Inc. consisted of QuoVadis Trust/Link which provides managed Public Key Infrastructure (PKI) including Digital Certificates for authentication, encryption, and digital signature; TLS/SSL Certificates for websites; QuoVadis sealsign which provides software and cloud solutions for Electronic Signatures and time-stamping. We retained ownership of the ISTANA Platform used to secure, among other things, the connected car industry, as part of its offerings for the Internet of Things (IoT) market, together with its latest Blockchain technology. The ISTANA Platform complements our core products and solutions which are based on our Cybersecurity SaaS business, also known as managed PKI services, and on our Semiconductor chips, and focus on securing the IoT market and using Artificial Intelligence (AI) to analyze data, with products and services using public key encryption and hardware encryption, digital identity protection services, anti-illicit trade products and services, and Blockchain services.

The SEC maintains an internet site at http://www.sec.gov that contains reports, information statements, and other information regarding issuers that file electronically with the SEC.

B. Business Overview

Overview

We are a Swiss cybersecurity company, publicly listed in Switzerland on the SIX since 2016 (Class B Shares) and NASDAQ, since 2019 (American Depositary Shares), focused on delivering integrated security solutions for the Internet of Things (IoT) and digital identity ecosystems. With over two decades of experience in the digital security market, we integrate our secure semiconductors, cybersecurity software, and a globally recognized Root of Trust (RoT) into leading-edge products and services that protect users, devices, data and transactions in the internet-connected world.

The rapid proliferation of internet-connected devices and individuals' increasing dependence on them for personal and business purposes have exposed shortcomings in traditional security solutions. Legacy IT networks are easy targets for attackers that leverage the vulnerabilities of the outdated perimeter-based security methods that can't keep up with the sheer number of devices that are being added every day. According to an Ernst and Young survey of 200 global CEOs in 2019, Cybersecurity is listed as the biggest threat to the world economy over the next decade, above and beyond income inequality and job losses from technological change. Our cybersecurity platform is the first of its kind to be intentionally designed to provide organizations with a holistic cybersecurity solution to safeguard their connected device ecosystem from the evolving cyber threats that lurk around every corner of the burgeoning Internet of Things (IoT) landscape.

Cyber-attacks are becoming increasingly sophisticated, posing significant and persistent threats to international organizations and the sensitive data that they are responsible to protect under government regulations such as GDPR. According to Symantec's 2017 Internet Security Threat Report, there were more than 1,200 security breaches in 2016, resulting in 1.1 billion exposed identities. The report also noted that it takes only 2 minutes for an IoT device to be attacked. Attackers deploy clandestine, advanced, and targeted attacks on less secure bring-your-own-devices (BYOD) to infiltrate broader networks. These attacks can remain inside a network for extended periods of time undetected, most often to steal valuable data, spread malicious malware, or sabotage critical infrastructure. The World Economic Forum said, in an article published in November of 2019, that Cybercrime will remain a large-scale concern for years to come. From 2019 to 2023E, approximately $5.2 trillion in global value will be at risk from cyberattacks, creating an ongoing challenge for corporations and investors alike¹.

___________________________

¹ Ghosh, I, ‘This is the crippling cost of cybercrime on corporations’, World Economic Forum, November 7, 2019.

28

In the context of cybersecurity, a major concern is not just the risk of exposing data to bad actors, but also the actions and decisions that are made based on the data and that cannot take place if the data cannot be trusted. As a result, conceptually in terms of data classes, some data can be trusted to take a particular action and other data cannot. If data is categorized as "Untrusted Data", where the identity of a device is not known, the network security is low or the data integrity cannot be validated, that data is flagged as unusable. So called "Smart Data" on the other hand stems from devices with trusted identities and data validation processes, inherently part of a Public Key Infrastructure (PKI), generating "Trusted Data" that can trigger reliable actions, transactions and processes. As more and more applications rely on immediate actions at the edge, like the decision for an autonomous car to proceed to take over another car on a freeway, the need for Smart Data becomes critical for safety and security and it can only derive from secure, trusted IoT ecosystems.

We are one among very few companies in our market combining secure IoT microchips with proven cybersecurity software and services. Simply put, devices that are deployed without the security provided by our platform are exposed and lack the mission-critical on-device security systems to defend themselves and the networks they are connected to. Our security solutions are therefore at the forefront of cybersecurity innovation, driving the future of IoT security as the most comprehensive way to fill all gaps in identity and data protection, giving organizations the confidence that they are protected from device-to-cloud and beyond.

Our cybersecurity platform is comprised of our proprietary software and hardware products that have been designed from the ground up to address the unique attack parameters that threaten the IoT ecosystem:

· Hardware - Our unique position as one of only six companies worldwide capable of designing and deploying secure microchips that have been certified by globally recognized security certification boards like Common Criteria, Cybersecurity and Infrastructure Security Agency and FIPS (Federal Information Processing Standards) gives us the advantage of being able to provide our clients with the highest level of digital security available on the market at this time. Our secure microchips, typically referred to as Secure Elements, have been embedded into billions of devices and are trusted to secure banking, enterprise, government, and medical-grade applications.

· Software - Our software solutions are driven by proprietary technologies based on widely adopted standards such as Root of Trust (RoT) and Public Key Infrastructure (PKI), that enable our clients to effectively manage their digital identities, information, and communications through a single integrated platform. RoT enables us to secure electronic information through our PKI digital certificate technology. These digital certificates are deployed for mutual authentication and encryption, creating tamperproof electronic "fingerprints", allowing our clients to adapt to an always changing device landscape without compromising their digital security and integrity.

Market Opportunities

Our security solutions address the complex needs of global enterprises and organizations. As of December 2019, more than 3,500 customers across a wide variety of industries were using our products to enable secure digital authentication across the globe. Our customers include leading organizations in a diverse set of industries, including energy and utilities, financial services, healthcare, manufacturing, retail, technology and telecommunications, as well as the public and academic sectors. In addition, we have an extensive network of channel partners, including software providers, integrators, IT outsourcing providers and leading cybersecurity consulting firms.

While our focus is on integrated solutions, we market and sell our products as both standalone products and integrated product suites. We derive revenue from the sales of microchips, software subscriptions, maintenance and licenses across our product portfolio.

29

Our core business addresses primarily two large and growing markets – Cybersecurity and IoT. According to industry research, worldwide information security spending will exceed $124 billion in 2019 (Aitken 2018)² and steady commercial and consumer adoption will drive worldwide spending on the Internet of Things to $1.1 Trillion by 2023 (IDC 2019)³ with an estimated 7 billion IoT devices deployed (IoT Analytics 2018)⁴. Some notable sub-categories of IoT where we have a significant track record include:

· Industry 4.0

· Anti-illicit trade

· Consumer Engagement

· Data Privacy

· Autonomous Safety

As at December 31, 2019, we had 84 employees located across 6 countries. We also have 18 independent contractors located in Vietnam. For the fiscal year ended December 31, 2019, we generated revenues of USD 22.7 million with cash reserves (restricted and unrestricted) of USD 16.6 million.

Security is our DNA and we are committed to continuing to develop and deliver solutions that keep our clients ahead of the unique cybersecurity threats that they face within their markets, enabling them to adapt to an evolving device landscape. Trustworthiness is also demonstrated by means of independent audits and accreditations. WISeKey products and services are recognized for their superior quality and maximum-security levels through accreditations such as WebTrust for the PKI solutions and Common Criteria for the semiconductor products, meeting or exceeding the highest standards required by the industry.

Industry Background

Broad rollout and adoption of internet connected devices creates increased exposure

The Internet of Things (IoT) is the network of physical devices, vehicles, home appliances, and other things embedded with electronics, software, sensors, actuators and network connectivity that create an ecosystem of connected devices exchanging and making decisions on data that is being broadcast across the Internet.

According to Gartner's 2017 Strategic Roadmap for IoT Network Technology, 63 million IoT devices will be attempting to connect to the enterprise network each second by 2020, driven by the constantly growing use cases that are dependent on IoT applications (Gartner 2017)⁵. The amount of data transmitted from these devices will continue to grow, largely originating beyond the enterprise network edge and traditional IT security perimeters.

Organizations face persistent threats from advanced attackers who are increasingly aware of existing vulnerabilities in existing security solutions and target the weakest link in the chain of security. Attackers can penetrate unsecured devices and subsequently connect to and cause harm to networks, manipulate data or use this data to gain competitive advantages. These devices include employees' personal devices (e.g., smartphones, laptops, and tablets), non-employee personal devices, (e.g., devices owned by third parties and others within enterprises), as well as IoT devices used for corporate purposes (e.g., lights, security cameras, printers, point-of-sale machines, thermostats, and medical devices). This landscape is growing rapidly and securing these devices and the data they provide has become an overwhelming priority for almost every single company in business today.

Most devices today lack encryption, authentication and other forms of protection from malicious attacks. Once the security parameters are penetrated, attackers can infiltrate and further spread malicious software to a range of devices. This can ultimately lead to interruption of business operations, slowdown of internet functionality, potential disruptions to critical infrastructure, and in some cases even the loss of sensitive consumer information. Based on a report that INC.com conducted with collaboration from Cisco and the National Center for Middle Market, 60% of small businesses would fold within 6 months of a cyber-attack (Galvin 2018)⁶.

___________________________

² Aitken, R, ‘Global Information Security Spending To Exceed $124B in 2019, Privacy Concerns Driving Demand’, Forbes, August 19, 2018.

³ IDC Spending Guides, ‘Steady Commercial and Consumer Adoption Will Drive Worldwide Spending on the Internet of Things to $1.1 Trillion in 2023, According to a New IDC Spending Guide’, Business Wire, June 13, 2019.

⁴ Lueth, KL,‘State of the IoT 2018: Number of IoT devices now at 7B – Market accelerating’, IoT Analytics, August 8, 2018.

⁵ Harris, S, et al., ‘2017 Strategic Roadmap for Storage’, Gartner Research, March 8, 2017.

⁶ Galvin, J, ‘60 Percent of Small Businesses Fold Within 6 Months of a Cyber Attack. Here’s How to Protect Yourself’, Inc., May 7, 2018

30

Existing security solutions were not built for today's connected world

Traditional IT security consists of software security solutions that were developed decades ago and focus primarily on legacy closed networks where the security landscape and challenges are less fractured and firewalls are used to protect a well-defined network perimeter.

Unlike personal computers, IoT devices rely on cloud computing for much of their operations. This has driven a paradigm shift to device-level security, as smart devices lack the critical security infrastructure to prevent infiltration. Attackers carry out DDoS (Distributed Denial of Service) attacks by taking advantage of vulnerabilities in these devices, which enables them to command a much greater and more widely distributed IP address base than other attacks.

In today's environment, security for IoT relies on various vendors and solutions. According to Symantec Corporation, the average enterprise uses 75 distinct and different security products (Symantec 2015)⁷. These products can be effective at preventing an attack if it falls within the scope of their specific capability and the enterprises have the necessary security knowledge of how to implement the different elements. Enterprises increasingly require a vendor such as WISeKey that can provide a fully integrated offering designed specifically to address the unique challenges of IoT security.

Enterprises need security solutions that address today's complexities and dynamic threat environment

Enterprises must address the IoT security problem and bridge the gap between device proliferation and device security. It is imperative for devices to be manufactured with immutable digital identities that can be secured inside embedded microchips, giving the devices the ability to securely authenticate themselves within the network. This device-level authentication creates an end-to-end secure connection, extending all of the way from the device through the cloud platforms and ultimately to the end applications, eliminating potential security gaps that are inevitably generated during integration of various technologies.

Cyber-attackers often target identities as they provide access to valuable systems and data while concealing their activity within networks. More than ever, enterprises must focus on digital identities as the primary constant in an ever-evolving technology and threat landscape. PKI and digital certificates are two tools in the security chain that leverage the device's digital identity to implement strong authentication, encryption and digital signatures, which are the building blocks of cybersecurity solutions. Digital certificates provide identifying information, are forgery resistant, and can be verified because they are issued by official, trusted agencies. As digital identities have effectively become the new network perimeter, securing these identities has become paramount.

Our Technology

After reviewing the market conditions listed in the Industry Background section above, it's easy to see that there is a clear and present need for a unified platform that can address the broad range of unique security and trust challenges facing the IoT market today. Even with a host of large corporations operating in the semiconductor or cybersecurity software markets, they have not succeeded in building - in the way WISeKey did - comprehensive solutions that integrate hardware and software into a single, easy to implement, platform that gives organizations the peace of mind that their products, networks, private data, and reputations are holistically protected.

Connected Trust Essentials - The future of the connected world relies on trust and our mission at WISeKey is to build trust through the delivery of integrated security solutions. There are three core technologies that we believe are necessary to deliver on this mission: Digital Identities (Digital IDs), Public Key Infrastructure (PKI), and a globally recognized Root of Trust (RoT). Below is a brief overview of each component:

___________________________

⁷Symantec, ‘Symantec Introduces New Era of Advanced Threat Protection’, Symantec Press Release, October 27, 2015

31

Digital IDs - A digital identity is the virtual representation of the real identity of a person, application or object. This identity must be:

· Based on standards that are commonly adopted and implemented by default by most common software applications and operating systems, in order to reduce the implementation effort;

· Trustworthy by all parties involved in its use or validation, by means of trusting the entity that issued the digital identity;

· Multifunctional, so the same technology can be used for as many purposes as possible, like strong authentication, digital signature and encryption;

· Revocable, in case of security compromise, cease of operation or other causes, in such a way that all participants can verify at any moment if an identity is valid.

WISeKey leverages the standards around Public Key Cryptography and Digital Certificates to build its concept of Digital ID and electronic transaction security.

Public Key Infrastructure (PKI) - A Public Key Infrastructure (PKI) is commonly defined as "a set of IT systems, people, policies, and procedures needed to create, manage, distribute, use, store, and revoke digital certificates". PKI is WISeKey's base technology to manage Digital Identities. WISeKey's PKI is built fully compatible with the ITU X.509 standard (International Telecommunication Union 2016 ITU-T X-Series Recommendations) for personal certificates, and is built around a proprietary software solution for certificate management, that allows issuing millions of certificates and provide a multi-tenant interface that can be accessed by our corporate customers to manage the certificates of their employees or customers.

Root of Trust (RoT) - The concept of "Root of Trust" has a dual approach and interpretation:

· Software-approach: Transactional RoT - This approach to the RoT is the one related to PKI technology and Digital Certificates. Typically the PKI is built as a hierarchy of Certification Authorities, in such a way that the CA that issues the Digital Certificate of an entity is itself endorsed by a higher level Certification Authority (CA). Typically this chain has two or three levels and at the top level we'll find what is called the "Root Certification Authority" (Root CA). This brings a key concept around Trust in PKI: We can trust a Digital Certificate if we trust the Root CA. WISeKey's Root CA is endorsed by the OISTE Foundation.

· Device-approach: Hardware RoT - Encryption techniques in general and Public Key Cryptography in particular requires an adequate protection of these encryption keys. Keys must be protected against physical and logistical attacks, ensuring that only the authorized owner can use it. The highest protection for these keys can be achieved by incorporating in the device a specific chip that assumes the role to protect the encryption keys and perform the cryptographic operations in a protected environment. These chips, or secure microcontrollers, are commonly known as the "Secure Element". For IoT devices it is also important to ensure that the software running in the device can't be corrupted or modified. This can also be achieved by encrypting and digitally signing the device firmware with a key protected in the secure element.

The WISeKey Unique RoT – WISeKey at present is the only company in the world with a value proposition for Root of Trust that covers both the requirements for the Transactional RoT and the Hardware RoT:

· WISeKey provides worldwide trusted Digital Certificates thanks to its PKI and the WISeKey/OISTE Root Certification Authorities.

· WISeKey provides extremely secure elements that can protect the cryptographic keys in IoT devices.

OISTE Root of Trust - Founded in 1998, Transactions Electroniques OISTE was created with the objectives of promoting the use and adoption of international standards to secure electronic transactions, expand the use of digital certification and ensure the interoperability of certification authorities' e-transaction systems. OISTE holds special consultative status with the Economic and Social Council of the UN (ECOSOC) and is an accredited member of the Non-commercial Users Stakeholders Group (NCSG) of ICANN as part of the Not-for-Profit Operational Concerns (NPOC) constituency. The OISTE foundation is regulated by article 80 of the Swiss Civil Code. The OISTE Foundation owns and regulates the OISTE Global Trust Model, which includes as "Root of Trust" a number of Root Certification Authorities that are globally recognized. OISTE delegated to WISeKey SA the operation of the systems and infrastructures supporting the Global Trust Model. The OISTE foundation does not itself issue certificates to end subscribers or operate as data center, instead, it granted WISeKey SA an exclusive license as Subordinate Certification Authority, allowing the delivery of Trust Services for Persons, Applications and Objects.

32

WISeKey acts as the operator chosen by the foundation for the management of the OISTE Cryptographic Root Key. The OISTE RoT serves as a common trust anchor, recognized by operating systems and IoT applications to ensure the authenticity, confidentiality, and integrity of online identities and transactions. We believe these features are important in creating business opportunities with governments, international bodies, and corporations that are wary of foreign government oversight intervention and centralization of data on servers outside of their respective jurisdictions.

Our Products & Services

Secure Microchips and Secure Software Products - We offer a large range of secure microcontrollers that share consistent secure 8-/16-/32-bit RISC CPU performance, with strong security mechanisms, and enhanced crypto engines to optimize performance and power consumption. The products also provide high-density, low-power EEPROM and FLASH memory storage technologies. We design our chips to meet the most stringent security requirements, many of them are EAL5+ Common Criteria security-certified, or VISA and MasterCard certified. Common Criteria is a world standard, government driven design for assessing the level of resistance of systems or devices to all known attacks. It is constantly updated with all new attacks, and the chips' resistance is reassessed annually. EAL5+ is currently the highest level of resistance in the secure chip industry. We offer over 50 versions of secure microcontrollers and various supporting secure software solutions:

· VaultIC - Family of secure microcontrollers delivered with our own embedded firmware, which we designed to give an unforgeable identity to any connected device, and to provide system integrators with a set of cryptographic APIs (Application Programming Interface) to protect devices against cyber-attacks, counterfeiting and forgery. VaultIC chips are bundled together with our software and services platform to serve the IoT market.

· Nanoseal - New family of secure memory chips specifically designed for digital brand protection applications.

· MicroXsafe - Secure microcontrollers delivered with an SDK (Software Development Kit) that allows our customers to develop their own embedded firmware (also called OS – Operating System). They are designed to protect smart cards, USB tokens, and electronic systems against cyber-attacks, counterfeiting and forgery.

· MicroPass - Family of secure microcontrollers certified by VISA and MasterCard. They have been designed and certified to be integrated into payment cards as well as into wearable devices such as watches, bracelets, and jerseys. They are compatible with NFC (Near Field Communication) standards, thus capable to interact with NFC enabled devices such as Android or iOS smartphones.

· PicoPass - Family of secure memory chips specifically designed for NFC (Near Field Communication) access control badges.

· VaultiTrust - WISeKey’s VaultiTrust offers two modules: trusted data generation and secure elements provisioning. VaultiTrust takes advantage of WISeKey’s government grade security certified offerings and end-to-end digital security management to generate identity keys and efficiently install them into chips. VaultiTrust’s web portal complements the service by offering an easy way to configure, manage and track production. WISeKey operates FIPS 140-2 Level 3 certified Hardware Security Modules (HSM) to efficiently generate secure data. These HSM are located in a WISeKey Common Criteria EAL5+ and ISO27001 certified backed up data center and the HSM can be shared only upon customer’s request. WISeKey also offers a cryptography customization service whenever needed.

· WISeTrustBoot - WISeKey's WISeTrustBoot solution, is the first platform-independent "Secure Boot" and "Secure Firmware Update" solution that combines the strength of a tamper resistant secure elements- VaultIC, state-of-the-art crypto libraries and strong digital signatures. By storing critical boot information in a VaultIC chip, and cryptographically embedding this chip into the device's main processor, the carefully designed boot loader of the main processor becomes a stronghold able to verify the authenticity of the firmware prior to starting up or receive firmware updates. WISeTrustBoot is delivered to our customers with a powerful toolbox providing application developers the flexibility to tailor it to their specific needs.

33

· CertifyID PKI Suite – WISeKey's PKI Suite is branded with the "CertifyID" trademark. This suite comprises all the products required to: 1) build an enterprise-grade PKI platform that can be used to serve the most vital needs, and 2) leverage the use of the digital certificates due to software applications to implement digital signatures, authentication and encryption. The CertifyID Suite is composed of these Products:

o Universal Registration Authority (URA) - The URA is WISeKey's main application for certificate management and can be used to build a multi-tenant, multi-purpose certificate management Solution

o WISignDoc - This product provides a "Document Signature Server" that can be integrated into the corporate business processes to manage legally-binding digital signatures

o CertifyID Suite for Microsoft CAS - WISeKey provides series of modules that can enhance the Microsoft Active Directory Certificate Services to build enterprise-grade PKI systems. WISeKey uses the CertifyID Suite to build its own PKI platform and operate it from our Secure Datacenter in Switzerland and other locations to provide "Trust Services" like mPKI (managed PKI).

· WISeID - WISeKey's WISeID offers secured storage to protect Personally Identifiable Information (PII). Protecting your PII is important to avoid impersonation and identity theft. The personal data that you save in WISeID always stays under your control, is encrypted with strong keys, and is never communicated to third parties. WISeID users have the freedom to choose where their data resides and who is allowed to access it. By decoupling content from the application and digital identity itself, users are able to use their data as currency and develop digital data dividends-based solutions in the spirit that consumers have a right to know and control how their data is being used and should be able to monetize their data.

· WISeID self-sovereign identity - A self-sovereign identity typically starts with a number, unique to an individual, that is associated with a public key for which the user has the private key issued by the OISTE/WISeKey Cryptographic RootKey. The WISeID Network is a fully deployed standard for digital identity operating since 1998 by OISTE – designed to bring the neutrality, trust, consent, personal control, and ease-of-use of Digital IDs to the Internet.

· WISeID the Human Browser - WISeID Human Browser allows consumers to take full control of their own digital identities —based on a decentralized Blockchain and using the central aspect of what we call Web 3.0. Instead of logging into an application like twitter, Google Chrome, Safari, or Facebook, consumers will log into a personal, WISeID cryptographically authenticated browser they themselves own. The Human Browser is an open source software, audited by network participants and enabled by several types of biometrics creating a decentralized digital identity that acts as a birth certificate that will be embedded into browsers. Users control their ID and have the equivalent of a digital passport, able to build reputations across Web3 and interact with economies without sacrificing privacy, value, or security.

· WISeAuthentic - WISeKey has been a pioneer in digital luxury product authentication since 2007. WISeKey's expertise in the design of NFC (Near Field Communication) secure chips combined with its WISeAuthentic platform for the identification, authentication, tracking and direct marketing of goods, provides customer-tailored solutions for brand protection. WISeAuthentic provides the link between a physical product and a digital identity to effectively protect them against counterfeiting and create new, unprecedented channels between brands and their distributors and customers. WISeAuthentic is both an enterprise solution as well as mobile applications that provide a variety of services and information specifically designed to a particular a stakeholder group. WISeKey has successfully deployed its WISeAuthentic platform to luxury brands including Bulgari and LVMH's Hublot watches, and believes the WISeAuthentic platform can successfully be deployed for a large variety of sectors. Our most recent developments enhance our security solution through secure Blockchain layers.

· WISePrint – The WISeAuthentic portfolio has been expanded to reduce the risk of fraud and help printer manufacturers to protect their legitimate cartridges. This solution called WISePrint includes cryptographic hardware modules and a turnkey high security infrastructure as well as services that help deployment from the manufacturer to the end-user.

34

· Trust Services, Managed PKI - WISeKey operates, under the WISeKey/OISTE Root, a worldwide-recognized PKI platform from its secure datacenter in Switzerland. This platform is based in the Certificate Management Solution CertifyID URA (Universal Registration Authority), and enables WISeKey to provide a full portfolio of "Trust Services", delivering digital certificates to protect persons, applications and objects. One of the advantages of the URA platform is the capability to build a multi-tenant service with delegated administrators. This service allow WISeKey to provide a "Managed PKI" service to our customers, that can access the URA to manage their digital certificates without requiring to deploy any on-premises architecture, as the MPKI service is securely accessed from the cloud using a web portal or advanced API, that enables certificate management automation. MPKI customers have the ability to manage multiple certificate types, as for example:

· Personal Digital Certificates for employees or customers, that enable secure email, document signatures and others;

· SSL Certificates, to protect the corporate web and application servers;

· Device Certificates, to protect IoT applications.

Market Verticals

Internet of Things (IoT) – IoT is an "umbrella" term that has been adopted as the universal way of describing every digital device that is connecting itself to the internet with the goal of becoming more valuable to its user through new controls and features, the original manufacturer through the ability to remotely monitor their devices, or the providers of cloud-based services who are creating entire companies around the data that they are collecting from these devices. Many of these devices have never had internet connectivity, and the original manufacturers of these devices have never had to worry about the security challenges that come along with making their devices accessible to the connected ecosystem. The IoT market, and the security challenges that come along with it, is an ideal market vertical for WISeKey and our portfolio of hardware and cybersecurity software solutions. With billions of devices already shipping with our solutions embedded in them, we have created one of the largest IoT centric revenue streams inside of our market segment where other companies that claim to serve the IoT market are still struggling to show any true revenue from this space.

Industry 4.0 - Industry 4.0 is based on the concept of smart factories where machines are augmented with internet connectivity and connected to a system that can visualize the entire production chain and make decisions on its own. The trend is towards automation and data exchange in manufacturing technologies which include Cyber-Physical Systems (CPS), the Industrial IoT (IIOT), cloud computing and cognitive computing. Industry 4.0 is also referred to as the fourth industrial revolution. Our cybersecurity platform is ideally suited to meet the needs of the Industry 4.0 market, where connected devices and cloud platforms merge with the goal of improving manufacturing processes and introducing predictive analytics that can submit a repair request before a manufacturing line breaks down, saving valuable down-time that costs manufacturers millions in lost production. Industry 4.0 reaches beyond manufacturing though, and is fast becoming synonymous for the connectivity trend that is happening inside of smart cities, smart electricity grids, smart buildings, and any network that connects industrial applications.

Anti-Illicit-Trade and Counterfeiting - Governments, enterprises and citizens across the globe continue to be adversely affected by the sales of counterfeit products and the distribution of illicit goods. In 2017 it was projected that the global economic impact of counterfeit goods alone was as high as $ 1.2 Trillion per year (R Strategic Global 2017)⁸ – about the equivalent of all defense budgets of the world combined. By 2022 the ICC projects that counterfeiting and privacy will drain US $4.2 trillion from the global economy and put 5.4 million legitimate jobs at risk (ICC 2017)⁹. The astounding and consistent growth rate of counterfeiting and illicit trade persists despite increased efforts by the private sector, governments, international government organizations and NGOs clearly highlights that there is room for improvement and that new approaches are required through the adoption of innovative technologies. Efficiently combating illicit trade will require products and the people that handle them to have a digital identity that can be verified at any time and point of the supply chain.

___________________________

⁸ R Strategic Global, ‘Global Brand Counterfeiting Report 2018: Value of Counterfeited Goods in 2017 Amounted to $1.2 Trillion - Research and Markets’, ResearchAndMarkets, December 2017.

⁹ Frontier Economics, ‘Global impacts of counterfeiting and piracy to reach US$4.2 trillion by 2022’, International Chamber of Commerce, June 2, 2017.

35

Consumer Connectivity (KYC) - Know Your Customer (KYC) is a contemporary way of describing the age-old need to understand who your customers are and through predictive algorithms estimate what they want to buy, and most importantly, when they might buy it. This is considered the "Holy Grail" of marketing data and companies pay billions in advertising dollars to attract customers and extract this information from them. With the increase in mobile devices as the primary search platform for consumer research on companies and products, brands are looking to find new and captivating ways to get their marketing messages on the screens of their customers and build lasting online "relationships" with them. One new exciting avenue for brands to connect with consumers is through the use of Near Field Communication (NFC) enabled tags that are embedded inside of clothing, sportswear, handbags, watches, and even spirit bottles. These tags use the same technology that is used by smart phone manufactures to allow consumers to pay for a cup of coffee with a simple tap of their phone. With the single-tap of an embedded NFC tag, consumers can authenticate products, gain access to VIP product offerings, and connect to the social media platform of the brand, creating a new sense of brand loyalty. WISeKey has partnered with several key players in the clothing and spirit authentication markets to deploy secure tag technologies and backend systems that can leverage device identities and PKI services to enable Blockchain driven traceability solutions and KYC platforms.

Data Privacy - The protection of the information in general, and the protection of the private personal information of people in particular, is based on two major paradigms:

· Information can only be accessed by the authorized parties, as decided by the owner at any moment. This includes the capability to authenticate who is trying to access the information, and also to avoid eavesdropping during storage or transmission;

· Information must be authentic, so it can't be manipulated while stored or transmitted, and there must be a mechanism to detect if any tampering occurred.

WISeKey uses advanced technologies that ensure the privacy of personal data thanks to the adoption of PKI technology, including:

· Digital Identity, in the form of a Digital Certificate, to implement strong authentication mechanism, being able to ensure who can access the information

· Strong encryption to protect the data while stored in servers or transmitted over the internet

· Legally-binding digital signatures to ensure that the authenticity and integrity of the information

WISeKey's suite of products and services, including CertifyID and WISeID products enable such capabilities on all environments, including enterprise applications, desktop solutions, and mobile applications.

Autonomous Safety - The growing addition of complex technologies in the automotive industry had always as a goal to elevate the levels of safety and comfort for drivers and passengers. Self-driving cars, intelligent collision detection, advanced entertainment systems, connected to the Internet are just a few to mention. The potential risk of security flaws or errors in these technologies is enormous. Latest reports go as far as to consider a self-driving vehicle as a weapon if a malicious attacker takes controls of it (Campbell 2018)¹⁰. The only possibility to adopt these technologies with a reasonable control of the inherent risks is to adopt and embed security as a fundamental principle of the design and manufacturing process. Intelligent cars must embed security technologies in all layers where a potential attack vector exists. All sensors in the cars must interact with the controlling units in a way that both parts can be sure that there's no room for tampering in the data and commands. One must also control who can access the car components, from the driver to the personnel at the service shops. WISeKey offers a suite of technologies to enable such levels of security, including:

· VaultiTrust - WISeKey’s VaultiTrust can be used for trusted data generation and secure elements provisioning inside of secure automotive manufacturing applications.

· ISTANA PKI solution: Solution to manage all components in an intelligent car, by means of providing strong digital identities, based on PKI technology

___________________________

¹⁰ Campbell, P, ‘Hackers have self-driving cars in their headlights’, Financial Times, March 15, 2018.

36

Our Competitive Strengths

We believe we have several competitive advantages that will enable us to defend and extend our market position in digital identification and IoT security. Our key competitive strengths include:

· Unified Cybersecurity Platform - On the surface it may seem easy to look at WISeKey's secure semiconductor offerings and to compare us to other traditional semiconductor companies like NXP, Microchip, or ST Microelectronics or, or considering our experience in Root of Trust and PKI services, compare us to Certificate Authorities (CA) like Digicert, Comodo, or Globalsign. The key to our success is the fact that we are the first company of our scale to combine both offerings into a single platform.

The term "one-stop-shop" may seem a bit cliché but in this case it's a perfect description of our capabilities. In the end, your security ecosystem must be solid across the full spectrum. There are three distinct advantages to building a connected security scheme from the products delivered by one vendor: First, one does not have to hire or pay for the security expertise to make sure that each different component will work with the next element; second, time to market is critical in the IoT space and qualifying multiple vendors and negotiating contracts takes up time where a manufacturer's product could be selling instead of waiting to be built; third, if a security issue needs to be addressed only one vendor needs to be engaged to resolve the issues as quickly as possible.

· Security in our DNA - Our management team has extensive security domain expertise and a proven track record. Our Chief Executive Officer, Carlos Moreira, founded WISeKey in 1999 after spending 17 years as a United Nations Expert on Cybersecurity and Trust Models. He is recognized as an internet security pioneer. Bernard Vian led the Semiconductor and IoT security practice with over 25 years of industry experience. We have a deep bench of talent at the executive level, with years of industry experience (See Item 6.A. Directors and Senior Management).

Trusted products are the result of the people who build them. Their strengths come from the collective experiences and successful track record of seeing projects through from research and development, to large scale production deployments, and even on to the end of life of long running programs. When selecting a security vendor one should expect for them to have been through some battles, defended billions of devices, and to have the respect of their peer community. Having a team of high-caliber, market leading contributors, that have been together for years, some even for decades, makes WISeKey uniquely qualified to provide the next generation of cybersecurity solutions and gives us a distinct advantage over our competition.

· Swiss-based RoT - Swiss neutrality, security and privacy laws allow us to operate as the trusted operator of the OISTE Global RoT and without geo-political or governmental constraints. The OISTE RoT is located in Switzerland and is managed by a not-for-profit entity, OISTE. The OISTE RoT serves as a common trust anchor, recognized by operating systems and IoT applications to ensure the authenticity, confidentiality, and integrity of online identities and transactions. We believe these features are important in creating business opportunities with various governments, international bodies, and industrial companies that are wary of foreign government oversight intervention and centralization of data on servers outside of their respective jurisdictions.

· Global Interoperability - We offer solutions on a global scale that are capable of adapting to complex and country-specific rules and regulations. We operate our RoT within the EU and India, and expect to operate RoT in the United States and China. Our RoT satisfies national cybersecurity requirements and is backed by globally recognized security credentials, allowing us to deploy our trusted platforms on a global scale while adapting to country-specific security regulatory bodies.

· Strong Partnership Ecosystem: We have strong network of strategic, technology and channel partnerships. Current partnerships include agreements with industry leaders such as SAP, to integrate our RoT with devices leveraging the SAP HANA Cloud Platform for IoT, IBM, to integrate with IBM Watson to enhance the security of the data exchanged with IoT devices, and MasterCard, to deliver payment for luxury watches, accessories or wearable devices using our biometric authentication. One of our most recent partnerships is with ORACLE whereby WISeKey became ORACLE's first external digital identity providers, integrating WISeKey's RoT and CertifyID CMS solutions onto the ORACLE Blockchain platform.

37

Our Growth Strategies

Our mission is to build trust through the delivery of integrated security solutions. This is a broad reaching goal that requires a well-thought-out strategy to accomplish it. The key elements of our growth strategy include:

· Expansion within our Existing Customer Base with our Integrated Security Platforms - Our existing customer base of over 3,500 customers provides a significant opportunity to drive incremental sales. We plan to increasingly market our cybersecurity software and ROT offerings to our IoT and semiconductor customers and vice – versa. We currently have growing number of customers using both our semiconductor and cybersecurity software offerings and believe helping our current customers identify gaps in their cybersecurity defense strategies will drive significant cross selling opportunities and increase our product deployment.

· Acquiring New Customers within Existing Geographic Coverage - We plan to continue broadening and growing our customer base across industry verticals, including energy and utilities, financial services, healthcare, manufacturing and retail, further expanding our market reach. To drive the acquisition of new customers, we plan to invest in our direct sales team, enhance our marketing efforts, and expand our channel partnerships. We are also focused on the education of existing partners in order to further expand our market reach through our channel partner network.

· Expand our Geographic Coverage - We operate in a large, growing markets and there are substantial opportunities to expand our geographic coverage and client base. We plan to expand our global footprint outside of the areas where we currently operate. Our Swiss affiliation allows us to penetrate markets that have been traditionally difficult for our competitors and other security vendors, including China. In recent years we entered into the Indian market and expanded our operations in France, Taiwan, Japan and the United States. We specifically want to focus on continued expansion in the United States, which is a very underpenetrated foreign market for the Company.

· Expand the Integrated Security Platforms into New Technology Applications - We have begun to develop applications that integrate our platform into Blockchain and Artificial Intelligence. We aim to enhance the security of the data exchanged with IoT devices and leverage a digital identity that a device can use to authenticate itself in the IoT network, using a dual-factor authentication at the device level, and encrypt the communications.

· Selectively Pursue Strategic Transactions - We will continue to proactively explore and pursue selective acquisitions to help drive our growth and complement our product offerings, expand the functionality of our security solutions, acquire technology or talent, or bolster our leadership position by gaining access to new customers or markets. Acquisitions remain core to our strategy and we continue to monitor an active pipeline of opportunities.

38

C. Organizational Structure

We are the holding company of the WISeKey Group.

The chart below contains a summary of our organizational structure and sets out our subsidiaries, associated companies and joint ventures as at December 31, 2019. Although not all of our subsidiaries are wholly-owned, all of them are assessed as being under our control.

 

As at December 31, 2019, our main operating subsidiaries were WISeKey Semiconductors SAS, domiciled in France, and WISeKey SA, domiciled in Switzerland:

Company Name	Country of incorporation	Percentage ownership as at December 31, 2019
WISeKey SA	Switzerland	95.58%
WISeKey Semiconductors SAS	France	100.00%

D. Property, Plants, and Equipment

Our corporate headquarters are located in Geneva, Switzerland. The principal office for our Swiss and international operations, which is also our registered office, is located in Zug, Switzerland.

As of December 31, 2019, the net book values of tangible fixed assets were as follows:

	As at December 31, 2019
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

39

We do not own any facility and our group companies have entered into lease arrangements for the premises in which they operate. The following table sets forth our most significant facilities as at December 31, 2019:

Location	Size of site (in m2)	Use of the property
Meyreuil, France	1,498*	Research & development, sales & marketing, administration.
Geneva, Switzerland	693*	Head office administration, sales & marketing and data center.

* excluding parking spaces

Item 4A.  Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report on Form 20-F.

Certain information included in this discussion and analysis includes forward-looking statements that are subject to risks and uncertainties, and which may cause actual results to differ materially from those expressed or implied by such forward-looking statements. For further information on important factors that could cause our actual results to differ materially from the results described in the forward-looking statements contained in this discussion and analysis, see "Special Note Regarding Forward-Looking Statements" and "Item 3D. Risk Factors."

A. Operating Results

Company Overview

We are a Swiss cybersecurity company focused on delivering integrated security solutions for the Internet of Things ("IoT") and digital identity ecosystems. With over two decades of experience in the digital security market, we integrate our secure semiconductors, cybersecurity software, and a globally recognized Root of Trust (Rot) into leading-edge products and services that protect users, devices, data and transactions in the connected world.

The rapid proliferation of internet-connected devices and individuals' increasing dependence on them for personal and business purposes, and the need to protect them against cyberattacks and data theft, has prompted WISeKey to take steps to refocus its product offering on the IoT market by divesting WISeKey (Bermuda) Holding Ltd (formerly named QV Holdings Ltd) and its affiliates (together "QuoVadis" or the "QuoVadis Group").

Basis of presentation

We prepare our financial statements in accordance with US GAAP. Our reporting currency is the U.S. Dollar ("USD").

Our critical accounting policies are described in Note 4.

Discontinued Operations relating to WISeKey (Bermuda) Holding Ltd and affiliates (QuoVadis Group)

On December 21, 2018 the Group signed a sale and purchase agreement (the "SPA") to sell WISeKey (Bermuda) Holding Ltd, a Bermuda based company, and its affiliates to Digicert Inc. The sale was completed in the first quarter of 2019. The group subsidiaries making up the QuoVadis Group in scope for the sale were WISeKey (Bermuda) Holding Ltd, QuoVadis Trustlink Schweiz AG, WISeKey (UK) Ltd, QuoVadis Trustlink BVBA, QuoVadis Trustlink BV, QV BE BV, QuoVadis Trustlink GmbH, QuoVadis Services Ltd, and QuoVadis Ltd.

40

WISeKey Consolidated Financial Statements for the Year Ended December 31, 2018

We assessed the SPA under ASC 205 and concluded that, although the sale had not been completed as at December 31, 2018, the operation met the requirement to be classified as held for sale and as such qualifies as a discontinued operation.

In line with ASC 205-20-45-3A, we reported the results of the discontinued operations as a separate component of income, and classified their assets and liabilities separately as held for sale in the balance sheet for all periods presented. Long lived assets classified as held for sale were recorded at the lower of (i) their carrying value, and (ii) their fair value less costs to sell. No gain or loss on classification as held for sale was recorded in 2018. The Group elected to allocate interest to discontinued operations in accordance with ASC 205-20-45-6 to 205-20-45-8.

WISeKey Consolidated Financial Statements for the Year Ended December 31, 2019

The sale of WISeKey (Bermuda) Holding Ltd and its affiliates was completed on January 16, 2019, when all entities except QuoVadis Services Ltd were transferred to Digicert Inc. The transfer of ownership of QuoVadis Services Ltd was conditional on receiving the consent from the Regulatory Authority in Bermuda (the "RAB") (the "RAB Consent") to the change in ultimate beneficial ownership of QuoVadis Services Ltd, being the entity holding the Communications Operating Licence in Bermuda. The RAB Consent was obtained in February 2019 and the transfer of ownership of QuoVadis Services Ltd from WISeKey to Digicert Inc. was effective on February 28, 2019. We assessed the SPA under ASC 810-10-40-6 and concluded that the terms and conditions of the SPA met the definition to account for the sale as a single transaction effective on January 16, 2019.

We assessed the SPA under ASC 205 and concluded that, for the period January 01, 2019 to January 16, 2019, the operation met the requirement to be classified as held for sale and as such qualifies as a discontinued operation. The Group elected to allocate interest to discontinued operations in accordance with ASC 205-20-45-6 to 205-20-45-8. The allocation method is detailed in Note 28.

In line with ASC 205-20-45-3A, we reported the results of the discontinued operations as a separate component of income. The divested assets and liabilities were deconsolidated from February 28, 2019 for QuoVadis Services Ltd, and from January 16, 2019 for all other entities.

The gain from divestiture recorded in the year to December 31, 2019 is shown as a separate line within discontinued operations in the income statement.

Factors affecting our results of operations

Although most of our IoT segment customers are recurring customers, it is not industry practice to work with long-term contracts. Therefore most of our IoT customers have signed a framework agreement with us but are not committed to certain volumes over a period of time. This introduces a level of uncertainty on the level of revenue generated from recurring customers.

In our IoT segment, as microelectronics technology evolves, customers look for added functionalities, and competitors in the semiconductors industry develop new products, sales of a given product typically decrease over time as the next-generation semiconductors are introduced. In order to sustain revenue, IoT companies must be able to develop or otherwise acquire the rights to develop or market new products with additional or innovative security and application features. See "Item 4. Information on the Company – B. Business Overview" for information regarding our technology and product developments.

41

Operating Segments

Since the acquisition of WISeKey Semiconductors SAS in 2016, we organized our business into two operating segments: the IoT segment, which is centered on our family of secure microcontrollers designed to give an unforgeable identity to any connected device, and the mPKI segment, for managed Public Key Infrastructure, which encompasses our digital identity, certificate management and signing solutions, and trust services.

Geographic Information

Our operations are global in scope and we generate revenue from selling our products and services across various regions. While our operations in Europe have historically contributed the largest portion of our revenues, our efforts to expand in the United States have increased the revenue generated from North America since 2017. We are also building a strategy to expand into new territories in Asia, although at this stage the results have not yet materialized in our revenue.

Our total revenue by geographic region for the fiscal years ended December 31, 2019, December 31, 2018 and December 31, 2017 is set forth in the following table:

	12 months ended December 31,
	2019		2018		2017
Net Sales by region	USD'000	%	USD'000	%	USD'000	%
Switzerland	2,137	9%	2,512	7%	4,629	14%
Rest of EMEA	8,046	36%	14,122	41%	11,342	34%
North America	9,691	43%	15,165	44%	12,714	38%
Asia Pacific	2,504	11%	2,306	7%	3,664	11%
Latin America	274	1%	175	1%	1,325	4%
Total Net sales	22,652	100%	34,280	100%	33,674	100%

42

Financial year ended December 31, 2019 compared with financial year ended December 31, 2018

	12 months ended December 31,			12 months ended December 31,			Year-on-Year Variance
USD'000	2019			2018
Net sales		22,652			34,280			-34	%
Cost of sales		(13,196	)		(18,319	)		-28	%
Gross profit		9,456			15,961			-41	%
Other operating income		180			289			-38	%
Research & development expenses		(6,422	)		(5,306	)		21	%
Selling & marketing expenses		(7,929	)		(5,772	)		37	%
General & administrative expenses		(15,789	)		(14,232	)		11	%
Total operating expenses		(29,960	)		(25,021	)		20	%
Operating income / (loss)		(20,504	)		(9,060	)		126	%
Non-operating income		1,918			2,181			-12	%
Gain / (loss) on derivative liability		214			-			n/a
Gain / (loss) on debt extinguishment		(233	)		-			n/a
Interest and amortization of debt discount		(742	)		(150	)		395	%
Non-operating expenses		(3,670	)		(2,826	)		30	%
Income / (loss) from continuing operations before income tax expense		(23,017	)		(9,855	)		134	%
Income tax (expense)/recovery		(13	)		(53	)		-75	%
Income/ (loss) from continuing operations, net		(23,030	)		(9,908	)		132	%
Discontinued operations:
Net sales from discontinued operations		1,934			19,412			-90	%
Cost of sales from discontinued operations		(791	)		(6,196	)		-87	%
Total operating and non-operating expenses from discontinued operations		(1,801	)		(19,778	)		-91	%
Income tax (expense)/recovery from discontinued operations		42			205			-80	%
Gain on disposal of a business, net of tax on disposal		31,100			-			n/a
Income / (loss) on discontinued operations		30,484			(6,357	)		580	%
Net income / (loss)		7,454			(16,265	)		146	%
Less: Net income / (loss) attributable to noncontrolling interests		(733	)		13			-5738	%
Net income / (loss) attributable to WISeKey International Holding AG		8,187			(16,278	)		150	%

43

Revenue

Our total revenue for the year ended December 31, 2019 decreased by USD 11.6 million or 34% from prior period. This is mostly attributable to three factors:

· The impact of the sale of WISeKey (Bermuda) Holding Ltd and its affiliates on our continuing operations with the absence of cross-selling opportunities, i.e. opportunities to sell other products and services of the group to existing customers of the divested entities, and the reduction of our sales team.

· Our IoT activity was adversely affected by the overall downturn in the semiconductor industry worldwide. This downturn, linked to the political and trading tensions between the U.S. and China, and the rising threat of protectionism and vulnerabilities in emerging markets, has affected all IoT and microprocessors companies (according to the Semiconductors Industry Association, 2019 mid-year global semiconductor sales were down 14.5% as compared to 2018¹¹).

· One of our products, the old-generation of MicroPass used in the past for electronic payments in the U.S. market, is reaching the end of its life.

With the introduction of the Nanoseal family, the next-generation family of secure memory chips, we are positioning our product offering for the next technological evolutions. However, the performance of our IoT segment will remain dependent on the macro-economic factors impacting the semiconductors industry, particularly the evolution of the tensions between the United States and China.

The table below shows the breakdown of our revenue by operating segment for the years ended December 31, 2019 and December 31, 2018.

	12 months ended December 31,	12 months ended December 31,	Year-on-Year
USD'000	2019	2018	Variance
IoT segment revenue from external customers	20,504	29,404	-30%
mPKI segment revenue from external customers	2,148	4,876	-56%
Total IoT segment revenue	22,652	34,280	-34%

Gross Profit

Our gross profit decreased by USD 6.5 million to USD 9.4 million (gross margin of 42%) in the year ended December 31, 2019 in comparison with a gross profit of USD 16.0 million (gross margin of 47%) in the year ended December 31, 2018. Due to the long manufacturing cycle of our IoT activity, and in order to reduce the lead time to our customers, we start the manufacturing cycle early. However, with the downturn in the semiconductor industry, some customers were left with excess stock at the end of 2018 thus reduced their order volumes in 2019 on a very short notice, which did not allow us to adapt our manufacturing cycle. The gross margin improved significantly between the first half of 2019 (39%) and the second half of 2019 (45%), however this was not enough to reach a gross margin consistent with 2018 because of the decrease on the higher-margin mPKI revenue between 2018 and 2019.

To a lesser extent, our gross profit was also adversely impacted by the new product introduction costs in our IoT segment.

Other operating income

In 2019 our other operating income consisted of recharges for the use of our premises by OISTE (see Note 39 of our consolidated financial statement as at December 31, 2019) for USD 140,000 and a gain on the liquidation of our subsidiaries WISeKey Italia s.r.l and WISeKey Singapore Pte Ltd. for USD 40,000. In the year ended December 31, 2018 the Group had recorded a USD 289,000 gain on the liquidation of its subsidiary WISeKey BRBV classified as other operating income.

We do not have recurring other operating income that contributes to our profit.

___________________________

¹¹ Semiconductors Industry Association, ‘Mid-Year Global Semiconductor Sales Down 14.5 Compared to 2018’, SIA Latest News, August 5, 2019.

44

Research & development expenses

Our research and development ("R&D") expenses includes expenses related to the research of new technology, products and applications, as well as their development and proof of concept, and the development of further application for our existing products and technology. They include salaries, bonuses, pension costs, stock-based compensation, depreciation and amortization of capitalized assets, costs of material and equipment that do not meet the criteria for capitalization, as well as any tax credit relating to R&D activities, among others.

Our R&D expenses represented respectively 21% of total operating expenses in 2019 and 2018. Our Group being technology-driven, this reflects our engagement to act as a leader on new cybersecurity developments and future applications. In addition to the expected growth in our R&D expenses linked to our technology leadership position, in 2019, the increase by USD 1.1 million or 21% from prior period was partly due to an increase by USD 0.7 million in R&D-related stock-based compensation.

Research tax credits are provided by the French government to give incentives for companies to perform technical and scientific research. Our subsidiary WISeKey Semiconductors SAS is eligible to receive such tax credits. The credit is deductible from the entity's income tax charge for the year or payable in cash the following year, whichever event occurs first.

Selling & marketing expenses

Our selling & marketing ("S&M") expenses include advertising and sales promotion expenses such as salaries, bonuses, pension costs, stock-based compensation, business development consultancy services, and costs of supporting material and equipment that do not meet the criteria for capitalization, among others.

Our S&M expenses increased by 37% or USD 2.2 million in 2019 compared with 2018. This is explained by the expansion of our sales force in Europe and North America and our efforts to rebuild our sales team following the divestiture of WISeKey (Bermuda) Holding Ltd and its affiliates in addition to an increase in our stock-based compensation by USD 0.7 million.

General & administrative expenses

Our general & administrative ("G&A") expenses covers all other charges necessary to run our operations and supporting functions, and include salaries, bonuses, pension costs, stock-based compensation, lease and building costs, insurance, legal, professional, accounting and auditing fees, depreciation and amortization of capitalized assets, and costs of supporting material and equipment that do not meet the criteria for capitalization, among others.

Our G&A expenses increased by 11% or USD 1.6 million in 2019 compared with 2018. This increase is due to an increase in stock-based compensation by USD 2.4 million year-on-year following the grant of ESOP options to our employees in recognition for past services to our Company. If we exclude the impact of our stock-based compensation, our G&A expenses actually decreased by USD 0.8 million, which reflects the efforts that we made to reduce our cost basis.

Operating loss

Our operating loss for the year ended December 31, 2019 increased by USD 11.4 million compared with 2018, primarily. The key factors behind this results are to the decrease in gross profit by USD 6.5 million as detailed above, and the increase of our stock-based compensation expense by a total of USD 3.8 million year on year, following the grant of ESOP options to our employees in recognition for past services to our Company.

45

Non-operating income and expenses

Income and expenditure resulting from non-operating activities increased by USD 1.7 million in 2019 compared with 2018. This was primarily due to our financing facilities. As at December 31, 2018, we had three interest-bearing instruments: the ExWorks Line of Credit, the Crede Convertible Loan Agreement from September 28, 2018, and the Yorkville Convertible Loan Agreement from September 28, 2018. In line with ASC 205, part of the interest expense relating to the ExWorks Line of Credit was classified under the results from discontinued operations, whilst the interest expense in connection with both the Crede Convertible Loan Agreement and the Yorkville Convertible Loan Agreement only related to one quarter. In 2019, the ExWorks Line of Credit was repaid in full on January 16, 2019, but our Company entered into a new loan with ExWorks from April 2019, and the Group paid interest expense for the full year on both the Crede Convertible Loan Agreement and the Yorkville Convertible Loan Agreement, hence an increase in interest expense of USD 0.4 million and in interest and amortization of debt discount by USD 0.6million from prior year. See Note 24 of our consolidated financial statements for the year ended December 31, 2018 and 2019 for details on these financial instruments.

Additionally, for the year ended December 31, 2019, our non-operating income decreased by USD 0.3 million from prior period because of a non-recurring credit for the fair value measurement of our investment in OpenLimit booked in the income statement in 2018, and our foreign exchange losses increased by USD 0.4 million from prior period due to unfavorable currency fluctuations (see Impact of foreign currency fluctuation below).

Our Company regularly enters into loan and convertible loan agreements to finance its operations.

46

Net loss from continuing operations

As a result of the above factors, the net loss from continuing operations increased by 132%, or USD 13.1 million, from USD 9.9 million in the year ended December 31, 2018 to USD 23.0 million in the year ended December 31, 2019.

Income from discontinued operations

As detailed in the above Basis of presentation subsection, the SPA to sell WISeKey (Bermuda) Holding Ltd and its affiliates met the requirement to be classified as held for sale and as such qualified as a discontinued operation. In line with ASC 205-20-45-3A, we reported the results of the discontinued operations, WISeKey (Bermuda) Holding Ltd and its affiliates, as a separate component of income.

The USD 31.1 million gain from the divestiture of WISeKey (Bermuda) Holding Ltd and its affiliates was also reported in the results of the discontinued operations in the year ended December 31, 2019.

Net income

With the USD 31.1 million gain from divestiture included in the income on discontinued operations in the income statement in the year ended December 31, 2019, we reached a net income position of USD 7.5 million, compared with a net loss of USD 16.3 million in the year ended December 31, 2018.

Non-GAAP Performance Measures

In addition to our reported financial results prepared under US GAAP, we also prepare and disclose EBITDA and Adjusted EBITDA, which are measures not prepared in accordance with US GAAP. We present EBITDA and Adjusted EBITDA because we believe that these measures are useful to investors as they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We further believe that Adjusted EBITDA is helpful to investors in identifying trends in our business that could otherwise be obscured by certain items unrelated to ongoing operations because they are highly variable, difficult to predict, may substantially impact our results of operations and may limit the ability to evaluate our performance from one period to another on a consistent basis.

The usefulness of EBITDA and Adjusted EBITDA to investors has limitations including, but not limited to, (i) they may not be comparable to similarly titled measures used by other companies, including those in our industry, (ii) they exclude financial information and events, such as the effects of an acquisition or amortization of intangible assets, or of stock-based compensation, that some may consider important in evaluating our performance, value or prospects for the future, (iii) they exclude items or types of items that may continue to occur from period to period in the future and (iv) they may not exclude all items, which could increase or decrease these measures, which investors may consider to be unrelated to our long-term operations, such as the results of businesses divested during a period. These non-GAAP measures should not be considered in isolation and are not, and should not be viewed as, substitutes for income, net profit for the year or any other measure of performances presented in accordance with US GAAP. We encourage investors to review our historical financial statements in their entirety and caution investors to use US GAAP measures as the primary means of evaluating our performance, value and prospects for the future, and EBITDA and Adjusted EBITDA as supplemental measures.

EBITDA and Adjusted EBITDA

We define EBITDA as net profit before income tax expenses, depreciation and amortization including purchase accounting ("PPA") effects, and net interest expense.

We define Adjusted EBITDA as EBITDA further adjusted to exclude non-cash expenses such as stock-based compensation and equity settlements, and other items that management believes are unrelated to our core operations such as non-recurring legal and professional expenses related to our merger and acquisition activities.

47

The following table provides a reconciliation from operating loss to EBITDA and Adjusted EBITDA for the years ended December 31, 2019 and December 31, 2018.

	12 months ended December 31,
(Million USD)	2019	2018
Operating loss as reported	(20.5)	(9.1)
Non-GAAP adjustments from continuing operations:
Depreciation expense from continuing operations	0.8	0.9
Amortization expense on intangibles from continuing operations	0.5	0.5
EBITDA	(19.2)	(7.7)
Non-GAAP adjustments from continuing operations:
Stock-based compensation	5.4	1.7
Expenses settled in equity	-	1.7
M&A-related legal fees	1.0	1.3
M&A-related professional fees	-	0.3
NASDAQ listing-related professional fees	0.2	-
Adjusted EBITDA	(12.6)	(2.7)

48

Financial year ended December 31, 2018 compared with financial year ended December 31, 2017

	12 months ended December 31,		Year-on-Year
USD'000	2018	2017	Variance
Net sales	34,280	33,674	2%
Cost of sales	(18,319)	(17,870)	3%
Gross profit	15,961	15,804	1%
Other operating income	289	1,526	-81%
Research & development expenses	(5,306)	(5,339)	-1%
Selling & marketing expenses	(5,772)	(4,459)	29%
General & administrative expenses	(14,232)	(15,401)	-8%
Total operating expenses	(25,021)	(23,673)	6%
Operating income / (loss)	(9,060)	(7,869)	15%
Non-operating income	2,181	762	186%
Gain / (loss) on derivative liability	-	(98)	-100%
Gain / (loss) on debt extinguishment	-	(556)	-100%
Interest and amortization of debt discount	(150)	(543)	-72%
Non-operating expenses	(2,826)	(1,751)	61%
Income / (loss) from continuing operations before income tax
expense	(9,855)	(10,055)	-2%
Income tax (expense)/recovery	(53)	(71)	-25%
Income/ (loss) from continuing operations, net	(9,908)	(10,126)	-2%
Income / (loss) on discontinued operations	(6,357)	(14,624)	-57%
Net income / (loss)	(16,265)	(24,750)	-34%
Less: Net income / (loss) attributable to noncontrolling interests	13	(483)	-103%
Net income / (loss) attributable to WISeKey International Holding AG	(16,278)	(24,267)	-33%

Revenue

Our 2018 total revenue grew by USD 0.6 million or 2% from 2017, mainly due to higher revenues generated from the development of the ISTANA platform and the subsequent license and rights sale to Daimler. This was the first sizeable application of our ISTANA PKI solution, a solution to manage all components in an intelligent car, by means of providing strong digital identities, based on PKI technology.

This success allowed us to offset the decrease in external revenue in our IoT segment by USD1.0 million between 2017 and 2018, from USD 30.4 million to USD 29.4 million. This decrease is mainly due to two factors: the fact that one of our products is reaching the end of its life, and the negative trend in the semiconductors industry. With the introduction of the Nanoseal family, the next-generation family of secure memory chips, we are positioning our product offering for the next technological evolutions. However, the performance of our IoT segment will remain dependent on the macro-economic factors impacting the semiconductors industry, particularly in 2018 and 2019 the tensions between the United States and China.

49

The table below shows the breakdown of our revenue by operating segment for the financial years ended December 31, 2018 and December 31, 2017.

	12 months ended December 31,		Year-on-Year
USD'000	2018	2017	Variance
IoT segment revenue from external customers	29,404	30,435	-3%
mPKI segment revenue from external customers	4,876	3,239	51%
Total Revenue	34,280	33,674	2%

Gross Profit

Our activities generated an improved gross profit of USD 16.0 million in 2018 at a slightly lower margin of 46.6% against 46.9% in the prior year. The margin was impacted by the new product introduction costs in our IoT segment. However, this rise was offset by an improved sales blend with the Secure Access business moving away from end of line products that carry a lower gross profit margin, and increased sales of our new products at higher margins.

Other operating income

In the year ended December 31, 2018 the Group recorded a USD 0.3 million gain on the liquidation of its subsidiary WISeKey BRBV classified as other operating income.

Other operating income reduced by USD 1.2 million from 2017 to 2018. This is due to a significant one-off credit of USD 1.4 million in 2017, being the release of a provision resulting from the renegotiation of an unfavorable contract. In prior financial periods, a provision had been made on a supplier contracts deemed onerous, i.e. a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The renegotiation changed the terms of the contract which no longer qualified as onerous, and, as such, the provision for onerous contract previously recorded was released back to the income statement leading to a one-off upside.

We do not have recurring other operating income that contributed to our profit.

Research & development expenses

Our research and development ("R&D") expenses includes expenses related to the research of new technology, products and applications, as well as their development and proof of concept, and the development of further application for our existing products and technology. They include salaries, bonuses, pension costs, stock-based compensation, depreciation and amortization of capitalized assets, costs of material and equipment that do not meet the criteria for capitalization, as well as any tax credit relating to R&D activities, among others.

Our R&D expenses represented respectively 21% and 23% of total operating expenses in the years 2018 and 2017. Our group being technology-driven, this reflects our engagement to act as a leader on new cybersecurity developments and future applications.

Research tax credits are provided by the French government to give incentives for companies to perform technical and scientific research. Our subsidiary WISeKey Semiconductors SAS is eligible to receive such tax credits. The credit is deductible from the entity's income tax charge for the year or payable in cash the following year, whichever event occurs first.

Selling & marketing expenses

Our selling & marketing ("S&M") expenses include advertising and sales promotion expenses such as salaries, bonuses, pension costs, stock-based compensation, business development consultancy services, and costs of supporting material and equipment that do not meet the criteria for capitalization, among others.

50

Our 2018 S&M expenses increased by 29%, or USD 1.3 million from 2017. This is explained by the expansion of our sales force in Europe and North America on the one side, and, on the other side, by our USD 0.6 million investment in several critical ventures including the Blockchain Research Initiative and Blockchain Davos Round Table events, both designed to raise awareness on the benefits of the Blockchain technology which is one of the security layers in our core service offering.

General & administrative expenses

Our general & administrative ("G&A") expenses covers all other charges necessary to run our operations and supporting functions, and include salaries, bonuses, pension costs, stock-based compensation, lease and building costs, insurance, legal, professional, accounting and auditing fees, depreciation and amortization of capitalized assets, and costs of supporting material and equipment that do not meet the criteria for capitalization, among others.

Our G&A expenses decreased by 8% or USD 1.2 million between 2017 and 2018, which reflects the efforts that we made to reduce our cost basis.

Operating loss

Our operating loss has increased by 15% or USD 1.2 million primarily due to the increase in our S&M expenses as detailed above.

Non-operating income and expenses

Income and expenditure resulting from non-operating activities was reduced by USD 1.4 million between 2017 and 2018. This was primarily due to non-recurring financial charges incurred in 2017 in relation to the financial instruments held by our Company, including a USD 0.6 million loss on debt extinguishment, a USD 0.1 million loss on derivative liability, as well as a reduction in interest and amortization of debt discount by USD 0.4 million between 2017 and 2018.

Our company regularly enters into loan and convertible loan agreements to finance its operations.

Net loss from continuing operations

As a result of the above factors, the net loss from continuing operations decreased by 2% or USD 0.2 million, from USD 10.1 million for the financial year ended December 31, 2017 to USD 9.9 million in the financial year ended December 31, 2018.

Loss from discontinued operations

As detailed in the above Basis of presentation subsection, the SPA to sell QuoVadis Group met the requirement to be classified as held for sale and as such qualified as a discontinued operation. In line with ASC 205-20-45-3A, we reported the results of the discontinued operations, QuoVadis group, as a separate component of income.

Non-GAAP Performance Measures

In addition to our reported financial results prepared under US GAAP, we also prepare and disclose EBITDA and Adjusted EBITDA, which are measures not prepared in accordance with US GAAP. We present EBITDA and Adjusted EBITDA because we believe that these measures are useful to investors as they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We further believe that Adjusted EBITDA is helpful to investors in identifying trends in our business that could otherwise be obscured by certain items unrelated to ongoing operations because they are highly variable, difficult to predict, may substantially impact our results of operations and may limit the ability to evaluate our performance from one period to another on a consistent basis.

51

The usefulness of EBITDA and Adjusted EBITDA to investors has limitations including, but not limited to, (i) they may not be comparable to similarly titled measures used by other companies, including those in our industry, (ii) they exclude financial information and events, such as the effects of an acquisition or amortization of intangible assets, or of stock-based compensation, that some may consider important in evaluating our performance, value or prospects for the future, (iii) they exclude items or types of items that may continue to occur from period to period in the future and (iv) they may not exclude all items, which could increase or decrease these measures, which investors may consider to be unrelated to our long-term operations, such as the results of businesses divested during a period. These non-GAAP measures should not be considered in isolation and are not, and should not be viewed as, substitutes for income, net profit for the year or any other measure of performances presented in accordance with US GAAP. We encourage investors to review our historical financial statements in their entirety and caution investors to use US GAAP measures as the primary means of evaluating our performance, value and prospects for the future, and EBITDA and Adjusted EBITDA as supplemental measures.

EBITDA and Adjusted EBITDA

We define EBITDA as net profit before income tax expenses, depreciation and amortization including purchase accounting ("PPA") effects, and net interest expense.

We define Adjusted EBITDA as EBITDA further adjusted to exclude non-cash expenses such as stock-based compensation and equity settlements, and other items that management believes are unrelated to our core operations such as non-recurring legal and professional expenses related to our merger and acquisition activities.

The following table provides a reconciliation from operating loss to EBITDA and Adjusted EBITDA for the financial years ended December 31, 2018 and 2017.

	12 months ended December 31,
(Million USD)	2018	2017
Operating loss as reported	(9.1)	(7.9)
Non-GAAP adjustments:
Depreciation expense	1.4	1.4
Amortization expense on intangibles	0.5	1.9
PPA amortization expense	1.6	1.7
EBITDA	(5.6)	(2.9)
Non-GAAP adjustments:
Stock-based compensation	1.7	2.2
Expenses settled in equity	1.7	-
M&A-related legal fees	1.3	2.6
M&A-related professional fees	0.3	1.8
Adjusted EBITDA	(0.6)	3.7

52

Factors affecting our income tax expenses and recovery

For the financial years 2019, 2018 and 2017, income tax at the Swiss statutory rate compared to the Group's income tax expenses as reported is as per table below.

Income tax at the Swiss statutory rate USD'000	As at December 31, 2019	As at December 31, 2018	As at December 31, 2017
Net income/(loss) from continuing operations before income tax	(23,017)	(9,855)	(10,055)
Statutory tax rate	24%	24%	24%
Expected income tax (expense)/recovery	5,524	2,365	2433
Income tax (expense)/recovery	(13)	(53)	(71)
Change in valuation allowance	(2,129)	4,228	(4,487)
Permanent Difference	-	(9)	(344)
Change in expiration of tax loss carryforwards	(3,395)	(6,584)	2,397
Income tax (expense) / recovery from continuing operations	(13)	(53)	(71)

Our change in expiration of tax loss carryforwards is made up of several elements:

i. In some of the countries where we have subsidiaries, losses carried forward can be used for a limited number of years after the fiscal year in which the loss was incurred. If the entity continues to make losses after that limited period has ended, then unused losses that have expired are no longer available as carryforwards. For our group, this concerns entities located in the U.S.A., Switzerland, Spain, Taiwan and India.

ii. When entities are liquidated, their losses carried forward which were reflected in the group's deferred tax calculations are no longer available from the date of the liquidation. For instance, in both financial years 2019 and 2018 respectively, two group subsidiaries were liquidated, representing a reduction in losses carried forward of circa USD 533,000 and USD 200,000.

iii. When our consolidated financial statements are issued prior to the finalization of our subsidiaries' statutory financial statements, there may be subsequent adjustments to the amounts disclosed as losses carried forward in our consolidated financial statements which would be included in the change in expiration of tax loss carryforwards in the following financial year.

Between 2019 and 2018, the aggregate impact of the above factors affecting losses carried forward generated an adjustment of USD 3.4 million from the expected income tax at the Swiss statutory rate. Between 2017 and 2018, the aggregate impact of the above factors affecting losses carried forward generated an adjustment of USD 6.6 million from the expected income tax at the Swiss statutory rate.

As at December 31, 2019 and 2018, our net deferred tax balance was reconciled as follows:

Deferred tax assets and liabilities USD'000	As at December 31, 2019	As at December 31, 2018	As at December 31, 2017
Stock-based compensation	-	9	344
Defined benefit accrual	1,100	1,272	1,289
Tax loss carry-forwards	11,264	10,606	14,888
Deferred Income tax liability	-	(1,356)	(1,476)
Deferred tax asset from acquisition	-	477	477
Other temporary adjustments	-	2,426	1,396
Less discontinued Operations	-	(3,196)	(2,418)
Valuation allowance	(12,358)	(10,230)	(14,458)
Deferred tax assets / (liabilities)	6	8	42

53

The valuation allowance corresponds to the amount of deferred tax that, based on our accounting assessment under applicable standards, should not be recognized as assets in our balance sheet. For the calculation of the valuation allowance, management has considered the extent to which realization of the tax assets is probable for group entities that are or have been in a loss-making position during the last three financial years.

In 2019, the valuation allowance increased by USD 2.2 million, mainly due to the increase in tax loss carry-forwards by USD 0.7 million and the impact of the divestiture of QuoVadis in 2018, the valuation allowance decreased by USD 4.2 million, mainly due to the decrease in tax loss carry-forwards by USD 4.3 million excluding the impact of discontinued operations.

Impact of foreign currency fluctuation

We operate worldwide and as such are exposed to currency fluctuation risks. Although the majority of our sales, purchase and financial operations are denominated in our reporting currency, the U.S. Dollar, some sales and financing contracts are denominated in other currency, and especially in the currency of our head office in Switzerland, the Swiss Franc.

Fluctuations in the exchange rates between the U.S. Dollar and other currencies may have a significant effect on both the Company's results of operations, including reported sales and earnings, and the Company's assets, liabilities and cash flows. This, in turn, may affect the comparability of period-to-period results of operations.

We do not currently hedge against foreign currency fluctuation.

54

The table below shows the variation in foreign exchange rates used to prepare our financial statements for the financial years ended December 31, 2019, December 31, 2018 and December 31, 2017.

		12 months ended December 31,
		2019		2018		Year-on-Year Variance
Foreign currency to U.S. Dollar		Closing rate	12-month Average rate	Closing rate	12-month Average rate	Closing rate	12-month Average rate
Swiss Franc	CHF:USD	1.033253	1.006467	1.016946	1.022876	1.60%	-1.60%
Euro	EUR:USD	1.122701	1.119921	1.145548	1.181497	-1.99%	-5.21%
Indian Rupee	INR:USD	0.014027	0.014200	0.014367	0.014654	-2.37%	-3.10%
Japanese Yen	JPY:USD	0.009201	0.009174	0.009115	0.009061	0.94%	1.25%
Singapore Dollar	SGD:USD	0.743657	0.732963	0.734040	0.741450	1.31%	-1.14%
U.K. Pound Sterling	GBP:USD	1.326752	1.276954	1.276021	1.335429	3.98%	-4.38%
Taiwanese Dollar	TWD:USD	0.033396	0.032374	0.032663	0.033194	2.24%	-2.47%

		12 months ended December 31,
		2018		2017		Year-on-Year Variance
Foreign currency to U.S. Dollar		Closing rate	12-month Average rate	Closing rate	12-month Average rate	Closing rate	12-month Average rate
Swiss Franc	CHF:USD	1.016946	1.022876	1.025927	1.015961	-0.88%	0.68%
Euro	EUR:USD	1.145548	1.181497	1.199861	1.125218	-4.53%	5.00%
Indian Rupee	INR:USD	0.014367	0.014654	0.015662	0.015361	-8.27%	-4.60%
Japanese Yen	JPY:USD	0.009115	0.009061	0.008876	0.008918	2.69%	1.60%
Singapore Dollar	SGD:USD	0.734040	0.741450	0.747760	n/a*	-1.83%	n/a*
U.K. Pound Sterling	GBP:USD	1.276021	1.335429	1.350291	1.288230	-5.50%	3.66%
Taiwanese Dollar	TWD:USD	0.032663	0.033194	0.033662	n/a*	-2.97%	n/a*

* 12-month average not used in the preparation of the financial statements

We do not operate in countries experiencing hyperinflation and assessed the impact of inflation as immaterial to our financial statements.

B. Liquidity and Capital Resources

Company liquidity

Our cash and capital requirement relate mainly to our operating cash requirement, capital expenditures, contractual obligations, repayment of indebtedness and payment of interest and financing fees.

Sources of liquidity

Our usual sources of liquidity are cash generated from customers, cash from financing instruments such as debt and convertible debt, cash from share subscription facilities, and cash from private investors in exchange for our Class B Shares. As a non-recurring source of liquidity, the sale of the QuoVadis Group in the first quarter of 2019 provided a material cash inflow. Historically, the Group has been dependent on equity financing to augment the operating cash flow to cover its cash requirements.

55

We had positive adjusted working capital of USD 3.5 million as at December 31, 2019. We calculate adjusted working capital as our current assets, less our current liabilities excluding deferred revenue, because our deferred revenue is made up of non-refundable customer advances. Although our adjusted working capital is positive, based on the Group’s cash projections for the next 12 months to March 31, 2021, the Group will need approximately USD 2.1 million to fund operations and financial commitments. Note 24 of our consolidated financial statement as at December 31, 2019 describes the sources of funding that the Group can turn to whenever needed. In addition to two separate equity facilities (the SFF and SEDA), the loans contracted by WISeKey in 2018 and 2019 demonstrate the availability of lenders to support the Group in its activities and development.

As at December 31, 2019, we hold cash and cash equivalent in an amount of USD 12.1 million following from the cash injection from the sale of the QuoVadis Group. We expect to use this liquidity to fund our operations, develop our sales team, and form part of the consideration for future potential merger and acquisition transactions.

Consolidated cash flows

The following table shows information about our cash flows during the financial years ended December 31, 2019, 2018 and 2017 respectively.

	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Cash Flows from operating activities:
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
Effect of exchange rate changes on cash and cash equivalents	41	(200)	(733)
Cash and cash equivalents
Net increase (decrease) during the period	5,492	(1,060)	6,993
Balance, beginning of period	11,154	12,214	5,221
Balance, end of period	16,646	11,154	12,214
Reconciliation to balance sheet
Cash and cash equivalents from continuing operations	12,121	9,146	9,583
Restricted cash, current from continuing operations	2,525	618	-
Restricted cash, noncurrent from continuing operations	2,000	-	-
Cash and cash equivalents from discontinued operations	-	1,390	2,631
Balance, end of period	16,646	11,154	12,214

56

The following tables provide the details of the cash flows separated between continuing and discontinued activities following the divestiture of QuoVadis.

Continuing operations	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Net cash provided by (used in) operating activities	(14,674)	(2,328)	1,595
Net cash provided by (used in) investing activities	36,626	(5,489)	(12,412)
Net cash provided by (used in) financing activities	(17,284)	8,198	6,917

Discontinued operations	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Net cash provided by (used in) operating activities	783	(6,164)	(6,526)
Net cash provided by (used in) investing activities	-	1,245	(440)
Net cash provided by (used in) financing activities	-	3,678	18,592

We have not experienced any legal or economic restrictions on the ability of subsidiaries to transfer funds to the Company in the form of loans.

Impact of discontinued operations

The Company has assessed the anticipated impact on our cash flows following the sale of the QuoVadis Group. As shown in the table above, the QuoVadis Group was cash flow negative on operating activities, largely as a result of ongoing losses. The sale of the QuoVadis Group has enabled the Company to repay the ExWorks Line of Credit in full during 2019, a facility that carried interest at 12% per annum. In addition to this, the sale of the QuoVadis Group has left the Company with an improved net cash and cash equivalents balance that will enable us to fund our activities as set out above.

We believe that the sale of the QuoVadis Group has benefitted the Company significantly as it has provided us with sufficient working capital to be able to focus on the future whilst, at the same time, removing a part of the business that was a drain on our liquidity.

Level of borrowing

As at December 31, 2019, we held short-term notes payable in an amount of USD 4,103,740, and no long–term notes payable. The section below gives the detail of the financial instruments used by the company.

57

Financial instruments

The following financial instruments are those that were in use, and disclosed in our balance sheet and notes as at December 31, 2019.

Share Subscription Facility with GEM LLC

On January 19, 2016 the Group closed a Share Subscription Facility ("the GEM Facility") with GEM Global Yield Fund LLC SCS and GEM Investments America, LLC (collectively referred to as "GEM") (Global Equity Markets, "GEM"), which is a CHF 60 million facility over 5 years and allows the Group to draw down funds at its option in exchange for our Class B shares. The mechanics of the GEM Facility allow for a drawdown essentially 18 times in a year, the amount being in a range related to the trading volume and price of our Class B share trading on the SIX. The drawdown amount is based on 90% of the average closing price of the last 15 trading days multiplied by 1,000% of the average volume of the last 15 trading days. GEM can then elect to purchase between 50% and 200% of this figure.

In 2017, WISeKey made three drawdowns for a total of CHF 3,905,355 in exchange for a total of 825,000 WIHN Class B shares issued out of authorized share capital.

There were no drawdowns made in 2018 nor in 2019. Therefore, as at December 31, 2019 the outstanding facility available remains CHF 56,094,645 (USD 57,959,960 at December 31, 2019 closing rate).

Acquisition Line of Credit Agreement with ExWorks Capital Fund I, L.P

On January 16, 2017 the Group signed an acquisition line of credit agreement with ExWorks Capital Fund I, L.P. ("ExWorks") (the "ExWorks Line of Credit") headquartered in the USA, is an international, import and export finance company that offers financing solutions to businesses utilizing its own capital as well as by leveraging its Delegated Authority granted by both the SBA and ExIm Bank. A first amendment was subsequently signed on February 06, 2017, a second amendment on March 31, 2017, a third amendment on July 21, 2017, a fourth amendment on August 10, 2017, a fifth amendment on September 19, 2017, a sixth amendment on February 5, 2018, a seventh amendment on March 30, 2018, an eighth amendment on June 20, 2018, a ninth amendment on July 24, 2018, a tenth amendment on August 17, 2018, and an eleventh amendment on September 27, 2018.

As of December 31, 2018, under the ExWorks Line of Credit as amended, the Group may borrow up to USD 22,646,437, including a loan of up to USD 4,000,000 to support the launch of WISeKey's WISeCoin setup. Borrowings under the ExWorks Line of Credit bear interest payable monthly at 1%. The maturity date of the arrangement is January 16, 2020 with an option to extend maturity to January 16, 2021 for a fee equal to 12% of the outstanding loan at the time WISeKey exercises the extension option. Under current terms, ExWorks can elect to have part of or all of the principal loan amount and interests paid either in cash or in WIHN class B shares at a conversion price of USD 4.74 per share.

Under the terms of the ExWorks Line of Credit, the Group is required to not enter into agreements that would result in restriction on liens, reserved restriction on indebtedness, mergers, consolidations, organizational changes except with an affiliate, contingent and third party liabilities, any substantial change in the nature of its business, restricted payments, insider transactions, certain debt payments, certain agreements, negative pledge or asset transfer other than sale of assets in the ordinary course of business. Furthermore, the Group is required to maintain its existence and pay all taxes and other liabilities, provide ExWorks with periodical accounting reports and the detail of any material litigation, comply with applicable laws, meet the financial covenants set in the line of credit agreement in terms of average cash on hand and minimum ending cash on hand. The Group has complied with the line of credit covenants in the 12 months to December 31, 2018.

As at December 31, 2018, borrowings under the ExWorks Line of Credit are secured by (i) the grant of options to ExWorks exercisable for up to 1,075,000 WIHN class B registered shares, par value CHF 0.05, at an exercise price of CHF 3.15; (ii) 100% of the shares in QuoVadis Trustlink Schweiz AG; (iii) any cash bank account of the Group held in Switzerland; (iv) 100% of the shares in WISeKey USA; (v) 100% of the shares in WISeKey Singapore; (vi) 100% of the shares held by the Group in WISeKey SAARC Ltd; and (vii) all shares owned by WISeKey (Bermuda) Holding Ltd in each of its subsidiaries.

58

The ExWorks Line of Credit can be up-sized / syndicated at the same terms for up to an additional USD 10,000,000 by way of adding co-lender(s) or selling a participation interest.

The line of credit was initially recognized as a revolving credit falling under ASC 480, and, in line with ASU 2015-15 the commitment fee and debt issuance costs totalling USD 3,165,880 were capitalized as deferred charges to be amortized over the duration of the contract. These deferred charges included the fair value of an option agreement signed by both parties on February 06, 2017, granting ExWorks the option to acquire up to 1,075,000 WIHN class B shares at an exercise price of CHF 3.15, exercisable in a maximum of four separate exercises, between June 28, 2017 and February 06, 2020. The option agreement exercisable for up to 1,075,000 WIHN class B shares was fair valued at grant for an amount of USD 2,173,395 using the Black-Scholes model and the market price of WIHN class B shares on the date of grant, February 06, 2017, of CHF 4.04. The option agreement was assessed as equity instrument. The credit entry from the recognition of the option agreement fair value was booked in Additional Paid-In Capital ("APIC").

However, the fifth amendment on September 19, 2017 introduced an option to convert payments of the full or partial amounts of principal loan, interests and fees in WIHN class B shares. The introduction of the conversion option was assessed to be a substantial modification of terms for the existing contract and therefore, in line with ASC 470-50-40-6, was accounted for like an extinguishment. As a result, all fees and debt issuance costs, including the option agreement, previously capitalized were fully amortized into the income statement in 2017, the old debt was written off, and the new debt was accounted for. This gave rise to a USD 6,511,421 loss on extinguishment in 2017 made up of total amendment fees of USD 700,000, the unamortized portion of the commitment fee and debt issuance costs totalling USD 2,199,502 (of which USD 1,467,746 related to the option agreement), and the fair value of the conversion option introduced for USD 4,087,519 calculated using the Black-Scholes model and the market price of WIHN class B shares as at the date of the fifth amendment of CHF 4.10 (USD 4.26 at historical rate).

As at December 31, 2017, there were no unamortized debt discount/premium or debt issuance costs. We note that the conversion option was assessed as an equity instrument which did not require bifurcation from its debt host. The credit entry from the recognition of the conversion option fair value was booked in APIC.

The sixth amendment signed on February 05, 2018 extended maturity of the loans to January 16, 2020 (instead of January 15, 2019), reduced the monthly interest rate to 1% (instead of 1.5%), and introduced a clause whereby cash repayments are restricted in time. The amendment fee was USD 1,890,000.

The seventh amendment signed on March 30, 2018, granted an extension of USD 4m to the maximum loan amount to be used for "Other Approved Business Purpose". The amendment fee was USD 400,000. As at December 31, 2018 WISeKey has drawn USD 3,995,575 from this extended facility to fund the creation of WISeCoin AG.

Both the sixth and seventh amendments were analysed as debt modification and accounted for under ASC 470-50-40-14. Total debt issue costs of USD 2,290,000 were recorded as debt discounts and amortized over the duration of the credit line.

The eighth, ninth and tenth amendments were assessed and did not give rise to any debt modification or debt extinguishment accounting.

With the eleventh amendment on September 27, 2018 ExWorks removed liens on some intellectual property of the Group in exchange for WISeKey purchasing from ExWorks a 22% warrant in Tarmin (see note 19) for a total purchase price of USD 7,000,000 made up of a USD 3,000,000 cash payment made on October 05, 2018 and a USD 4,000,000 promissory note payable on March 31, 2019. The amendment fee was USD 250,000. The Tarmin Warrant was assessed as an equity investment without a readily determinable fair value and we elected the measurement at cost less impairment, adjusted for observable price changes for identical or similar investments of the same issuer as permitted by ASU 2016-01. As such, the Tarmin Warrant was initially recognized on the balance sheet at USD 7,000,000.

In line with ASC 470-50, we compared the present value of the new debt per the eleventh amendment to the present value of the old debt under the tenth amendment and concluded that the difference was below the 10% threshold. The eleventh amendment was analysed as a debt modification and accounted for under ASC 470-50-40-14. Total debt issue costs of USD 2,540,000 were recorded as debt discounts and amortized over the duration of the credit line.

59

As at December 31, 2018, outstanding borrowings were USD 22,642,012.48 and unamortized debt discount USD 1,375,374.

On January 16, 2019, WISeKey repaid in cash all outstanding amounts: USD 22,618,226 of principal, USD 120,654 of accrued interests, and USD 2,595,000 of accrued fees.

For the period starting January 01, 2019 to January 16, 2019, WISeKey recorded a total debt amortization charge of USD 49,822. Therefore the unamortized debt discount as at January 16, 2019 amounted to USD 1,325,552.

The repayment of the loan was assessed as a debt extinguishment in line with ASC 405-20-40-1. As a result, the unamortized debt discount of USD 1,325,552 was expensed as loss on debt extinguishment in the income statement. Because most of the principal loan balance related to the acquisition credit line for the purchase of QuoVadis in 2017, and in application of ASC 205-20-45-6 to 205-20-45-8 after the signature of the SPA to sell QuoVadis, WISeKey further elected to apply ASC 205-20-45-8 and to allocate interest to the discontinued operations based on the debt that can be identified as specifically attributed to the operations of QuoVadis. As a result, USD 1,092,783 out of the USD 1,325,552 total loss on debt extinguishment was recorded under discontinued operations and presented as a separate line item in the income / (loss) on discontinued operations presented in Note 37. The remaining USD 232,769 loss on debt extinguishment attributable to continuing operations is showing as a separate line item on the face of the income statement.

Standby Equity Distribution Agreement with YA II PN, Ltd.

On February 08, 2018 WISeKey entered into a Standby Equity Distribution Agreement with a fund managed by Yorkville Advisors Global LLC. Under the terms of the SEDA as amended, Yorkville has committed to provide WISeKey, upon a drawdown request by WISeKey, up to CHF 50,000,000 in equity financing over a three-year period ending March 01, 2021. Provided that a sufficient number of Class B Shares is provided through share lending, WISeKey has the right to make drawdowns under the SEDA, at its discretion, by requesting Yorkville to subscribe for (if the Class B Shares are issued out of authorized share capital) or purchase (if the Class B Shares are delivered out of treasury) Class B Shares worth up to CHF 5,000,000 by drawdown, subject to certain exceptions and limitations (including the exception that a drawdown request by WISeKey shall in no event cause the aggregate number of Class B Shares held by Yorkville to meet or exceed 4.99% of the total number of shares registered with the commercial register of the Canton of Zug). The purchase price will be 93% of the relevant market price at the time of the drawdown, determined by reference to a five-day trading period following the draw down request by WISeKey.

The instrument was assessed under ASC 815 as an equity instrument. WISeKey paid a one-time commitment fee of CHF 500,000 (USD 524,231 at historical rate) on April 24, 2018 in 100,000 WIHN Class B Shares. In line with ASU 2015-15 the commitment fee was capitalized as deferred charges to be amortized over the duration of the contract as a reduction of equity.

In 2018, WISeKey made 4 drawdowns for a total of CHF 1,749,992 (USD 1,755,378 at historical rate) in exchange for a total of 540,539 WIHN class B shares issued out of authorized share capital or treasury share capital.

In 2019, WISeKey made the following drawdowns:

On January 08, 2019 WISeKey made one drawdown for CHF 250,000 (USD 245,125 at historical rate) in exchange for 97,125 WIHN class B shares issued out of treasury share capital.

On August 15, 2019 one drawdown for CHF 250,000 (USD 256,187 at historical rate) in exchange for 120,250 WIHN class B shares issued out of treasury share capital.

On September 17, 2019 one drawdown for CHF 199,999 (USD 202,520 at historical rate) in exchange for 84,281 WIHN class B shares issued out of treasury share capital.

On October 10, 2019 one drawdown for CHF 249,999 (USD 249,999 at historical rate) in exchange for 111,012 WIHN class B shares issued out of treasury share capital.

60

On November 07, 2019 one drawdown for CHF 157,933 (USD 157,933 at historical rate) in exchange for 78,146 WIHN class B shares issued out of treasury share capital.

The amortization charge for the capitalized fee recognized in APIC amounted to USD 183,631 for the year to December 31, 2019 and the remaining deferred charge balance was USD 214,322 made up of USD 184,134 current and USD 30,188 noncurrent.

As at December 31, 2019 the outstanding equity financing available was CHF 47,142,077.

Facility Agreement and Convertible Loan Agreement with YA II PN, Ltd.

On September 28, 2018 WISeKey entered into the Yorkville Loan, a Facility Agreement with Yorkville to borrow USD 3,500,000 repayable by May 01, 2019 in monthly cash instalments starting in November 2018. The loan bears an interest rate of 4% per annum payable monthly in arrears. A fee of USD 140,000 and debt issuance costs of USD 20,000 paid at inception.

The debt instrument was assessed as a term debt. A discount of USD 160,000 was recorded at inception and will be amortized using the effective interest method over the life of the debt.

The remaining loan balance at December 31, 2018 was USD 2,717,773 including unamortized debt discount of USD 57,007. The discount amortization expense recorded for the period to December 31, 2018 was USD 102,993. In the period to December 31, 2018, WISeKey repaid USD 725,220 of the principal loan amount in cash.

On June 27, 2019, WISeKey entered into the Yorkville Convertible Loan, a Convertible Loan Agreement with Yorkville to borrow USD 3,500,000 repayable by August 01, 2020 in monthly instalments starting in August 01, 2019 either in cash or in WIHN class B Shares. The loan bears an interest rate of 6% per annum payable monthly in arrears. Total fees of USD 160,000 were paid at inception.

The conversion option into WIHN Class B shares is exercisable at the election of Yorkville and may be exercised at each monthly repayment date, covering any amount outstanding, be it principal and/or accrued interests. The initial exercise price is set at CHF 3.00 per WIHN class B Share but may be adjusted as a result of specific events so as to prevent any dissolution effect. The events triggering anti-dissolution adjustments are: (a) increase of capital by means of capitalization of reserves, profits or premiums by distribution of WIHN Shares, or division or consolidation of WIHN Shares, (b) issue of WIHN shares or other securities by way of conferring subscription or purchase rights, (c) spin-offs and capital distributions other than dividends, and (d) dividends.

At the date of inception of the Yorkville Convertible Loan, on June 27, 2019, an unpaid balance of USD 500,000 remained on the Yorkville Loan. There was no unamortized debt discount on the Yorkville Loan as it was amortized in accordance with the planned repayment schedule, i.e. by May 01, 2019.

In line with ASC 470-50, we compared the present value of the new debt (the Yorkville Convertible Loan) to the present value of the old debt (the Yorkville Loan) using the net method and concluded that the difference was below the 10% threshold. Therefore, the Yorkville Convertible Loan was analyzed as a debt modification and accounted for under ASC 470-50-40-14.

In line with ASU 2014-16, the convertible note was assessed as a hybrid instrument, being a debt instrument with an equity-linked component (the conversion option). Per ASC 815-10, the embedded conversion option met the definition of a derivative and was accounted for separately, thereby creating a debt discount.

The derivative liability component (the conversion option) was fair valued using a binomial lattice model, building in quoted market prices of WIHN class B shares, and inputs such as time value of money, volatility, and risk-free interest rates. It was valued at inception at USD 257,435, and was allocated between current and noncurrent on a pro rata temporis basis according to the monthly repayment schedule. The derivative component will be revalued at fair value at each reporting date in line with ASC 815-15-30-1.

61

On the date of the agreement, WISeKey signed an option agreement granting Yorkville the option to acquire up to 500,000 WIHN class B shares at an exercise price of CHF 3.00, exercisable between June 27, 2019 and June 27, 2022. In order to prevent any dissolution effect, the exercise price may be adjusted as a result of the same specific events listed above as adjustments to the conversion price of the principal amount. In line with ASC 470-20-25-2, the proceeds from the convertible debt with a detachable warrant was allocated to the two elements based on the relative fair values of the debt instrument net of the warrant and the embedded conversion separated out on the one side, and the warrant at time of issuance on the other side. The option agreement was assessed as an equity instrument and was fair valued at grant for an amount of USD 373,574 using the Black-Scholes model and the market price of WIHN class B shares on the date of grant, June 27, 2019, of CH 2.35. The fair value of the debt was calculated using the discounted cash flow method as USD 3,635,638. Applying the relative fair value method per ASC 470-20-25-2, the recognition of the option agreement created a debt discount on the debt host in the amount of USD 326,126, and the credit entry was booked in APIC.

As a result of the above accounting entries, the total debt discount recorded at inception was USD 743,561, made up of USD 160,000 fees to Yorkville, USD 257,435 from the bifurcation of the embedded conversion option into derivative liabilities, and USD 326,126 from the recognition of the warrant agreement.

As at December 31, 2019, WISeKey had repaid USD 1,162,607 and the principal amount outstanding was USD 2,337,393 with an unamortized debt discount of USD 275,296.

For the year 2019, the Group recorded in the income statement a net debt discount amortization expense of USD 468,265.

Convertible Loan with Crede CG III, Ltd

On September 28, 2018 the Group closed a Convertible Loan Agreement with Crede CG III, Ltd for an amount of USD 3,000,000. The funds were made available on October 31, 2018. The loan bears a 10% p.a. interest rate, payable in arrears on a quarterly basis starting December 31, 2018, and is repayable in WIHN class B Shares any time between November 30, 2018 and the maturity date of September 28, 2020, at Crede's election. Accrued interests are payable, at WISeKey's sole election, either in cash or in WIHN class B Shares. The conversion price applicable to the prepayment of the principal amount or accrued interest is calculated as 93% of the average of the 2 lowest daily volume-weighted average prices quoted on the SIX Stock Exchange during the 10 Trading Days immediately preceding the relevant conversion date or interest payment date respectively, disregarding any day on which Crede (or its Affiliates or related party) has effected any trade, converted into USD at the exchange rate reported by Bloomberg at 9 a.m. Swiss time on the relevant conversion date or interest payment date. As at December 31, 2018 the full amount of USD 3 million remained outstanding and accrued interest of USD 50,833 were recognized in the income statement.

Due to Crede's option to convert the loan in part or in full at any time before maturity, the Crede Convertible Loan was assessed as a share-settled debt instrument with an embedded put option. Because the value that Crede will receive at settlement does not vary with the value of the shares, the settlement provision is not considered a conversion option. We assessed the put option under ASC 815 and concluded that it is clearly and closely related to its debt host and therefore did not require bifurcation. Per ASC 480-10-25, the Crede Convertible Loan was accounted for as a liability measured at fair value using the discounted cash flow method at inception.

On the date of the agreement, WISeKey signed an option agreement granting Crede the option to acquire up to 408,247 WIHN class B shares at an exercise price of CHF 3.84, exercisable between October 31, 2018 and October 29, 2021. Per the option agreement's term, the date of grant under US GAAP is October 29, 2018 upon issuance of a Tax Ruling from the Swiss Federal Tax Administration and the Zug tax authority. In line with ASC 470-20-25-2, the proceeds from the convertible debt with a detachable warrant was allocated to the two elements based on the relative fair values of the debt instrument without the warrant and of the warrant at time of issuance. The option agreement was assessed as an equity instrument and was fair valued at grant for an amount of USD 408,056 using the Black-Scholes model and the market price of WIHN class B shares on the date of grant, October 29, 2018, of CH 3.06. The fair value of the debt was calculated using the discounted cash flow method as USD 2,920,556. Applying the relative fair value method per ASC 470-20-25-2, the recognition of the option agreement created a debt discount on the debt host in the amount of USD 367,771, and the credit entry was booked in APIC.

62

In 2019, Crede issued six exercise notices, resulting in the following conversions:

On January 03, 2019 for 30,000 WHIN class B shares delivered on January 08, 2019 for a conversion of USD 73,559.

On January 15, 2019 for 100,000 WHIN class B shares delivered on January 17, 2019 for a conversion of USD 265,099.

On February 19, 2019 for 100,000 WHIN class B shares delivered on February 26, 2019 for a conversion of USD 279,525.

On June 24, 2019 for 100,000 WHIN class B shares delivered on July 01, 2019 for a conversion of USD 208,755.

On September 03, 2019 for 300,000 WHIN class B shares delivered on September 09, 2019 for a conversion of USD 640,934.

On December 03, 2019 for 150,000 WHIN class B shares delivered on December 09, 2019 for a conversion of USD 303,228.

As at December 31, 2019, the principal amount outstanding was USD 1,228,899, and the unamortized debt discount USD 64,971.

For the year 2019, the Group recorded in the income statement a net debt discount amortization expense of USD 155,389. In line with ASC 470-20-50-5, as at December 31, 2019, the amount by which the instrument’s if-converted value exceeds its principal amount is USD 318,270.

Credit Agreement with ExWorks Capital Fund I, L.P.

On April 04, 2019 WISeCoin AG ("WISeCoin"), an affiliate of the Company, signed a credit agreement with ExWorks. Under this credit agreement, WISeCoin was granted a USD 4,000,000 term loan and may add up to USD 80,000 accrued interest to the loan principal, hence a maximum loan amount of USD 4,080,000. The loan bears an interest rate of 10% p.a. payable monthly in arrears. The maturity date of the arrangement is April 04, 2020 therefore all outstanding balances are classified as current liabilities in the balance sheet. ExWorks can elect to have part of or all of the principal loan amount and interests paid either in cash or in WISeCoin Security Tokens (the "WCN Token") as may be issued by WISeCoin from time to time. As at December 31, 2019, the conversion price is set at CHF 12.42 per WCN Token based on a non-legally binding term sheet.

Under the terms of the credit agreement, WISeCoin is required to not enter into agreements that would result in liens on property, assets or controlled subsidiaries, in indebtedness other than the exceptions listed in the credit agreement, in mergers, consolidations, organizational changes except with an affiliate, contingent and third party liabilities, any substantial change in the nature of its business, restricted payments, insider transactions, certain debt payments, certain agreements, negative pledge, asset transfer other than sale of assets in the ordinary course of business, or holding or acquiring shares and/or quotas in another person other than WISeCoin R&D. Furthermore, WISeCoin is required to maintain its existence, pay all taxes and other liabilities.

Borrowings under the line of credit are secured by first ranking security interests on all material assets and personal property of WISeCoin, and a pledge over the shares in WISeCoin representing 90% of the capital held by the Company. Under certain circumstances, additional security may be granted over the intellectual property rights of WISeCoin and WISeCoin R&D, and the shares held by WISeCoin in WISeCoin R&D.

Total debt issue costs of USD 160,000 were recorded as debt discount and amortized over the duration of the loan.

In the year 2019, WISeKey recorded a total debt amortization charge of USD 151,343 and an unamortized debt discount of USD 8,657 remained as at December 31, 2019.

As at December 31, 2019, outstanding borrowings were USD 4,030,129.

63

Credit Agreement with Long State Investment Limited

On December 16, 2019, WISeKey entered into a Convertible Term Loan Facility Agreement (the “LSI Convertible Facility”) with Long State Investment Limited (“LSI”), a Hong Kong-based investment company, to borrow up to CHF 30 million. Under the terms of the LSI Convertible Facility, WISeKey will be able to drawdown individual term loans of up to CHF 500,000 or, if so agreed between the parties, up to CHF 2.5 million at an interest rate of 1.5% p.a., up to an aggregate amount of CHF 30 million over a commitment period of 24 months.

LSI will have the right to convert a drawdown tranche into WIHN Class B Shares or, if so agreed among the parties and permitted by law, into American Depositary Shares (“ADSs”) representing WIHN Class B Shares, within a period of 21 SIX trading days after each individual drawdown at 95% of the higher of (i) the then prevailing market rate and (ii) the minimum conversion price of CHF 1.80. Any term loan not converted by LSI initially will automatically convert into WIHN Class B Shares, or ADSs, 20 SIX trading days before the expiration of the commitment period at the applicable conversion price. Under certain circumstances, interest payments may be “paid in kind” by capitalizing such interest and adding to it the aggregate principal balance of the loan outstanding.

Under the arrangement, WISeKey and LSI plan to establish a Joint Venture in Hong Kong in the first quarter of 2020 to focus on business opportunities in Asia. A memorandum of understanding has been executed between WISeKey and LSI to that effect.

Due to LSI’s option to convert the loan in part at each drawdown before maturity, the LSI Convertible Facility was assessed as a debt instrument with an embedded put option. We assessed the put option under ASC 815 and concluded that it is clearly and closely related to its debt host and therefore did not require bifurcation. Per ASC 480-10-25, the LSI Convertible Facility will be accounted for as a liability measured at fair value using the discounted cash flow method for each term loan (corresponding to each drawdown).

As at December 31, 2019, debt issue costs corresponding to CHF 22,230 in legal fees were recorded in the income statement by WISeKey to execute the LSI Convertible Facility. Also, per the terms of the LSI Convertible Facility, WISeKey owes LSI a CHF 10,000 expense allowance and a commitment fee payable in 400,000 WIHN class B shares, which were not yet settled as at December 31, 2019 and are expected to be settled in January 2020. The debt issue costs and commitment fee will be recorded as a debt discount proportionately to each drawdown. However, as at December 31, 2019, WISeKey had not yet drawn down on the LSI Convertible Facility, therefore, in application of ASC 340-10-S99-1, WISeKey accounted for the debt issue costs of CHF 22,230 as a deferred asset to be amortized on a straight-line basis over the access period of the LSI Convertible Facility.

As at December 31, 2019 the outstanding LSI Convertible Facility available was CHF 30 million.

C. Research and Development, Patents and Licenses, Etc.

WISeKey's research and development spending totaled USD 6.4 million in the year ended December 31, 2019, and USD 5.3 million in each year ended December 31, 2018 and 2017. As mentioned in Item 3. Key Information – D. Risk Factors, we need to keep pace with changing technologies in order to maintain and grow our revenue. We currently own 88 individual patents which preserve our technology. Our spending in research and development include the development of future technologies that we will register legally in the future to develop our patent portfolio and ensure that competitors cannot replicate our technology easily.

D. Trend Information

Our growth strategy and industry trends are detailed in Item 3. Key Information – B. Business Overview. The uncertainties and material commitments such as financial instruments that are likely to have a material effect on the companies' financial condition are described in Item 3. Key Information – D. Risk Factors and Item 5. Operating and Financial Review and Prospects – B. Liquidity and Capital resources.

64

E. Off-Balance Sheet Arrangements

We have no special purpose financing or partnership entities, or other off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that is material to investors.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations as at December 31, 2019 in USD'000s:

	Payments due by period
Contractual obligations	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

A. Directors and Senior Management

The following table sets forth the name, date of birth and functions of our non-executive and executive directors, and our senior management as at the date of this annual report. Unless otherwise indicated, the current business addresses for our executive officers and directors is General-Guisan-Strasse 6, 6300 Zug, Switzerland. Our non-executive and executive directors are elected annually and individually as a matter of law by the shareholders at each Annual General Meeting of the shareholders for a term extending up until the following Annual General Meeting of the shareholders. The last Annual General Meeting of the shareholders was on May 21, 2019.

Name	Date of birth	Functions in WISeKey	Date first appointed
Non-Executive Directors
Philippe Doubre	March 24, 1935	Board Member, Member of the Nomination and Compensation Committee	March 21, 2016 (1999*)
David Fergusson	August 15, 1960	Board Member, Chairman of the Nomination and Compensation Committee, Member of the Audit Committee	May 31, 2017
Juan Hernández Zayas	May 07, 1962	Board Member, Chairman of the Audit Committee, Member of the strategy committee	March 21, 2016 (2007*)
Executive Directors
Carlos Moreira	September 01, 1958	Chairman of the Board of Directors, Member of the Strategy Committee, Founder and Chief Executive Officer	March 21, 2016 (1999*)
Dourgam Kummer	May 08, 1965	Vice-Chairman of the Board of Directors, Head of M&A	March 21, 2016 (2005*)
Peter Ward	January 05, 1952	Board Member, Member of the Strategy Committee	March 21, 2016 (2012*)

65

Name Date of birth Functions in WISeKey Date first appointed

Senior Management
Pedro Fuentes	November 12, 1969	Chief Security Officer	August 01, 2016
Carlos Moreno	March, 09, 1964	Vice President of Strategic Partnerships	July 15, 2006*
Jean-Yves Le Saux	June 02, 1958	Vice President of Sales and Business Development	September 21, 2016**
Nathalie Verjus	February 19, 1975	Company Secretary and Financial Planning & Reporting Manager	November 01, 2016
Bernard Vian	March 22, 1967	General Manager of WISeKey Semiconductors	September 21, 2016**
Alexander Zinser	July 17, 1969	Chief Legal Officer	April 09, 2018

* Includes board membership and employment at the Company's predecessor holding company of the WISeKey Group, WISeKey SA.

** Joined the WISeKey Group on the acquisition of WISeKey Semiconductors SAS on September 21, 2016.

Biographies

Directors

Carlos Moreira, Founder, Chairman of the Board of Directors and CEO of WISeKey, UN Expert on CyberSecurity and Trust Models for ILO, UN, UNCTAD, ITC/WTO, World Bank, UNDP, ESCAP (83-99). Author, Internet Pioneer; Founder OISTE.org. Founding Member of the "Comité de Pilotage Project E-Voting" of the Geneva Government, Member of the UN Global Compact, Member of the WEF Global Agenda Council. Founding Member WEF Global Growth Companies 2007. WEF New Champion 2007 to 2016, Vice Chair WEF Agenda Council on Illicit Trade 12/15, Member of the Selection Committee for the WEF Growth Companies. Founder of the Geneva Security Forum. Member the WEF Global Agenda Council on the Future of IT Software & Services 2014-16. Member of the New York Forum. Selected as one of the WEF, Trailblazers, Shapers and Innovators, Member of Blockchain Advisory Board of the Government of Mexico. Nominated by Bilan.CH among the 300 most influential persons in Switzerland 2011 and 2013, top 100 of Who's Who of the Net Economy, Most Exciting EU Company at Microsoft MERID 2005, Man of the Year AGEFI 2007, Selected by Bilanz among the 100 most important 2016 digital heads in Switzerland 2017. Award Holder CGI. Adjunct Professor of the Graduate School of Engineering RMIT Australia (95/99). Head of the Trade Efficiency Lab at the Graduate School of Engineering at RMIT.  M&A Award 2017 Best EU acquisition. 2018 Blockchain Davos Award of Excellence by the Global Blockchain Business Council. Member of The Blockchain Research Institute. Founder Blockchain Center of Excellence 2019.  Entrepreneur and investor in disruptive cryptotechnology AI, Blockchain, IoT and Cybersecurity. Keynote speaker at the UN, WEF, CGI, ITU, Bloomberg, Oracle, SAP, Zermatt Summit, Microsoft, IMD, INSEAD, MIT Sloan, HEC, UBS, CEO Summit. Coauthor of "The transHuman Code: How to Program Your Future" (2019).

Peter Ward has served our Chief Financial Officer and a director since 2012. Mr. Ward began his tenure with our Company in 2008 as Finance Director. From 2005 to 2008, Mr. Ward served as a director and International Finance Director at Isotis International Inc., a manufacturer and distributor of bone and skin transplants. From 1996 to 2004, Mr. Ward served as a director and International Finance Director, then Director Administration and Taxes of Iomega International, a manufacturer and distributor of external computer drives and disks. From 1986 to 1996, Mr. Ward served as Finance Director for Germany, Austria & Switzerland Finance for GE Information Services (GEISCO), based in Cologne, Germany, then Commercial Finance Manager for GE Plastics BV, based in Bergen op Zoom, The Netherlands and Finance Director for Germany, Austria & Switzerland for GE Medical Services AG, based in Frankfurt am Main, Germany at General Electric. From 1973 to 1985, Mr. Ward served as Cost Analyst at Standard Telephones & Cables Ltd, a manufacturer and installer of submarine telephone cables, based in Southampton, United Kingdom, then Finance Accountant for Payot Cosmetics Ltd and Mavala Cosmetics Ltd, manufacturers of cosmetics and nail products respectively, based in Ashford, Kent, United Kingdom, then Financial Controller for Rimmel Cosmetics Germany and ITT Photoproducts, Germany, distributors of cosmetics and photographic equipment respectively, based in Frankfurt am Main, Germany, then Financial Analyst for the Automotive and Sanitary Products Division, based in ITTE HQ in Brussels, Belgium, then Manager Financial Controls for the Telecommunications Division based in ITTE HQ Brussels, Belgium, at ITTE. He holds a B.A. with honors in Business Administration from Wolverhampton University, in Wolverhampton, U.K. and is a qualified Chartered Management Accountant.

66

Philippe Doubre is a co-founder of our company and has served as a member of our board since 1999. Mr. Doubre is also the co-founder and Président du Conseil de Fondation of the Organisation Internationale pour la Sécurité des Transactions Electroniques (OISTE), a not-for-profit organization founded in 1998 that promotes digital security and certification of persons and objects. Mr. Doubre serves as vice president and treasurer of the World Trade Point Federation (WTPF), an international non-governmental organization founded in 2000 in partnership with the United Nations Conference on Trade and Development (UNCTAD), which assists small and medium enterprises (SMEs) in over 70 countries worldwide to trade internationally through the use of electronic commerce technologies. Additionally, Mr. Doubre serves as president of the China Hub in Geneva, Switzerland, and a permanent representative of the WTCA organization to the U.N. in Geneva, Switzerland. From 1979 to 2015, Mr. Doubre served as secretary general and then president of the World Trade Centre Geneva, Switzerland, a member of the World Trade Center Association (WTCA). Mr. Doubre served as the co-chairman of the WTCA Committee on Information and Communication, and as a member of the WTCA New York board of directors since 1999. Prior to his role with the WTCA, Mr. Doubre held several senior positions in the banking and finance industry, including vice president and general cashier of American Express Paris, and general manager of the Overseas Development Bank between 1967 and 1970. Mr. Doubre graduated in mathematics from the Collège Saint Barbe in Paris, France.

David Fergusson has served as a member of our board since 2017. Since 2010, Mr. Fergusson serves as president and CEO of "The M&A Advisor", the world's premier think tank for corporate finance, mergers & acquisition and restructuring professionals. From London and New York, M. Fergusson leads the company's market intelligence, media, event, and consulting services for a global constituency of over 350,000 finance industry professionals. M. Fergusson is a sought-after speaker and contributor on the subjects of finance, technology and operational innovation with international media, educational institutions and leadership assemblies. A market expert on the impact of technological innovation on corporations, M. Fergusson is also the editor of 5 annual editions of "The Best Practices of the Best Dealmakers" with over 500,000 readers and distribution in over 60 countries. In 2013, Mr. Fergusson founded the global Corporate Finance Emerging Leaders program, which engages future global business stalwarts to affect significant change through social innovation. A pioneer in cross border M&A between the United States and China, he was recognized with the 2017 M&A Leadership Award from the China Mergers & Acquisitions Association and is Chairman of the US Chapter of the Asia M&A Association. Additionally, Mr. Fergusson serves as president-elect of Hugh O'Brien Youth Leadership (HOBY), the world's largest social leadership philanthropic foundation for high school students. He received the 2015 Albert Schweitzer Leadership Award for his work in youth leadership development. Mr. Fergusson is also a founding member of the City of London's Guild of Entrepreneurs, a member of British American Business, and of the Association for Corporate Growth (ACG). Mr. Fergusson is a graduate of Kings College School and the University of Guelph where he earned a Bachelor of Arts in Political Studies.

Juan Hernández Zayas has served as a member of our board since 2007. Since 2001, Mr. Hernández Zayas serves as chief executive officer of the Cosimet-Velasco Group, playing a major role in the company's diversification strategy and in the consolidation of a large industrial holding, with companies involved in several sectors, including steel, real estate, construction and services. Mr. Hernández Zayas also serves as a member of the board of Grupo TDG CLAMPING SOLUTIONS SL, a manufacturing company in the machinery and tool industry, since 2018. Prior to joining Cosimet-Velasco Group, Mr. Hernández Zayas served as director of affiliates for the Eguizabal-Paternina Group, one of Spain's leading wine producers, from 1995 until its IPO in 1998. From 1989 to 1995, Mr. Hernández Zayas joined the audit and corporate division of PricewaterhouseCoopers (PwC), specializing in corporate finance, mergers and takeovers, working with large corporates and multinationals as well as important family groups. Mr. Hernández Zayas currently serves as a member of the board of directors of Welzia Management SA, Igurco SL., SaltX Technology Holding AB. Mr. Hernández Zayas is a member of the ROAC, the official Spanish College of Chartered Accountants. Mr. Hernández Zayas holds a B.A. in Economics and Business Administration from UPV, Universidad del Pais Vasco, in Bilbao, Spain, and an M.B.A. in Foreign Trade from the LSFT, London School of Foreign Trade, in London, U.K.

Dourgam Kummer has served as a member of our board of directors since 2005. From 1992 to 2001, Mr. Kummer worked for André & Cie SA, a structured finance, trade finance, and project finance/M&A specialist, where he served in several management positions in the former USSR and Austria representation offices between 1993 and 1997, before becoming their deputy director at the headquarter in Switzerland. From 2001 to 2004, Mr. Kummer served as a member of the board of directors and managing director for Bisange SA, a private family office active in equity financing. Mr. Kummer joined our board of directors in 2005. Mr. Kummer served as our chief financial officer from 2005 until 2011, and our chief operations officer from 2011 to 2015. From 2016 to 2018, Mr. Kummer served as a senior partner at FRACTAL-SWISS AG and a member of their board of directors. Since January 2019, Dourgam Kummer serves as our Head of M&A and has therefore become an executive member of our board of directors. He graduated in company management and finance at "l'école de Cadre" in Lausanne, Switzerland, and obtained a certificate in structured finance and strategic finance from the IMD Business School in Lausanne, Switzerland.

67

Senior Management

Pedro Fuentes serves as our Chief Security Officer. Mr. Fuentes is responsible for the PKI platforms and compliance, ensuring the worldwide accreditation of WISeKey's certification services, our product strategy, leading projects and customer support worldwide. He is a senior specialist in information security and PKI in particular with more than 20 years of active work in these areas as a certified professional (CISM, ISO27000, MSCP and others). Mr. Fuentes joined WISeKey in 2009 to reinforce the eSecurity Business Unit. Prior to joining WISeKey, he worked at Siemens as responsible for the cybersecurity product line for southern Europe, managing key projects for national identity and leveraging eGovernance services through the integration of eSecurity techniques in business processes. Mr. Fuentes obtained a high degree in Computer Science from the Polytechnic University of Valencia, Spain.

Carlos Moreno is our Vice President of Strategic Partnerships. Mr. Moreno has more than 30 years of experience in Sales Engineering, Sales Management and Business Development. He has worked extensively on strategic projects for both national and multinational companies in the public, financial and industrial sectors throughout his career at Banque Worms, Infogestion, Sopra Steria Informatique, Deutsche Bank, Uniface, Compuware and BMC Software. He has held management and executive roles in the areas of people management, sales coaching, market analysis, establishment and implementation of account plans. He joined WISeKey in 2006 as sales director for Switzerland and held several operational positions before being appointed Vice President of Strategic Partnerships to oversee commercial relationships with strategic customers and helm market analysis and go-to-market strategies. He qualified in Business and administration with the Commercial School Nicolas Bouvier in Geneva, Switzerland, and obtained a qualification as Programmer Analyst with the IEPIGE Institute in Geneva, Switzerland.

Jean-Yves Le Saux serves as our Vice President of Sales and Business Development. Prior to joining WISeKey, he served as Vice President of Sales and Business Development for EMEA at INSIDE Secure from 2013 to 2016. Mr. Le Saux joined INSIDE Secure in 2010 from Atmel Corporation where he was the Sales Director for Southern Europe and the Sales Director for Secure Products. Prior to joining Atmel Corporation in 1995, he spent nine years as Sales Director Southern Europe at ES2. Mr. Le Saux holds an MBA from the ESSEC Business School in Paris, France.

Nathalie Verjus serves as our Company Secretary and Financial Planning & Reporting Manager. A qualified chartered accountant, Ms. Verjus has a solid background in compliance and finance, combined with project management and operational experience. Prior to joining WISeKey, Ms. Verjus worked for Tyco International, where she served as EMEA Controllership Senior Manager, then Finance Transformation Senior Project Manager, before becoming Operational Excellence Lead and Head of a Business Unit. Prior to joining Tyco International, Ms. Verjus spent four years with PricewaterhouseCoopers UK in Audit and Risk Assurance. Prior to joining PricewaterhouseCoopers, Ms. Verjus served as Project Manager and Export Administration Manager for NACCO Industries. In addition to her chartered accountant qualification (ACA) with the Institute of Chartered Accountants in England and Wales (ICAEW), UK, Ms Verjus holds an MA in International Business Administration for Bournemouth University, UK, and a Master in International Business from the EDC Paris Business School in Paris, France.

Bernard Vian serves as General Manager of WISeKey Semiconductors. Prior to our acquisition of WISeKey Semiconductors SAS, Mr. Vian served as the Executive Vice President of the Secure Transaction Business Division, Vice President of Business Development and Executive Vice President for Secure Payments at INSIDE Secure SA. He came to INSIDE Secure from Gemplus (now renamed GEMALTO) where he served in several positions in Sales Support and Marketing, in Europe and lately in California where he opened the Gemplus North America headquarter and served as Technical Support Director for 5 years. Mr. Vian joined INSIDE Secure's team in 2002 as Business Development Vice President. He is a graduate of the University of Aix-Marseille, France, with an engineering degree in Electronic Systems.

Alexander Zinser serves as Chief Legal Officer. Prior to joining WISeKey, Mr. Zinser served ad-interim at the General Counsel Office for Ernst & Young Switzerland. Prior to joining Ernst & Young Switzerland, Mr. Zinser served as Managing Counsel for SFR Tobacco International GmbH (formerly Reynolds American Group) in Switzerland. Prior to working for SFR Tobacco International GmbH, Mr. Zinser served as Assistant General Counsel Europe at the EMEA headquarter of Guardian Industries Europe S.à.r.l. in Luxembourg. Prior to working for Guardian Industries Europe S.à.r.l., Mr. Zinser served as senior attorney for Agilent Technologies International S.à.r.l., initially in Germany before transferring to the European headquarter in Switzerland. Prior to working for Agilent Technologies International S.à.r.l., Mr. Zinser served as Attorney-at-law for Graf von Westphalen Fritze & Modest in Germany. Mr. Zinser is a qualified Doctor of Laws from the University of Kiel, Germany. He also holds a post-graduate degree in Comparative Law from the University of Strasbourg, France, a diploma in English Law from the University of Birmingham, U.K., a Master of Laws from the University of Huddersfield, U.K., and an Executive MBA from the University of Saint Gallen, Switzerland.

68

Family Relationship

There are no family relationships among any of our executive and non-executive officers or directors.

Potential arrangements

There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management. However, Carlos Moreira has a significant shareholding in our company as disclosed in "Item 7A. Major Shareholders".

B. Compensation

Compensation of Directors and Executive Officers

We are subject to the Ordinance against Excessive Compensation with respect to Listed Companies issued by the Swiss Federal Council (the "Compensation Ordinance") and the Directive on Information Relating to the Corporate Governance issued by the SIX (the "Corporate Governance Directive"). The Compensation Ordinance requires a "say on pay" approval mechanism for the compensation of the board of directors and the executive management pursuant to which the shareholders must vote on the compensation of the board of directors and the executive management on an annual basis. Accordingly, our Articles provide that the general meeting of shareholders must, each year, vote separately on the proposals by the board of directors regarding the maximum aggregate amounts of:

· the total compensation of the board of directors for the next term of office; and

· the total compensation of the executive management for the period of the next fiscal year.

If the general meeting of shareholders does not approve a proposal of the board of directors, the board of directors determines the maximum aggregate amount or maximum partial amounts taking into account all relevant factors and submits such amounts for approval to the same general meeting of shareholders, to an extraordinary general meeting of shareholders or to the next ordinary general meeting of shareholders for retrospective approval. If the maximum aggregate amount of compensation already approved by the general meeting of shareholders is not sufficient to also cover the compensation of persons newly appointed to or promoted within the executive management, such persons may be paid for each of the following purposes an aggregate of up to 40% in excess of the total annual compensation of the respective predecessor or for a similar pre-existing position: (i) as compensation for the relevant compensation period; and, in addition, (ii) as compensation for any prejudice incurred in connection with the change of employment.

For the year ended December 31, 2019, the aggregate compensation paid to the members of our board of directors and our executive officers for services in all capacities was CHF 7,865,000 (USD 7,915,863 at annual average rate). For the year ended December 31, 2019, the compensation of Carlos Moreira, as the company's highest paid executive, was CHF 3,588,000 (USD 3,611,204 at annual average rate).

The tables below show the amount of compensation paid and benefits in kind granted to our executive and non-executive directors for the year ended December 31, 2019 as disclosed in our 2019 annual report. We note that Mr. Thomas Hürlimann was a member of our board of directors as at December 31, 2018 but he resigned at the general meeting of shareholders held on May 21, 2019 and was therefore not re-elected for the board term starting May 22, 2019. We also note that Ms. Maryla Shingler Bobbio was a member of our board of directors as at December 31, 2018, but she resigned on November 21, 2019.

69

Compensation of the Board of Directors of WISeKey International Holdings AG

for the 12 months ending December 31, 2019

				Other Stock
		Board	Additional	Based	Total
CHF'000 1	Function	Fee2	Fees3	Compensation4	Compensation
Philippe Doubre	Board Member, NCC5 Member	113	-	-	113
David Fergusson	Board Member, NCC Chairman, Audit Committee Member	160	-	-	160
Juan Hernandez Zayas	Board Member, Audit Committee Chairman, Strategy Committee Member	164	-	-	164
Thomas Hürlimann	Former Board Member	63	-	-	63
Dourgam Kummer6	Board Member	52	308	274	634
Maryla Shingler Bobbio	Former Board Member, NCC Member, Audit Committee Member	122	-	-	122
Total Board Members		674	308	274	1,256

1 Board members are remunerated in Swiss Francs (CHF).

2 Board fees can be paid in a mix of cash and options.

Compensation in options on WIHN Class B Shares is disclosed in the period it was granted, regardless of whether it relates to Board fees from prior financial periods. The amount shown reflects the fair value of options granted in line with US GAAP standards. The options granted were valued using the Black-Scholes method, using the market price of WIHN shares at the relevant date. In 2019, Board members received the options relating to the following Board Term: 2017/2018, 2018/2019, and 2019/2020 up until December 31, 2019.

The amount of Board fees includes employer social charges paid by the Company.

3 Additional fees relate to services other than Board duties rendered to the Company.

4 Other stock based compensation refers to stock based compensation for services other than Board services.

The amount shown reflects the fair value of options granted in line with US GAAP standards. The options granted were valued using the Black-Scholes method, using the market price of WIHN shares at the relevant date.

5 Nomination & Compensation Committee

6 The Board Fee for Mr. Kummer is made up of the compensation for his Board services up until December 31, 2018, prior to his employment by WISeKey. The amounts disclosed under Additional Fees and other Stock Based Compensation relate to his compensation as employee of WISeKey from January 2019.

Peter Ward	Board Member, Chief Financial Officer	520	923	-	1,390	188	3,021
Total Executive Management		1,170	2,061	-	2,956	423	6,609

1 The executive management members are remunerated in Swiss Francs (CHF).

2 Base salary includes employee social security costs.

3 Additional Fees include fees paid for special services rendered to the Company.

4 The amount shown reflects the fair value of options granted in line with US GAAP standards. The options granted are valued using the Black-Scholes method, using the market price of WIHN shares at the relevant date.

5 Other compensation includes pension contributions and employer social charges paid by the Company.

Disclosure of the amount set aside by us to provide pension, retirement or similar benefits to members of our board of directors or executive officers is not required in Switzerland and is not otherwise disclosed by the Company.

Disclosure of compensation to our senior management is not required in Switzerland and is not otherwise publicly disclosed by the Company.

Annual Incentive Plan

Compensation for our executive directors and senior management includes a bonus. Our annual incentive plan is designed to encourage management to achieve pre-established performance goals, both short-term and long-term.

The annual incentive plan for our executive directors is approved by our nomination and compensation committee which then submits it for approval by our board of directors. It is included in the total compensation that the shareholders must vote on, on an annual basis, as described above.

70

Share-based Compensation

We maintain an Employee Stock Option Plan ("ESOP") which was transferred from WISeKey SA for the benefit of our directors, employees and consultants. Options issued under the ESOP to our directors for compensation entitle the participant to WISeKey Class B shares at the ratio of 1:1, at an exercise price equal to the nominal value of WISeKey Class B shares of CHF 0.05, with immediate vesting and expiring on the seventh anniversary of the grant date. Each grant is subject to the approval of the board of directors who may, in line with the terms and conditions of the ESOP, amend the terms of the grant.

C. Board Practices

Our articles of association provide that our board of directors consists of a minimum of three and a maximum of 12 directors. Our board of directors currently consists of six members. Each director is elected for a one-year term. The current members of our board of directors were elected at an annual shareholders' meeting held on May 21, 2019 to serve until our next annual general shareholders meeting and until their successors are elected at such next annual general meeting. Please also refer to Item 6.A. Directors and Senior Management above for further details regarding the periods of service of each of our current directors and senior managers.

Other than with respect to our directors that are also executive officers, we do not have written agreements with any director providing for benefits upon the termination of his or her engagement with our company.

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under NASDAQ’s rules for domestic U.S. issuers, provided that we disclose which requirements we are not following and describe the equivalent home country requirement.

Board Independence

Currently, 3 of our 6 directors, Juan Hernández Zayas, David Fergusson and Philippe Doubre, are considered "independent" under the NASDAQ rules, therefore we do not comply with NASDAQ Listing Rule 5605 (b)(1) which requires an issuer to maintain a majority of independent directors. Under the Swiss Code of Best Practice for Corporate Governance (the "Swiss Code"), which is a non-binding set of corporate governance recommendations issued by economiessuisse and addressed to Swiss public companies, the majority of the board of directors is recommended to be independent. Members of the board of directors are considered independent under the Swiss Code if they are non-executive members of the Board of Directors who have never been a member of the company's executive management, or who were not members of the company's executive management during the preceding three years, and who have no or only comparatively minor business relations with the company. The Swiss Code is not binding and follows a "comply or explain" principle. In addition, we are not subject to NASDAQ Listing Rule 5605 (b)(2) that requires that independent directors must have regularly scheduled meetings at which only independent directors are present.

Board Committees

Our board of directors has established an audit committee, a nomination and compensation committee, and a strategy committee.

Audit Committee

The audit committee consists of Juan Hernández Zayas (Chairman) and David Fergusson. The Audit Committee currently consists of only two members. Swiss statutory law does not require a specific number of Audit Committee members and therefore our practice varies from NASDAQ Listing Rule 5605(c)(2) which requires an Audit Committee of at least three members. The audit committee consists exclusively of members of our board of directors who are financially literate. Our board of directors has determined that all members of the audit committee satisfy the "independence" requirements set forth in Rule 10A-3 under the Exchange Act and under the rules of NASDAQ. The members of the audit committee are appointed by our board of directors. The Audit Committee has a charter that complies with Swiss law, but does not fully comply with the requirements of NASDAQ Listing Rule 5605(c)(1).

71

The audit committee is responsible for, among other things:

· overseeing our accounting and financial reporting processes and the audits of our financial statements;

· the compensation, retention and oversight of the work of our independent registered public accounting firm and statutory auditors who are appointed by the shareholders pursuant to Swiss corporate law;

· our accounting policies, financial reporting and disclosure controls and procedures;

· the quality, adequacy and scope of external audit;

· our accounting compliance with financial reporting requirements; and

· the management's approach to internal controls with respect to the production and integrity of the financial statements and disclosure of our financial performance.

Nomination and Compensation Committee

Our nomination and compensation committee consists of David Fergusson (Chairman) and Philippe Doubre. Our board of directors has determined that each of the members of the nomination and compensation committee is independent under NASDAQ’s listing standards. We follow our home country standards with respect to the responsibilities of our Nomination and Compensation Committee. Our board of directors has adopted a charter for the Nomination and Compensation Committee that complies with Swiss law but, which does not, however, fully comply with the requirements of NASDAQ Listing Rules 5605(d)(1) and (d)(3). Thus, the Nomination and Compensation Committee practice varies from the requirements of NASDAQ Listing Rules 5605(d)(1) and (d)(3).

The primary purpose of our nomination and compensation committee is to discharge our board of directors' responsibilities to oversee our compensation policies, plans and programs, and to review and determine the compensation to be paid to our executive officers, directors and other senior management, as appropriate. We are subject to the Swiss Ordinance against Excessive Compensation in Listed Companies (the "Compensation Ordinance") issued by the Swiss Federal Council, known as the "say-on-pay" rule. As a result of the say-on-pay rule, the members of the nomination and compensation committee must be elected by our shareholders at the annual general meeting for a one-year term and the aggregate compensation of our board of directors and executive officers must also be approved by our shareholders. Pursuant to the Swiss Code, all members of a nomination committee must be independent.

The nomination and compensation committee is responsible, among other things to:

· review and recommend to our board of directors the compensation of our directors based on the aggregate compensation approved by our shareholders;

· review and approve, or recommend that our board of directors approve, the terms of compensatory arrangements with our executive officers;

· review and approve, or recommend that our board of directors approve, incentive compensation and equity plans, and any other compensatory arrangements for our executive officers and other senior management, as appropriate;

· identify, evaluate and select, or recommend that our board of directors approve, nominees for election to our board of directors and new members of the executive management and their terms of employment; and

· consider and make recommendations to our board of directors regarding the composition of the committees of the board of directors.

72

Strategy Committee

Our strategy committee currently consists of three members of the board of directors: Carlos Moreira (Chairman), Juan Hernández Zayas and Peter Ward. The strategy committee advises the board of directors on all strategic matters, including acquisitions, divestments, joint ventures, restructurings and similar matters. The strategy committee continuously reviews our strategic direction and assesses the impact of changes in the environment on us. The members of the Strategy Committee are appointed by our board of directors.

Quorum requirements

In accordance with Swiss law and generally accepted business practices, our Articles of Association do not provide for quorum requirements generally applicable to general meeting of shareholders. Our practice varies from NASDAQ Listing Rule 5620(c), which requires an issuer to provide in its bylaws for a generally applicable quorum, and that such quorum may not be less than one-third of the outstanding voting stock.

Solicitation of proxies

Our Articles of Association provide for an independent proxy holder elected by the shareholders at a general meeting of shareholders and prohibit, in accordance with Swiss law, the institutional representation of shareholders by our corporate representatives at a general meeting of shareholders. We must further submit to shareholders an invitation to the general meeting twenty calendar days prior to the general meeting date, indicate in such invitation the items on the agenda of the general meeting and provide together therewith other relevant documents for the general meeting, such as our annual report, the meeting admission card and the proxy card. However, Swiss law does not have a regulatory regime for the solicitation of proxies and thus, our practice varies from NASDAQ Listing Rule 5620(b) that sets forth certain requirements regarding the solicitation of proxies.

Shareholder approval

Under Swiss law, we are not generally required to obtain shareholder approval for the issuance of securities in connection with certain events such as the acquisition of stock or assets of another company, the establishment of or amendments to equity-based compensation plans for employees, a change of control and certain private placements. While Swiss law does broadly require us to obtain shareholder approval for any issuance of new shares, irrespective of the relevant event, Swiss law permits us to rely in certain circumstances on a share issuance pre-authorization of shareholders granted to our board of directors prior to the occurrence of events of the aforementioned nature. Further, we have, in accordance with Swiss law, opted out from the statutory requirement that an acquirer of voting rights attached to our shares exceeding 33 1/3% - the relevant "change of control" threshold under Swiss law for public companies – submit a mandatory public takeover offer to our shareholders. To some extent, our practice therefore varies from the requirements of NASDAQ Listing Rule 5635, which generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events.

Third party compensation

Swiss law does not require that we disclose information regarding third party compensation of our directors or director nominees, except where, in each case with respect to serving directors, such compensation directly or indirectly affects (potential) assets of the Company or one of its subsidiaries, or where because of the third party compensation a risk of conflicts of interest or dependency of the director on such third party exists. As a result, our practice varies from the third party compensation requirements of NASDAQ Listing Rule 5250(b)(3).

Related party transactions

Our board of directors, or a committee of our board of directors composed of directors not subject to the potential conflict, is required to conduct an appropriate review and oversight of all related party transactions for potential conflict of interest situations on an ongoing basis.

73

Voting Rights

We do not have the authority to disparately reduce or restrict the voting rights of existing stockholders of our listed common stock (Class B), including by issuing (a) stock with voting rights that are superior to those of outstanding listed common stock or (b) stock with voting rights that are inferior to those of outstanding listed common stock through an exchange offer, except where the general meeting of shareholders resolves, with a majority of two-thirds of voting rights associated with the shares, and the absolute majority of the par value of the shares, in each case as represented at the general meeting of shareholders, on the issuance of privileged voting rights stock, including as part of a separate class of stock.

Code of Conduct

We have followed Swiss law which does not require a company to have a Code of Conduct applicable to all directors, officers and employees. As a result, our practice varies from NASDAQ Listing Rule 5610 which requires a publicly available Code of Conduct. We do, however, expect ethical behavior from all of our directors, officers and employees.

74

D. Employees

As at December 31, 2019, date of our last audited financial statements, we had 84 employees, of which 19 were located in Switzerland and 58 were located in France. The following table shows the breakdown of our workforce of employees and contractors by category of activity as at the dates indicated:

Headcount breakdown	As at December 31,
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

With respect to French employees, French labor laws govern the length of the workday and workweek, minimum wages for employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and anti-discrimination laws and other conditions of employment. French labor laws also impose the creation of a worker's council for a companies employing more than 50 people. Two employees of WISeKey Semiconductors SAS represent labor unions at the workers' council.

As at December 31, 2019, we also have 18 independent contractors in Vietnam. We maintain close cooperation with each of these independent contractors.

We have never experienced any labor-related work stoppages or strikes and believe our relationships with our employees and independent contractors are agreeable.

E. Share Ownership

See Item 7.A. Major Shareholders for a list of beneficial ownership of our shares as at December 31, 2019.

The table below shows the beneficial share ownership of the persons listed in above subsection 6.B, including any shareholding by their related parties.

	As at December 31, 2019
Name	Number of Class A Shares held	Percentage of Class A Shares	Number of Class B Shares held	Percentage of Class B Shares**	Number of options held***
Non-Executive Directors
Philippe Doubre	701,695	1.8	*	*	36,313
David Fergusson	-	-	*	*	29,266
Juan Hernández Zayas	-	-	*	*	18,468
Executive Directors
Carlos Moreira	38,508,733	96.2	*	*	759,184****
Dourgam Kummer	626,085	1.6	*	*	112,000
Peter Ward	*	*	*	*	573,400
Senior Management
Pedro Fuentes	-	-	-	-	123,495
Carlos Moreno	-	-	-	-	-

75

	As at December 31, 2019
Name	Number of Class A Shares held	Percentage of Class A Shares	Number of Class B Shares held	Percentage of Class B Shares**	Number of options held***

Jean-Yves Le Saux	-	-	-	-	-
Nathalie Verjus	-	-	-	-	84,000
Bernard Vian	-	-	-	-	-
Alexander Zinser	-	-	-	-	40,000

*       Shareholding less than one percent of the class of shares and that has not been disclosed to shareholders or otherwise made public. 

**      Based on the total number of fully paid-in outstanding shares, in line with our share capital registered with the commercial register of the Canton of Zug as at December 31, 2019.

***   Each option giving right to one Class B Share upon exercise. 

****  Includes 66,000 options held by immediate family members.

The terms of the options held by directors and senior management are described in the following table:

Name	Number of options held***	Exercise price of option	Expiration date of options
Non-Executive Directors
Philippe Doubre	17,317	CHF 0.05	February 11, 2026
Philippe Doubre	18,996	CHF 0.05	December 23, 2026
David Fergusson	11,052	CHF 0.05	February 11, 2026
David Fergusson	18,214	CHF 0.05	December 23, 2026
Juan Hernández Zayas	240	CHF 0.05	February 11, 2026
Juan Hernández Zayas	18,228	CHF 0.05	December 23, 2026
Executive Directors
Carlos Moreira	759,184****	CHF 0.05	September 26, 2026
Dourgam Kummer	112,000	CHF 0.05	September 26, 2026
Peter Ward	573,400	CHF 0.05	September 26, 2026
Senior Management
Pedro Fuentes	123,495	CHF 0.05	September 26, 2026
Nathalie Verjus	84,000	CHF 0.05	September 26, 2026
Alexander Zinser	40,000	CHF 0.05	September 26, 2026

***         Each option giving right to one Class B Share upon exercise.

****       Includes 66,000 options held by immediate family members.

Each Class A Share and each Class B Share give their respective owner one voting right.

Summary of Stock Plans

Employee Share Option Plan

We have the WISeKey Employee Share Option Plan in place, last amended on September 29, 2016 (the "WISeKey Share Ownership Plan"). The WISeKey Share Ownership Plan was originally adopted by WISeKey SA on January 1, 2012 as a continuation of the existing Stock Option Plans approved on December 31, 2007 and December 31, 2011, respectively, and, upon the listing of the Class B Shares on the SIX, amended to reflect the fact that WISeKey International Holding Ltd is the ultimate parent of the Group.

76

Administration

Our board of directors administers the WISeKey Share Ownership Plan and has full power to construe and interpret the WISeKey Share Ownership Plan, establish and amend rules and regulations for the administration thereof, and perform all other actions relating thereto. Under the WISeKey Share Ownership Plan, the members of the board of directors and executive management as well as other employees, advisors, consultants and other persons providing services to us (the "Participants") may be granted options that entitle the respective Participant to receive a certain number of Class B Shares.

Subject in particular to the limitations which may be determined from time to time by the board of directors, options granted to Participants shall vest gradually on a straight line basis over a period of three years from the grant date, provided, however, that the Participant may not exercise any options during the first year of employment or contractual relationship. Our board of directors may set shorter vesting periods for any Participant. The exercise period shall be seven years. Subject to certain exceptions, upon termination of the employment or contractual relationship between us or any of its subsidiaries or by the Participant, all options that are not vested held by the Participant shall be immediately forfeited without value, while vested options may be exercised by the Participant pursuant to the WISeKey Share Ownership Plan during a period of thirty days after the end of the employment or contractual relationship. The board of directors may grant options to employees, members of management and consultants, whose terms and conditions deviate from the WISeKey Share Ownership Plan.

Authorized Shares

As at December 31, 2019, the maximum number of our Class B Shares that may be issued out of our conditional capital under our WISeKey Share Ownership Plan is 11,840,090 Class B Shares based on the share capital of the Company registered with the commercial register of the Canton of Zug as at December 31, 2019.

Under the current plan, as at December 31, 2019, we had a total number of 2,727,594 options outstanding, vested and nonvested, each of which entitles the respective Participant to receive an equal number of Class B Shares. Of these options, 510,000 have been granted to our advisors and 2,217,594 to our employees, contractors or Board members. As of December 31, 2019, 1,228,838 options had been exercised out of our conditional capital under our WISeKey Share Ownership Plan but not yet registered with the commercial register of the Canton of Zug as at December 31, 2019.

Plan Amendment or Termination

Our board of directors has the authority to amend, suspend, or terminate our WISeKey Share Ownership Plan, provided that such action does not materially impair the existing rights of any Participant without such Participant's written consent.

For further information on the compensation of our directors and executive officers, see "Item 6B. Compensation" and for further information on our shareholders and related party transactions policy, see "Item 7. Major Shareholders and Related Party Transactions."

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table sets forth information with respect to the beneficial ownership of our Class A and Class B Shares as at December 31, 2019 for each beneficial owner of 3% or more of our Class A and Class B Shares in line with the Swiss Financial Market Infrastructure Act ("FMIA") and the rules and regulations promulgated thereunder.

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and include shares issuable upon the exercise of options that are immediately exercisable or exercisable within 60 days of December 31, 2019. Percentage ownership calculations are based on 40,021,988 fully-paid and outstanding Class A Shares and 28,824,086 fully-paid and outstanding Class B Shares, as reflected in our share capital registered with the commercial register of the Canton of Zug as at December 31, 2019.

77

Name of beneficial owner	Total Class A Shares	Total Class B Shares	Total % of Outstanding Class A Shares*	Total % of Outstanding Class B Shares*	% Voting Power**
Carlos Moreira	38,508,733	1,019,179***	96.2	3.5	58.4

*        Based on the total number of fully paid-in outstanding Class A Shares and Class B Shares, as reflected in our share capital registered with the commercial register of the Canton of Zug as at December 31, 2019.

**       Based on the total number of fully paid-in outstanding Class A Shares and Class B Shares, as reflected in our share capital registered with the commercial register of the Canton of Zug as at December 31, 2019, less 1,202,191 Class B shares held as treasury shares as at December 31, 2019.

***       This total includes 693,184 options held directly by Carlos Moreira and 66,000 options held by Mr. Moreira’s immediate family members. These options are immediately exercisable, subject to the holder not being in a restricted period. Each option gives the holder the right to acquire one Class B share.

Regarding significant changes in the percentage ownership held by any major shareholders during the past three years, on incorporation in November 2015, our Chairman and CEO, Carlos Moreira contributed the full capital amount and was therefore the sole owner of the 10,000,000 Class A shares created in our company. On March 02, 2016, Mr. Moreira contributed his shares in WiseTrust SA to us in consideration for our issuance to him of 30,021,988 Class A Shares, which brought his total shareholding in our company to 40,021,988 Class A Shares (see below Item 7. Major Shareholders and Related Party Transactions – B. Related Party Transactions). As a result, prior to the reverse acquisition on March 22, 2016 whereby WISeKey International Holding AG acquired the operations of WISeKey SA, Carlos Moreira held 100% of the share capital and voting rights of the 'empty shell' company WISeKey International Holding Ltd consisting of 40,021,988 Class A Shares. With the reverse acquisition, Carlos Moreira converted his shareholding in WISeKey SA into WISeKey International Holding Ltd Class B Shares at the same terms and conditions of exchange offered to all WISeKey SA shareholders, which increased his shareholding in our company by 160,700 Class B Shares representing 1.2% of outstanding Class B Shares and bringing his voting rights to 74.3% as at March 22, 2016. Then upon the listing of our company on March 31, 2016, Carlos Moreira entered into a lock-up agreement with several shareholders of Class B Shares whereby Mr. Moreira exchanged 11,421,320 of his Class A Shares for 2,284,264 Class B Shares corresponding to a ratio of 5:1. This brought Mr. Moreira's holding respectively to 71.5% of outstanding Class A Shares and 16.6% of outstanding Class B Shares, and his voting right to 56.8%, after the listing, as at March 31, 2016. Simultaneously, each of the holders of Class A Shares entered into an agreement with the Company, according to which such shareholder had given an undertaking not to sell or otherwise dispose of the Class A Shares. During the year 2017, Mr. Moreira carried out another exchange of 1,956,602 Class B Shares for 9,783,015 Class A Shares, bringing his ownership to 95.9% of outstanding Class A Shares and 2.0% of outstanding Class B Shares, and his voting right to 60.2% as at December 31, 2017. In 2018, a combination of exchange of Class B Shares for Class A Shares and sale of Class B shares to the company as debt repayment changed Mr. Moreira's shareholding to 38,508,733 Class A Shares and 259,995 Class B Shares, respectively 96.2% of outstanding Class A Shares and 0.9% of outstanding Class B Shares. In 2019, a grant of 693,184 options under the company’s ESOP brought Mr. Moreira's shareholding to the position disclosed in the above table as at December 31, 2019.

Our major shareholder does not have different voting rights than other shareholders of the same class of shares.

As at December 31, 2019, based on the list of registered shareholders, there were 5 record holders of our Class B shares showing as residing in the U.S., holding 1,572,663 of our Class B Shares, representing approximately 5.5% of our outstanding Class B Shares. This includes 1,002,075 Class B Shares held under the name of The Bank of New York Mellon, the U.S. depositary bank for our ADSs, for which we have no information on the country of residency of the beneficial owners of such ADSs.

We are not aware of any arrangement that may, at a subsequent date, result in a change of our control.

78

B. Related Party Transactions

Our Formation

WISeKey International Holdings Ltd. was constituted as our parent company through a series of transactions commencing in March 2016.

Contribution of Shares of WiseTrust SA

On incorporation in November 2015, our Chairman and CEO, Carlos Moreira contributed the full capital amount and was therefore the sole owner of the 10,000,000 Class A Shares created in our Company.

As of March 01, 2016, Carlos Moreira held 100% of the equity interests in WISeTrust SA, a company that held the following assets:

· a 19.4% interest in WISeKey SA, our predecessor;

· the U.S. distribution rights to technology offered by WISeKey SA; and

· a 50% equity interest in WISeKey USA, Inc., an operating company incorporated in Delaware, with a focus on business opportunities in the United States, with the other 50% interest being held by WISeKey SA.

On March 02, 2016, Mr. Moreira contributed his shares in WiseTrust SA to us in consideration for our issuance to him of 30,021,988 Class A Shares, which brought his total shareholding in our company to 40,021,988 Class A Shares. The valuation of WiseTrust SA was based on its net assets as at December 31, 2015.

In March 2016, WISeKey International Holding Ltd acquired the entire equity interest of WISe Trust SA against the issuance of 40,021,988 new shares, which, under the Articles, are now Class A Shares. As a result, the Company acquired:

· the U.S. distribution rights pertaining to the technology offered by WISeKey;

· WISeTrust SA's 50% equity interest in WISeKey USA, Inc., an operating company incorporated in Delaware, with a focus on business opportunities in the United States; the other 50% interest in WISeKey USA, Inc., is held by WISeKey SA;

· WISeTrust SA's entire equity interest in WISeKey SA, which at the time of the contribution represented approximately 19.4% of WISeKey SA's issued share capital.

WISeTrust SA was originally the founders company incorporated before WISeKey SA and majority shareholders of WISeKey SA. When the founders incorporated WISeKey, they transferred the international distribution rights pertaining to the technology to WISeKey SA with the exclusion of the US territory. Now WISeKey International Holding Ltd owns 100% of all distributions rights.

79

Structure of the company pre-contribution of the WiseTrust SA shares:

 

80

Structure of the company post-contribution of the WiseTrust SA shares:

 

Contribution of Shares of WISeKey SA

In March 2016, immediately following the contribution of shares of WiseTrust SA by Carlos Moreira described above, the holders of 90.9% of the remaining outstanding shares of WISeKey SA, with a nominal value of CHF 0.01 per share, contributed their shares to us in exchange for 13,234,027 of our Class B Shares with a nominal value of CHF 0.05 per share. This represented an exchange ratio of one of our Class B Shares for each five shares of WISeKey SA contributed, corresponding to the ratio of the nominal value of one WISeKey SA share to the nominal value of one of our Class B Shares.

81

The structure of our company after the March 2016 share exchange described above was as follows:

 

In September 2017, following bilateral negotiations, the holders of 4.51% of the shares of WISeKey SA that had not previously exchanged their shares contributed their shares to us in exchange for 841,069 of our Class B Shares. This represented an exchange ratio of one of our Class B Shares for each five shares of WISeKey SA. This ratio was determined based on a fairness opinion established by an independent financial advisor by applying the "Praktikermethode". According to this methodology, (i) the valuation of our assets and (ii) the revenues of each of our subsidiaries were valued relative to our total market capitalization as at September 20, 2017, and our total revenues for the six months ended June 30, 2017, respectively. The asset and revenues value have been weighted appropriately, and based on this relative value, the total equity value of WISeKey SA has been determined. The total equity value of WISeKey SA amounted to 22.4% of our market capitalization, which supported the exchange ratio of 1:5. Nearly all of these shareholders committed not to transfer, sell, or otherwise dispose of the Class B Shares obtained as a result of the share exchange until June 30, 2018.

In the year to December 31, 2019, the holders of 0.23% of the shares of WISeKey SA that had not previously exchanged their shares contributed their shares to us in exchange for 60,394 of our Class B Shares. The exchange ratio of our Class B Shares for WISeKey SA shares was calculated based on the company’s capitalization at the time of the transaction.

82

The structure of our company after the 2019 share exchange described above was as follows:

  

We do not currently hold the remaining 4.42% of the outstanding equity interest in WISeKey SA which is held by approximately 30 shareholders. We may elect to acquire these shares in the future through further bilateral negotiations or through a squeeze-out merger pursuant to the Swiss Merger Act. The exchange ratio in connection with either such transaction would be determined at the time.

The table below includes a brief description of our group subsidiaries:

Group Company Name	Country of	Year of	Share Capital		% ownership as of December	% ownership  as of December	Nature of business
	incorporation	incorporation			31, 2019	31, 2018
WISeKey SA	Switzerland	1999	CHF	933,436	95.58%	95.35%	Main operating company. Sales and R&D services
WISeKey Semiconductors SAS	France	2010	EUR	1,298,162	100.0%	100.0%	Chip manufacturing, sales & distribution
WiseTrust SA	Switzerland	1999	CHF	680,000	100.0%	100.0%	Non-operating investment company
WISeKey (Suisse) SA**	Switzerland	2002	CHF	100,000	100.0%	100.0%	Dormant
WISeKey ELA SL	Spain	2006	EUR	4,000,000	100.0%	100.0%	Sales & support
WISeKey SAARC Ltd	U. K.	2016	GBP	100,000	51.0%	51.0%	Non trading
WISeKey USA Inc*	U.S.A	2006	USD	6,500	100% *	100% *	Sales & support
WISeKey India Private Ltd***	India	2016	INR	1,000,000	45.9%	45.9%	Sales & support
WISeKey KK	Japan	2017	JPY	1,000,000	100.0%	100.0%	Sales & distribution
WISeKey Taiwan	Taiwan	2017	TWD	100,000	100.0%	100.0%	Sales & distribution
WISeCoin AG	Switzerland	2018	CHF	100,000	90.0%	90.0%	Sales & distribution
WISeKey Equities AG	Switzerland	2018	CHF	100,000	100.0%	100.0%	Financing, Sales & distribution
WISeCoin France R&D Lab SAS	France	2019	EUR	10,000	90.0%	not incorporated	Research & development
WISeKey Semiconductors GmbH	Germany	2019	EUR	25,000	100.0%	not incorporated	Sales & distribution
WISeKey Arabia - Information Technology Ltd	Saudi Arabia	2019	SAR	200,000.00	51.0%	not incorporated	Sales & distribution

* 50% ow ned by WISeKey SA and 50% owned by WiseTrust SA

** dormant or in the process of being liquidated

*** 88% owned by WISeKey SAARC which is controlled by WISeKey International Holding AG

Sale of Class A Shares

In September 2017 and February 2018, the board of directors released previous holders of Class A Shares from the contractual transfer restrictions existing pursuant to shareholders agreement to enable such holders to enter into private transactions with Carlos Moreira to exchange their Class A Shares for Class B Shares held by Carlos Moreira. The table below shows the composition of the holders of Class A Shares on the basis of the execution of these private share exchange transactions.

83

Name of Shareholder	Number of Class A Shares Held	% of Share Capital Registered in the Commercial Register*	% Voting Rights**
Philippe Doubre	701,695	0.38%	1.1%
Dourgam Kummer	626,085	0.34%	0.9%
Carlos Moreira	38,508,733	20.91%	57.0%
Peter Ward	185,475	0.10%	0.3%
Total as a Group	40,021,988	21.73%	59.2%

*        Based on the total number of fully paid-in outstanding Class A Shares and Class B Shares, as reflected in our share capital registered with the commercial register of the Canton of Zug as at December 31, 2019.

**       Based on the total number of fully paid-in outstanding Class A Shares and Class B Shares, as reflected in our share capital registered with the commercial register of the Canton of Zug as at December 31, 2019, less 1,202,191 Class B shares held as treasury shares as at December 31, 2019.

Each of the above holders of Class A Shares is bound by an agreement with us, according to which such shareholder has made the undertaking not to sell or otherwise dispose of Class A Shares. However, each of the above shareholders has the right to request that at an item be included on the agenda of our annual general meeting of shareholders, according to which Class A Shares will be, at the discretion of each holder of Class A Shares, converted into Class B Shares, which are not subject to the agreed transfer restrictions.

Relationship with the International Organization for Secure Electronic Transactions

The Organisation Internationale pour la Sécurité des Transactions Electroniques, or OISTE, is a Swiss non-profit foundation that owns the cryptographic rootkey we use. OISTE is acting as a trusted third party and not-for-profit entity in charge of ensuring that the Root of Trust remains neutral and trusted. The members of the foundation board of OISTE are also board members of our company: Carlos Moreira, Philippe Doubre and Dourgam Kummer. The board of the OISTE foundation acts as a supervisory authority to ensure that the foundation acts in accordance with its purpose, and complies with its articles of association and Swiss law. It also reviews the audited annual accounts and the annual report of the foundation. Under Swiss law, the members of the board of a Swiss non-profit foundation are required to ensure that OISTE, as a Swiss non-profit foundation, is independent of control by any third party.

The OISTE foundation's board members are elected by a majority of the current active board members and, once elected, the member serves for an indeterminate period of time. The OISTE foundation has a full General Corporate Governance Manual which covers the distribution of responsibilities within the management structure, executive representation inclusive of the foundation Board Members and Policy Approval Authority Board Members, and the signing authorities of the foundation.

The OISTE foundation has no commercial activities and it uses its funding to organize events and launch Internet security projects with the UN, the World Economic Forum and other NGOs. The OISTE foundation board members do not make any decisions on behalf of the OISTE foundation and serve as guardians to ensure the foundation complies with its articles of association and carries out activities towards its stated purpose. We believe that this ensures that no conflicts of interest may arise for the three board members of WISeKey who serve as board members of the OISTE foundation.

The OISTE foundation has a seond boards, the “Policy Approval Authority Board”. The Policy Approval Authority Board is nominated by the foundation’s board or directors and serves as the policy approval and enforcement entity for a specific domain within the OISTE RootKey. The Policy Approval Authority Board is represented by members of the network of organizations using OISTE RootKey to secure their Certifications Authorities (“CAs”) and create interoperability between other PKI Domains and CAs external to the network. This policy represents Medium Assurance and Medium-Hardware Assurance Levels for public key digital certificates to ensure that the participating relying party can be certain of the identity binding between the public key and the individual whose subject name is cited in the certificate. In addition, it also reflects how well the relying party can be certain that the individual whose subject name is cited in the certificate is controlling the use of the private key that corresponds to the public key in the certificate, and how securely the system which was used to produce the certificate and (if appropriate) deliver the private key to the subscriber performs its task. This OISTE Policy Approval Authority Board is consistent with the Internet Engineering Task Force (IETF) Public Key Infrastructure X.509 (IETF PKIX) RFC 3647, Certificate Policy and Certification Practices Statement Framework. The Policy Approval Authority Board does not have any involvement in the appointment of members of the OISTE foundation’s board of directors. The following members of the Policy Approval Authority Board are related parties of the Company: Dourgam Kummer and Pedro Fuentes, who are respectively a board member and a member of senior management of the Company.

84

In 2001, OISTE granted us a perpetual license to exclusively use the cryptographic rootkey and develop technologies and processes based on OISTE's trust model. The perpetual license agreement can only be terminated under limited circumstances, including if we were to move from the trust model developed by OISTE and/or changing the location of the Root of Trust from Switzerland to another country. We have to pay royalties to OISTE for the use of the cryptographic rootkey on the basis of the amount of certificates issued to end users. Certain annual minimum payments apply.

The Collaboration Agreement signed between the OISTE and WISeKey SA on June 20, 2018 provides that:

a. WISeKey shall be the preferred service provider of OISTE for the fulfilment of the OISTE objectives. WISeKey shall benefit from the right to commercially exploit the Root Cryptographic Key Pairs and the associated Root Certification Authorities held by OISTE, subject to the terms and conditions set forth in the Collaboration Agreement.

b. WISeKey is the technical manager of the OISTE foundation for Global Cryptographic ROOTS Key, the global certification authorities as well as the digital certificates for people, servers and objects as well as the storage of the four Global Cryptographic ROOTS Key in WISeKey's Data Centre Bunker.

Those professional services and storage facilities are against a payment of a "Management Fee" specified in the Collaboration Agreement dated June 20, 2018.

c. WISeKey is appointed as operator with an exclusive for the duration of this Collaboration Agreement.

d. WISeKey is granted a non-sublicensable worldwide license to commercially exploit the Root Cryptographic Key Pair(s) by providing certification services in conformity with the OISTE objectives.

e. OISTE is entitled to the following yearly fees (excl taxes):

i. Management Fee: CHF 120,000 in 4 equal instalments of CHF 30'000, due and payable at the beginning of each quarter.

ii. License Fee: CHF 96,000 in 4 equal instalments of CHF 24'000, due and payable at the beginning of each quarter.

iii. Royalty Fee: a certain percentage (the “Percentage”) of any certificate fees collected by WISeKey for the issuance of certificates to end users (the “Certificate Fees”) on any given year since the signature of this collaboration agreement (each, a “Contract Year”). The Percentage shall be 2.50%, to be reduced by 0.25% for each tranche of Certificate Fees of CHF 1'000'000 in any given Contract Year, until it reaches 1.50%;

1. CHF 1'000'000 at 2.50% = CHF 25'000.00

2. CHF 2'000'000 at 2.25% = CHF 45'000.00

3. CHF 3'000'000 at 2.00% = CHF 60'000.00

4. CHF 4'000'000 at 1.75% = CHF 70'000.00

5. CHF 5'000'000 at 1.50% = CHF 75'000.00

85

In the years ended December 31, 2019 and December 31, 2018, OISTE invoiced WISeKey respectively CHF 217,923 (USD 219,332) and CHF 216,000 (USD 221,000).

In 2019, WISeKey charged OISTE fees of CHF 138,610 (USD 139,506) for the facilities and personnel hosted by WISeKey SA on behalf of OISTE. During the year ended December 31, 2018, WISeKey waived the fees for these hosting services.

Indemnification Agreements

We intend to enter into indemnification agreements with our directors and executive officers. The indemnification agreements and our Articles require us to indemnify our directors and executive officers to the fullest extent permitted by law.

Related-Party Transactions Policy

Swiss law does not have a specific provision regarding conflicts of interest. However, the Swiss Code of Obligations (“CO”)contains a provision that requires our directors and executive management to safeguard the company's interests and imposes a duty of loyalty and duty of care on our directors and executive management. This rule is generally understood to disqualify directors and executive management from participation in decisions that directly affect them. Our directors and executive officers are personally liable to us for breach of these provisions. In addition, Swiss law contains provisions under which directors and all persons engaged in the company's management are liable to the company, each shareholder and the company's creditors for damages caused by an intentional or negligent violation of their duties. Furthermore, Swiss law contains a provision under which payments made to any of the company's shareholders or directors or any person associated with any such shareholder or director, other than payments made at arm's length, must be repaid to the company if such shareholder, director or associated person acted in bad faith.

C. Interests of experts and counsel

Not applicable.

Item 8.Financial Information

A. Consolidated Financial Statements and Other Financial Information

For a list of all financial statements filed as part of the annual report, see "Item 17. Financial Statements". For information on our dividend policy, see "Item 10B. Memorandum and Articles of Association".

Legal Proceedings

In the third quarter 2019, the Company received a claim for breach of contract from a former employee. The Company does not expect this claim to have significant effects on the Company's financial position or profitability.

We are not aware of any other legal or arbitration proceedings against our company or any of its affiliates.

B. Significant Changes

For information on any significant changes that may have occurred since the date of our annual financial statements, see "Item 5. Operating and Financial Review and Prospects."

86

Item 9. The Listing

A. Listing Details

A discussion of the offering and listing details can be found under “Markets” below.

B. Plan of Distribution

Not applicable.

C. Markets

Our Class B Shares have been trading under the symbol "WIHN" on the SIX since March 2016. Our ADSs were quoted on the OTCQX under the symbol "WIKYY" from May 2018 until December 2018 and have been traded on the NASDAQ Capital Market since December 2019 under the symbol "WKEY."

Our Class B Shares, par value CHF 0.05 per share issued and outstanding, have been trading under the symbol "WIHN" on the SIX since March 2016. Our ADSs were quoted on the Over-the-Counter market under the symbol "WIKYY" from May 2018 until December 2018 and have been traded on the NASDAQ Capital Market since December 2019 under the symbol "WKEY."

On March 06, 2020 the closing price of our Class B Shares on the SIX was CHF 1.244 per ordinary share. The closing price of the ADS on the NASDAQ Capital Market on March 06, was USD 5.95 per ADS.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

Item 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

Ordinary Capital Increase, Authorized Share Capital and Conditional Share Capital

Under Swiss law, we may increase our share capital (Aktienkapital) with a resolution of the general meeting of shareholders (ordinary capital increase) that must be carried out by the board of directors within three months in order to become effective. Under our Articles of Association (the "Articles"), in the case of subscription and increase against payment of contributions in cash, when shareholders' statutory pre-emptive rights are safeguarded, a resolution passed by an absolute majority of the votes represented at the general meeting of shareholders is required. In the case of subscription and increase against contributions in kind or to fund acquisitions in kind, when shareholders' statutory pre-emptive rights are withdrawn or where transformation of reserves into share capital is involved, a resolution passed by two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented is required.

87

Furthermore, under the Swiss Code of Obligations (the "CO"), our shareholders, by a resolution passed by two-thirds of the shares present or represented at a general meeting of shareholders and the absolute majority of the par value of the shares present or represented, may authorize our board of directors to issue shares of a specific aggregate par value up to a maximum of 50% of the share capital registered in the commercial register in the form of:

· conditional share capital (bedingtes Aktienkapital) for the purpose of issuing shares in connection with, among other things, (1) option and conversion rights granted in connection with warrants and convertible bonds of ours or one of our subsidiaries or (2) grants of rights to employees, members of our board of directors or consultants or our subsidiaries to subscribe for new shares (conversion or option rights); or

· authorized share capital (genehmigtes Kapital) to be utilized by our board of directors within a period determined by the shareholders but not exceeding two years from the date of the shareholder approval.

Pre-emptive Rights

Pursuant to the CO, shareholders have pre-emptive rights (Bezugsrechte) to subscribe for new issuances of shares in proportion to the respective par values of their holdings. With respect to conditional capital in connection with the issuance of conversion rights, convertible bonds or similar debt instruments, shareholders have advance subscription rights (Vorwegzeichnungsrechte) for the subscription of conversion rights, convertible bonds or similar debt instruments in proportion to the respective par values of their holdings.

A resolution passed at a general meeting of shareholders by two-thirds of the shares represented and the absolute majority of the par value of the shares represented may authorize our board of directors to withdraw or limit pre-emptive rights or advance subscription rights in certain circumstances for valid reasons.

If pre-emptive rights are granted, but not exercised, our board of directors may allocate the pre-emptive rights as it elects, subject to the particulars of the relevant shareholders' resolution or board resolution.

With respect to our authorized share capital, our board of directors is authorized by our Articles to withdraw or to limit the pre-emptive rights of shareholders, and to allocate them to third parties or to us, in the event that the newly issued shares are used for the purpose of:

· issuing new shares if the issue price of the new shares is determined by reference to the market price;

· the acquisition of an enterprise, parts of an enterprise or participations or for new investment projects or for purposes of financing or refinancing any such transactions;

· broadening the shareholder constituency in certain financial or investor markets or in connection with the listing of new shares on domestic or foreign stock exchanges;

· national and international offerings of shares for the purpose of increasing the free float or to meet applicable listing requirements;

· the participation of strategic partners;

· an over-allotment option ("greenshoe") being granted to one or more financial institutions in connection with an offering of shares;

· the participation of directors, officers, employees, contractors, consultants of, or other persons providing services to the Company or a group company; or

88

· raising capital in a fast and flexible manner which could only be achieved with great difficulty without exclusion of the pre-emptive rights of the existing shareholders.

Our Authorized Share Capital

Under our Articles in effect as of December 31, 2019, our board of directors is authorized at any time until May 25, 2020, to increase our share capital by a maximum aggregate amount of CHF 444,091.45 through the issuance of not more than 8,881,829 shares, which would have to be fully paid-in, with a par value of CHF 0.05 each.

Increases in partial amounts are permitted. Our board of directors has the power to determine the type of contributions, the issue price and the date on which the dividend entitlement starts.

Our board of directors is also authorized to withdraw or limit pre-emptive rights as described above. This authorization is exclusively linked to the particular available authorized share capital set out in the respective article. If the period to increase the share capital lapses without having been used by our board of directors, the authorization to withdraw or to limit the pre-emptive rights lapses simultaneously with such capital.

Our Conditional Share Capital

Our conditional share capital as registered with the commercial register of the Canton of Zug as at June 30, 2019 amounts to CHF 592,004.50, corresponding to 11,840,090 new Class B Shares, whereby CHF 352,692 of the conditional share capital is available for the issuance of up to 7,053,840 Class B Shares in connection with rights granted to third parties or shareholders in connection with Rights Bearing Obligations (as defined in art. 4b para. 1(a) of the Articles) and CHF 239,312.50, corresponding to 4,786,250 Class B Shares, is available for the issuance of Class B Shares in connection with the issuance of Class B Shares or Rights-Bearing Obligations granted to the members of the board of directors, members of the executive management, employees, consultants or other persons providing services to us or another company of the Group (art. 4b para. 1 (b) of the Articles).

General Meeting of Shareholders

The general meeting of shareholders is our supreme corporate body. Under Swiss law, ordinary and extraordinary general meetings of shareholders may be held. Under Swiss law, an ordinary general meeting of shareholders must be held annually within six months after the end of a corporation's financial year. In our case, this means on or before June 30 of any calendar year.

The following powers are vested exclusively in the general meeting of shareholders:

· adopting and amending our Articles;

· electing the members of the board of directors, the chairman of the board of directors, the members of the nomination and compensation committee, the auditors and the independent proxy;

· approving the management report (annual report), the annual statutory financial statements and consolidated financial statements;

· approving the appropriation of earnings, including the payments of dividends and any other distributions of capital to shareholders;

· discharge of the members of the board of directors and the members of the executive management from liability for their business conduct during the previous fiscal year; and

· the adoption of resolutions that are reserved to the general meeting of shareholders by law or the Articles or that are submitted to the general meeting of the shareholders by the Board (unless the relevant matter is within the exclusive competence of the board of directors pursuant to Swiss law).

89

An extraordinary general meeting of shareholders may be called by a resolution of the board of directors or, under certain circumstances, by our auditor. In addition, the board of directors is required to convene an extraordinary general meeting of shareholders if shareholders representing at least 10% of the share capital or, according to the views expressed in legal writing which is a persuasive authority in Switzerland, holding shares with an aggregate par value of CHF 1 million, request such general meeting of shareholders in writing. Such request must set forth the items to be discussed and the proposals to be acted upon. The board of directors must convene an extraordinary general meeting of shareholders and propose financial restructuring measures if, based on our stand-alone annual statutory balance sheet, half of our share capital and reserves are not covered by our assets.

Voting and Quorum Requirements

Dual Class Voting Rights

Each share carries one vote at a general meeting of shareholders, irrespective of the difference in par value of Class A Shares (CHF 0.01 per share) and Class B Shares (CHF 0.05 per share). Our Class A Shares have a lower par value (CHF 0.01) than our Class B Shares (CHF 0.05) but have same voting right as the higher par value Class B Shares, namely one (1) vote per share. This means that, relative to their respective per share contribution to the Company’s capital, the holders of our Class A Shares have a greater relative per share voting power than the holders of our Class B Shares for matters that require approval on the basis of a specified majority of shares present at the shareholders meeting.

Some matters however, as further described below under “Voting Requirements,” require a vote on the basis of par value associated with the shares present at the meeting. To the extent shareholder resolutions require, as the relevant majority standard, a majority of the par value of the shares present at the meeting, Class A Shares have less voting power than Class B Shares.

Voting rights may be exercised by registered shareholders or by a duly appointed proxy of a registered shareholder or nominee, which proxy need not be a shareholder up to a specific qualifying day before the relevant general meeting (the "Record Date") designated by the board of directors.

The Articles do not limit the number of shares that may be voted by a single shareholder. Holders of treasury shares, whether ours or one of our majority-owned subsidiaries, will not be entitled to vote at general meetings of the shareholders.

Voting Requirements

Shareholder resolutions and elections (including elections of members of the board of directors) require the affirmative vote of an absolute majority of the votes represented (in person or by proxy) at a general meeting of shareholders (each Class A Share and each Class B Share having one vote), unless otherwise stipulated by law or our Articles. The following matters require approval by a majority of the par value of the shares present or represented at the general meeting (each Class A Share having a par value of CHF 0.01 per share and each Class B Share having a par value of CHF 0.05 per share):

· electing our auditor;

· appointing an expert to audit our business management or parts thereof;

· adopting any resolution regarding the instigation of a special investigation; and

· adopting any resolution regarding the initiation of a derivative liability action.

Under Swiss corporate law and our Articles, approval by two-thirds of the shares present or represented at the meeting, and by the absolute majority of the par value of the shares present or represented is required for:

· amending our corporate purpose;

· creating or cancelling shares with preference rights;

· restricting the transferability of registered shares;

· restricting the exercise of the right to vote or the cancellation thereof;

· creating authorized or conditional share capital;

90

· increasing the share capital out of equity, against contributions in kind or for the purpose of acquiring specific assets and granting specific benefits;

· limiting or withdrawing shareholder's pre-emptive rights;

· relocating our registered office;

· our dissolution or liquidation; and

· transactions among corporations based on Switzerland's Federal Act on Mergers, Demergers, Transformations and the Transfer of Assets of 2003, as amended (the "Swiss Merger Act") including a merger, demerger or conversion of a corporation.

In accordance with Swiss law and generally accepted business practices, our Articles do not provide attendance quorum requirements generally applicable to general meetings of shareholders.

Notice

General meetings of shareholders must be convened by the board of directors at least 20 calendar days before the date of the meeting. The general meeting of shareholders is convened by way of a notice appearing in our official publication medium, the Swiss Official Gazette of Commerce. Registered shareholders may also be informed by mail. The notice of a general meeting of shareholders must state the items on the agenda, the proposals to be acted upon and, in case of elections, the names of the nominated candidates. No resolutions may be passed at a shareholders meeting concerning agenda items for which proper notice was not given. This does not apply, however, to proposals made during a shareholders meeting to convene an extraordinary shareholders meeting or to initiate a special investigation. No previous notification will be required for proposals concerning items included on the agenda or for debates as to which no vote is taken. Under the CO, a general meeting of shareholders for which a notice of meeting has been duly published may not be adjourned without publishing a new notice of meeting.

Agenda Requests

Pursuant to Swiss law, one or more shareholders whose combined shareholdings represent the lower of (1) one tenth of the share capital or (2) an aggregate par value of at least CHF 1,000,000, may request that an item be included in the agenda for a general meeting of shareholders. To be timely, the shareholder's request must be received by us at least forty-five (45) calendar days in advance of the meeting. No previous notification will be required for proposals concerning items included on the agenda or for debates as to which no vote is taken.

Our business report, including the Company's financial information, the compensation report and the auditor's reports thereon must be made available for inspection by the shareholders at our registered office no later than 20 calendar days prior to the ordinary general meeting. Shareholders of record must be notified of this in writing.

Dividends and Other Distributions

We have never declared or paid cash dividends to our shareholders and we do not intend to pay cash dividends in the foreseeable future. However, on July 9, 2019, we commenced a public share repurchase program, whereby repurchase shares will be used for potential acquisitions and/or other future M&A transactions. On February 3, 2020, we expanded our share repurchase program to include our ADSs. Shares and ADSs repurchased under our repurchase program may be used as consideration in future potential M&A transactions and for (1) our existing employee share incentive program, (2) convertible loans entered into by us, and (3) on demand equity lines available to us. Otherwise, we currently intend to reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors.

91

Our board of directors may propose to shareholders that a dividend or other distribution be paid but cannot itself authorize the distribution. Under our Articles, dividend payments require a resolution passed by an absolute majority of the votes present or represented at a general meeting of shareholders. In addition, our auditor must confirm that the dividend proposal of our board of directors conforms to Swiss statutory law and our Articles.

Under Swiss law, we may pay dividends only if we have sufficient distributable profits brought forward from the previous business years, or if we have distributable reserves, each as evidenced by our audited stand-alone statutory balance sheet prepared pursuant to Swiss law, and after allocations to reserves required by Swiss law and the Articles have been deducted. We are not permitted to pay interim dividends out of profit of the current business year. Dividends and other distributions are made relative to nominal value of the shares.

Dividends paid on our shares out of available earnings are subject to Swiss withholding tax. See Item 10.E. Taxation.

Distributions out of issued share capital (i.e. the aggregate par value of our issued shares) may be made only by way of a share capital reduction. Such a capital reduction requires a resolution passed by an absolute majority of the shares present or represented at a general meeting of shareholders. The resolution of the shareholders must be recorded in a public deed and a special audit report must confirm that claims of our creditors remain fully covered despite the reduction in the share capital recorded in the commercial register. The share capital may be reduced below CHF 100,000 only if and to the extent that at the same time the statutory minimum share capital of CHF 100,000 is reestablished by sufficient new fully paid-up capital. Upon approval by the general meeting of shareholders of the capital reduction, the board of directors must give public notice of the capital reduction resolution in the Swiss Official Gazette of Commerce three times and notify creditors that they may request, within two months of the third publication, satisfaction of or security for their claims. The reduction of the share capital may be implemented only after expiration of this time limit.

Distributable reserves are booked either as "retained earnings" (Bilanzgewinn; Gewinnvortrag) or as reserves from capital contributions (Kapitaleinlagereserven). Under the CO, if our general reserves (réserve générale) amount to less than 20% of our share capital recorded in the commercial register (i.e., 20% of the aggregate par value of our issued capital), then at least 5% of our annual profit must be retained as general reserves. In addition, if our general reserves amount to less than 50% of our share capital, 10% of the amounts distributed beyond payment of a dividend of 5% must be retained as general reserves. The CO permits us to accrue additional general reserves. Further, a purchase of our own shares (whether by us or a subsidiary) reduces the equity and thus the distributable dividends in an amount corresponding to the purchase price of such own shares. Finally, the CO under certain circumstances requires the creation of revaluation reserves which are not distributable.

Dividends are usually due and payable shortly after the shareholders have passed a resolution approving the payment, but shareholders may also resolve at the annual general meeting of shareholders to pay dividends in quarterly or other instalments. The Articles provide that dividends that have not been claimed within five years after the due date become our property and are allocated to the general reserves. Dividends paid are subject to Swiss withholding tax, all or part of which can potentially be reclaimed under the relevant tax rules in Switzerland or double taxation treaties concluded between Switzerland and foreign countries. Distributions of cash or property that are based upon a capital reduction or that are made out of statutory capital reserves (Kapitaleinlage) are not subject to Swiss withholding tax.

Transfer of Shares

Our shares constitute intermediated securities (Bucheffekten) based on uncertificated securities (Wertrechte) and entered into the main register of SIS or such other custodian as the case may be. Any transfer of Shares is effected by a corresponding entry in the securities deposit account of a bank or a depository institution. Shares cannot be transferred by way of assignment, nor can a security interest in any Shares be granted by way of assignment.

Voting rights may be exercised only after a shareholder has been entered in our share register (Aktienregister) with his, her or its name and address (in the case of legal entities, the registered office) as a shareholder with voting rights.

92

We maintain, through Computershare Switzerland Ltd., a share register, in which the full name, address and nationality (in the case of legal entities, the company name and registered office) of the shareholders and usufructuaries are recorded. A person entered into the share register must notify the share registrar of any change in address. Until such notification occurs, all written communication from us to persons entered in the share register is deemed to have been validly made if sent to the relevant address recorded in the share register.

Share Repurchase Program

On July 9, 2019, the Company commenced a public repurchase program with respect to our shares, which on February 3, 2020 was expanded to also include ADSs. Shares and ADSs repurchased under our repurchase program may be used as consideration in potential future M&A transactions and for (1) our existing employee share incentive program, (2) convertible loans entered into by us and (3) on demand equity lines available to us. Our share repurchase was approved by the Swiss Takeover Board under its notification procedure, will last up to 3 years, and allows us to repurchase up to 3,682,848 Ordinary Class B shares equivalent to 10% of the registered share capital of the Company at the relevant time.

Activity under the program is monitored on a daily basis, with all transactions being published on our website in line with Swiss Law.

Inspection of Books and Records

Under the CO, a shareholder has a right to inspect our share register with respect to his, her or its own shares and otherwise to the extent necessary to exercise his, her or its shareholder rights. No other person has a right to inspect our share register. Our books and correspondence may be inspected with the express authorization of the general meeting of shareholders or by resolution of the board of directors and subject to the safeguarding of our business secrets.

Special Investigation

If the shareholder inspection rights as outlined above prove to be insufficient in the judgment of the shareholder, any shareholder may propose to the general meeting of shareholders that specific facts be examined by a special auditor in a special investigation. If the general meeting of shareholders approves the proposal, we or any shareholder may, within 30 calendar days after the general meeting of shareholders, request a court sitting at our registered office in Zug, Switzerland to appoint a special auditor. If the general meeting of shareholders rejects the request, one or more shareholders representing at least 10% of the share capital or holders of shares in an aggregate par value of at least CHF 2,000,000 may request that the court appoint a special auditor. The court will issue such an order if the petitioners can demonstrate that the board of directors, any member of the board of directors or our executive management infringed the law or our Articles and thereby caused damages to us or the shareholders. The costs of the investigation would generally be allocated to us and only in exceptional cases to the petitioners.

Compulsory Acquisitions; Appraisal Rights

Business combinations and other transactions that are governed by the Swiss Merger Act, are binding on all shareholders. A statutory merger or demerger requires approval of two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented.

If a transaction under the Swiss Merger Act receives all of the necessary consents, all shareholders are compelled to participate in such transaction.

Swiss corporations may be acquired by an acquirer through the direct acquisition of shares. The Swiss Merger Act provides for the possibility of a so-called "cash-out" or "squeeze-out" merger if the acquirer controls 90% of the outstanding shares. In these limited circumstances, minority shareholders of the corporation being acquired may be compensated in a form other than through shares of the acquiring corporation (for instance, through cash or securities of a parent corporation of the acquiring corporation or of another corporation).

93

For business combinations effected in the form of a statutory merger or demerger and subject to Swiss law, the Swiss Merger Act provides that if equity rights have not been adequately preserved or compensation payments in the transaction are unreasonable, a shareholder may request the competent court to determine a reasonable amount of compensation. A decision issued by a competent court in this respect can be acted upon by any person who has the same legal status as the claimant.

In addition, under Swiss law, the sale of all or substantially all of our assets may be construed as a de facto dissolution of our company, and consequently require the approval of two-thirds of the shares present or represented at a general meeting of shareholders and the absolute majority of the par value of the shares present or represented. Whether a shareholder resolution is required depends on the particular transaction, whereas the following circumstances are generally deemed relevant in this respect:

· a core part of the company's business is sold without which it is economically impracticable or unreasonable to continue to operate the remaining business;

· the company's assets, after the divestment, are not invested in accordance with the company's statutory business purpose; and

· the proceeds of the divestment are not earmarked for reinvestment in accordance with the company's business purpose but, instead, are intended for distribution to the company's shareholders or for financial investments unrelated to the company's business.

A shareholder of a Swiss corporation participating in certain corporate transactions governed by the Swiss Merger Act may, under certain circumstances, be entitled to appraisal rights. As a result, such shareholder may, in addition to the consideration (be it in shares or in cash) receive an additional amount to ensure that the shareholder receives the fair value of the shares held by the shareholder. Following a statutory merger or demerger, pursuant to the Swiss Merger Act, shareholders can file an appraisal action against the surviving company. If the consideration is deemed inadequate, the court will determine an adequate compensation payment.

Board of Directors

Our Articles provide that our Board of Directors (the "Board") shall consist of a minimum of three directors and a maximum of twelve directors.

The members of our Board and the chairman are elected annually by the general meeting of shareholders for a period until the completion of the subsequent ordinary general meeting of shareholders and are eligible for re-election. Each member of the Board must be elected individually.

Powers

The Board has the following non-delegable and inalienable powers and duties:

· the ultimate direction of the business of the company and issuing of the relevant directives;

· laying down the organization of the Company;

· formulating accounting procedures, financial controls and financial planning;

· appointing and removing persons entrusted with the management and representation of the Company and regulating the power to sign for the Company;

· the ultimate supervision of those persons entrusted with management of the Company, with particular regard to adherence to law, our Articles as well as our regulations and directives;

· issuing the business report (including the financial statements) and the compensation report, and preparing for the general meeting of shareholders and carrying out its resolutions;

94

· all duties of the board of directors pursuant to the Swiss Merger Act;

· informing the court in case of over-indebtedness; and

· passing resolutions regarding the increase of the share capital, provided that it has the authority to do so and attesting to such capital increase, preparing of the capital increase report and the executing corresponding amendment to our Articles.

The Board may, while retaining such non-delegable and inalienable powers and duties, delegate some of its powers, in particular direct management, to a single or to several of its members, managing directors, committees or to third parties who need be neither members of the board of directors nor shareholders. Pursuant to Swiss law, details of the delegation must be set in the organizational rules issued by the Board. The organizational rules may also contain other procedural rules such as quorum requirements.

According to our organizational rules, resolutions of the Board are adopted upon the absolute majority of the votes cast. In the event of a tie of votes, the chairman has, in addition to his vote, the casting vote. To validly pass a resolution, more than half of the members of the Board have to attend the meeting in person, by telephone or similar communications equipment. Pursuant to the CO, no attendance quorum is required for confirmation resolutions and adaptations of our Articles in connection with capital increases.

Indemnification of Executive Management and Directors

Subject to Swiss law, our Articles provide for indemnification of the existing and former members of the Board, executive management and their heirs, executors and administrators, against liabilities arising in connection with the performance of their duties in such capacity, and permits us to advance the expenses of defending any act, suit or proceeding to our directors and executive management.

In addition, under general principles of Swiss employment law, an employer may be required to indemnify an employee against losses and expenses incurred by such employee in the proper execution of his or her duties under the employment agreement with the employer.

We have entered or will enter into indemnification agreements with each of the members of our board of directors and executive management.

Conflict of Interest, Management Transactions

Swiss law does not have a specific provision regarding conflicts of interest. However, the CO contains a provision that requires our directors and executive management to safeguard the company's interests and imposes a duty of loyalty and duty of care on our directors and executive management. This rule is generally understood to disqualify directors and executive management from participation in decisions that directly affect them. Our directors and executive officers are personally liable to us for breach of these provisions. In addition, Swiss law contains provisions under which directors and all persons engaged in the company's management are liable to the company, each shareholder and the company's creditors for damages caused by an intentional or negligent violation of their duties. Furthermore, Swiss law contains a provision under which payments made to any of the company's shareholders or directors or any person associated with any such shareholder or director, other than payments made at arm's length, must be repaid to the company if such shareholder, director or associated person acted in bad faith.

Principles of the Compensation of the Board of Directors and the Executive Management

We are subject to the Compensation Ordinance (the "Compensation Ordinance") and the Directive on Information Relating to the Corporate Governance issued by the SIX (the "Corporate Governance Directive"). The Compensation Ordinance requires a "say on pay" approval mechanism for the compensation of the Board and the Executive Management pursuant to which the shareholders must vote on the compensation of the Board and the Executive Management on an annual basis. In accordance therewith, the Articles provide that the general meeting of shareholders must, each year, vote separately on the proposals by the Board regarding the maximum aggregate amounts of:

95

· the total compensation of the Board for the next term of office; and

· the total compensation of the Executive Management for the period of the next fiscal year.

If the general meeting of shareholders does not approve a proposal of the Board, the Board determines the maximum aggregate amount or maximum partial amounts taking into account all relevant factors and submits such amounts for approval to the same general meeting of shareholders, to an extraordinary general meeting of shareholders or to the next ordinary general meeting of shareholders for retrospective approval. If the maximum aggregate amount of compensation already approved by the general meeting of shareholders is not sufficient to also cover the compensation of persons newly appointed to or promoted within the Executive Management, such persons may be paid for each of the following purposes an aggregate of up to 40% in excess of the total annual compensation of the respective predecessor or for a similar pre-existing position: (i) as compensation for the relevant compensation period; and, in addition, (ii) as compensation for any prejudice incurred in connection with the change of employment.

The Compensation Ordinance further requires us to set forth in its Articles the principles for the determination of the compensation of the Board and the Executive Management. These principles have been included in the Articles as described further below.

The Compensation Ordinance also contains compensation disclosure rules. Pursuant to these rules, we are required to prepare an annual compensation report. The compensation report will, among other things, include the compensation of the members of the Board on an aggregate and on an individual basis and of the members of the Executive Management on an aggregate basis as well as the amount for the highest paid member of the Executive Management.

Pursuant to the Corporate Governance Directive, we are required to disclose basic principles and elements of compensation and shareholding programs for both acting and former members of the Board and the Executive Management as well as the authority and procedures for determining such compensation.

In accordance with the Compensation Ordinance, the Articles provide that loans may be granted to members of the Board and the Executive Management, provided such loans are granted at arm's length terms. In addition, the Articles provide that we may grant to members of the Executive Management post-retirement benefits beyond the occupational benefit scheme only if such post-retirement benefits do not exceed 50% of the base salary in the fiscal year immediately preceding the retirement.

The Compensation Ordinance generally prohibits certain types of compensation payments to the members of the board of directors, the Executive Management and the advisory board of listed companies, taking the form of severance pay, advance compensation (e.g. advance salary payments), incentive payments for certain acquisition transactions, loans, credits and pension benefits not based on occupational pension schemes, and performance-based compensation not provided for in the articles of association as well as equity securities and conversion and option rights awards not provided for in the articles of association.

Board of Directors

The Articles set out the principles for the elements of the compensation of the members of the Board. The compensation of non-executive members of the Board consists of a fixed compensation and may consist of additional compensation elements and benefits. The compensation of the executive members of the Board may consist of fixed and variable compensation. The total compensation shall take into account the position and level of responsibility of the respective member of the Board. The general meeting of shareholders approves the proposals of the Board in relation to the maximum aggregate amount of the compensation of the Board for the term of office until the next annual general meeting of shareholders. Members of the Board who are our employees do not receive compensation for Board service. Consequently, Carlos Moreira, Peter Ward and Dourgam Kummer (since the start of his employment by the Group), the only members of the Board who are also members of the executive management and/or employees of the Group, do not receive compensation for their Board service.

96

Executive Management

The Articles set out the principles for the elements of the compensation of the members of the Executive Management. The compensation of the members of the Executive Management may consist of fixed and variable compensation elements. Fixed compensation may comprise the base salary and other non-variable compensation elements. Variable compensation may comprise short-term and long-term variable compensation elements. Short-term variable compensation elements may be governed by performance metrics that take into account the achievement of operational, strategic, financial or other objectives, our results, the WISeKey group or parts thereof and/or individual targets, and the achievement of which is generally measured during a one-year period. Depending on achieved performance, the compensation may amount to a multiplier of target level. Long-term variable compensation elements may be governed by performance metrics that take into account the development of the share price or share performance in absolute terms or in relation to peer groups or indices and/or our results, the group or parts thereof and/or the achievement of operational, strategic, financial or other objectives in absolute terms or in relation to the market, other companies or comparable benchmarks and/or retention elements. An achievement of the objectives will generally be measured over a period of several years. Depending on achieved performance, the compensation may amount to a multiplier of target level. The Board or, to the extent delegated to it, the Nomination and Compensation Committee will determine the performance metrics and target levels of the short- and long-term variable compensation elements, as well as their achievement. Compensation may be paid in the form of cash, shares, in the form of share-based instruments or units or in the form of other types of benefits. The general meeting of shareholders approves the proposals of the Board in relation to the maximum aggregate amounts of fixed and variable compensation, respectively, of the Executive Management.

Borrowing Powers

Neither Swiss law nor our Articles restrict in any way our power to borrow and raise funds. The decision to borrow funds is made by or under the direction of our Board, and no approval by the shareholders is required in relation to any such borrowing.

Repurchases of Shares and Purchases of Own Shares

The CO limits our right to purchase and hold our own shares. We and our subsidiaries may purchase shares only if and to the extent that (1) we have freely distributable reserves in the amount of the purchase price; and (2) the aggregate par value of all shares held by us does not exceed 10% of our share capital. Pursuant to Swiss law, where shares are acquired in connection with a transfer restriction set out in the articles of association of a company, the foregoing upper limit is 20%. We currently do not have any transfer restriction in our Articles. If we own shares that exceed the threshold of 10% of our share capital, the excess must be sold or cancelled by means of a capital reduction.

Shares held by us or our subsidiaries are not entitled to vote at the general meeting of shareholders but are entitled to the economic benefits applicable to the shares generally, including dividends and pre-emptive rights in the case of share capital increases.

In addition, selective share repurchases are only permitted under certain circumstances. Within these limitations, as is customary for Swiss corporations, we may purchase and sell our own shares from time to time in order to meet our obligations under our equity plans, to meet imbalances of supply and demand, to provide liquidity and to even out variances in the market price of shares.

Notification and Disclosure of Substantial Share Interests

Under the applicable provisions of the Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading of 2015, or the Financial Market Infrastructure Act ("FMIA"), persons who directly, indirectly or in concert with other parties acquire or dispose of our shares, purchase rights or obligations relating to our shares (the "Purchase Positions") or sale rights or obligations relating to our shares (the "Sale Positions"), and thereby, directly, indirectly or in concert with other parties reach, exceed or fall below a threshold of 3%, 5%, 10%, 15%, 20%, 25%, 331⁄3%, 50% or 662⁄3% of our voting rights (whether exercisable or not) must notify us and the Disclosure Office of the SIX of such acquisition or disposal in writing within four trading days. Within two trading days of the receipt of such notification, we must publish such information via the SIX's electronic publishing platform. For purposes of calculating whether a threshold has been reached or crossed, shares and Purchase Positions, on the one hand, and Sale Positions, on the other hand, may not be netted. Rather, the shares and Purchase Positions and the Sale Positions must be accounted for separately and may each trigger disclosure obligations if the respective positions reach, exceed or fall below one of the thresholds. In addition, actual share ownership must be reported separately if it reaches, exceeds or falls below one of the thresholds.

97

Pursuant to Article 663c of the CO, Swiss corporations whose shares are listed on a stock exchange must disclose their significant shareholders and their shareholdings in the notes to their balance sheet, where this information is known or ought to be known. Significant shareholders are defined as shareholders and groups of shareholders linked through voting rights who hold more than 5% of all voting rights.

Mandatory Bid Rules

Pursuant to the applicable provisions of the FMIA, any person that acquires shares of a listed Swiss company, whether directly or indirectly or acting in concert with third parties, which shares, when taken together with any other shares of such company held by such person (or such third parties), exceed the threshold of 33 1/3% of the voting rights (whether exercisable or not) of such company, must make a takeover bid to acquire all the other newly issued shares of such company. A company's articles of association may either eliminate this provision of the FMIA or may raise the relevant threshold to 49% ("opting-out" or "opting-up", respectively).

We have an opting-out provision in Article 6 para. 9 of our Articles. Accordingly, an acquirer of Shares is not obliged to make a public offer pursuant to article 135 and 163 of the Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading.

The Swiss laws applicable to Swiss corporations and their shareholders differ from laws applicable to U.S. corporations and their shareholders. The following table summarizes significant differences in shareholder rights between the provisions of the Swiss Code of Obligations (Schweizerisches Obligationenrecht) and the Compensation Ordinance and the Delaware General Corporation Law applicable to companies incorporated in Delaware and their shareholders. Please note that this is only a general summary of certain provisions applicable to companies in Delaware. Certain Delaware companies may be permitted to exclude certain of the provisions summarized below in their charter documents.

Comparison of Shareholder Rights

DELAWARE CORPORATE LAW	SWISS CORPORATE LAW
Mergers and similar arrangements
Under the Delaware General Corporation Law, with certain exceptions, a merger, consolidation, sale, lease or transfer of all or substantially all of the assets of a corporation must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon. A shareholder of a Delaware corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration such shareholder would otherwise receive in the transaction. The Delaware General Corporation Law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of each class of capital stock without a vote by the shareholders of such subsidiary. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights.	Under Swiss law, with certain exceptions, a merger or a division of the corporation or a sale of all or substantially all of the assets of a corporation must be approved by two-thirds of the shares represented at the relevant general meeting of shareholders as well as the absolute majority of the par value of the shares represented at such shareholders' meeting. A shareholder of a Swiss corporation participating in a statutory merger or demerger pursuant to the Swiss Merger Act can file an appraisal right lawsuit against the surviving company. As a result, if the consideration is deemed "inadequate," such shareholder may, in addition to the consideration (be it in shares or in cash) receive an additional amount to ensure that such shareholder receives the fair value of the shares held by such shareholder. Swiss law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of the voting rights without a vote by shareholders of such subsidiary, if the shareholders of the subsidiary are offered the payment of the fair value in cash as an alternative to shares.

98

Shareholders' suits
Class actions and derivative actions generally are available to shareholders of a Delaware corporation for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys' fees incurred in connection with such action.	Class actions and derivative actions as such are not available under Swiss law. Nevertheless, certain actions may, to a limited extent, have a similar effect. An appraisal lawsuit won by a shareholder can be acted upon by any person who has the same legal status as the claimant. Also, a shareholder is entitled to bring suit against directors for breach of, among other things, their fiduciary duties and claim the payment of damages. However, unless the company is subject to bankruptcy proceedings, or if the relevant shareholder can demonstrate having suffered a loss in a personal capacity, a shareholder will only be allowed to ask for payment of damages to the corporation. Under Swiss law, the winning party is generally entitled to recover attorneys' fees incurred in connection with such action, provided, however, that the court has discretion to permit the shareholder whose claim has been dismissed to recover attorneys' fees incurred to the extent he acted in good faith.
Shareholder vote on board and management compensation
Under the Delaware General Corporation Law, the board of directors has the authority to fix the compensation of directors, unless otherwise restricted by the certificate of incorporation or bylaws.	Pursuant to the Swiss Ordinance against excessive compensation in listed stock corporations, the general meeting of shareholders has the non-transferable right, amongst others, to have a binding vote each year on the compensation due to the board of directors, executive management and advisory boards.

99

Annual vote on board renewal
Unless directors are elected by written consent in lieu of an annual meeting, directors are elected in an annual meeting of stockholders on a date and at a time designated by or in the manner provided in the bylaws. Re-election is possible. Classified boards are permitted.	The general meeting of shareholders elects annually (i.e. for the period between two annual ordinary general meeting of shareholders) the members of the board of directors, the chairman of the board and the members of the compensation committee individually for a term of office of one year. Re-election is possible.
Indemnification of directors and executive management and limitation of liability
The Delaware General Corporation Law provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of directors (but not other controlling persons) of the corporation for monetary damages for breach of a fiduciary duty as a director, except no provision in the certificate of incorporation may eliminate or limit the liability of a director for: ·any breach of a director's duty of loyalty to the corporation or its shareholders; ·acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; ·statutory liability for unlawful payment of dividends or unlawful stock purchase or redemption; or ·any transaction from which the director derived an improper personal benefit. A Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any proceeding, other than an action by or on behalf of the corporation, because the person is or was a director or officer, against liability incurred in connection with the proceeding if the director or officer acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation; and the director or officer, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.	Under Swiss corporate law, an indemnification of a director or member of the executive management in relation to potential personal liability is not effective to the extent the director or member of the executive management intentionally or grossly negligently violated his or her corporate duties towards the corporation. Most violations of corporate law are regarded as violations of duties towards the corporation rather than towards the shareholders. In addition, indemnification of other controlling persons is generally not permitted under Swiss corporate law, including shareholders of the corporation. Nevertheless, a corporation may enter into and pay for directors' and officers' liability insurance which typically covers negligent acts as well.

100

Unless ordered by a court, any foregoing indemnification is subject to a determination that the director or officer has met the applicable standard of conduct:

·by a majority vote of the directors who are not parties to the proceeding, even though less than a quorum;

·by a committee of directors designated by a majority vote of the eligible directors, even though less than a quorum;

·by independent legal counsel in a written opinion if there are no eligible directors, or if the eligible directors so direct; or

·by the shareholders.

Moreover, a Delaware corporation may not indemnify a director or officer in connection with any proceeding in which the director or officer has been adjudged to be liable to the corporation unless and only to the extent that the court determines that, despite the adjudication of liability but in view of all the circumstances of the case, the director or officer is fairly and reasonably entitled to indemnity for those expenses which the court deems proper.

101

Directors' fiduciary duties
A director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: ·the duty of care; and ·the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.	A director of a Swiss corporation has a fiduciary duty to the corporation only. This duty has two components: ·the duty of care; and ·the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent director would exercise under similar circumstances. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits in principle self-dealing by a director and mandates that the best interest of the corporation take precedence over any interest possessed by a director or officer. The burden of proof for a violation of these duties is with the corporation or with the shareholder bringing a suit against the director. Directors also have an obligation to treat shareholders that are in similar situations equally.
Shareholder action by written consent
A Delaware corporation may, in its certificate of incorporation, eliminate the right of shareholders to act by written consent.	Shareholders of a Swiss corporation may only exercise their voting rights in a general meeting of shareholders and may not act by written consents.

102

Shareholder proposals

A shareholder of a Delaware corporation has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

At any general meeting of shareholders any shareholder may put proposals to the meeting if the proposal is part of an agenda item. Unless the articles of association provide for a lower threshold or for additional shareholders' rights: ·one or several shareholders whose combined shareholdings represent the lower of (1) one tenth of the share capital or (2) an aggregate par value of at least CHF 1,000,000, may ask that a general meeting of shareholders be called for specific agenda items and specific proposals; and ·one or several shareholders representing 10.0% of the share capital or CHF 1.0 million of nominal share capital may ask that an agenda item including a specific proposal be put on the agenda for a regularly scheduled general meeting of shareholders, provided such request is made with appropriate notice. Any shareholder can propose candidates for election as directors at an annual general meeting without prior written notice. In addition, any shareholder is entitled, at a general meeting of shareholders and without advance notice, to (1) request information from the Board on the affairs of the company (note, however, that the right to obtain such information is limited), (2) request information from the auditors on the methods and results of their audit, (3) request the holding of an extraordinary general meeting of shareholders and (4) request, under certain circumstances and subject to certain conditions, a special audit.

103

Cumulative voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation's certificate of incorporation provides for it.	Cumulative voting would be permitted under Swiss corporate law; however, we are not aware of any company that has cumulative voting. An annual individual election of all members of the board of directors for a term of office of one year (i.e. until the end of the following annual general meeting) is mandatory for listed Swiss companies.
Removal of directors
A Delaware corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.	A Swiss corporation may remove, with or without cause, any director at any time with a resolution passed by an absolute majority of the shares represented at a general meeting of shareholders. The articles of association may require the approval by a qualified majority of the shares represented at a meeting for the removal of a director.
Transactions with interested shareholders
The Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in certain business combinations with an "interested shareholder" for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or group who or which owns or owned 15.0% or more of the corporation's outstanding voting stock within the past three years.	No such specific rule applies to a Swiss corporation.
Dissolution; Winding up
Unless the board of directors of a Delaware corporation approves the proposal to dissolve, dissolution must be approved by shareholders holding 100.0% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation's outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.	A dissolution and winding up of a Swiss corporation requires the approval by two-thirds of the shares represented as well as the absolute majority of the par value of the shares represented at a general meeting of shareholders passing a resolution on such dissolution and winding up. The articles of association may increase the voting thresholds required for such a resolution.

104

Variation of rights of shares
A Delaware corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise.	A Swiss corporation may modify the rights of a classes of shares with (1) a resolution passed by an absolute majority of the shares represented at the general meeting of shareholders and (2) a resolution passed by an absolute majority of the shares represented at the special meeting of the affected preferred shareholders. The issuance of shares that are granted more voting power requires the approval by two-thirds of the shares represented as well as the absolute majority of the par value of the shares represented at the relevant general meeting of shareholders.
Amendment of governing documents
A Delaware corporation's governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.	The articles of association of a Swiss corporation may be amended with a resolution passed by an absolute majority of the shares represented at such meeting, unless otherwise provided in the articles of association. There are a number of resolutions, such as an amendment of the stated purpose of the corporation and the introduction of authorized and conditional capital, that require the approval by two-thirds of the votes and an absolute majority of the par value of the shares represented at a shareholders' meeting. The articles of association may increase the voting thresholds.
Inspection of books and records
Shareholders of a Delaware corporation, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to obtain copies of list(s) of shareholders and other books and records of the corporation and its subsidiaries, if any, to the extent the books and records of such subsidiaries are available to the corporation.	Shareholders of a Swiss corporation may only inspect books and records if the general meeting of shareholders or the board of directors approved such inspection and only if confidential information possessed by a corporation is protected. A shareholder is only entitled to receive information to the extent required to exercise such shareholders' rights, subject to the interests of the corporation. The right to inspect the share register is limited to the right to inspect that shareholder's own entry in the share register.

105

Payment of dividends
The board of directors may approve a dividend without shareholder approval. Subject to any restrictions contained in its certificate of incorporation, the board may declare and pay dividends upon the shares of its capital stock either: ·out of its surplus; or ·in case there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared or the preceding fiscal year. Stockholder approval is required to authorize capital stock in excess of that provided in the charter. Directors may issue authorized shares without stockholder approval.	Dividend payments are subject to the approval of the general meeting of shareholders. The board of directors may propose to shareholders that a dividend shall be paid but cannot itself authorize the distribution. Payments out of the Company's stated share capital (in other words, the aggregate par value of the Company's registered share capital) in the form of dividends are not allowed; payments out of stated share capital may be made by way of a capital reduction only. Dividends may be paid only from the profits brought forward from the previous business years or if the Company has distributable reserves, each as will be presented on the Company's audited annual stand-alone financial statements. The dividend may be determined only after the allocations to reserves required by the law and the articles of association have been made.
Creation and issuance of new shares
All creation of shares requires the board of directors to adopt a resolution or resolutions, pursuant to authority expressly vested in the board of directors by the provisions of the company's certificate of incorporation.	All creation of shares requires a shareholders' resolution. Authorized shares can be, once created by shareholder resolution, issued by the board of directors (subject to limitations of the authorization; the term of authorized share capital is at a maximum two years, and the amount of authorized share capital is capped at 50% of the share capital registered in the commercial register at the time the authorized share capital is adopted). Conditional share capital is the underlying for shares issued upon the exercise of options and conversion rights related to debt instruments issued by the board of directors or such rights issued to employees. The amount of conditional share capital is capped at 50% of the share capital registered in the commercial register at the time the conditional share capital is adopted.

106

Rights plans / poison pills

Under Swiss corporation law, shareholders have pre-emptive rights to subscribe for new issuances of shares in proportion to the respective par values of their holdings. Under certain circumstances, shareholders limit or withdraw, or authorize the board of directors to limit or withdraw, pre-emptive rights or advance subscription rights in certain circumstances. However, limitation or withdrawal of shareholders' pre-emptive rights can only be decided for valid reasons. Preventing a particular shareholder to exercise influence over the company is generally believed not to be a valid reason to limit or withdraw shareholders' pre-emptive rights

C. Material Contracts

Yorkville Standby Equity Distribution Agreement

The Company entered into the SEDA, dated February 8, 2018 and amended on September 28, 2018, with Yorkville. Pursuant to the SEDA, the Company has the right, at any time during a three-year period, to request Yorkville, in one or several transactions, to subscribe for Class B Shares up to an aggregate subscription amount of CHF 50,000,000. Provided that a sufficient number of Class B Shares is provided by the Company to Yorkville as security through a share lending arrangement, the Company has the right to make drawdowns under the SEDA at its discretion by requesting Yorkville to subscribe for (if the Class B Shares are issued out of authorized share capital) or purchase (if the Class B Shares are delivered out of treasury) Class B Shares worth up to CHF 5,000,000 per drawdown, subject to certain exceptions and limitations (including the exception that a drawdown request by the Company shall in no event cause the aggregate number of Class B Shares held by Yorkville to meet or exceed 4.99% of the total number of shares registered with the commercial register of the Canton of Zug). The subscription price for each drawdown request of the Company corresponds to 93% of the lowest daily VWAP of a Class B Share, as traded and quoted on the SIX, over the five trading days following the drawdown request by the Company.

As at December 31, 2019, the remaining amount available for drawdown by the Company under the SEDA is CHF 47,142,077 (USD 48,709,692 at closing rate) and, as at December 31, 2019, the estimated maximum number of Class B Shares deliverable under the SEDA is 23,467,780 Class B Shares at CHF 2.0088 per Class B Share (calculated based on the closing price of a Class B Share on December 30, 2019 of CHF 2.16 per Class B Share, discounted by 7%). The actual price, at which the Company may drawdown under the SEDA is subject to change, and, therefore, the number of Class B Shares deliverable to Yorkville may vary.

107

As at December 31, 2019, the Company held 1,202,191 Class B Shares as treasury shares available for delivery under the SEDA, either directly or through a subsidiary. Depending on WISeKey's capital requirements, this amount of Class B Shares may not be sufficient and the Company may issue Class B Shares out of its authorized share capital for further drawdowns under the SEDA and delivery to Yorkville. If such number of Class B Shares is not sufficient for delivery to Yorkville in connection with drawdowns under the SEDA, the Company may, instead of issuing the required additional number of Class B Shares to Yorkville directly, issue additional Class B Shares for delivery under the SEDA as follows. The additional Class B Shares would be subscribed for by WISeKey Equities AG (WISeKey Equities), a direct, wholly-owned subsidiary of the Company. WISeKey Equities would subscribe for the Class B Shares at nominal value and upon issuance of such Class B Shares, on-sell the Class B Shares back to the Company at nominal value plus a fee as consideration for providing the subscription service. The Company would hold the new Class B Shares in treasury and deliver them to Yorkville in accordance with the terms of the SEDA.

Crede Convertible Loan Agreement

The Company entered into the Crede Convertible Loan Agreement, dated September 28, 2018, with Crede, pursuant to which Crede committed to grant a loan to the Company in the amount of USD 3,000,000.00. The Crede Principal Amount will mature on October 30, 2020. The Crede Principal Amount is to be repaid through the delivery of such number of Class B Shares, as corresponds to the quotient of the Crede Principal Amount then outstanding and a conversion price corresponding to 93% of the average of the two lowest daily VWAPs of a Class B Share, as traded and quoted on the SIX during the ten trading days immediately preceding the relevant conversion date, converted into USD at the relevant exchange rate. Crede may request a conversion of the Crede Principal Amount, in part or in full, at any time before the Maturity Date. The loan granted in accordance with the Crede Convertible Loan Agreement bears interest at a rate of 10% per annum. The Company has the right, at its discretion, to pay Crede Interest accrued on the outstanding Crede Principal Amount in cash or by delivery of such number of Class B Shares as corresponds to the quotient of the respective Crede Interest payment amount and a conversion price corresponding to 93% of the average of the two lowest daily VWAPs of a Class B Share, as traded and quoted on the SIX during the ten trading days immediately preceding the relevant conversion date, converted into USD at the relevant exchange rate.

After conversions in January, February, July, September and December 2019, as requested by Crede, representing an aggregate repayment amount of USD 1,771,101, the remaining Crede convertible loan amount outstanding is USD 1,228,899 as at December 31, 2019. The conversion of the Crede Principal Amount and, if applicable, the Crede Interest, into Class B Shares will dilute the Company's shareholders' interest in the Company. The number of Class B Shares deliverable by the Company to Crede in connection with conversions of the Crede Principal Amount and the Crede Interest will depend on the applicable conversion price. As at December 31, 2019, the estimated maximum number of Class B Shares deliverable by the Company under the Crede Convertible Loan Agreement (for payment of Crede Principal Amount and maximum Crede Interest until maturity) is 636,803 Class B Shares (calculated based on the closing price of a Class B Share on the SIX on December 30, 2019 of CHF 2.16 per Class B Share discounted by 7% and converted into USD at the relevant exchange rate). Note that the actual price at which Crede may convert the Crede Principal Amount and at which the Company may convert the Crede Interest into Class B Shares is subject to change, and, as a consequence, the number of Class B Shares deliverable to Crede may vary.

As at December 31, 2019, the Company held 1,202,191 Class B Shares in treasury, either directly or through a subsidiary, in order to be able to comply with its obligations under the Crede Convertible Loan Agreement (including the conversion of the Crede Principal Amount and the Crede Interest into Class B Shares). If such number of Class B Shares is not sufficient in connection with the conversion of the Crede Principal Amount and the Crede Interest under the Crede Convertible Loan Agreement, the Company may, instead of issuing the required additional number of Class B Shares directly to Crede, issue additional Class B Shares for delivery to Crede as follows. The additional Class B Shares would be subscribed for by WISeKey Equities at nominal value and upon issuance of such Class B Shares, WISeKey Equities would on-sell the Class B Shares back to the Company at nominal value plus a fee as consideration for providing the subscription service. The Company would hold the new Class B Shares in treasury and deliver them to Crede in accordance with the terms of the Crede Convertible Loan Agreement.

108

On March 04, 2020, WISeKey executed with Yorkville a new convertible loan agreement for a total amount of USD 4 million repayable in monthly instalments starting March 30, 2020. This new USD 4 million agreement replaces the existing Yorkville Convertible Loan signed on June 27, 2019 and the USD 2,337,393 remaining balance under the Yorkville Convertible Loan was rolled over into the new agreement. The new convertible loan agreement bears an interest rate of 6% per annum payable monthly in arrears and matures on April 30, 2021. Yorkville has the right to convert the outstanding loan amount or any portion thereof, and any accrued interest, into Class B Shares at an initial conversion price of CHF 3.00 applying as exchange rate any publicly available spot rate of exchange selected by Yorkville in the New York foreign exchange market at the applicable date.  The Initial Yorkville Conversion Price may be adjusted using certain agreed-upon formulae in case of (a) an increase in capital by means of capitalization of reserves, profits or premiums by distribution of Class B Shares, or division or consolidation of Class B Shares; (b) an issue of Class B Shares or other securities by way of conferring subscription or purchase rights; (c) spin-offs and capital distributions other than dividends; and (d) dividends.

Options Issued to Crede

In connection with the Crede Convertible Loan Agreement, on September 28, 2018, the Company granted to Crede, 408,247 options for the acquisition of an equal number of Class B Shares. The options may be exercised by Crede at any time on or before October 29, 2021, at an exercise price per option equal to CHF 3.84 per Class B Share. Shares issued to Crede in connection with the options would be issued out of the Company's conditional share capital or authorized share capital without triggering the pre-emptive rights of the existing shareholders of the Company.

Yorkville Convertible Loan Agreement

The Company entered into a Yorkville Convertible Loan Agreement, dated June 27, 2019, with Yorkville, pursuant to which Yorkville committed to grant a loan to the Company in the amount of USD 3,500,000.00. The Yorkville Convertible Loan is repayable in monthly cash installments starting August 1, 2019 up until its maturity on August 1, 2020. The Yorkville Convertible Loan bears interest at a yearly rate of 6% (Yorkville Interest). Yorkville, at its sole discretion, may elect to request that any amount due and outstanding, be it Yorkville Principal Amount or Yorkville Interest, be paid in Class B Shares using a conversion price of CHF 3.00 per Class B Share (Initial Yorkville Conversion Price) and, as exchange rate, any available spot rate of exchange selected by Yorkville in the New York foreign exchange market at the applicable date. The Initial Yorkville Conversion Price may be adjusted using certain agreed-upon formulae in case of (a) an increase in capital by means of capitalization of reserves, profits or premiums by distribution of Class B Shares, or division or consolidation of Class B Shares; (b) an issue of Class B Shares or other securities by way of conferring subscription or purchase rights; (c) spin-offs and capital distributions other than dividends; and (d) dividends.

As at December 31, 2019, and as agreed with Yorkville, WISeKey has repaid an aggregate amount of USD 1,162,607, therefore the remaining Yorkville Convertible Loan amount outstanding is USD 2,337,393. The conversion of the Yorkville Principal Amount and, if applicable, the related interest, into Class B Shares will dilute the Company's shareholders' interest in the Company. The number of Class B Shares deliverable by the Company to Yorkville in connection with conversions of the Yorkville Principal Amount and the Yorkville Interest will depend on the applicable conversion price. Based on the Initial Yorkville Conversion Price on the date of execution of the Yorkville Convertible Loan (CHF 3.00) converted into USD at the relevant exchange rate, the estimated maximum number of Class B Shares deliverable under the Yorkville Convertible Loan (for the payment of Yorkville Principal Amount outstanding as at December 31, 2019 and Yorkville Interest until maturity) is 772,968 Class B Shares. Note that the actual price at which Yorkville may convert the Yorkville Principal Amount and Yorkville Interest into Class B Shares is subject to change, and, as a consequence, the number of Class B Shares deliverable to Yorkville may vary.

As at December 31, 2019, the Company held 1,202,191 Class B Shares in treasury, either directly or through a subsidiary, in order to be able to comply with its obligations under the Yorkville Convertible Loan (including the conversion of the Yorkville Principal Amount and the Yorkville Interest into Class B Shares). If such number of Class B Shares is not sufficient in connection with the conversion of the Yorkville Principal Amount and the Yorkville Interest under the Yorkville Convertible Loan, the Company may, instead of issuing the required additional number of Class B Shares directly to Yorkville, issue additional Class B Shares for delivery to Yorkville as follows. The additional Class B Shares would be subscribed for by WISeKey Equities at nominal value and upon issuance of such Class B Shares, WISeKey Equities would on-sell the Class B Shares back to the Company at nominal value plus a fee as consideration for providing the subscription service. The Company would hold the new Class B Shares in treasury and deliver them to Yorkville in accordance with the terms of the Yorkville Convertible Loan.

Options Issued to Yorkville

In connection with the Yorkville Convertible Loan, on June 27, 2019, the Company granted to Yorkville 500,000 options for the acquisition of an equal number of Class B Shares. The options may be exercised by Yorkville at any time on or before June 27, 2022, at an exercise price per option initially set to CHF 3.00 per Class B Share (Initial Exercise Price). The Initial Exercise Price may be adjusted using certain agreed-upon formulae in case of (a) an increase of capital by means of capitalization of reserves, profits or premiums by distribution of Class B Shares, or division or consolidation of Class B Shares; (b) an issue of Class B Shares or other securities by way of conferring subscription or purchase rights; (c) spin-offs and capital distributions other than dividends; and (d) dividends. The Class B Shares issued to Yorkville in connection with the options would be issued out of the Company's conditional share capital or authorized share capital without triggering he pre-emptive rights of the existing shareholders of the Company.

109

Share Subscription Facility with GEM LLC

On January 19, 2016 the Company entered into SFF with GEM, which is a CHF 60 million facility over 5 years and allows the Group to draw down funds at its option in exchange for Class B Shares. Under the SFF, the Company may drawdown funds essentially 18 times in a year, the amount being in a range related to the trading volume and price of the Class B Shares on the SIX. The drawdown amount is based on 90% of the average closing price for Class B Shares of the last 15 trading days multiplied by 1,000% of the average volume of the last 15 trading days. GEM can then elect to purchase between 50% and 200% of this figure.

As at December 31, 2019, the remaining amount available for drawdown by the Company under the SFF is CHF 56,094,645 and the estimated maximum number of Class B Shares deliverable under the SFF is 28,855,270 Class B Shares at CHF 1.944 per Class B Share (calculated based on the closing price of a Class B Share on December 30, 2019 of CHF 2.16 per Class B Share, discounted by 10%). The actual price, at which the Company may drawdown under the SFF is subject to change, and, therefore, the number of Class B Shares deliverable to GEM may vary.

Options Issued to GEM

In connection with the SFF, the Company granted to GEM 1,459,127 options for the acquisition of an equal number of Class B Shares on May 06, 2016. The options may be exercised by GEM at any time on or before May 06, 2021, at an exercise price per option initially set to CHF 8.85432 per Class B Share (Initial Exercise Price). The Initial Exercise Price may be adjusted using certain agreed-upon formulae in case of (a) an alteration to the nominal value of the Class B Shares as a result of the consolidation or subdivision thereof; (b) an issue of any securities (other than Class B Shares or options, warrants or other rights to subscribe for or purchase or otherwise acquire any Class B Shares) to shareholders by way of rights, or a grant to shareholders by way of rights of any options, warrants or other rights to subscribe for or purchase or otherwise acquire any securities (other than Class B Shares or options, warrants or other rights to subscribe for or purchase or otherwise acquire any Class B Shares); (c) an issue of Class B shares to shareholders by way of rights, or an issue or grant to shareholders by way of rights of options, warrants or other rights to subscribe for or purchase any Class B Shares at less than the relevant price; (d) an issue of Class B Shares to shareholders by way of rights, by way of capitalization of profits or reserves other than as part of a cash dividend; (e) any capital distribution to shareholders by way of rights; (f) an issue (other than per above item c) wholly for cash or for no consideration of Class B Shares, or an issue or grant (other than per above item c) wholly for cash or for no consideration of any options, warrants or other rights to subscribe for or purchase any Class B Shares at less than the relevant price; (g) the company or any subsidiary or any other person shall issue wholly for cash or for no consideration any securities (or enter into any contractual arrangements which would have an equivalent economic effect to issuing securities) which by their terms of issue carry (directly or indirectly) rights of conversion into, or exchange or subscription for, Class B shares (other than Class B Shares already in issue at the time of the issue of the said securities) (or shall grant any such rights in respect of existing securities so issued) or securities which by their terms might be redesignated as Class B Shares, and the consideration per Class B Share receivable upon conversion, exchange, subscription or redesignation is less than the relevant price; (h) any modification of the rights of conversion, exchange or subscription of some securities; and (i) the company or any subsidiary or any other person shall offer any securities in connection with which offer, shareholders as a class are entitled to participate in arrangements whereby such securities may be acquired by them.

In application of adjustment provisions under the relevant warrant, the exercise price of the warrant has been adjusted from CHF 8.85342 to CHF 8.8264 and the number of Class B Shares that GEM is entitled to purchase upon exercise of the warrant has been increased by 4,612 Class B Shares to 1,463,739 as at December 31, 2019. The Class B Shares issued to GEM in connection with the GEM Options would be issued out of the Company's conditional share capital or authorized share capital without triggering the pre-emptive rights of the existing shareholders of the Company. The exercise of GEM Options will dilute the Company's shareholders' interests in the Company.

110

Credit Agreement with Long State Investment Limited

On December 16, 2019, WISeKey entered into the LSI Convertible Facility with LSI to borrow up to CHF 30,000,000. Under the terms of the LSI Convertible Facility, WISeKey is able to drawdown individual term loans of up to CHF 500,000 or, if so agreed between the parties, up to CHF 2,500,000 at an interest rate of 1.5% per annum, up to an aggregate amount of CHF 30,000,000 over a commitment period of 24 months. LSI have the right to convert a drawdown tranche into Class B Shares or, if so agreed among the parties and permitted by law, into ADSs, within a period of 21 SIX trading days after each individual drawdown at 95% of the higher of (i) the then prevailing market rate and (ii) the minimum conversion price of CHF 1.80. Any term loan not converted by LSI initially will automatically convert into Class B Shares, or ADSs, 20 SIX trading days before the expiration of the commitment period at the applicable conversion price. Under certain circumstances, interest payments may be “paid in kind” by capitalizing such interest and adding to it the aggregate principal balance of the loan outstanding.

As at December 31, 2019, WISeKey has not made any drawdown under the LSI Convertible Facility, therefore the remaining amount available for drawdown is CHF 30,000,000. The conversion of the LSI Principal Amount and, if applicable, the LSI Interest, into Class B Shares will dilute the Company's shareholders' interest in the Company. The number of Class B Shares deliverable by the Company to LSI in connection with conversions of the LSI Principal Amount and the LSI Interest will depend on the applicable conversion price. As at December 31, 2019, the remaining amount available for drawdown by the Company under the LSI Convertible Facility is CHF 30,000,000 (USD 30,997,590 at closing rate) and, as at December 31, 2019, the estimated maximum number of Class B Shares deliverable under the LSI Convertible Facility is 14,619,883 Class B Shares at CHF 2.052 per Class B Share (calculated based on the closing price of a Class B Share on the SIX on December 30, 2019 of CHF 2.16 per Class B Share discounted by 5%). Note that the actual price at which LSI may convert each tranche under the LSI Convertible Facility is subject to change, and, therefore, the number of Class B Shares deliverable to LSI may vary.

OISTE Collaboration Agreement

Our subsidiary, WISeKey SA and the Organisation Internationale pour la Sécurité de Transactions Electroniques (OISTE), a foundation created under Swiss law, entered into a cooperation agreement, dated June 20, 2018 (OISTE Collaboration Agreement), which amended and restated prior agreements between us and OISTE.  Under the terms of the OISTE Collaboration Agreement, we are granted a worldwide license to commercialize its Root Global Cryptographic Key Pairs or Root of Trust. Roots of Trust (RoT) is a set of functions in the trusted computing module of a computer's operating system (OS). The RoT serves as separate computing engine controlling the trusted computing platform cryptographic processor on the PC or mobile device it is embedded in. The OISTE RoT was created in 1999 as part of a partnership with the International Telecommunication Union which is the International UN organization in charge of standards used on the Internet, IoT and mobile networks. 

WISeKeys uses the OISTE RoT to provide trust to its digital identity technology used to authenticate users, and encrypt and decrypt messages among users. It is also used for WISeKey's Certify ID and WISeID technology to provide Digital Certificates for people, servers and IoT objects by providing certification technology and services in conformity with OISTE directives and standards.  The OISTE RoT is audited annually by webtrust.org. The OISTE Foundation owns and regulates the "OISTE Global Trust Model", which includes as "Root of Trust" a number of Root Certification Authorities|, globally recognized. OISTE delegates to the Swiss company, WISeKey SA, the operation of the systems and infrastructures supporting the Trust Model. The OISTE Foundation doesn't issue certificates to end subscribers, but grants to WISeKey a license as subordinate certification authority, allowing the delivery of Trust Services for Persons, Applications and Objects. In return for this license, we agree to pay a license fee and a royalty fee to OISTE.  In addition, the OISTE Collaboration Agreement delegates to us the technical management of the OISTE Root Global Cryptographic Key pairs, the OISTE global Root Certification Authority as well as its Digital Certificates, including the safekeeping of the OISTE Root Global Cryptographic Key Pairs in our data center bunker.  In return for this management service, we are paid a management fee by OISTE.

WebTrust is an assurance service jointly developed by the American Institute of Certified Public Accountants (AICPA). WebTrust relies on a series of principles and criteria designed to promote confidence and trust between consumers and companies conducting business on the Internet. Public accounting firms and practitioners, who obtain a WebTrust business license from the AICPA or the Canadian Institute of Chartered Accountants (CICA), can provide assurance services to evaluate and test whether a particular web site meets any one of the Trust Services principles and criteria.

111

D. Exchange Controls

There are currently no exchange controls restrictions in effect in Switzerland.

E. Taxation

Material U.S. Federal Income Tax Considerations for U.S. Holders

The following is a description of the material U.S. federal income tax consequences to U.S. Holders, as defined below, of owning and disposing of our ADSs. It does not describe all tax considerations that may be relevant to a particular person's decision to acquire, hold or dispose of ADSs. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), administrative pronouncements, judicial decisions, final, temporary and proposed Treasury regulations, and the income tax treaty between Switzerland and the United States (the "Treaty"), all as of the date hereof, any of which is subject to change or differing interpretations, possibly with retroactive effect.

This discussion applies only to a U.S. Holder that holds ADSs as capital assets for U.S. federal income tax purposes. Furthermore, it does not describe all of the U.S. federal income tax consequences that may be relevant in light of a U.S. Holder's particular circumstances, including consequences for purposes of the alternative minimum tax and the potential application of the Medicare contribution tax. Furthermore, it does not address classes of U.S. holders that may be subject to special rules, such as:

· banks, insurance companies, and certain other financial institutions;

· dealers or traders in securities who use a mark-to-market method of tax accounting;

· persons holding ADSs as part of a hedging transaction, straddle, wash sale, conversion transaction or other integrated transaction or persons entering into a constructive sale with respect to the ADSs;

· regulated investment companies or real estate investment trusts;

· U.S. expatriates and certain former citizens or long-term residents of the United States;

· U.S. Holders whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

· entities or arrangements classified as partnerships for U.S. federal income tax purposes;

· tax-exempt entities, including an "individual retirement account" or "Roth IRA";

· persons that own or are deemed to own ten percent or more of our shares by vote or value; or

· persons holding ADSs in connection with a trade or business conducted outside of the United States.

If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds ADSs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding ADSs and partners in such partnerships should consult their tax advisers as to the particular U.S. federal income tax consequences of owning and disposing of the ADSs.

A "U.S. Holder" is a holder who, for U.S. federal income tax purposes, is a beneficial owner of ADSs, who is eligible for the benefits of the Treaty and who is:

· a citizen or individual resident of the United States;

· a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia; or

112

· an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

Generally, a U.S. Holder of an ADS should be treated for U.S. federal income tax purposes as holding the Class B Shares represented by the ADS. Accordingly, no gain or loss will be recognized upon an exchange of ADSs for Class B Shares.

U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning and disposing of ADSs in their particular circumstances.

Taxation of Distributions

As stated above under "Item 10B. Memorandum and Articles of Association," we do not intend to pay cash dividends in the foreseeable future. If we do make distributions of cash or property with respect to ADSs, subject to the passive foreign investment company rules described below, any such distributions (before reduction for any amounts withheld in respect of Swiss withholding tax), other than certain pro rata distributions of ADSs, will generally be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, we expect that distributions generally will be reported to U.S. Holders as dividends.

For so long as our ADSs are listed on NASDAQ or we are eligible for benefits under the Treaty, dividends paid to certain non-corporate U.S. Holders will be eligible for taxation as "qualified dividend income" and therefore, subject to applicable limitations, will be taxable at rates not in excess of the long-term capital gain rate applicable to such U.S. Holder. U.S. Holders should consult their tax advisers regarding the availability of the reduced tax rate on dividends in their particular circumstances.

The amount of a dividend will include any amounts withheld by us in respect of Swiss income taxes. The amount of the dividend will be treated as foreign-source dividend income to U.S. Holders and will not be eligible for the dividends-received deduction generally available to U.S. corporations under the Code. Dividends will be included in a U.S. Holder's income on the date of the depositary's receipt of the dividend. The amount of any dividend income paid in foreign currency will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date of actual or constructive receipt, regardless of whether the payment is in fact converted into U.S. dollars at that time. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.

Subject to applicable limitations, some of which vary depending upon the U.S. Holder's particular circumstances, Swiss income taxes withheld from dividends on ADSs at a rate not exceeding the rate provided by the Treaty will be creditable against the U.S. Holder's U.S. federal income tax liability. The rules governing foreign tax credits are complex and U.S. Holders should consult their tax advisers regarding the creditability of foreign taxes in their particular circumstances. In lieu of claiming a foreign tax credit, U.S. Holders may, at their election, deduct foreign taxes, including any Swiss income tax, in computing their taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year.

Sale or Other Disposition of ADSs

Subject to the passive foreign investment company rules described below, gain or loss realized on the sale or other disposition of ADSs will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder held the ADSs for more than one year. The amount of the gain or loss will equal the difference between the U.S. Holder's tax basis in the ADSs disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. This gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes. The deductibility of capital losses is subject to various limitations.

113

Passive Foreign Investment Company Rules

We will be a PFIC for any taxable year in which, after the application of certain "look-through" rules with respect to subsidiaries, either (i) 75% or more of our gross income consists of "passive income," or (ii) 50% or more of the average quarterly value of our assets consist of assets that produce, or are held for the production of, "passive income." For purposes of the above calculations, we will be treated as if we hold our proportionate share of the assets of, and receive directly our proportionate share of the income of, any other corporation in which we directly or indirectly own at least 25%, by value, of the shares of such corporation. Passive income generally includes interest, dividends, rents, certain non-active royalties and capital gains.

Based on our financial statements, business plan and certain estimates and projections, including as to the relative values of our assets, we do not believe that we were a PFIC for our 2019 taxable year and do not expect to be a PFIC in the foreseeable future. However, there can be no assurance that the IRS will agree with our conclusion regarding our PFIC status, and whether we are or will be classified as a PFIC in any particular year is uncertain because, among other things, we currently own a substantial amount of passive assets, including cash, and the valuation of certain of our assets is uncertain and may vary substantially over time. Accordingly, there can be no assurance that we will not be a PFIC for any taxable year. If a U.S. Holder holds ADSs in any year in which we are treated as a PFIC, we generally will continue to be treated as a PFIC with respect to that U.S. Holder for all succeeding years during which the U.S. Holder holds ADSs, even if we cease to meet the threshold requirements for PFIC status.

If we are a PFIC in any taxable year during which a U.S. Holder holds ADSs (assuming such U.S. Holder had not made a timely mark-to-market election, as described below), gain recognized by such U.S. Holder on a sale or other disposition (including certain pledges) of the ADSs will be allocated ratably over the U.S. Holder's holding period for the ADSs. The amounts allocated to the taxable year of the disposition and to any year before we become a PFIC will be taxed as ordinary income. The amount allocated to each other taxable year will be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge will be imposed on such amount. Further, to the extent that any distribution received by the U.S. Holder on its ADSs exceeds 125% of the average of the annual distributions on the ADSs received during the preceding three years or the U.S. Holder's holding period, whichever is shorter, that distribution would be subject to taxation in the same manner as gain recognized on the disposition of the ADSs (as described earlier in this paragraph).

A U.S. Holder can avoid certain of the adverse rules described above by making a mark-to-market election with respect to its ADSs, provided that the ADSs are "marketable." ADSs will be marketable if they are "regularly traded" on a "qualified exchange" or other market within the meaning of applicable Treasury regulations. If a U.S. Holder makes the mark-to-market election, it generally will recognize as ordinary income any excess of the fair market value of the ADSs at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ADSs over their fair market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election, the holder's tax basis in the ADSs will be adjusted to reflect the income or loss amounts recognized. Any gain recognized on the sale or other disposition of ADSs in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of the mark-to-market election).

In addition, in order to avoid the application of the foregoing rules, a United States person that owns stock in a PFIC for U.S. federal income tax purposes may make a "qualified electing fund" election (a "QEF Election") with respect to such PFIC if the PFIC provides the information necessary for such election to be made. If a United States person makes a QEF Election with respect to a PFIC, the United States person will be currently taxable on its pro rata share of the PFIC's ordinary earnings and net capital gain (at ordinary income and capital gain rates, respectively) for each taxable year that the entity is classified as a PFIC and will not be required to include such amounts in income when actually distributed by the PFIC. We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections.

In addition, if we pay a dividend to a U.S. Holder with respect to which we are treated as a PFIC, the preferential dividend rates discussed above with respect to dividends paid to certain non-corporate U.S. Holders will not apply.

If a U.S. Holder owns ADSs during any year in which we are a PFIC, the holder generally must file annual reports containing such information as the U.S. Treasury may require on IRS Form 8621 (or any successor form) with respect to us, generally with the holder's federal income tax return for that year.

U.S. Holders should consult their tax advisers concerning our potential PFIC status and the potential application of the PFIC rules.

114

Information Reporting and Backup Withholding

Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification number and certifies that it is not subject to backup withholding.

The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the holder's U.S. federal income tax liability and may entitle it to a refund, provided that the required information is timely furnished to the IRS.

Information with Respect to Foreign Financial Assets

A U.S. Holder who is an individual and, in certain cases, an entity, and who holds certain specified foreign financial assets (which may include the ADSs) with an aggregate value in excess of certain thresholds, is generally required to report information related to such interests by attaching a completed IRS Form 8938 (Statement of Specified Foreign Financial Assets) with such U.S. Holder's tax return for each year in which such U.S. Holder held an interest in the specified foreign financial assets, subject to certain exceptions (including an exception for ADSs held in accounts maintained by U.S. financial institutions). Persons who are required to report foreign financial assets and fail to do so may be subject to substantial penalties. U.S. Holders should consult their tax advisors regarding these information reporting requirements.

SWISS TAX CONSIDERATIONS

Swiss Federal, Cantonal and Communal Individual Income Tax and Corporate Income Tax

Non-Resident Shareholders

Holders of or shares or ADSs representing our shares who are not resident in Switzerland for tax purposes, and who, during the relevant taxation year, have not engaged in a trade or business carried on through a permanent establishment or fixed place of business situated in Switzerland for tax purposes (all such shareholders are hereinafter referred to as the "Non-Resident Shareholders"), will not be subject to any Swiss federal, cantonal and communal income tax on dividends and similar cash or in-kind distributions on ADSs representing our shares (including dividends on liquidation proceeds and stock dividends) (hereinafter referred to as the "Dividends"), distributions based upon a capital reduction (Nennwertrückzahlungen) or paid out of reserves from capital contributions (Reserven aus Kapitaleinlagen) on shares underlying the ADSs, or capital gains realized on the sale or other disposition of ADSs (see, however, paragraph 1.3 "Swiss Federal Withholding Tax" for a summary of Swiss federal withholding tax on Dividends).

Resident Private Shareholders

Swiss resident individuals who hold their ADSs as private assets all such shareholders are hereinafter referred to as the "Resident Private Shareholders") are required to include Dividends, but not distributions based upon a capital reduction (Nennwertrückzahlungen) or paid out of reserves from capital contributions (Reserven aus Kapitaleinlagen) of the shares underlying the ADSs, in their personal income tax return and are subject to Swiss federal, cantonal and communal income tax on any net taxable income for the relevant taxation period, including the Dividends, but not the distributions based upon a capital reduction (Nennwertrückzahlungen) or paid out of reserves from capital contributions (Reserven aus Kapitaleinlagen). Capital gains resulting from the sale or other dispositions of ADSs are not subject to Swiss federal, cantonal and communal income tax, and conversely, capital losses are not tax-deductible for Resident Private Shareholders. See paragraph 1.1(C) "Domestic Commercial Shareholders" for a summary of the taxation treatment applicable to Swiss resident individuals, who, for income tax purposes, are classified as "professional securities dealers."

115

Domestic Commercial Shareholders

Corporate and individual shareholders who are resident in Switzerland for tax purposes and corporate and individual shareholder who are not resident in Switzerland, and who, in each case, hold their ADSs as part of a trade or business carried on in Switzerland, in the case of corporate and individual shareholders not resident in Switzerland, through a permanent establishment or fixed place of business situated, for tax purposes, in Switzerland, are required to recognize Dividends, distributions based upon a capital reduction (Nennwertrückzahlungen) or paid out of reserves from capital contributions (Reserven aus Kapitaleinlagen) received on shares underlying the ADSs and capital gains or losses realized on the sale or other disposition of ADSs in their income statement for the relevant taxation period and are subject to Swiss federal, cantonal and communal individual or corporate income tax, as the case may be, on any net taxable earnings for such taxation period. The same taxation treatment also applies to Swiss-resident private individuals who, for income tax purposes, are classified as "professional securities dealers" for reasons of, inter alia, frequent dealing, or leveraged investments in ADSs and other securities (the shareholders referred to in this paragraph 1.1.(C), hereinafter for the purposes of this section, as the "Domestic Commercial Shareholders"). Domestic Commercial Shareholders who are corporate taxpayers may be eligible for dividend relief (Beteiligungsabzug) in respect of Dividends and distributions based upon a capital reduction (Nennwertrückzahlungen) or paid out of reserves from capital contributions (Reserven aus Kapitaleinlagen) if the shares underlying the ADSs held by them as part of a Swiss business have an aggregate market value of at least CHF 1 million.

Swiss Cantonal and Communal Private Wealth Tax and Capital Tax

Non-Resident Shareholders

Non-Resident Shareholders are not subject to Swiss cantonal and communal private wealth tax or capital tax.

Resident Private Shareholders and Domestic Commercial Shareholders

Resident Private Shareholders and Domestic Commercial Shareholders who are individuals are required to report their ADSs as part of private wealth or their Swiss business assets, as the case may be, and will be subject to Swiss cantonal and communal private wealth tax on any net taxable wealth (including the ADSs), in the case of Domestic Commercial Shareholders to the extent the aggregate taxable wealth is allocated in Switzerland. Domestic Commercial Shareholders who are corporate taxpayers are subject to Swiss cantonal and communal capital tax on taxable capital to the extent the aggregate taxable capital is allocated to Switzerland.

Swiss Federal Withholding Tax

Dividends that the Company pays on the shares underlying the ADSs are subject to Swiss Federal withholding tax (Verrechnungssteuer) at a rate of 35% on the gross amount of the Dividend. The Company is required to withhold the Swiss federal withholding tax from the Dividend and remit it to the Swiss Federal Tax Administration. Distributions based upon a capital reduction (Nennwertrückzahlungen) or paid out of reserves from capital contributions (Reserven aus Kapitaleinlagen) are not subject to Swiss federal withholding tax.

The Swiss federal withholding tax on a Dividend will be refundable in full to a Resident Private Shareholder and to a Domestic Commercial Shareholder, who, in each case, inter alia, as a condition to refund, duly reports the Dividend in his or her individual income tax return as income or recognizes the Dividends in its income statement as earnings, as applicable.

A Non-Resident Shareholder may be entitled to a partial refund of the Swiss federal withholding tax on Dividend if the country of his or her residence for tax purposes has entered into a bilateral treaty for the avoidance of double taxation with Switzerland and the conditions of such treaty are met. Such shareholders should be aware that the procedures for claiming tax treaty benefits (and the time required for obtaining a refund) might be different from country to country. For example, a shareholder who is resident of the U.S. for the purposes of the bilateral treaty between the U.S. and Switzerland is eligible for a refund of the amount of the withholding tax in excess of the 15% treaty rate, provided such shareholder: (i) qualifies for benefits under this treaty and qualifies as beneficial owner of the Dividends; (ii) hold, directly or indirectly, less than 10% of the voting stock of the Company; (iii) does not qualify as a pension scheme or retirement arrangement for the purpose of the bilateral treaty; and (iv) does not conduct business through a permanent establishment or fixed base in Switzerland to which the ADSs are attributable. Such an eligible U.S. shareholder may apply for a refund of the amount of the withholding tax in excess of the 15% treaty rate. The applicable refund request form may be filed with the Swiss Federal Tax Administration following receipt of the dividend and the relevant deduction certificate, however no later than December 31 of the third year following the calendar year in which the dividend was payable.

116

Swiss Federal Stamp Taxes

Any dealings in the ADSs, where a bank or another securities dealer in Switzerland, as defined in the Swiss Federal Stamp Tax Act, acts as intermediary or is a party to the transaction, are, subject to certain exemptions provided for in the Swiss Federal Stamp Tax Act, subject to Swiss securities turnover tax at an aggregate tax rate of up to 0.15% of the consideration paid for such ADSs.

International Automatic Exchange of Information in Tax Matters

On November 19, 2014, Switzerland signed the Multilateral Competent Authority Agreement, which is based on article 6 of the OECD/Council of Europe administrative assistance convention and is intended to ensure the uniform implementation of automatic exchange of information (the "AEOI"). The Federal Act on the International Automatic Exchange of Information in Tax Matters (the "AEOI Act") entered into force on January 1, 2017. The AEOI Act is the legal basis for the implementation of the AEOI standard in Switzerland.

The AEOI is being introduced in Switzerland through bilateral agreements or multilateral agreements. The agreements have, and will be, concluded on the basis of guaranteed reciprocity, compliance with the principle of specialty (i.e., the information exchanged may only be used to assess and levy taxes (and for criminal tax proceedings)) and adequate data protection.

Based on such multilateral agreements and bilateral agreements and the implementing laws of Switzerland, Switzerland exchanges data in respect of financial assets, including the Shares, held in, and income derived thereon and credited to, accounts or deposits with a paying agent in Switzerland for the benefit of individuals resident in a EU member state or in a treaty state.

Swiss Facilitation of the Implementation of the U.S. Foreign Account Tax Compliance Act

Switzerland has concluded an intergovernmental agreement with the U.S. to facilitate the implementation of FATCA. The agreement ensures that the accounts held by U.S. persons with Swiss financial institutions are disclosed to the U.S. tax authorities either with the consent of the account holder or by means of group requests within the scope of administrative assistance. Information will not be transferred automatically in the absence of consent, and instead will be exchanged only within the scope of administrative assistance on the basis of the double taxation agreement between the U.S. and Switzerland. On 8 October 2014, the Swiss Federal Council approved a mandate for negotiations with the U.S. on changing the current direct-notification-based regime to a regime where the relevant information is sent to the Swiss Federal Tax Administration, which in turn provides the information to the U.S. tax authorities.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

117

H. Documents on Display

Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within 120 days of each fiscal year. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Our financial statements have been prepared in accordance with U.S. GAAP.

We will make available to our shareholders annual reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP. Our documents may be available at our corporate headquarters at General-Guisan-Strasse 6, 6300 Zug, Switzerland.

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risks primarily related to foreign currency exchange rates, commodity prices, and changes in the value of investment securities. The Company is not exposed to interest rate risks because all its financial instruments have fixed interest rate terms.

The table below shows the balances of our market risk sensitive instruments, which are financial instruments, as at the end of the latest fiscal year grouped by functional currency, and the expected cash flows from these instruments for each of the next five years. The contractual cash flows are presented on an undiscounted cash flow basis, including interest expense. For those instruments where the lender has the choice to settle the repayment of principal and interests in cash or in shares, we have assumed that all amounts would be repaid in cash; this table therefore shows the maximum expected cash flows. Additional details on the financial instruments considered are available in Note 24. Loans and line of credit of our consolidated financial statements for the years ended December 31, 2018 and 2019.

					Expected cash flows by period
Market risk sensitive instruments (USD'000)	Net carrying amount	Principal amount and interests	Interests	Weighted average effective interest rate per annum	Total	Less than 1 year	Between 1 and 2 years	Between 2 and 3 years	Between 3 and 4 years	Between 4 and 5 years	More than 5 years
Debt and convertible note obligations:
- held by entities with CHF functional currency	6,083	6,532		19%	6,532	6,532	-	-	-	-	-
- held by entities with GBP functional currency	82	82		0%	82	82	-	-	-	-	-
Total contractual obligations	6,165	6,614		-	6,614	6,614	-	-	-	-	-

Foreign currency exchange rate risk

For information about the foreign currency exchange rate risk see Item 5. Operating and Financial Review and Prospects – A. Operating Results.

118

Commodity price risk

The Company has only a very limited exposure to price risk related to anticipated purchases of certain commodities used as raw material. Our raw material inventory was USD 636,000 as at December 31, 2019. A change in those prices may affect our gross margin, however because the inventory balance is relatively small in comparison with our total assets, the Company does not enter into commodity futures, forwards or any other hedge instrument to manage fluctuations in prices of anticipated purchases.

Risk of changes in the value of investment securities

As at December 31, 2019, the Company had two investment securities apart from the investments in consolidated subsidiaries: an investment in equity securities at fair value of USD 755,803, and an investment in equity securities at cost of USD 7,000,000. The Company has not entered into any instrument to hedge against the fluctuation in value of these equity instruments.

For the equity instrument held at fair value, the Company manages the risk of fluctuation of its market price by regularly reviewing the share prices and financial position of the issuer. Changes in the fair value of the equity are recorded in the income statement in the period in which they occur.

For the equity instrument held at cost, the Company is in regular contact with the management of the issuer to review its financial position, so as to manage the risk of fluctuation.

Item 12. Description of Securities Other than Equity Securities

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

D. American Depositary Shares

Fees and Expenses

Persons depositing or withdrawing Class B Shares or ADS holders must pay:	For:
USD5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	• Issuance of ADSs, including issuances resulting from a distribution of Class B Shares or rights or other property • Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
USD0.05 (or less) per ADS	• Any cash distribution to ADS holders

119

Persons depositing or withdrawing Class B Shares or ADS holders must pay:	For:
A fee equivalent to the fee that would be payable if securities distributed to you had been Class B Shares and the Class B Shares had been deposited for issuance of ADSs	• Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders
USD0.05 (or less) per ADSs per calendar year	• Depositary services
Registration or transfer fees	• Transfer and registration of Class B Shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw Class B Shares
Expenses of the depositary	• Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) • Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes	• As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities	• As necessary

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing Class B Shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-based services until its fees for these services are paid.

From time to time, the depositary may make payments to us to reimburse and/or class B share revenue from the fees collected from ADS holders, or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the ADS program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers that are affiliates of the depositary and that may earn or share fees or commissions.

Depositary Payments

In 2019, we did not receive any payments or reimbursements from The Bank of New York Mellon, the depositary bank of our ADS program.

120

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to The Rights of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

(a) Our Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this annual report, have concluded that, as of such date, our disclosure controls and procedures were effective.

(b) Management’s annual report on internal control over financial reporting: Our Board of Directors and management are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting was designed to provide reasonable assurance to our management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated financial statements.

Internal controls over financial reporting, no matter how well designed, have inherent limitations. Therefore, even those internal controls over financial reporting determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, it used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, management concluded that, as of December 31, 2019, our internal control over financial reporting is effective based on those criteria.

(c) Not applicable.

(d) There were no changes to our internal control over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16. [RESERVED]

Item 16A. Audit Committee Financial Expert

The Company does not have an audit committee financial expert serving on its audit committee. Each of the Company’s directors serving on the audit committee is financially literate and is able to professionally discharge the duties incumbent upon audit committee members. However, none of the audit committee members are “financial experts.” We are working to identify candidates to our Board of Directors who would qualify as an “audit committee financial expert.”

Item 16B. Code of Ethics

We have followed Swiss law which does not require a company to have a code of ethics applicable to all directors, officers and employees. We do, however, expect ethical behavior from all our directors, officers and employees.

121

Item 16C. Principal Accounting Fees and Services

(a) Audit Fees: The aggregate fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements amounted to CHF 698,946 (USD 703,466) and CHF 663,387 (USD 663,714) respectively for the years ended December 31, 2019 and 2018.

(b) Audit-Related Fees: None.

(c) Tax Fees: None.

(d) All Other Fees: None.

(e) Audit committee’s pre-approval policies and procedures: Our audit committee is responsible for overseeing the activities of BDO, our principal accountant. The audit committee regularly evaluates the performance of BDO and, based on this, once a year determines whether BDO should be proposed to the shareholders for election. To assess the performance of BDO, the audit committee holds meetings with the CFO. Criteria applied for the performance assessment of BDO include an evaluation of its technical and operational competence; its independence and objectivity; the sufficiency of the resources it has employed; its focus on areas of significant risk; its willingness to probe and challenge; its ability to provide effective, practical recommendations; and the openness and effectiveness of its communications and coordination with the audit committee.

In the years ended December 31, 2019 and 2018, BDO has not provided services other that those rendered for the audit of our annual financial statements or in connection with statutory and regulatory filings or engagements.

(f) Not applicable.

Item 16D. Exemptions from the Listing Standards for Audit Committees

None.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

In the year ended December 31, 2019, the Company purchased its own Class B Shares as per detail below:

Period	(a) Total Number of Shares Purchased1	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs2	(d) Maximum Number of Shares that may Yet Be Purchased Under the Plans or Program
January 01 to January 31, 2019	22,442	USD 3.32	-	n/a
February 01 to February 28, 2019	7,346	USD 2.84	-	n/a
March 01 to March 31, 2019	4,434	USD 2.76	-	n/a
April 01 to April 30, 2019	28,634	USD 2.89	-	n/a
May 01 to May 31, 2019	68,485	USD 2.71	-	n/a
June 01 to June 30, 2019	63,103	USD 2.53	-	n/a
July 01 to July 31, 2019	68,000	USD 2.53	68,000	3,614,848
August 01 to August 31, 2019	58,000	USD 2.39	58,000	3,556,848
September 01 to September 30, 2019	18,000	USD 2.97	18,000	3,538,848
October 01 to October 31, 2019	11,500	USD 2.44	11,500	3,527,348
November 01 to November 30, 2019	10,500	USD 2.22	10,500	3,516,848
December 01 to December 31, 2019	36,000	USD 2.05	36,000	3,480,848
Total	396,444	USD 2.64	202,000	3,480,848

1  Column (a) shows shares we purchased as part of our share buyback program, as well as the share purchased outside of our publicly announced share buyback program using the services of a market maker.

2  Column (c) shows shares purchased as part of our share buyback  program which was approved by the Board of directors on June 18, 2019 and publicly announced on July 08, 2019. WISeKey has received approval from the Swiss Takeover Board to purchase up to 3,682,848 of its class B shares. This maximum amount of shares is equivalent to 10% of the registered share capital of the Company. The shares will be purchased in the open market starting July 09, 2019 for a period of 3 years until July 07, 2022. WISeKey has the right to terminate the buyback program early.

122

Item 16F. Change in Registrant's Certifying Accountant

None.

Item 16G. Corporate Governance

See “Item 6.C. Board Practices” for significant ways in which our corporate governance practices differ from NASDAQ’s standards.

Item 16H. Mine Safety Disclosure

Not applicable.

123

Item 17. Financial Statements

The Company has elected to furnish the financial statements and related information specified in Item 18.

Item 18. Financial Statements

The consolidated financial statements and related notes required by this Item 18 are included in this annual report beginning on page F-1.

Item 19. Exhibits

Index to Exhibits

Exhibit No.	Description
1.1*	Amended and Restated Articles of Association of the Registrant (incorporated by reference to exhibit 1.1 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
2.1*	Form of Specimen Certificate for Class B Shares of the Registrant (incorporated by reference to exhibit 2.1 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
2.2*	Form of Registrant's American Depositary Receipt -  Previously filed and incorporated by reference to form of ADR filed pursuant to Rule 424(b)(3) on November 13, 2019 under the F-6 Registration Statement for the Registrant’s American Depositary Shares (Reg No. 333-224780).
2.4*	Deposit Agreement, dated as of May 16, 2018, among the Registrant, the Depositary and the Owners and Beneficial Owners of the American Depositary Shares issued thereunder (incorporated by reference to exhibit 2.4 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
2.5	Description of Securities registered under Section 12 of the Exchange Act.
4.1*	WISeKey Employee Share Option Plan, dated September 29, 2016 (incorporated by reference to exhibit 4.1 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
4.2*	Form of indemnification agreement by and between Registrant and each of its directors and executive officers  (incorporated by reference to exhibit 4.2 of Amendment No.1 to WISeKey International Holding AG’s registration statement on the Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
4.3*	Convertible Loan Agreement by and between Registrant and Crede CG III, Ltd., dated as of September 28, 2018 (incorporated by reference to exhibit 4.3 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
4.4*	Warrant Agreement by and between Registrant and Crede CG III, Ltd., dated as of September 28, 2018 (incorporated by reference to exhibit 4.4 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
4.5*	Convertible Loan Agreement by and between Registrant and YA II PN, Ltd., dated as of June 27, 2019 (incorporated by reference to exhibit 4.5 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
4.6*	Warrant Agreement by and between Registrant and YA II PN, Ltd., dated as of June 27, 2019 (incorporated by reference to exhibit 4.6 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).

124

4.7*	Standby Equity Distribution Agreement by and between Registrant and YA II PN, Ltd., dated as of February 8, 2018 (incorporated by reference to exhibit 4.7 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
4.8*	Share Subscription Facility Agreement by and among Registrant, GEM Global Yield Fund LLC SCS and GEM Investments America, LLC, dated as of January 19, 2016 (incorporated by reference to exhibit 4.8 of WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on October 30, 2019).
4.9*	Warrant to Purchase Ordinary Shares by and between Registrant and GEM Global Yield Fund LLC SCS, dated as of May 6, 2016 (incorporated by reference to exhibit 4.9 of WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on October 30, 2019).
4.10*	Master Purchase Agreement by and between Cisco Systems International B.V. and INSIDE Secure, dated as of August 25, 2014 (incorporated by reference to exhibit 4.10 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
4.11*	Buffer Stock Agreement by and between WISeKey Semiconductors and Key Tronic Corporation, dated as of June 9, 2017 (incorporated by reference to exhibit 4.11 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
4.12*	Supplier Agreement by and between Vault-IC France and UTAC Headquarters Pte. Ltd, dated as of September 19, 2016 (incorporated by reference to exhibit 4.12 of WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on October 30, 2019).
4.13*	Service Level Agreement by and among Inside Secure, Presto Engineering HVM and Presto Engineering, Inc., dated as of June 30, 2015 (incorporated by reference to exhibit 4.13 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019). (1)
4.14*	First Amendment to Service Level Agreement, by and among Inside Secure, Presto Engineering HVM and Presto Engineering, Inc., dated as of May 26, 2016 (incorporated by reference to exhibit 4.14 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).  (1)
4.15*	Second Amendment to Service Level Agreement, by and among WISeKey Semiconductors, Presto Engineering HVM and Presto Engineering, Inc., dated as of June 25, 2018 (incorporated by reference to exhibit 4.15 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).  (1)
4.16*	SafeNet Supplier Agreement by and between SafeNet, Inc. and Inside Secure SA, dated as of March 26, 2012 (incorporated by reference to exhibit 4.16 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).
4.17*	PicoPass License Agreement by and between Inside Secure and HID Global Corporation, dated as of December 8, 2014 (incorporated by reference to exhibit 4.17 of Amendment No.1 to WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on November 8, 2019).  (1)
4.18*	Collaboration Agreement by and between Organisation Internationale pour la Sécurité de Transactions Electroniques OISTE and WISeKey SA, dated as of June 20, 2018 (incorporated by reference to exhibit 4.18 of WISeKey International Holding AG’s registration statement on Form 20-F (File No. 333-39115) as filed with the SEC on October 30, 2019).
4.19	Credit Agreement, dated as of April 4, 2019, by and between ExWorks Capital Fund I, L.P. and WISeCoin AG. (1)
4.20	Convertible Term Loan Facility Agreement, dated as of December 16, 2019, by and between Long State Investment Limited and WISeKey International Holding AG. (1)

125

4.21	Convertible Loan Agreement, dated as of March 4, 2020, between WISeKey International Holding AG and YA II PN, LTD. (1)
8.1	List of significant subsidiaries of the Registrant.
12.1	Certification of Carlos Moreira, Chief Executive Officer of WISeKey International Holding AG, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Certification of Peter Ward, Chief Financial Officer of WISeKey International Holding AG, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certification of Carlos Moreira, Chief Executive Officer of WISeKey International Holding AG, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2	Certification of Peter Ward, Chief Financial Officer of WISeKey International Holding AG, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Previously filed

(1) Portions of this exhibit have been omitted.

126

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing of Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

WISEKEY INTERNATIONAL HOLDING AG
By:	/s/ Carlos Moreira	/s/ Peter Ward
	Carlos Moreira	Peter Ward
	Chief Executive Officer	Chief Financial Officer
Date: March 12, 2020

127

Index to Financial Statements
Consolidated Financial Statements for Years Ended December 31, 2017, 2018 and 2019	F-1
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statement of Comprehensive Income / (Loss)	F-3
Consolidated Balance Sheet	F-4
Consolidated Statements of Changes on Shareholders' Equity (Deficit)	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

128

WISeKey Consolidated Financial Statements

for Years Ended December 31, 2017, 2018 and 2019

F-1

1. Report of Independent Registered Public Accounting Firm

To the Board of Directors of

WISeKey International Holding AG

6300 Zug

Switzerland

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of WISeKey International Holding AG (the “Group”) as of December 31, 2019 and 2018, the related consolidated statements of comprehensive income / loss, consolidated statements of changes in shareholders’ equity (deficit), and consolidated statements of cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. 

Basis for Opinion

These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Zurich, March 12, 2020

BDO AG

/s/ Christoph Tschumi	/s/ Philipp Kegele
Christoph Tschumi	Philipp Kegele

We have served as the Group's auditor since 2015.

F-2

2. Consolidated Statement of Comprehensive Income/(Loss)

	12 months ended December 31,			12 months ended December 31,			12 months ended December 31,			Note ref.
USD'000	2019			2018			2017
Net sales		22,652			34,280			33,674			29
Cost of sales		(13,196	)		(18,319	)		(17,870	)
Gross profit		9,456			15,961			15,804
Other operating income		180			289			1,526			30
Research & development expenses		(6,422	)		(5,306	)		(5,339	)
Selling & marketing expenses		(7,929	)		(5,772	)		(4,459	)
General & administrative expenses		(15,789	)		(14,232	)		(15,401	)
Total operating expenses		(29,960	)		(25,021	)		(23,673	)
Operating income / (loss)		(20,504	)		(9,060	)		(7,869	)
Non-operating income		1,918			2,181			762			32
Gain / (loss) on derivative liability		214			-			(98	)		6 / 24
Gain / (loss) on debt extinguishment		(233	)		-			(556	)		24
Interest and amortization of debt discount		(742	)		(150	)		(543	)		24
Non-operating expenses		(3,670	)		(2,826	)		(1,751	)		33
Income / (loss) from continuing operations before income tax expense		(23,017	)		(9,855	)		(10,055	)
Income tax (expense)/recovery		(13	)		(53	)		(71	)		34
Income/ (loss) from continuing operations, net		(23,030	)		(9,908	)		(10,126	)
Discontinued operations:											37
Net sales from discontinued operations		1,934			19,412			9,404
Cost of sales from discontinued operations		(791	)		(6,196	)		(4,516	)
Total operating and non-operating expenses from discontinued operations		(1,801	)		(19,778	)		(20,620	)
Income tax (expense)/recovery from discontinued operations		42			205			1,108
Gain on disposal of a business, net of tax on disposal		31,100			-			-
Income / (loss) on discontinued operations		30,484			(6,357	)		(14,624	)
Net income / (loss)		7,454			(16,265	)		(24,750	)
Less: Net income / (loss) attributable to noncontrolling interests		(733	)		13			(483	)
Net income / (loss) attributable to WISeKey International Holding AG		8,187			(16,278	)		(24,267	)
Earnings per share
Earnings from continuing operations per share - Basic		(0.64	)		(0.29	)		(0.34	)		36
Earnings from continuing operations per share - Diluted		(0.64	)		(0.29	)		(0.34	)		36
Earnings from discontinued operations per share - Basic		0.84			(0.19	)		(0.50	)		36
Earnings from discontinued operations per share - Diluted		0.81			(0.19	)		(0.50	)		36
Earning per share attributable to WISeKey International Holding AG
Basic		0.23			(0.48	)		(0.82	)		36
Diluted		0.23			(0.48	)		(0.82	)		36
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments		516			108			1,548
Unrealized holding loss arising during period		-			-			(375	)
Net loss arising during period		(2,199	)		287			(102	)		28
Other comprehensive income / (loss)		(1,683	)		395			1,071
Comprehensive income / (loss)		5,771			(15,870	)		(23,679	)
Other comprehensive income / (loss) attributable to noncontrolling interests		(127	)		(23	)		(369	)
Other comprehensive income / (loss) attributable to WISeKey International Holding AG		(1,556	)		418			1,440
Comprehensive income / (loss) attributable to noncontrolling interests		(860	)		(10	)		(851	)
Comprehensive income / (loss) attributable to WISeKey International Holding AG		6,631			(15,860	)		(22,828	)

The accompanying notes are an integral part of these consolidated financial statements.

F-3

3. Consolidated Balance Sheet

	As at December 31,			As at December 31,			Note
USD'000	2019			2018			ref.
ASSETS
Current assets
Cash and cash equivalents		12,121			9,146			7
Restricted cash, current		2,525			618			8
Accounts receivable, net of allowance for doubtful accounts		3,770			7,620			9
Notes receivable from related parties		-			8
Inventories		2,787			4,186			10
Contract assets		15			-
Prepaid expenses		690			521
Deferred charges, current		207			184
Current assets held for sale		-			8,916			37
Other current assets		1,469			919			11
Total current assets		23,584			32,118
Noncurrent assets
Restricted cash, noncurrent		2,000			-			8
Notes receivable, noncurrent		23			-			12
Equity securities, at fair value		756			857			13
Deferred income tax assets		6			8
Deferred tax credits		2,488			2,541			14
Property, plant and equipment net of accumulated depreciation		1,801			2,370			15
Intangible assets, net of accumulated amortization		600			1,132			16
Finance lease right-of-use assets		289			-
Operating lease right-of-use assets		2,780			-			17
Goodwill		8,317			8,317			18
Deferred charges, noncurrent		30			214
Equity securities, at cost		7,000			7,000			19
Noncurrent assets held for sale		-			23,744			37
Other noncurrent assets		230			152
Total noncurrent assets		26,320			46,335
TOTAL ASSETS		49,904			78,453
LIABILITIES
Current Liabilities
Accounts payable		10,713			12,917			21
Notes payable		4,104			6,797			22
Convertible note payable, current		3,226			-			24
Deferred revenue, current		89			91			29
Current portion of obligations under finance lease liabilities		103			-			17
Current portion of obligations under operating lease liabilities		556			-			17
Income tax payable		11			9
Derivative liabilities		44			-			6
Current liabilities held for sale		-			14,085			37
Other current liabilities		1,304			976			23
Total current liabilities		20,150			34,875
Noncurrent liabilities
Convertible note payable, noncurrent		-			23,940			24
Deferred revenue, noncurrent		10			9			29
Finance lease liabilities, noncurrent		169			-			17
Operating lease liabilities, noncurrent		2,223			-			17
Employee benefit plan obligation		6,880			4,465			25
Other deferred tax liabilities		25			4
Noncurrent liabilities held for sale		-			8,590
Other noncurrent liabilities		3			2,595
Total noncurrent liabilities		9,310			39,603
TOTAL LIABILITIES		29,460			74,478
Commitments and contingent liabilities								26
SHAREHOLDERS' EQUITY
Common stock - Class A		400			400			27
CHF 0.01 par value
Authorized - 40,021,988 and 40,021,988 shares
Issued and outstanding - 40,021,988 and 40,021,988 shares
Common stock - Class B		1,475			1,472			27
CHF 0.05 par value
Authorized - 41,066,298 and 41,063,901
Issued - 28,824,086 and 28,769,797
Outstanding - 27,621,895 and 26,681,736
Share subscription in progress		6			-
Treasury stock, at cost (1,202,191 and 2,088,061 shares held)		(1,288	)		(1,139	)		27
Additional paid-in capital		212,036			201,373
Accumulated other comprehensive income / (loss)		(1,453	)		100			28
Accumulated deficit		(189,161	)		(197,348	)
Total shareholders'equity (deficit) attributable to WISeKey shareholders		22,015			4,858
Noncontrolling interests in consolidated subsidiaries		(1,571	)		(883	)
Total shareholders'equity		20,444			3,975
TOTAL LIABILITIES AND EQUITY		49,904			78,453

The accompanying notes are an integral part of these consolidated financial statements.

F-4

4. Consolidated Statements of Changes in Shareholders’ Equity/(Deficit)

	Number of common shares		Common Share Capital
USD'000	Class A	Class B	Class A	Class B	Total share capital	Treasury Shares	Additional paid-in capital	Share  subscription in progress	Accumulated  deficit	Accumulated other comprehensive income / (loss)	Total equity	Non controlling  interests	Total equity
As at December 31, 2017	40,021,988	24,590,918	400	1,261	1,661	-	189,152	-	(180,554)	(650)	9,608	(883)	8,725
Common stock issued1	-	1,761,021	-	90	90	-	7,663	-	-	-	7,753	-	7,753
Options exercised	-	159,461	-	8	8	-	205	-	-	-	213	-	213
Stock-based compensation	-	-	-	-	-	-	1,660	-	-	-	1,660	-	1,660
Changes in treasury shares	-	2,000,000	-	100	100	(2,177)	619	-	-	-	(1,458)	-	(1,458)
Impact of ASU2016-01 on marketable
securities	-	-	-	-	-	-	-	-	(375)	375	-	-	-
Liquidation of subsidiaries	-	-	-	-	-	-	-	-	-	(43)	(43)	-	(43)
Yorkville SEDA	-	258,397	-	13	13	1,038	606	-	-	-	1,657	-	1,657
Acquisition of QuoVadis Group
noncontrolling interest	-	-	-	-	-	-	1,101	-	-	-	1,101	-	1,101
Creation of WISeCoin AG	-	-	-	-	-	-	-	-	-	-	-	10	10
Crede convertible loan	-	-	-	-	-	-	368	-	-	-	368	-	368
Net loss	-	-	-	-	-	-	-	-	(16,278)	-	(16,278)	13	(16,265)
Other comprehensive income / (loss)	-	-	-	-	-	-	-	-	-	418	418	(23)	395
Deemed dividend	-	-	-	-	-	-	-	-	(141)	-	(141)	-	(141)
As at December 31, 2018	40,021,988	28,769,797	400	1,472	1,872	(1,139)	201,373	-	(197,348)	100	4,858	(883)	3,975
Common stock issued1	-	-	-	-	-	-	-	-	-	-	-	-	-
Options exercised	-	54,289	-	3	3	-	3,375	-	-	-	3,378	-	3,378
Stock-based compensation	-	-	-	-	-	-	5,414	6	-	-	5,420	-	5,420
Changes in treasury shares	-	-	-	-	-	(534)	-	-	-	-	(534)	-	(534)
Sale of QuoVadis Group	-	-	-	-	-	-	-	-	-	34	34	131	165
Change in Ownership in WISeKey SA	-	-	-	-	-	29	(159)	-	-	(10)	(140)	41	(99)
Liquidation of subsidiaries	-	-	-	-	-	-	-	-	-	(21)	(21)	-	(21)
Yorkville SEDA	-	-	-	-	-	296	632	-	-	-	928	-	928
Crede convertible loan	-	-	-	-	-	549	1,075	-	-	-	1,624	-	1,624
Yorkville convertible loan	-	-	-	-	-	-	326	-	-	-	326	-	326
Share buyback program	-	-	-	-	-	(489)	-	-	-	-	(489)	-	(489)
Net loss	-	-	-	-	-	-	-	-	8,187	-	8,187	(733)	7,454
Other comprehensive income / (loss)	-	-	-	-	-	-	-	-	-	(1,556)	(1,556)	(127)	(1,683)
As at December 31, 2019	40,021,988	28,824,086	400	1,475	1,875	(1,288)	212,036	6	(189,161)	(1,453)	22,015	(1,571)	20,444

1. The articles of association of the Company had not been fully updated as of December 31, 2019 with the shares issued out of conditional capital.

The accompanying notes are an integral part of these consolidated financial statements.

F-5

5. Consolidated Statements of Cash Flows

	12 months ended December 31,			12 months ended December 31,			12 months ended December 31,
USD'000	2019			2018			2017
Cash Flows from operating activities:
Net Income (loss)		7,454			(16,265	)		(24,750	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of property, plant & equipment		821			1,437			1,376
Amortization of intangible assets		534			2,047			3,645
Interest and amortization of debt discount		783			1,165			1,467
Loss / (gain) on derivative liability		(214	)		-			98
Loss on debt extinguishment		1,326			-			7,067
Stock-based compensation		5,414			1,660			2,232
Bad debt expense		99			276			537
Inventory obsolescence impairment		535			284			(2,277	)
Deferred tax asset write-off		-			161			132
Loss /(gain) on disposal of property and equipment		-			-			(49	)
Income tax expense / (recovery) net of cash paid		(17	)		(152	)		(1,115	)
Release of provision		-			(218	)		(1,700	)
Other non cash expenses /(income)
Expenses settled in equity		40			1,685			-
Gain on disposal of a business		(31,100	)		-			-
Other		80			-			-
Unrealized and non cash foreign currency transactions		157			(201	)		(365	)
Changes in operating assets and liabilities, net of effects of businesses acquired
Decrease (increase) in accounts receivables		1,346			(2,898	)		2,591
Decrease (increase) in inventories		1,399			(722	)		(480	)
Decrease (increase) in other current assets, net		(84	)		(4,385	)		(45	)
Decrease (increase) in deferred research & development tax credits, net		19			279			-
Decrease (increase) in other noncurrent assets, net		(77	)		(63	)		-
Increase (decrease) in accounts payable		(1,765	)		(126	)		1,509
Increase (decrease) in deferred revenue, current		25			3,007			1,915
Increase (decrease) in income taxes payable		(362	)		349			149
Increase (decrease) in other current liabilities		(217	)		1,312			198
Increase (decrease) in deferred revenue, noncurrent		2,247			2,985			2,710
Increase (decrease) in defined benefit pension liability		258			(109	)		711
Increase (decrease) in other noncurrent liabilities		(2,592	)		-			(487	)
Net cash provided by (used in) operating activities		(13,891	)		(8,492	)		(4,931	)
Cash Flows from investing activities:
Sale / (acquisition) of equity securities		(4,000	)		(3,000	)		-
Sale / (acquisition) of property, plant and equipment		(293	)		(1,244	)		(669	)
Decrease / (increase) in notes receivables		-			-			(554	)
Sale / (acquisition) of a business, net of cash and cash equivalents divested		40,919			-			(11,629	)
Net cash provided by (used in) investing activities		36,626			(4,244	)		(12,852	)
Cash Flows from financing activities:
Proceeds from options exercises		3,412			217			36
Proceeds from issuance of Common Stock		1,112			2,904			5,039
Proceeds from convertible loan issuance		2,860			3,000			-
Proceeds from debt		4,030			7,656			20,984
Repayments of debt		(27,631	)		(1,001	)		(550	)
Payments of debt issue costs		(42	)		-			-
Repurchase of treasury shares		(1,025	)		(900	)		-
Net cash provided by (used in) financing activities		(17,284	)		11,876			25,509
Effect of exchange rate changes on cash and cash equivalents		41			(200	)		(733	)
Cash and cash equivalents
Net increase (decrease) during the period		5,492			(1,060	)		6,993
Balance, beginning of period		11,154			12,214			5,221
Balance, end of period		16,646			11,154			12,214
Reconciliation to balance sheet
Cash and cash equivalents from continuing operations		12,121			9,146			9,583
Restricted cash, current from continuing operations		2,525			618			-
Restricted cash, noncurrent from continuing operations		2,000			-			-
Cash and cash equivalents from discontinued operations		-			1,390			2,631
Balance, end of period		16,646			11,154			12,214
Supplemental cash flow information
Cash paid for interest, net of amounts capitalized		756			772			250
Cash paid for incomes taxes		12			72			78
Noncash conversion of convertible loans into common stock		1,771			-			-
Restricted cash received for share subscription in progress		5			2,020			-
Issuance of shares in relation to the acquisition of QuoVadis		-			-			4,307
Issuance / (redemption) of redeemable preferred stock		-			(5,021	)		4,340
Issuance of common stock to purchase non-controlling interest		-			3,920			3,474
Deemed dividend		-			141			540
Settlement of Carlos Moreira's loan in shares		-			473			-
Payment of SEDA fees in shares		-			(500	)		-
Conversion of loan receivable into equity securities		-			-			799
ROU assets obtained from finance lease		321			-			-
ROU assets obtained from operating lease		3,768			-			-

The accompanying notes are an integral part of these consolidated financial statements.

F-6

6. Notes to the Consolidated Financial Statements

Note 1. The WISeKey Group

WISeKey International Holding AG, together with its consolidated subsidiaries (“WISeKey” or the “Group” or the “WISeKey Group”), has its headquarters in Switzerland. WISeKey International Holding AG, the ultimate parent of the WISeKey Group, was incorporated in December 2015 and is listed on the Swiss Stock Exchange, SIX SAG with the valor symbol “WIHN” since March 2016 and on the NASDAQ Capital Market exchange with the valor symbol “WKEY” since December 2019.

The Group develops, markets, hosts and supports a range of solutions that enable the secure digital identification of people, content and objects, by generating digital identities that enable its clients to monetize their existing user bases and at the same time, expand its own eco-system. WISeKey generates digital identities from its current products and services in Cybersecurity Services, IoT (internet of Things), Digital Brand Management and Mobile Security.

The Group leads a carefully planned vertical integration strategy through acquisitions of companies in the industry. The strategic objective is to provide integrated services to its customers and also achieve cross-selling and synergies across WISeKey. Through this vertical integration strategy, WISeKey anticipates being able to generate profits in the near future.

Note 2. Future operations and going concern

The Group experienced a loss from operations in this reporting period but a net income of USD 7.5 million following the divestiture of WISeKey (Bermuda) Holding Ltd (formerly named QV Holdings Ltd) and its affiliates (together “QuoVadis” or the “QuoVadis Group”) to Digicert Inc, which generated a net cash inflow of USD 37.7 million and allowed WISeKey to repay in full the line of Credit it had contracted with ExWorks Capital Fund I, L.P. (“ExWorks”) in an amount of USD 25.4 million (see Note 24).

The accompanying consolidated financial statements have been prepared assuming that the Group will continue as a going concern.

The Group incurred a net operating loss from continuing operations of USD 20.5 million and had positive adjusted working capital of USD 3.5 million as at December 31, 2019, calculated as the difference between current assets and current liabilities net of current deferred revenue. Based on the Group’s cash projections for the next 12 months to March 31, 2021, it will need approximately USD 2.1 million to fund operations and financial commitments. Historically, the Group has been dependent on equity financing to augment the operating cash flow to cover its cash requirements. Any additional equity financing may be dilutive to shareholders.

In the year 2019, the Group secured two loans: (a) a Convertible Loan Agreement (the “Yorkville Convertible Loan”) with YA II PN, Ltd. a fund managed by Yorkville Advisors Global, LLC (“Yorkville”) for an amount of USD 3.5 million, with an interest rate of 6% per annum, repayable by August 01, 2020 in monthly instalments starting August 01 2019 either in cash or in WIHN class B Shares, and (b) a credit agreement between WISeCoin AG and ExWorks in an amount of USD 4 million, repayable by April 04, 2020, with an annual interest rate of 10%, secured on the shares of WISeCoin AG with the option to convert principal repayment, interest charges and fees into WISeSecurity Tokens issued by WISeCoin AG.

In 2020 prior to the release of this annual report, WISeKey signed a new convertible loan agreement for a total amount of USD 4 million repayable in monthly instalments starting March 30, 2020 in cash or, at Yorkville’s election, in class B shares (see Note 40). The new convertible loan agreement bears an interest rate of 6% per annum payable monthly in arrears and matures on April 30, 2021. This new agreement replaces the existing Yorkville Convertible Loan signed on June 27, 2019. The remaining balance of USD 2.3 million under the Yorkville Convertible Loan was rolled over into the new agreement, which means that the loan generated a net cash inflow of USD 1.7 million. The amount of USD 2.1 million required to fund operations and financial commitments until March 31, 2021 takes into account the net cash inflow of USD 1.7 million from this new convertible loan agreement.

These loans demonstrate the availability of lenders to support the WISeKey Group in its activities and development. See Note 24 for detail on these loans.

On January 19, 2016, the Group had closed a Share Subscription Facility (the “Share Subscription Facility”, the “GEM Facility”) with GEM LLC (Global Equity Markets, “GEM”) which is a CHF 60.0 million facility over 5 years and allows the Group to draw down funds at its option in exchange for WIHN class B shares (see Note 24 for detail). The mechanics of the deal allow for a drawdown essentially 18 times in a year, the amount being in a range related to the trading volume and price of the WIHN class B share trading on the SIX Swiss Stock Exchange. The drawdown amount is based on 90% of the average closing price of the last 15 trading days multiplied by 1,000% of the average volume of the last 15 trading days. GEM can then elect to purchase between 50% and 200% of this figure. In year 2019, WISeKey made no drawdowns under the GEM Facility. Therefore, as at December 31, 2019, the outstanding facility available remained CHF 56.1 million.

On February 08, 2018 the Group entered into a Standby Equity Distribution Agreement (“SEDA”) with Yorkville (see Note 24 for detail). Pursuant to the SEDA, Yorkville commits to provide equity financing to WISeKey in the aggregate amount of up to CHF 50.0 million in exchange for Class B Shares over a three-year period. Provided that a sufficient number of Class B Shares is provided through share lending, WISeKey has the right to make drawdowns under the SEDA, at its discretion, by requesting Yorkville to subscribe for (if the Class B Shares are issued out of authorized share capital) or purchase (if the Class B Shares are delivered out of treasury) Class B Shares worth up to CHF 5.0 million by drawdown, subject to certain exceptions and limitations. In the year 2018, WISeKey made four drawdowns under the SEDA Facility, for a total amount of CHF 1.7 million. In the year 2019, WISeKey made five drawdowns for CHF 1.1 million. As at December 31, 2019, the outstanding equity financing available was CHF 47.1 million. On March 04, 2020, the SEDA was extended by 24 months to March 31, 2023.

F-7

Both the GEM Facility and the SEDA will be used as a safeguard should there be any difficulties in raising the necessary funds to cover the USD 2.1 million projected cash outflow noted above.

Based on the foregoing, Management believe it is correct to present these figures on a going concern basis.

Note 3. Basis of presentation

The consolidated financial statements are prepared in accordance with the Generally Accepted Accounting Principles in the United States of America (“US GAAP”) as set forth in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC). All amounts are in United States dollars (“USD”) unless otherwise stated.

Note 4. Summary of significant accounting policies

Fiscal Year

The Group’s fiscal year ends on December 31.

Principles of Consolidation

The consolidated financial statements include the accounts of WISeKey and its wholly-owned or majority-owned subsidiaries over which the Group has control.

The consolidated comprehensive loss and net loss of non-wholly owned subsidiaries is attributed to owners of the Group and to the noncontrolling interests in proportion to their relative ownership interests.

Intercompany income and expenses, including unrealized gross profits from internal group transactions and intercompany receivables, payables and loans have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make certain estimates, judgments and assumptions. We believe these estimates, judgements and assumptions are reasonable, based upon information available at the time they were made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and the actual results, our consolidated financial statements will be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by US GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting from available alternatives would not produce a materially different result.

Foreign Currency

In general, the functional currency of a foreign operation is the local currency. Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. The effects of foreign currency translation adjustments are included in stockholders’ equity as a component of accumulated other comprehensive income/loss. The Group's reporting currency is USD.

Cash and Cash Equivalents

Cash consists of deposits held at major banks that are readily available. Cash equivalents consist of highly liquid investments that are readily convertible to cash and that mature within three months or less from the date of purchase. The carrying amounts approximate fair value due to the short maturities of these instruments.

Accounts Receivable

Receivables represent rights to consideration that are unconditional and consist of amounts billed and currently due from customers, and revenues that have been recognized for accounting purposes but not yet billed to customers. The Group extends credit to customers in the normal course of business and in line with industry practices.

Allowance for Doubtful Accounts

We record allowance for doubtful accounts based upon a specific review of all outstanding invoices. We write off a receivable and charge it against its recorded allowance when we have exhausted our collection efforts without success.

F-8

Inventories

Inventories are stated at the lower of cost or net realizable value. Costs are calculated using standard costs, approximating average costs. Finished goods and work-in-progress inventories include material, labor and manufacturing overhead costs. The Group records write-downs on inventory based on an analysis of obsolescence or a comparison to the anticipated demand or market value based on a consideration of marketability and product maturity, demand forecasts, historical trends and assumptions about future demand and market conditions.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives which range from 1 to 8 years. Leasehold improvements are amortized over the lesser of the estimated useful lives of the improvements or the lease terms, as appropriate. Property, plant and equipment are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Intangible Assets

Those intangible assets that are considered to have a finite useful life are amortized over their useful lives, which generally range from 1 to 14 years. Each period we evaluate the estimated remaining useful lives of intangible assets and whether events or changes in circumstances require a revision to the remaining periods of amortization or that an impairment review be carried out. As at December 31, 2018 and 2017, all intangible assets held by the Group have been determined to have a finite life.

Leases

In line with ASC 842, the Group, as a lessee, recognizes right-of-use assets and related lease liabilities on its balance sheet for all arrangements with terms longer than twelve months, and reviews its leases for classification between operating and finance leases. Obligations recorded under operating and finance leases are identified separately on the balance sheet. Assets under finance leases and their accumulated amortization are disclosed separately in the notes. Operating and finance lease assets and operating and finance lease liabilities are measured initially at an amount equal to the present value of minimum lease payments during the lease term, as at the beginning of the lease term.

We have elected the short-term lease practical expedient whereby we do not present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that we are reasonably certain to exercise.

We have also elected the practical expedients related to lease classification of leases that commenced before the effective date of ASC 842.

We adopted ASC 842 as of January 01, 2019 using the cumulative effect adjustment approach. Accordingly, previously reported financial statements, including footnote disclosures, have not been restated to reflect the application of the new standard to all comparative periods presented.

Goodwill and Other Indefinite-Lived Intangible Assets:

Goodwill and other indefinite-lived intangible assets are not amortized, but are subject to impairment analysis at least once annually.

Goodwill is allocated to the reporting unit in which the business that created the goodwill resides. A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. We review our goodwill and indefinite lived intangible assets annually for impairment, or sooner if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We use October 1^st as our annual impairment test measurement date.

Equity Securities

Equity securities are any security representing an ownership interest in an entity or the right to acquire or dispose of an ownership interest in an entity at fixed or determinable prices, in accordance with ASC 321, i.e. investments that do not qualify for accounting as a derivative instrument, an investment in consolidated subsidiaries, or an investment accounted for under the equity method.

We account for these investments in equity securities at fair value at the reporting date, except for those investments without a readily determinable fair value where we have elected the measurement at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, in line with ASC 321. Changes in fair value are accounted for in the income statement as a non-operating income/expense.

Provision for Onerous Contracts

The Group recognizes a provision where the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation and when the amount can be reliably estimated. It is recorded in Other Liabilities.

Revenue Recognition

WISeKey’s policy is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, WISeKey applies the following steps:

- Step 1: Identify the contract(s) with a customer.

- Step 2: Identify the performance obligations in the contract.

- Step 3: Determine the transaction price.

- Step 4: Allocate the transaction price to the performance obligations in the contract.

- Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

F-9

Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. We typically allocate the transaction price to each performance obligation on the basis of the relative standalone selling prices of each distinct good or service promised in the contract. If a standalone price is not observable, we use estimates.

The Group recognizes revenue when it satisfies a performance obligation by transferring control over goods or services to a customer. The transfer may be done at a point in time (typically for goods) or over time (typically for services). The amount of revenue recognized is the amount allocated to the satisfied performance obligation. For performance obligations satisfied over time, the revenue is recognized over time, most frequently on a prorata temporis basis as most of the services provided by the Group relate to a set performance period.

If the Group determines that the performance obligation is not satisfied, it will defer recognition of revenue until it is satisfied.

We present revenue net of sales taxes and any similar assessments.

The Group delivers products and records revenue pursuant to commercial agreements with its customers, generally in the form of an approved purchase order or sales contract.

Where products are sold under warranty, the customer is granted a right of return which, when exercised, may result in either a full or partial refund of any consideration received, or a credit that can be applied against amounts owed, or that will be owed, to WISeKey. For any amount received or receivable for which we do not expect to be entitled to because the customer has exercised its right of return, we recognize those amounts as a refund liability.

Contract Assets

Contract assets consists of accrued revenue where WISeKey has fulfilled its performance obligation towards the customer but the corresponding invoice has not yet been issued. Upon invoicing, the asset is reclassified to trade accounts receivable until payment.

Deferred Revenue

Deferred revenue consists of amounts that have been invoiced and paid but have not been recognized as revenue. Deferred revenue that will be realized during the succeeding 12-month period is recorded as current and the remaining deferred revenue recorded as non-current. This would relate to multi-year certificates or licenses.

Contract Liability

Contract liability consists of either:

- amounts that have been invoiced and not yet paid, nor recognized as revenue. Upon payment, the liability is reclassified to deferred revenue if the amounts still have not been recognized as revenue. Contract liability that will be realized during the succeeding 12-month period is recorded as current and the remaining contract liability recorded as non-current. This would relate to multi-year certificates or licenses.

- advances from customers not supported by invoices.

Sales Commissions

Sales commission expenses where revenue is recognized are recorded in the period of revenue recognition.

Cost of Sales

Our cost of sales consists primarily of expenses associated with the delivery and distribution of our services and products. These include expenses related to the license to the Global Cryptographic ROOT Key, the global Certification authorities as well as the digital certificates for people, servers and objects, expenses related to the preparation of our secure elements and the technical support provided on the Group's ongoing production and on the ramp-up phase, including materials, labor, test and assembly suppliers, and subcontractors, freights costs, as well as the amortization of probes, wafers and other items that are used in the production process.

Research and Development and Software Development Costs

All research and development costs and software development costs are expensed as incurred.

Advertising Costs

All advertising costs are expensed as incurred.

Pension Plan

The Group maintains two defined benefit post retirement plans:

- one that covers all employees working for WISeKey SA in Switzerland, and

- one for the French employees of WISeKey Semiconductors SAS.

In accordance with ASC 715-30, Defined Benefit Plans – Pension, the Group recognizes the funded status of the plan in the balance sheet. Actuarial gains and losses are recorded in accumulated other comprehensive income / (loss).

Stock-based Compensation

Stock-based compensation costs are recognized in earnings using the fair-value based method for all awards granted. Fair values of options and awards granted are estimated using a Black-Scholes option pricing model. The model’s input assumptions are determined based on available internal and external data sources. The risk-free rate used in the model is based on the Swiss treasury rate for the expected contractual term. Expected volatility is based on historical volatility of WIHN class B shares.

F-10

Compensation costs for unvested stock options and awards are recognized in earnings over the requisite service period based on the fair value of those options and awards at the grant date.

In accordance with the Group’s adoption of ASU 2018-07 from January 01, 2019, the treatment of nonemployee share-based payments, previously subject to ASC 505, was aligned with existing guidance on employee share-based payments in ASC 718. As a result, nonemployee share-based payment transactions are measured by estimating the fair value of the equity instruments that an entity is obligated to issue and the measurement date will be consistent with the measurement date for employee share-based payment awards (i.e., grant date for equity-classified awards).

Income Taxes

Taxes on income are accrued in the same period as the revenues and expenses to which they relate.

Deferred taxes are calculated on the temporary differences that arise between the tax base of an asset or liability and its carrying value in the balance sheet of our companies prepared for consolidation purposes, with the exception of temporary differences arising on investments in foreign subsidiaries where WISeKey has plans to permanently reinvest profits into the foreign subsidiaries.

Deferred tax assets on tax loss carry-forwards are only recognized to the extent that it is “more likely than not” that future profits will be available and the tax loss carry-forward can be utilized.

Changes to tax laws or tax rates enacted at the balance sheet date are taken into account in the determination of the applicable tax rate provided that they are likely to be applicable in the period when the deferred tax assets or tax liabilities are realized.

WISeKey is required to pay income taxes in a number of countries. WISeKey recognizes the benefit of uncertain tax positions in the financial statements when it is more likely than not that the position will be sustained on examination by the tax authorities. The benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely of being realized on settlement with the tax authority, assuming full knowledge of the position and all relevant facts. WISeKey adjusts its recognition of these uncertain tax benefits in the period in which new information is available impacting either the recognition or measurement of its uncertain tax positions.

Research Tax Credits

Research tax credits are provided by the French government to give incentives for companies to perform technical and scientific research. Our subsidiary WISeKey Semiconductors SAS is eligible to receive such tax credits.

These research tax credits are presented as a reduction of Research & development expenses in the income statement when companies that have qualifying expenses can receive such grants in the form of a tax credit irrespective of taxes ever paid or ever to be paid, the corresponding research and development efforts have been completed and the supporting documentation is available. The credit is deductible from the entity’s income tax charge for the year or payable in cash the following year, whichever event occurs first. The tax credits are included in noncurrent deferred tax credits in the balance sheet in line with ASU 2015-17.

Earnings per Share

Basic earnings per share are calculated using WISeKey International Holding AG’s weighted-average outstanding common shares. When the effects are not antidilutive, diluted earnings per share is calculated using the weighted-average outstanding common shares and the dilutive effect of stock options as determined under the treasury stock method.

Segment Reporting

Our chief operating decision maker, who is also our Chief Executive Officer, regularly reviews information collated into two segments for purposes of allocating resources and assessing budgets and performance. We report our financial performance based on this segment structure described in Note 35.

Recent Accounting Pronouncements

Adoption of new FASB Accounting Standard in the current year – Prior-Year Financial Statements not restated:

In 2019, the Group adopted ASU 2016-02, Leases (Topic 842), which, under its core principle, requires a lessee to recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. The Group also adopted ASU 2018-11, Leases (Topic 842), and ASU 2018-10, Codification improvements to Topic 842, which provides a new transition method and a practical expedient for separating components of a contract intended to reduce costs and ease implementation of the lease standard for financial statement preparers. There have also been some practical expedients provided with the aim of simplifying adoption and the Group has elected to apply these. The practical expedients allow that an entity need not reassess any expired or existing contracts, nor reassess the lease classification for expired or existing leases, nor reassess initial direct costs for existing leases. They must all be applied as a package. Following on from ASU 2018-11, entities are permitted to elect not to restate comparative periods in the period of adoption. The Group has elected to follow this guidance.

As a result of the adoption of ASU 2016-02, the Group, as a lessee, recognized right-of-use assets and related lease liabilities on its balance sheet for all arrangements with terms longer than twelve months from January 01, 2019. In line with the practical expedients, WISeKey did not reassess any expired or existing contracts, nor reassess the lease classification for expired or existing leases, nor reassess initial direct costs for existing leases. The majority of leases held as at January 01, 2019 (the application date) were classified as operating leases in prior periods and should continue to be treated as such. There was no material impact on the Group’s results of operations in 2019 upon adoption of the new standard.

We adopted ASC 842 as of January 01, 2019 using the cumulative effect adjustment approach. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the new standard to all comparative periods presented. Financial statements for the year ended December 31, 2018 have not been restated.

F-11

The Group's disclosures regarding its leasing activities have been expanded to enable users of our consolidated financial statements to better understand the impact from leasing. Information regarding our adoption of ASU 2016-02 and its impact on the Group's consolidated financial statements and related disclosures is provided in Note 4 in the Leases subsection and in Note 17.

In 2019, the Group adopted ASU 2018-07, Compensation-Stock Compensation, which supersedes most of the prior accounting guidance on nonemployee share-based payments, and instead aligns it with existing guidance on employee share-based payments in ASC 718. As a result, nonemployee share-based payment transactions were measured by estimating the fair value of the equity instruments that an entity is obligated to issue and the measurement date is consistent with the measurement date for employee share-based payment awards. WISeKey was required to measure these nonemployee awards at fair value as of the beginning of the fiscal year of adoption. Because all costs were recognized in 2018, there was no impact on the Group results of operations or financial condition in 2019 upon adoption of the new standard.

New FASB Accounting Standard to be adopted in the future:

In August 2018, The FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.

Summary: ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820 as follows:

The following disclosure requirements were removed from Topic 820:

· The amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; The policy for timing of transfers between levels;

· The valuation processes for Level 3 fair value measurements; and for non-public entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period.

The following disclosure requirements were modified in Topic 820:

· In lieu of a rollforward for Level 3 fair value measurements, a non-public entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities; for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

The following disclosure requirements were added to Topic 820:

· The changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. In addition, the amendments eliminate at a minimum from the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures and to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements.

Effective Date: The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date.

The Group expects to adopt all of the aforementioned guidance when effective. Management is assessing the impact of the aforementioned guidance on its consolidated financial statements but does not expect it to have a material impact.

In August 2018, The FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.

Summary: ASU 2018-14 applies to all employers that sponsor defined benefit pension or other postretirement plans. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

ASU 2018-14 deletes the following disclosure requirements:

The amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year; the amount and timing of plan assets expected to be returned to the employer; related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan.

For public entities, the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs and (b) benefit obligation for postretirement health care benefits.

ASU 2018-14 adds/clarifies disclosure requirements related to the following:

The weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates; An explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period; The projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets; The accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets.

F-12

Effective Date: The amendments are effective for fiscal years ending after December 15, 2020 for public business entities. Early adoption is permitted. The Group expects to adopt all of the aforementioned guidance when effective. Management does not expect the aforementioned guidance to have an impact on its consolidated financial statements, other than the required changes in disclosures.

In April 2019, The FASB issued Accounting Standards Update (ASU) No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, Codification improvements:

Summary: ASU 2019-04 clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging, and recognition and measurement of financial instruments to ASU 2016-01, 2016-13 & 2017-12. Since issuance of these standards, the FASB has identified areas that need clarification and correction, resulting in changes similar to those issues under its ongoing Codification improvements.

Effective Date: The amendments related to ASU 2016-01 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is generally permitted.

The Company expects to adopt all of the aforementioned guidance when effective. Management is assessing the impact of the aforementioned guidance on its consolidated financial statements but does not expect it to have a material impact.

In December 2019, The FASB issued Accounting Standards Update (ASU) no 2019-12, ​Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ​(the ASU), as part as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. The FASB’s amendments primarily impact ASC 740, ​Income Taxes, ​ and may impact both interim and annual reporting periods.

It eliminates the need for an organization to analyze whether the following apply in a given period:

· Exception to the incremental approach for intraperiod tax allocation;

· Exceptions to accounting for basis differences when there are ownership changes in foreign investments; and

· Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The ASU also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for:

· Franchise taxes that are partially based on income;

· Transactions with a government that result in a step up in the tax basis of goodwill;

· Separate financial statements of legal entities that are not subject to tax; and

· Enacted changes in tax laws in interim periods.

Effective Date: The amendments related to ASU 2019-12 are effective for public business entities for annual reporting periods beginning after December 15, 2020, and interim periods within those reporting periods. Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption.

The Company expects to adopt all of the aforementioned guidance when effective. Management is assessing the impact of the aforementioned guidance on its consolidated financial statements but does not expect it to have a material impact.

Note 5. Concentration of credit risks

Financial instruments that are potentially subject to credit risk consist primarily of cash and cash equivalents and trade accounts receivable. Our cash is held with large financial institutions. Management believes that the financial institutions that hold our investments are financially sound and accordingly, are subject to minimal credit risk. Deposits held with banks may exceed the amount of insurance provided on such deposits.

The Group sells to large, international customers and, as a result, may maintain individually significant trade accounts receivable balances with such customers during the year. We generally do not require collateral on trade accounts receivable. Summarized below are the clients whose revenue were 10% or higher than the respective total consolidated net sales for fiscal years 2019, 2018 and 2017, and the clients whose trade accounts receivable balances were 10% or higher than the respective total consolidated trade accounts receivable balance for fiscal years 2019 and 2018:

	Revenue concentration (% of total net sales)			Receivables concentration  (% of total accounts receivable)
	Year to December 31, 2019	Year to December 31, 2018	Year to December 31, 2017	As at December 31, 2019	As at December 31, 2018
IoT operating segment
Multinational electronics contract manufacturing company	12%	8%	7%	19%	12%
International luxury watch company	6%	2%	3%	13%	4%
International packaging solutions, technology and chips	11%	3%	3%	0%	3%
International aduio software and hardware solutions company	2%	0%	0%	11%	0%

F-13

Note 6. Fair value measurements

ASC 820 establishes a three-tier fair value hierarchy for measuring financial instruments, which prioritizes the inputs used in measuring fair value. These tiers include:

·  Level 1, defined as observable inputs such as quoted prices in active markets;

·  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

·  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

	As at December 31, 2019		As at December 31, 2018		Fair value level
USD'000	Carrying amount	Fair value	Carrying amount	Fair value		Note ref.
Amortized costs fair value measurements
Accounts receivable	3,770	3,770	7,620	7,620	3	9
Notes receivable from related parties	-	-	8	8	3	40
Notes receivable, noncurrent	23	23	-	-	3	12
Equity securities, at cost	7,000	7,000	7,000	7,000	3	19
Accounts payable	10,713	10,713	12,917	12,917	3	21
Notes payable	4,104	4,104	6,797	6,797	3	22
Convertible note payable, current	3,226	3,226	-	-	3	24
Convertible note payable, noncurrent	-	-	23,940	23,940	3	24
Recurring fair value measurements
Equity securities, at fair value	756	756	857	857	1	13
Derivative liabilities, current	44	44	-	-	3	6

In addition to the methods and assumptions we use to record the fair value of financial instruments as discussed in the Fair Value Measurements section above, we used the following methods and assumptions to estimate the fair value of our financial instruments:

- Accounts receivable – carrying amount approximated fair value due to their short-term nature.

- Notes receivable from related parties – carrying amount approximated fair value due to their short-term nature.

- Notes receivable, noncurrent- carrying amount approximated fair value.

- Equity securities, at cost - no readily determinable fair value, measured at cost minus impairment

- Accounts payable – carrying amount approximated fair value due to their short-term nature.

- Notes payable – carrying amount approximated fair value.

- Convertible note payable current and noncurrent- carrying amount approximated fair value.

- Equity securities, at fair value - fair value remeasured as at reporting period.

Derivative liabilities, current - fair value remeasured as at reporting.

Derivative liabilities

In 2019, the Group held one derivative instrument which was measured at estimated fair value on a recurring basis and linked to embedded conversion option in the Yorkville Convertible Loan signed on June 27, 2019 (see Note 24).

The convertible note has a maturity date of August 01, 2020. It contains a conversion option into WIHN Class B shares at the election of the holder, which may be exercised at each monthly repayment date, covering any amount outstanding (principal and/or interests) that may be settled. The exercise price is set at CHF 3.00 with antidilution provision adjustments as further described in Note 24.

In line with ASU 2014-16, the convertible note was assessed as a hybrid instrument, being a debt instrument with an equity-linked component (the conversion option). Per ASC 815-10, the embedded conversion option met the definition of a derivative and was accounted for separately.

The hosting debt instrument was recorded using the residual method.

The derivative component (the conversion option) was fair valued using a binomial lattice model, building in quoted market prices of WIHN class B shares, and inputs such as time value of money, volatility, and risk-free interest rates. It was valued at inception at USD 257,435, and was allocated between current and noncurrent on a prorata temporis basis according to the monthly repayment schedule. The derivative component will be revalued at fair value at each reporting date in line with ASC 815-15-30-1.

In 2019, WISeKey made five repayments in cash of the Yorkville Convertible Loan, resulting in the following gain or loss on derivative:

- On August 15, 2019, WISeKey repaid USD 237,392 of the principal.

- On September 01, 2019, WISeKey repaid USD 69,847 of the principal.

- On September 17, 2019, WISeKey repaid USD 195,173 of the principal.

- On October 10, 2019, WISeKey repaid USD 249,999 of the principal.

- On November 07, 2019, WISeKey repaid USD 410,196 of the principal.

F-14

The derivative component was measured at fair value at the reporting date at USD 43,655, all in current derivative liabilities. Therefore, for the year ended December 31, 2019, WISeKey recorded in the income statement, a net gain on derivative of USD 213,780 and a net debt discount amortization expense of USD 468,265.

Derivative liabilities	USD'000
Balance as at December 31, 2017	-
Balance as at December 31, 2018	-
Fair value of the derivative instrument (conversion option)	258
Gain on derivative recognized as a separate line in the statement of loss	(214)
Balance as at December 31, 2019	44

Note 7. Cash and cash equivalents

Cash consists of deposits held at major banks.

Note 8. Restricted cash

Restricted cash as at December 31, 2019 is made up of:

- USD 4.5 million of the consideration for the sale of QuoVadis which is held in an escrow account, and to be released in an amount of up to USD 2.5 million on January 16, 2020 and the remaining amount on January 16, 2021 (see Note 37 for further details and Note 40 Subsequent events), and

- A balance of CHF 24,073 (USD 24,874) on the liquidity account funded by WISeKey in relation to the services provided by a market maker from August 10, 2018 until June 25, 2019.

As at December 31, 2018, the liquidity account had a balance of CHF 607,502, i.e. USD 617,796 at the reporting exchange rate. The carrying amounts approximate fair value due to the short maturities of these instruments. As part of the contract, WISeKey funded a liquidity account with CHF 1,000,000 on August 24, 2018.

Note 9. Accounts receivable

The breakdown of the accounts receivable balance is detailed below:

	As at December 31,	As at December 31,
USD'000	2019	2018
Trade accounts receivable	3,643	7,607
Allowance for doubtful accounts	(25)	(4)
Accounts receivable from other related parties	119	1
Other accounts receivable	33	16
Total accounts receivable net of allowance for doubtful accounts	3,770	7,620

Note 10. Inventories

Inventories consisted of the following:

	As at December 31,	As at December 31,
USD'000	2019	2018
Raw materials	636	1,342
Work in progress	2,151	2,844
Total inventories	2,787	4,186

In the years ended December 31, 2019, 2018 and 2017, the Group recorded inventory obsolescence charges in the income statement of respectively USD 26,249, USD 90,567 and USD 2,537 on raw materials, and USD 508,938, USD 193,213 and USD 2,274,710 on work in progress.

F-15

Note 11. Other current assets

Other current assets consisted of the following:

	As at December 31,	As at December 31,
USD'000	2019	2018
Value-Added Tax Receivable	1,449	858
Advanced payment to suppliers	7	53
Deposits, current	9	4
Other currrent assets	4	4
Total other current assets	1,469	919

Note 12. Notes receivable, noncurrent

As at December 31, 2019, the noncurrent notes receivable consisted of a loan to an employee for CHF 21,780 (USD 22,504). From April 01, 2019, WISeKey has agreed to lend CHF 2,420 per month to an employee over a period of 24 months, at an interest rate of 0.5% per annum. The loan and accrued interest are to be repaid in full on or before December 31, 2021. In exchange for the loan, the employee has pledged the 60,000 ESOP options that he holds on WIHN class B shares.

As at December 31, 2018, the noncurrent notes receivable balance was nil.

Note 13. Equity securities, at fair value

On March 29, 2017, the Group announced that the respective boards of directors of WISeKey and OpenLimit Holding AG (DE: O5H) (“OpenLimit“) had decided that discussions in relation to a possible merger transaction between WISeKey and OpenLimit as previously announced on July 25, 2016 were not being further pursued. The interim financing provided by WISeKey to OpenLimit in a principal amount of EUR 750,000 was, in accordance with applicable terms of a convertible loan agreement, converted into OpenLimit Shares issued by OpenLimit out of its existing authorized share capital. The conversion price was set at 95% of the volume weighted average price (“VWAP”) of the OpenLimit shares traded on the Frankfurt stock exchange as reported by the Frankfurt stock exchange for the ten trading days immediately preceding and including March 29, 2017. WISeKey received 2,200,000 newly issued fully fungible listed OpenLimit Shares representing – post issuance of these new shares – an 8.4% stake in OpenLimit on an issued share basis. The effective conversion ratio was EUR 0.3409 per share. The equity securities were fair valued at market price on the date of the transaction to USD 846,561.

As at December 31, 2019, the fair value was recalculated using the closing market price on the XETRA of EUR 0.306 (USD 0.3435) and amounted to USD 755,802. The difference of USD 101,068 from the fair value at December 31, 2018 was accounted for in the income statement as a non-operational expense.

Note 14. Deferred tax credits

Deferred tax credits consisted of the following:

	As at December 31,	As at December 31,
USD'000	2019	2018
Deferred research & development tax credits	2,487	2,505
Deferred other tax credits	1	36
Total deferred tax credits	2,488	2,541

WISeKey Semiconductors SAS and WISeCoin France R&D Lab SAS are eligible for Research tax credits provided by the French government (see Note 4 Summary of significant accounting policies). As at December 31, 2019, and 2018, the receivable balance in respect of these Research tax credits was respectively of USD 1,934,539 and USD 2,505,264 for WISeKey Semiconductors SAS, and USD 552,067 and USD nil for WISeCoin France R&D Lab SAS. The credit is deductible from the entity’s income tax charge for the year or payable in cash the following year, whichever event occurs first and is shown under noncurrent deferred tax assets in line with ASU 2015-17.

F-16

Note 15. Property, plant and equipment

Property, plant and equipment, net consisted of the following.

	As at December 31,	As at December 31,
USD'000	2019	2018
Machinery & equipment	4,029	3,815
Office equipment and furniture	2,505	2,469
Computer equipment and licences	1,069	1,056
Total property, plant and equipment gross	7,603	7,340
Accumulated depreciation for:
Machinery & equipment	(2,508)	(1,828)
Office equipment and furniture	(2,270)	(2,169)
Computer equipment and licences	(1,024)	(973)
Total accumulated depreciation	(5,802)	(4,970)
Total property, plant and equipment from continuing operations, net	1,801	2,370
Depreciation charge from continuing operations for the year	821	855

No depreciation expense was recorded in cost of sales on the face of the income statement for the years 2019, 2018 and 2017.

The depreciation charge from continuing operations for the year 2017 was USD 894,328.

The useful economic life of property plant and equipment is as follow:

· Office equipment and furniture: 2 to 5 years

· Production masks 5 years

· Production tools 3 years

· Licenses 3 years

· Software 1 year

Note 16. Intangible assets

Intangible assets and future amortization expenses consisted of the following:

	As at December 31,	As at December 31,
USD'000	2019	2018
Trademarks	130	128
Patents	2,281	2,281
License agreements	10,758	10,615
Other intangibles	6,152	6,070
Total intangible assets gross	19,321	19,094
Accumulated amortization for:
Trademarks	(129)	(126)
Patents	(1,683)	(1,175)
License agreements	(10,757)	(10,591)
Other intangibles	(6,152)	(6,070)
Total accumulated amortization	(18,721)	(17,962)
Total intangible assets from continuing operations, net	600	1,132
Amortization charge from continuing operations for the year	534	460

The amortization charge from continuing operations for the year 2017 was USD 1,690,931.

The useful economic life of intangible assets is as follow:

· Trademarks: 5 to 10 years

· Patents 5 to 10 years

· License agreements: 3 to 5 years

· Other intangibles: 5 to 10 years

Future amortization charges are detailed below:

Year	USD'000
2020	600
Total intangible assets, net	600

F-17

Note 17. Leases

WISeKey has historically entered into a number of lease arrangements under which it is the lessee. As at December 31, 2019, WISeKey holds one finance lease for IT equipment in our datacenter, 6 operating leases, and 9 short-term leases. One of its short-term leases is for a vehicle, whilst all other short-term and operating leases relate to premises. We do not sublease. All of our operating leases include multiple optional renewal periods which are not reasonably certain to be exercised. The finance lease contains an option to purchase the assets at the end of the lease which we have assumed will be exercised and so has been included in the calculation of the right of use asset and lease liability.

We have elected the short-term lease practical expedient related to leases of various premises and equipment. We have elected the practical expedients related to lease classification of leases that commenced before the effective date of ASC 842.

In the years 2019, 2018, and 2017 we recognized rent expenses associated with our leases as follows:

	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Finance lease cost:
Amortization of right-of-use assets	31	-	-
Interest on lease liabilities	8	-	-
Operating lease cost:
Fixed rent expense	567	561	481
Short-term lease cost	63	61	54
Net lease cost	669	622	535
Lease cost - Cost of sales	-	-	-
Lease cost - General & administrative expenses	669	622	535
Net lease cost	669	622	535

In the year 2019, we had the following cash and non-cash activities associated with our leases:

	As at December 31,
USD'000	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	47
Operating cash flows from operating leases	550
Financing cash flows from finance leases	8
Non-cash investing and financing activities :
Net lease cost	669
Additions to ROU assets obtained from:
New finance lease liabilities*	321
New operating lease liabilities*	3,768

*In line with the new standard ASC 842 “Leases” and its transition guidance, we considered all leases as new leases in 2019.

F-18

As at December 31, 2019, future minimum annual lease payments were as follows:

	USD'000		USD'000		USD'000		USD'000
Year	Operating		Short-term		Finance		Total
2020		578		13		114		705
2021		540		-		114		654
2022		370		-		57		427
2023		294		-		-		294
2024 and beyond		1,337		-		-		1,337
Total future minimum operating and short-term lease payments		3,119		13		285		3,417
Less effects of discounting		(340)		-		(13)		(353)
Less effects of practical expedient		-		(13)		-		(13)
Lease liabilities recognized		2,779		-		272		3,051

In line with ASU 2018-11, future minimum lease payments under legacy ASC 840 are disclosed in the table below:

Year	USD'000
2020	705
2021	654
2022	427
2023	294
2024 and beyond	1,337
Total future minimum operating and short-term lease payments	3,417

As of December 31, 2019, the weighted-average remaining lease term was 2.5 years for our finance lease and 6.83 years for operating leases.

For our finance lease, the implicit rate was calculated as 5.17%. For our operating leases and because we generally do not have access to the implicit rate in the lease, we calculated an estimate rate based upon the estimated incremental borrowing rate of the entity holding the lease. The weighted average discount rate associated with operating leases as of December 31, 2019 was 3.82%.

Note 18. Goodwill

We test goodwill for impairment annually on October 1st, or as and when indicators of impairment arise. As at October 01, 2019, the fair value of the net assets of the reporting unit concerned by goodwill was superior to the carrying value of the net assets and goodwill allocated. After October 01, 2019, there were no impairment indicators identified triggering a new impairment test. Therefore, no impairment loss was recorded in 2019.

An impairment review has been conducted for the item of goodwill allocated to the reporting unit (“RU”) relating to the acquisition of WISeKey Semiconductors SAS in 2016. Fair value has been determined based on the income approach. Cash flows have been projected over 5 years from the date of the assessment and have been discounted at the pre-tax weighted average cost of capital of the RU. The fair value is higher than its carrying value.

USD'000	IoT Segment	mPKI Segment	Total
Goodwill balance as at December 31, 2017	8,317	-	8,317
Goodwill acquired during the year	-	-	-
Impairment losses	-	-	-
As at December 31, 2018
Goodwill	8,317	-	8,317
Accumulated impairment losses	-	-	-
Goodwill balance as at December 31, 2018	8,317	-	8,317
Goodwill acquired during the year	-	-	-
Impairment losses	-	-	-
As at December 31, 2019
Goodwill	8,317	-	8,317
Accumulated impairment losses	-	-	-
Goodwill balance as at December 31,2019	8,317	-	8,317

F-19

The assumptions included in the impairment tests require judgment, and changes to these inputs could impact the results of the calculations. Other than management's projections of future cash flows, the primary assumptions used in the impairment tests were the weighted-average cost of capital and long-term growth rates. Although the Group's cash flow forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using to operate the underlying businesses, there are significant judgments in determining the expected future cash flows attributable to a reporting unit.

Note 19. Equity securities, at cost

On September 27, 2018 WISeKey purchased a warrant agreement in Tarmin Inc. from ExWorks as part of the eleventh amendment of the ExWorks Credit Agreement (see Note 24). As a result, WISeKey entered into a warrant agreement with Tarmin Inc (“Tarmin”) (the “Tarmin Warrant”), a private Delaware company, leader in data & software defined infrastructure to acquire 22% of common stock deemed outstanding at the time of exercise. The warrant may be exercised in parts or in full, at an exercise price of USD 0.01 per share at nominal value USD 0.0001. The purchase price of the Tarmin Warrant was USD 7,000,000, of which USD 3,000,000 was paid in cash on October 05, 2018 and the remaining USD 4,000,000 was paid on April 08, 2019.

The Tarmin Warrant was assessed as an equity investment without a readily determinable fair value and we elected the measurement at cost less impairment, adjusted for observable price changes for identical or similar investments of the same issuer as permitted by ASU 2016-01. As such, the Tarmin Warrant was initially recognized on the balance sheet at USD 7,000,000.

As at December 31, 2019, we performed a qualitative assessment to consider potential impairment indicators and did not identify impairment indicators. Therefore, no impairment loss was recorded in 2019. We also made reasonable efforts to identify any observable transactions of identical or similar investments of Tarmin, but did not identify any transaction requiring an adjustment to the carrying value of the Tarmin Warrant as at December 31, 2019. Therefore, the carrying value of the Tarmin Warrant as at December 31, 2019 was USD 7,000,000.

Note 20. Other noncurrent assets

Other noncurrent assets consisted of noncurrent deposits. Deposits are primarily made up of rental deposits on the premises rented by the Group.

Note 21. Accounts payable

The accounts payable balance consisted of the following:

	As at December 31,	As at December 31,
USD'000	2019	2018
Trade creditors	5,482	6,995
Factors or other financial institutions for borrowings	888	934
Accounts payable to Board Members	117	239
Accounts payable to other related parties	2	292
Accounts payable to underwriters, promoters, and employees	2,229	2,185
Other accounts payable	1,995	2,272
Total accounts payable	10,713	12,917

Accounts payable to Board Members are made up of accrued board fees and a payable balance of CHF 2,245 (USD 2,320) to Dourgam Kummer relating to unpaid business expenses (see note 40 for detail).

Accounts payable to other related parties are made up of a CHF 2,196 (USD 2,269) payable to a related party of Carlos Moreira (see note 40 for detail).

Accounts payable to employees consist primarily of holiday, bonus and 13th month accruals across WISeKey.

Other accounts payable are mostly amounts due or accrued for professional services (e.g. legal, accountancy, and audit services) and accruals of social charges in relation to the accrued liability to employees.

F-20

Note 22. Notes payable

Notes payable consisted of the following:

	As at December 31,	As at December 31,
USD'000	2019	2018
Short-term loan	4,021	6,718
Short-term loan from shareholders	82	79
Total notes payable	4,103	6,797

As at December 31, 2019, the current notes payable balance was made up of:

- a USD 4,021,472 short-term loan with ExWorks. See detail in Note 24.

- short-term loans from the noncontrolling shareholders of WISeKey SAARC for a total amount of USD 82,268 at closing rate (USD 79,122 as at December 31, 2018). These loans do not bear interests.

The weighted–average interest rate on current notes payable, excluding loans from shareholders at 0%, was respectively 10% and 1.62% per annum as at December 31, 2019 and 2018.

Note 23. Other current liabilities

Other current liabilities consisted of the following:

	As at December 31,	As at December 31,
USD'000	2019	2018
Value-Added Tax Payable	706	422
Other tax payable	65	91
Customer contract liability, current	255	142
Other current liabilities	278	321
Total other current liabilities	1,304	976

Note 24. Loans and line of credit

Share Subscription Facility with GEM LLC

On January 19, 2016 the Group closed a Share Subscription Facility (“the GEM Facility”) with GEM LLC, (Global Equity Markets, “GEM”), which is a CHF 60 million facility over 5 years and allows the Group to draw down funds at its option in exchange for WIHN class B shares. The mechanics of the deal allow for a drawdown essentially 18 times in a year, the amount being in a range related to the trading volume and price of the WIHN class B share trading on the Swiss SIX Stock Exchange. The drawdown amount is based on 90% of the average closing price of the last 15 trading days multiplied by 1,000% of the average volume of the last 15 trading days. GEM can then elect to purchase between 50% and 200% of this figure.

The instrument was assessed under ASC 815 as an equity instrument. The drawdowns were reflected as increases in Common Share Capital with an increase in the value of common stock issued and the difference between the nominal value of the shares and the funds received being recorded against Additional Paid-In Capital ("APIC").

In 2017, WISeKey made three drawdowns for a total of CHF 3,905,355 in exchange for a total of 825,000 WIHN class B shares issued out of authorized share capital.

There were no drawdowns made in 2018, nor in 2019.

Therefore, as at December 31, 2019 the outstanding facility available is CHF 56,094,645.

Acquisition line of credit agreement with ExWorks Capital Fund I, L.P

On January 16, 2017 the Group signed an acquisition line of credit agreement with ExWorks Capital Fund I, L.P. (the “ExWorks Line of Credit”) headquartered in the USA, is an international, import and export finance company that offers financing solutions to businesses utilizing its own capital as well as by leveraging its Delegated Authority granted by both the SBA and ExIm Bank. A first amendment was subsequently signed on February 06, 2017, a second amendment on March 31, 2017, a third amendment on July 21, 2017, a fourth amendment on August 10, 2017, a fifth amendment on September 19, 2017, a sixth amendment on February 5, 2018, a seventh amendment on March 30, 2018, an eighth amendment on June 20, 2018, a ninth amendment on July 24, 2018, a tenth amendment on August 17, 2018, and an eleventh amendment on September 27, 2018.

F-21

As of December 31, 2018, under the ExWorks Line of Credit as amended, the Group may borrow up to USD 22,646,437, including a loan of up to USD 4,000,000 to support the launch of WISeKey's WISeCoin setup. Borrowings under the ExWorks Line of Credit bear interest payable monthly at 1%. The maturity date of the arrangement is January 16, 2020 with an option to extend maturity to January 16, 2021 for a fee equal to 12% of the outstanding loan at the time WISeKey exercises the extension option. Under current terms, ExWorks can elect to have part of or all of the principal loan amount and interests paid either in cash or in WIHN class B shares at a conversion price of USD 4.74 per share.

Under the terms of the ExWorks Line of Credit, the Group is required to not enter into agreements that would result in restriction on liens, reserved restriction on indebtedness, mergers, consolidations, organizational changes except with an affiliate, contingent and third party liabilities, any substantial change in the nature of its business, restricted payments, insider transactions, certain debt payments, certain agreements, negative pledge or asset transfer other than sale of assets in the ordinary course of business. Furthermore, the Group is required to maintain its existence and pay all taxes and other liabilities, provide ExWorks with periodical accounting reports and the detail of any material litigation, comply with applicable laws, meet the financial covenants set in the line of credit agreement in terms of average cash on hand and minimum ending cash on hand. The Group has complied with the line of credit covenants in the 12 months to December 31, 2018.

As at December 31, 2018, borrowings under the ExWorks Line of Credit are secured by (i) the grant of options to ExWorks exercisable for up to 1,075,000 WIHN class B registered shares, par value CHF 0.05, at an exercise price of CHF 3.15; (ii) 100% of the shares in QuoVadis Trustlink Schweiz AG; (iii) any cash bank account of the Group held in Switzerland; (iv) 100% of the shares in WISeKey USA; (v) 100% of the shares in WISeKey Singapore; (vi) 100% of the shares held by the Group in WISeKey SAARC Ltd; and (vii) all shares owned by WISeKey (Bermuda) Holding Ltd in each of its subsidiaries.

The ExWorks Line of Credit can be up-sized / syndicated at the same terms for up to an additional USD 10,000,000 by way of adding co-lender(s) or selling a participation interest.

The line of credit was initially recognized as a revolving credit falling under ASC 480, and, in line with ASU 2015-15 the commitment fee and debt issuance costs totaling USD 3,165,880 were capitalized as deferred charges to be amortized over the duration of the contract. These deferred charges included the fair value of an option agreement signed by both parties on February 06, 2017, granting ExWorks the option to acquire up to 1,075,000 WIHN class B shares at an exercise price of CHF 3.15, exercisable in a maximum of four separate exercises, between June 28, 2017 and February 06, 2020. The option agreement exercisable for up to 1,075,000 WIHN class B shares was fair valued at grant for an amount of USD 2,173,395 using the Black-Scholes model and the market price of WIHN class B shares on the date of grant, February 06, 2017, of CHF 4.04. The option agreement was assessed as equity instrument. The credit entry from the recognition of the option agreement fair value was booked in APIC.

However, the fifth amendment on September 19, 2017 introduced an option to convert payments of the full or partial amounts of principal loan, interests and fees in WIHN class B shares. The introduction of the conversion option was assessed to be a substantial modification of terms for the existing contract and therefore, in line with ASC 470-50-40-6, was accounted for like an extinguishment. As a result, all fees and debt issuance costs, including the option agreement, previously capitalized were fully amortized into the income statement in 2017, the old debt was written off, and the new debt was accounted for at fair value. This gave rise to a USD 6,511,421 loss on extinguishment in 2017 made up of total amendment fees of USD 700,000, the unamortized portion of the commitment fee and debt issuance costs totaling USD 2,199,502 (of which USD 1,467,746 related to the option agreement), and the fair value of the conversion option introduced for USD 4,087,519 calculated using the Black-Scholes model and the market price of WIHN class B shares as at the date of the fifth amendment of CHF 4.10 (USD 4.26 at historical rate).

As at December 31, 2017, there were no unamortized debt discount/premium or debt issuance costs. The conversion option was assessed as an equity instrument which did not require bifurcation from its debt host. The credit entry from the recognition of the conversion option fair value was booked in APIC.

The sixth amendment signed on February 05, 2018 extended maturity of the loans to January 16, 2020 (instead of January 15, 2019), reduced the monthly interest rate to 1% (instead of 1.5%), and introduced a clause whereby cash repayments are restricted in time. The amendment fee was USD 1,890,000.

The seventh amendment signed on March 30, 2018, granted an extension of USD 4m to the maximum loan amount to be used for “Other Approved Business Purpose”. The amendment fee was USD 400,000. As at December 31, 2018 WISeKey has drawn USD 3,995,575 from this extended facility to fund the creation of WISeCoin AG.

Both the sixth and seventh amendments were analyzed as debt modification and accounted for under ASC 470-50-40-14. Total debt issue costs of USD 2,290,000 were recorded as debt discounts and amortized over the duration of the credit line.

The eighth, ninth and tenth amendments did not give rise to any debt modification or debt extinguishment accounting.

With the eleventh amendment on September 27, 2018 ExWorks removed liens on some intellectual property of the Group in exchange for WISeKey purchasing from ExWorks a 22% warrant in Tarmin (see note 19) for a total purchase price of USD 7,000,000 made up of a USD 3,000,000 cash payment made on October 05, 2018 and a USD 4,000,000 promissory note payable on March 31, 2019. The amendment fee was USD 250,000. The Tarmin Warrant was assessed as an equity investment without a readily determinable fair value and we elected the measurement at cost less impairment, adjusted for observable price changes for identical or similar investments of the same issuer as permitted by ASU 2016-01. As such, the Tarmin Warrant was initially recognized on the balance sheet at USD 7,000,000.

In line with ASC 470-50, we compared the present value of the new debt per the eleventh amendment to the present value of the old debt under the tenth amendment and concluded that the difference was below the 10% threshold. The eleventh amendment was analyzed as a debt modification and accounted for under ASC 470-50-40-14. Total debt issue costs of USD 2,540,000 were recorded as debt discounts and amortized over the duration of the credit line.

As at December 31, 2018, outstanding borrowings were USD 22,642,012 and unamortized debt discount USD 1,375,374.

On January 16, 2019, WISeKey repaid in cash all outstanding amounts: USD 22,618,226 of principal, USD 120,654 of accrued interests, and USD 2,595,000 of accrued fees.

For the period starting January 01, 2019 to January 16, 2019, WISeKey recorded a total debt amortization charge of USD 49,822. Therefore the unamortized debt discount as at January 16, 2019 amounted to USD 1,325,552.

F-22

The repayment of the loan was assessed as a debt extinguishment in line with ASC 405-20-40-1. As a result, the unamortized debt discount of USD 1,325,552 was expensed as loss on debt extinguishment in the income statement. Because most of the principal loan balance related to the acquisition credit line for the purchase of QuoVadis in 2017, and in application of ASC 205-20-45-6 to 205-20-45-8 after the signature of the SPA to sell QuoVadis, WISeKey further elected to apply ASC 205-20-45-8 and to allocate interest to the discontinued operations based on the debt that can be identified as specifically attributed to the operations of QuoVadis. As a result USD 1,092,783 out of the USD 1,325,552 total loss on debt extinguishment was recorded under discontinued operations and presented as a separate line item in the income / (loss) on discontinued operations presented in Note 37. The remaining USD 232,769 loss on debt extinguishment attributable to continuing operations is showing as a separate line item on the face of the income statement.

Standby Equity Distribution Agreement with YA II PN, Ltd.

On February 08, 2018 WISeKey entered into a Standby Equity Distribution Agreement (“SEDA”) with YA II PN, Ltd., a fund managed by Yorkville Advisors Global, LLC (“Yorkville”). Under the terms of the SEDA as amended, Yorkville has committed to provide WISeKey, upon a drawdown request by WISeKey, up to CHF 50,000,000 in equity financing over a three-year period ending March 01, 2021. Provided that a sufficient number of class B shares is provided through share lending, WISeKey has the right to make drawdowns under the SEDA, at its discretion, by requesting Yorkville to subscribe for (if the class B shares are issued out of authorized share capital) or purchase (if the class B shares are delivered out of treasury) class B shares worth up to CHF 5,000,000 by drawdown, subject to certain exceptions and limitations (including the exception that a drawdown request by WISeKey shall in no event cause the aggregate number of class B shares held by Yorkville to meet or exceed 4.99% of the total number of shares registered with the commercial register of the Canton of Zug). The purchase price will be 93% of the relevant market price at the time of the drawdown, determined by reference to a five-day trading period following the draw down request by WISeKey.

The instrument was assessed under ASC 815 as an equity instrument. WISeKey paid a one-time commitment fee of CHF 500,000 (USD 524,231 at historical rate) on April 24, 2018 in 100,000 WIHN class B shares. In line with ASU 2015-15 the commitment fee was capitalized as deferred charges to be amortized over the duration of the contract as a reduction of equity.

In 2018, WISeKey made 4 drawdowns for a total of CHF 1,749,992 (USD 1,755,378 at historical rate) in exchange for a total of 540,539 WIHN class B shares issued out of authorized share capital or treasury share capital.

In 2019, WISeKey made the following drawdowns:

- On January 08, 2019 one drawdown for CHF 250,000 (USD 245,125 at historical rate) in exchange for 97,125 WIHN class B shares issued out of treasury share capital.

- On August 15, 2019 one drawdown for CHF 250,000 (USD 256,187 at historical rate) in exchange for 120,250 WIHN class B shares issued out of treasury share capital.

- On September 17, 2019 one drawdown for CHF 199,999 (USD 202,520 at historical rate) in exchange for 84,281 WIHN class B shares issued out of treasury share capital.

- On October 10, 2019 one drawdown for CHF 249,999 (USD 249,999 at historical rate) in exchange for 111,012 WIHN class B shares issued out of treasury share capital.

- On November 07, 2019 one drawdown for CHF 157,933 (USD 157,933 at historical rate) in exchange for 78,146 WIHN class B shares issued out of treasury share capital.

The amortization charge for the capitalized fee recognized in APIC amounted to USD 183,631 for the year to December 31, 2019 and the remaining deferred charge balance was USD 214,322 made up of USD 184,134 current and USD 30,188 noncurrent.

As at December 31, 2019 the outstanding equity financing available was CHF 47,142,077.

Facility Agreement with YA II PN, Ltd.

On September 28, 2018 WISeKey entered into short-term Facility Agreement (the “Yorkville Loan”) with Yorkville to borrow USD 3,500,000 repayable by May 01, 2019 in monthly cash instalments starting in November 2018. The loan bears an interest rate of 4% per annum payable monthly in arrears. A fee of USD 140,000 and debt issuance costs of USD 20,000 paid at inception.

The debt instrument was assessed as a term debt. A discount of USD 160,000 was recorded at inception and will be amortized using the effective interest method over the life of the debt.

The remaining loan balance at December 31, 2018 was USD 2,717,773 including unamortized debt discount of USD 57,007.

The discount amortization expense recorded for the period to December 31, 2018 was USD 102,993.

In the period to December 31, 2018, WISeKey repaid USD 725,220 of the principal loan amount in cash.

On June 27, 2019, WISeKey entered into a Convertible Loan Agreement (the “Yorkville Convertible Loan”) with Yorkville to borrow USD 3,500,000 repayable by August 01, 2020 in monthly instalments starting in August 01, 2019 either in cash or in WIHN class B Shares. The loan bears an interest rate of 6% per annum payable monthly in arrears. Total fees of USD 160,000 were paid at inception.

The conversion option into WIHN Class B shares is exercisable at the election of Yorkville and may be exercised at each monthly repayment date, covering any amount outstanding, be it principal and/or accrued interests. The initial exercise price is set at CHF 3.00 per WIHN class B Share but may be adjusted as a result of specific events so as to prevent any dissolution effect. The events triggering anti-dissolution adjustments are: (a) increase of capital by means of capitalization of reserves, profits or premiums by distribution of WIHN Shares, or division or consolidation of WIHN Shares, (b) issue of WIHN shares or other securities by way of conferring subscription or purchase rights, (c) spin-offs and capital distributions other than dividends, and (d) dividends.

F-23

At the date of inception of the Yorkville Convertible Loan, on June 27, 2019, an unpaid balance of USD 500,000 remained on the Yorkville Loan. There was no unamortized debt discount on the Yorkville Loan as it was amortized in accordance with the planned repayment schedule, i.e. by May 01, 2019.

In line with ASC 470-50, we compared the present value of the new debt (the Yorkville Convertible Loan) to the present value of the old debt (the Yorkville Loan) using the net method and concluded that the difference was below the 10% threshold. Therefore the Yorkville Convertible Loan was analyzed as a debt modification and accounted for under ASC 470-50-40-14.

In line with ASU 2014-16, the convertible note was assessed as a hybrid instrument, being a debt instrument with an equity-linked component (the conversion option). Per ASC 815-10, the embedded conversion option met the definition of a derivative and was accounted for separately, thereby creating a debt discount.

The derivative liability component (the conversion option) was fair valued using a binomial lattice model, building in quoted market prices of WIHN class B shares, and inputs such as time value of money, volatility, and risk-free interest rates. It was valued at inception at USD 257,435, and was allocated between current and noncurrent on a prorata temporis basis according to the monthly repayment schedule. The derivative component will be revalued at fair value at each reporting date in line with ASC 815-15-30-1.

On the date of the agreement, WISeKey signed an option agreement granting Yorkville the option to acquire up to 500,000 WIHN class B shares at an exercise price of CHF 3.00, exercisable between June 27, 2019 and June 27, 2022. In order to prevent any dissolution effect, the exercise price may be adjusted as a result of the same specific events listed above as adjustments to the conversion price of the principal amount. In line with ASC 470-20-25-2, the proceeds from the convertible debt with a detachable warrant was allocated to the two elements based on the relative fair values of the debt instrument net of the warrant and the embedded conversion separated out on the one side, and the warrant at time of issuance on the other side. The option agreement was assessed as an equity instrument and was fair valued at grant for an amount of USD 373,574 using the Black-Scholes model and the market price of WIHN class B shares on the date of grant, June 27, 2019, of CH 2.35. The fair value of the debt was calculated using the discounted cash flow method as USD 3,635,638. Applying the relative fair value method per ASC 470-20-25-2, the recognition of the option agreement created a debt discount on the debt host in the amount of USD 326,126, and the credit entry was booked in APIC.

As a result of the above accounting entries, the total debt discount recorded at inception was USD 743,561, made up of USD 160,000 fees to Yorkville, USD 257,435 from the bifurcation of the embedded conversion option into derivative liabilities, and USD 326,126 from the recognition of the warrant agreement.

As at December 31, 2019, WISeKey had repaid USD 1,162,607 and the principal amount outstanding was USD 2,337,393 with an unamortized debt discount of USD 275,296.

For the year 2019, the Group recorded in the income statement a net debt discount amortization expense of USD 468,265.

Convertible Loan with Crede CG III, Ltd

On September 28, 2018 the Group closed a Convertible Loan Agreement (the “Crede Convertible Loan”) with Crede CG III (“Crede”), Ltd for an amount of USD 3,000,000. The funds were made available on October 31, 2018. The loan bears a 10% p.a. interest rate, payable in arrears on a quarterly basis starting December 31, 2018, and is repayable in WIHN class B Shares any time between November 30, 2018 and the maturity date of September 28, 2020, at Crede’s election. Accrued interests are payable, at WISeKey’s sole election, either in cash or in WIHN class B Shares. The conversion price applicable to the prepayment of the principal amount or accrued interest is calculated as 93% of the average of the 2 lowest daily volume-weighted average prices quoted on the SIX Stock Exchange during the 10 Trading Days immediately preceding the relevant conversion date or interest payment date respectively, disregarding any day on which Crede (or its Affiliates or related party) has effected any trade, converted into USD at the exchange rate reported by Bloomberg at 9 a.m. Swiss time on the relevant conversion date or interest payment date. As at December 31, 2018 the full amount of USD 3 million remained outstanding and accrued interest of USD 50,833 were recognized in the income statement.

Due to Crede’s option to convert the loan in part or in full at any time before maturity, the Crede Convertible Loan was assessed as a share-settled debt instrument with an embedded put option. Because the value that Crede will receive at settlement does not vary with the value of the shares, the settlement provision is not considered a conversion option. We assessed the put option under ASC 815 and concluded that it is clearly and closely related to its debt host and therefore did not require bifurcation. Per ASC 480-10-25, the Crede Convertible Loan was accounted for as a liability measured at fair value using the discounted cash flow method at inception.

On the date of the agreement, WISeKey signed an option agreement granting Crede the option to acquire up to 408,247 WIHN class B shares at an exercise price of CHF 3.84, exercisable between October 31, 2018 and October 29, 2021. Per the option agreement’s term, the date of grant under US GAAP is October 29, 2018 upon issuance of a Tax Ruling from the Swiss Federal Tax Administration and the Zug tax authority. In line with ASC 470-20-25-2, the proceeds from the convertible debt with a detachable warrant was allocated to the two elements based on the relative fair values of the debt instrument without the warrant and of the warrant at time of issuance. The option agreement was assessed as an equity instrument and was fair valued at grant for an amount of USD 408,056 using the Black-Scholes model and the market price of WIHN class B shares on the date of grant, October 29, 2018, of CH 3.06. The fair value of the debt was calculated using the discounted cash flow method as USD 2,920,556. Applying the relative fair value method per ASC 470-20-25-2, the recognition of the option agreement created a debt discount on the debt host in the amount of USD 367,771, and the credit entry was booked in APIC.

In 2019, Crede issued six exercise notices, resulting in the following conversions:

- On January 03, 2019 for 30,000 WHIN class B shares delivered on January 08, 2019 for a conversion of USD 73,559.

- On January 15, 2019 for 100,000 WHIN class B shares delivered on January 17, 2019 for a conversion of USD 265,099.

F-24

- On February 19, 2019 for 100,000 WHIN class B shares delivered on February 26, 2019 for a conversion of USD 279,525.

- On June 24, 2019 for 100,000 WHIN class B shares delivered on July 01, 2019 for a conversion of USD 208,755.

- On September 03, 2019 for 300,000 WHIN class B shares delivered on September 09, 2019 for a conversion of USD 640,934.

- On December 03, 2019 for 150,000 WHIN class B shares delivered on December 09, 2019 for a conversion of USD 303,228.

As at December 31, 2019, the principal amount outstanding was USD 1,228,899, and the unamortized debt discount USD 64,971.

For the year 2019, the Group recorded in the income statement a net debt discount amortization expense of USD 114,103. In line with ASC 470-20-50-5, as at December 31,2019, the amount by which the instrument’s if-converted value exceeds its principal amount is USD 318,270.

Credit Agreement with ExWorks Capital Fund I, L.P

On April 04, 2019 WISeCoin AG (“WISeCoin”), an affiliate of the Company, signed a credit agreement with ExWorks. Under this credit agreement, WISeCoin was granted a USD 4,000,000 term loan and may add up to USD 80,000 accrued interest to the loan principal, hence a maximum loan amount of USD 4,080,000. The loan bears an interest rate of 10% p.a. payable monthly in arrears. The maturity date of the arrangement is April 04, 2020 therefore all outstanding balances are classified as current liabilities in the balance sheet. ExWorks can elect to have part of or all of the principal loan amount and interests paid either in cash or in WISeCoin Security Tokens (the “WCN Token”) as may be issued by WISeCoin from time to time. As at June 30, 2019, the conversion price is set at CHF 12.42 per WCN Token based on a non-legally binding term sheet.

Under the terms of the credit agreement, WISeCoin is required to not enter into agreements that would result in liens on property, assets or controlled subsidiaries, in indebtedness other than the exceptions listed in the credit agreement, in mergers, consolidations, organizational changes except with an affiliate, contingent and third party liabilities, any substantial change in the nature of its business, restricted payments, insider transactions, certain debt payments, certain agreements, negative pledge, asset transfer other than sale of assets in the ordinary course of business, or holding or acquiring shares and/or quotas in another person other than WISeCoin R&D. Furthermore, WISeCoin is required to maintain its existence, pay all taxes and other liabilities.

Borrowings under the line of credit are secured by first ranking security interests on all material assets and personal property of WISeCoin, and a pledge over the shares in WISeCoin representing 90% of the capital held by the Company. Under certain circumstances, additional security may be granted over the intellectual property rights of WISeCoin and WISeCoin R&D, and the shares held by WISeCoin in WISeCoin R&D.

Total debt issue costs of USD 160,000 were recorded as debt discount and amortized over the duration of the loan.

In the year 2019, WISeKey recorded a total debt discount amortization charge of USD 151,343 and an unamortized debt discount of USD 8,657 remained as at December 31, 2019.

As at December 31, 2019, outstanding borrowings were USD 4,030,129.

Credit Agreement with Long State Investment Limited

On December 16, 2019, WISeKey entered into a Convertible Term Loan Facility Agreement (the “LSI Convertible Facility”) with Long State Investment Limited (“LSI“), a Hong Kong-based investment company, to borrow up to CHF 30 million. Under the terms of the LSI Convertible Facility, WISeKey will be able to drawdown individual term loans of up to CHF 500,000 or, if so agreed between the parties, up to CHF 2.5 million at an interest rate of 1.5% p.a., up to an aggregate amount of CHF 30 million over a commitment period of 24 months. LSI will have the right to convert a drawdown tranche into WIHN class B shares or, if so agreed among the parties and permitted by law, into American Depositary Shares (“ADSs”) representing WIHN class B shares, within a period of 21 SIX trading days after each individual drawdown at 95% of the higher of (i) the then prevailing market rate and (ii) the minimum conversion price of CHF 1.80. Any term loan not converted by LSI initially will automatically convert into WIHN class B shares, or ADSs, 20 SIX trading days before the expiration of the commitment period at the applicable conversion price. Under certain circumstances, interest payments may be “paid in kind” by capitalizing such interest and adding to it the aggregate principal balance of the loan outstanding.

Under the arrangement, WISeKey and LSI plan to establish a Joint Venture in Hong Kong in the first quarter of 2020 to focus on business opportunities in Asia. A memorandum of understanding has been executed between WISeKey and LSI to that effect.

Due to LSI’s option to convert the loan in part at each drawdown before maturity, the LSI Convertible Facility was assessed as a debt instrument with an embedded put option. We assessed the put option under ASC 815 and concluded that it is clearly and closely related to its debt host and therefore did not require bifurcation. Per ASC 480-10-25, the LSI Convertible Facility will be accounted for as a liability measured at fair value using the discounted cash flow method for each term loan (corresponding to each drawdown).

As at December 31, 2019, debt issue costs corresponding to CHF 22,230 in legal fees were recorded in the income statement by WISeKey to execute the LSI Convertible Facility. Also, per the terms of the LSI Convertible Facility, WISeKey owes LSI a CHF 10,000 expense allowance and a commitment fee payable in 400,000 WIHN class B shares, which were not yet settled as at December 31, 2019 and are expected to be settled in January 2020. The debt issue costs and commitment fee will be recorded as a debt discount proportionately to each drawdown. However, as at December 31, 2019, WISeKey had not yet drawn down on the LSI Convertible Facility, therefore, in application of ASC 340-10-S99-1, WISeKey accounted for the debt issue costs of CHF 22,230 as a deferred asset to be amortized on a straight-line basis over the access period of the LSI Convertible Facility.

As at December 31, 2019 the outstanding LSI Convertible Facility available was CHF 30 million.

F-25

Note 25. Employee benefit plans

Defined benefit post-retirement plan

The Group maintains three pension plans: one maintained by WISeKey SA covering its employees in Switzerland, and one maintained by WISeKey Semiconductors SAS as well as one maintained by WISeCoin France R&D Lab SAS, both covering WISeKey’s French employees.

All plans are considered defined benefit plans and accounted for in accordance with ASC 715 Compensation – Retirement Benefits. This model allocates pension costs over the service period of employees in the plan. The underlying principle is that employees render services ratably over this period, and therefore, the income statement effects of pensions should follow a similar pattern. ASC 715 requires recognition of the funded status or difference between the fair value of plan assets and the projected benefit obligations of the pension plan on the balance sheet, with a corresponding adjustment recorded in the net loss. If the projected benefit obligation exceeds the fair value of the plan assets, then that difference or unfunded status represents the pension liability.

The Group records net service cost as an operating expense and other components of defined benefit plans as a non-operating expense in the statement of comprehensive loss.

The liabilities and annual income or expense of the pension plan are determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate and the long-term rate of asset return (based on the market-related value of assets). The fair value of plan assets is determined based on prevailing market prices.

The defined benefit pension plan maintained by WISeKey Semiconductors SAS and WISeCoin France R&D Lab SAS, and their obligations to employees in terms of retirement benefits, are limited to a lump sum payment based on remuneration and length of service, determined for each employee. The plans are not funded.

The pension liability calculated as at December 31, 2019 is based on annual personnel costs and assumptions as of December 31, 2019.

Personnel Costs	As at December 31,	As at December 31,	As at December 31,
USD'000	2019	2018	2017
Wages and Salaries	11,161	9,738	8,698
Social security contributions	2,813	2,974	2,647
Net service costs	281	372	361
Other components of defined benefit plans, net	132	140	143
Total	14,387	13,224	11,849

						As at December 31,
Assumptions	2019	2019	2019	2018	2018		2018	2017	2017	2017
	France	Switzerland	India	France	Switzerland		India	France	Switzerland	India
Discount rate	0.70%	0.25%	7.30%	1.50%	0.80% - 0.90%		7.72%	1.31%	0.60% - 0.70%	6.90%
Expected rate of return on plan assets	n/a	1.50%	n/a	n/a	1.50% - 2%		n/a	n/a	1.50% - 2%	n/a
Salary increases	3%	1.50%	9%	3%	0.5% - 1.50%		9%	3%	0.5% - 1.50%	3%

For WISeKey SA’s funded plan, the expected long-term rate of return on assets is based on the pension fund policy which is based on approximately +0.5% in addition to the minimum interest by law in Switzerland (“Min LPP”). In 2020, Min LPP is 1.0% hence an assumption of 1.5%.

As at December 31, 2019 the Group’s accumulated benefit obligation amounted to USD 16,815,840.

F-26

Reconciliation to Balance Sheet start of year
USD'000
Fiscal year	2019	2018
Fair value of plan assets	(8,275)	(7,789)
Projected benefit obligation	12,740	12,374
Surplus/deficit	4,465	4,585
Opening balance sheet asset/provision (funded status)	4,465	4,585
Reconciliation of benefit obligation during the year
Projected benefit obligation at start of year	12,740	12,374
Net Service cost	412	372
Interest expense	107	86
Plan participant contributions	216	180
Net benefits paid to participants	1,377	(88)
Actuarial losses/(gains)	2,487	(37)
Currency translation adjustment	227	(148)
Projected benefit obligation at end of year	17,566	12,740
Reconciliation of plan assets during year
Fair value of plan assets at start of year	(8,275)	(7,789)
Employer contributions paid over the year	(347)	(293)
Plan participant contributions	(216)	(180)
Net benefits paid to participants	(1,401)	88
Interest income	(123)	(116)
Return in plan assets, excl. amounts included in net interest	(136)	(56)
Currency translation adjustment	(188)	71
Fair value of plan assets at end of year	(10,686)	(8,275)
Reconcilation to balance sheet end of year
Fair value of plan assets	(10,686)	(8,275)
Defined benefit obligation - funded plans	17,566	12,740
Surplus/deficit	6,880	4,465
Closing balance sheet asset/provision (funded status)	6,880	4,465

F-27

Estimated amount to be amortized from accumulated OCI into NPBC over next fiscal year
Net loss (gain)	283	88
Unrecognized transition (asset)/obligation	0	0
Prior service cost/(credit)	61	62

USD'000
Fiscal year	2019	2018	2017
Amounts recognized in accumulated OCI
Net loss (gain)	4,258	1,964	2,187
Unrecognized transition (asset)/obligation	0	0	0
Prior service cost/(credit)	300	357	423
Deficit	4,558	2,321	2,609

Movement in Funded Status
USD'000
Fiscal year	2019	2018	2017
Opening balance sheet liability (funded status)	4,465	4,585	3,810
Net Service cost	412	372	361
Interest cost/(credit)	107	86	71
Expected return on Assets	(123)	(116)	(93)
Amortization on Net (gain)/loss	88	108	103
Amortization on Prior service cost/(credit)	62	62	61
Currency translation adjustment	(2)	1	0
Total Net Periodic Benefit Cost/(credit)	544	512	504
Actuarial (gain)/loss on liabilities due to experience	1,056	272	743
Actuarial gain/loss on liab. from changes to fin. assump	1,431	(309)	1
Actuarial (gain)/loss on liab. from changes to demo. assump	0	1	0
Return in plan assets, excl. amounts included in net interest	(136)	(56)	(299)
Amortization on Net (gain)/loss	(88)	(108)	(103)
Amortization on Prior service cost/(credit)	(62)	(62)	(61)
Currency translation adjustment	(2)	(0)	(3)
Total gain/loss recognized via OCI	2,200	(262)	279
Employer contributions paid in the year	(371)	(293)	(250)
Total cashflow	(371)	(293)	(250)
Currency translation adjustment	43	(77)	242
Closing balance sheet liability (funded status)	6,880	4,465	4,585
Reconciliation of Net Gain / Loss
Amount at beginning of year	1,964	2,187	1,852
Amortization during the year	(86)	(109)	(103)
Asset (gain) / loss	(136)	(56)	(299)
Liability (gain) / loss	2,487	(37)	744
Currency translation adjustment	29	(21)	16
Amount at year-end	4,258	1,964	2,187
Reconciliation of prior service cost/(credit)
Amount at beginning of year	357	423	479
Amortization during the year	(62)	(62)	(61)
Currency translation adjustment	5	(4)	5
Amount at year-end	300	357	423

All of the assets are held under the collective contract by the plan’s re-insurer company and are invested in a mix of Swiss and International bond and equity securities. In line with ASC 820’s three-tier fair value hierarchy, pension assets belong to the fair value level 3.

F-28

The table below shows the breakdown of expected future contributions payable to the Plan :

Period USD'000	France	Switzerland
2020	19	1,337
2021	-	348
2022	142	344
2023	-	366
2024	7	1,958
2025-2029	202	2,955

The Group expects to make contributions of approximately $346,023 in 2020.

Note 26. Commitments and contingencies

Lease commitments

The future payments due under leases are shown in Note 17.

Guarantees

Our software and hardware product sales agreements generally include certain provisions for indemnifying customers against liabilities if our products infringe a third party’s intellectual property rights. Certain of our product sales agreements also include provisions indemnifying customers against liabilities in the event we breach confidentiality or service level requirements. It is not possible to determine the maximum potential amount under these indemnification agreements due to our lack of history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, we have not incurred any costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in our consolidated financial statements

Note 27. Stockholders’ equity

WISeKey International Holding AG	As at December 31, 2019		As at December 31, 2018
Share Capital	Class A Shares	Class B Shares	Class A Shares	Class B Shares
Par value per share (in CHF)	0.01	0.05	0.01	0.05
Share capital (in USD)	400,186	1,475,000	400,186	1,472,276
Per Articles of association and Swiss capital categories	-	-
Authorized Capital - Total number of authorized shares	-	8,881,829	-	8,881,829
Conditional Share Capital - Total number of conditional shares	-	11,840,090	-	11,894,379
Total number of fully paid-in shares	40,021,988	28,824,086	40,021,988	28,769,797
Per US GAAP
Total number of authorized shares	40,021,988	41,066,298	40,021,988	41,063,901
Total number of fully paid-in issued shares	40,021,988	28,824,086	40,021,988	28,769,797
Total number of fully paid-in outstanding shares	40,021,988	27,621,895	40,021,988	26,681,736
Par value per share (in CHF)	0.01	0.05	0.01	0.05
Share capital (in USD)	400,186	1,475,000	400,186	1,472,276
Total share capital (in USD)	1,875,186		1,872,462
Treasury Share Capital
Total number of fully paid-in shares held as treasury shares	-	1,202,191	-	2,088,061
Treasury share capital (in USD)	-	1,288,591	-	1,138,596
Total treasury share capital (in USD)	-	1,288,591	-	1,138,596

Note: unregistered conversion of conditional capital NOT deducted from total number of conditional shares, i.e. as if the issue had not taken place.

F-29

In the year to December 31, 2019 and 2018 respectively, WISeKey purchased a total of 593,824 and 2,729,657 treasury shares at an average purchase price of USD 2.75 and USD 0.96 per share, and sold a total of 1,479,694 and 641,596 treasury shares at an average sale price of USD 2.40 and USD 2.92 per share.

Share buyback program

On July 09, 2019, the Group started a share buyback program on the SIX Swiss Exchange to buy back WIHN class B shares up to a maximum 10.0% of the share capital and 5.35% of the voting rights. In compliance with Swiss Law, at no time will the group hold more than 10% of its own registered shares. The share buyback program will end on July 08, 2022 but WISeKey may terminate the buyback program early. Aa at December 31, 2019, WISeKey’s treasury share balance included 90,500 WIHN class B shares purchased through the share buyback program.

Voting rights

Each share carries one vote at a general meeting of shareholders, irrespective of the difference in par value of class A shares (CHF 0.01 per share) and class B shares (CHF 0.05 per share). Our class A shares have a lower par value (CHF 0.01) than our class B shares (CHF 0.05) but have same voting right as the higher par value class B shares, namely one (1) vote per share. This means that, relative to their respective per share contribution to the Company’s capital, the holders of our class A shares have a greater relative per share voting power than the holders of our class B shares for matters that require approval on the basis of a specified majority of shares present at the shareholders meeting.

Shareholder resolutions and elections (including elections of members of the board of directors) require the affirmative vote of an absolute majority of the votes represented (in person or by proxy) at a general meeting of shareholders (each class A share and each class B share having one vote), unless otherwise stipulated by law or our Articles. The following matters require approval by a majority of the par value of the shares represented at the general meeting (each class A share having a par value of CHF 0.01 per share and each class B share having a par value of CHF 0.05 per share):

- electing our auditor;

- appointing an expert to audit our business management or parts thereof;

- adopting any resolution regarding the instigation of a special investigation; and

- adopting any resolution regarding the initiation of a derivative liability action.

In addition, under Swiss corporation law and our Articles, approval by two-thirds of the shares represented at the meeting, and by the absolute majority of the par value of the shares represented is required for:

- amending our corporate purpose;

- creating or cancelling shares with preference rights;

- restricting the transferability of registered shares;

- restricting the exercise of the right to vote or the cancellation thereof;

- creating authorized or conditional share capital;

- increasing the share capital out of equity, against contributions in kind or for the purpose of acquiring specific assets and granting specific benefits;

- limiting or withdrawing shareholder's pre-emptive rights;

- relocating our registered office;

- converting registered shares into bearer shares and vice versa;

- our dissolution or liquidation; and

- transactions among corporations based on Switzerland's Federal Act on Mergers, Demergers, Transformations and the Transfer of Assets of 2003, as amended (the "Swiss Merger Act") including a merger, demerger or conversion of a corporation.

In accordance with Swiss law and generally accepted business practices, our Articles do not provide attendance quorum requirements generally applicable to general meetings of shareholders.

Both categories of Shares confer equal entitlement to dividends and liquidation rights relative to the nominal value of the class A shares and the class B shares, respectively.

Only holders of Shares (including nominees) that are recorded in the share register as of the record date communicated in the invitation to the General Meeting are entitled to vote at a General Meeting.

Any acquirer of Shares who is not registered in the share register as a shareholder with voting rights may not vote at or participate in any General Meeting, but will still be entitled to dividends and other rights with financial value with respect to such Shares.

Each holder of class A shares has entered into an agreement (each such agreement a "Shareholder Agreement") with WISeKey, pursuant to which such holder of class A shares has given the undertaking vis-à-vis WISeKey not to (i) directly or indirectly offer, sell, transfer or grant any option or contract to purchase, purchase any option or contract to sell, grant instruction rights with respect to or otherwise dispose of, or (ii) solicit any offers to purchase, otherwise acquire or be entitled to, any of his/her/its class A shares or any right associated therewith (collectively a "Transfer"), except if such Transfer constitutes a "Permitted Transfer", as defined hereafter. A Permitted Transfer is defined as a Transfer by a holder of class A share to his/her spouse or immediate family member (or a trust related to such immediate family member) or a third party for reasonable estate planning purposes, the transfer to an affiliate and any transfer following conversion of his/her/its class A shares into class B shares. Each holder of a class A share has the right to request that, at WISeKey's annual General Meeting, an item be included on the agenda according to which class A shares are, at the discretion of each holder of class A shares, converted into class B shares.

F-30

Note 28. Accumulated other comprehensive income

USD'000
Accumulated other comprehensive income as at December 31, 2017			(650)
	Total net foreign currency translation adjustments	131
	Total defined benefit pension adjustment	287
	Total unrealized loss on securities reclassified to accumulated deficit	375
	Total adjustment from liquidation of group companies	(43)
Total Other comprehensive income/(loss), net			750
Accumulated other comprehensive income as at December 31, 2018			100
	Total net foreign currency translation adjustments	643
	Total defined benefit pension adjustment	(2,199)
	Total unrealized loss on securities reclassified to accumulated deficit
	Total adjustment from liquidation of group companies	(21)
	Total adjustment from sale of QuoVadis Group	34
	Total adjustment from change in Ownership	(10)
Total Other comprehensive income/(loss), net			(1,553)
Accumulated other comprehensive income as at December 31, 2019			(1,453)

Note 29. Revenue

Nature of goods and services

The following is a description of the principal activities – separated by reportable segment – from which the Group generates its revenue. For more detailed information about reportable segments, see note 35 - Segment Information and Geographic Data.

- IoT Segment

The IoT segment of the Group principally generates revenue from the sale of semiconductors secure chips. Although they may be sold in connection with other services of the Group, they always represent distinct performance obligations.

The Group recognizes revenue when a customer takes possession of the chips, which usually occurs when the goods are delivered. Customers typically pay once goods are delivered.

- mPKI Segment

The mPKI Segment of the Group generates revenues from Digital Certificates, Software as a Service, Software license and Post-Contract Customer Support (PCS) for cybersecurity applications. Products and services are sold principally separately and more in bundled packages.

For bundled packages, the Group accounts for individual products and services separately if they are distinct – i.e. if a product or service is separately identified from other items in the bundled package and if a customer can benefit from it. The consideration is allocated between separate products and services in a bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the list prices when available or estimated based on the Adjusted Market Assessment approach (e.g. licenses), or the Expected Cost-Plus Margin approach (e.g. PCS).

Product and services	Nature, timing of satisfaction of performance obligations and significant payment terms
Certificates	The Group recognizes revenue on a straight-line basis over the validity period of the certificate, which is usually one to three years. This period starts after the certificate has been issued by the Certificate Authority and may be used by the customer for authentication and signature, by checking the certificate validity against the Root of Trust which is maintained by the Group on its IT infrastructure. Customers pay certificates when certificates are issued and invoiced. The excess of payments over recognized revenue is shown as deferred revenue.
SaaS	The Group’s SaaS arrangement cover the provision of cloud-based certificate life-cycle-management solutions and signing and authentication solutions. The Group recognizes revenue on a straight-line basis over the service period which is usually yearly renewable. Customers usually pay ahead of quarterly or yearly service periods; the paid amounts which have not yet been recognized are shown as deferred revenue.

F-31

Software

The Group provides software for certificates life-cycle management and signing and authentication solutions. The Group recognizes license revenue when the software has been delivered and PCS revenue over the service period which is usually one-year renewable. Customers pay upon delivery of the software or over the PCS.

Implementation, integration and other services

The Group provides services to implement and integrate multi-element cybersecurity solutions. Most of the time the solution elements are off-the-shelve non-customized components which represent distinct performance obligations. Implementation and integration services are payable when rendered, while other revenue elements are payable and recognized as per their specific description in this section. WISeKey also provides hosting and monitoring of infrastructure services which are distinct performance obligations and are paid and recognized over the service period.

Disaggregation of revenue

The following table shows the Group’s revenues disaggregated by reportable segment and by product or service type:

Disaggregation of revenue	Typical payment	At one point in time			Over time			Total
USD'000		2019	2018	2017	2019	2018	2017	2019	2018	2017
IoT Segment
Payment at one point in time:
Secure chips	Upon delivery	20,504	29,404	30,435	-	-	-	20,504	29,404	30,435
Total IoT segment revenue		20,504	29,404	30,435	-	-	-	20,504	29,404	30,435
mPKI Segment
Certificates	Upon issuance	-	-	-	172	338	716	172	338	716
Licenses and integration	Upon delivery	1,976	4,538	808	-	-	-	1,976	4,538	808
SaaS, PCS and hosting	Quarterly or yearly	-	-	-	-	-	1,715	-	-	1,715
Total mPKI segment revenue		1,976	4,538	808	172	338	2,431	2,148	4,876	3,239
Total Revenue		22,480	33,942	31,243	172	338	2,431	22,652	34,280	33,674

For the years ended December 31, 2019, 2018, and 2017 the Group recorded no revenues related to performance obligations satisfied in prior periods.

The following table shows the Group’s revenues disaggregated by geography, based on our customers’ billing addresses:

Net sales by region	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
IoT Segment
Switzerland	708	1,171	3,090
Rest of EMEA	7,508	10,695	9,748
North America	9,547	15,165	12,714
Asia Pacific	2,503	2,257	3,649
Latin America	238	116	1,234
Total IoT segment revenue	20,504	29,404	30,435
mPKI Segment
Switzerland	1,428	1,341	1,539
Rest of EMEA	539	3,428	1,594
North America	144	-	-
Asia Pacific	1	49	15
Latin America	36	58	91
Total mPKI segment revenue	2,148	4,876	3,239
Total Net sales	22,652	34,280	33,674

*EMEA includes Europe, Africa and Middle-east

F-32

Contract assets, deferred revenue and contract liability

Our contract assets, deferred revenue and contract liability consist of:

	As at December 31,	As at December 31,
USD'000	2019	2018
Trade accounts receivables
Trade accounts receivable - IoT segment	2,843	4,871
Trade accounts receivable - mPKI segment	800	2,736
Total trade accounts receivables	3,643	7,607
Contract assets	15	-
Total contract assets	15	-
Contract liabilities - current	255	-
Contract liabilities - noncurrent	2	-
Total contract liabilities	257	-
Deferred revenue
Deferred revenue  - mPKI segment	92	100
Deferred revenue  - IoT segment	7	-
Total Deferred revenue	99	100
Revenue recognized in the year from amounts included in the deferred revenue of the mPKI segment at the beginning of the year	83	297

Increases or decreases in trade accounts receivable, contract assets, deferred revenue and contract liability were primarily due to normal timing differences between our performance and customer payments.

Remaining performance obligations

As of December 31, 2019, approximately USD 355,997 is expected to be recognized from remaining performance obligations for mPKI contracts. We expect to recognize revenue for these remaining performance obligations during the next three years approximately as follows:

Estimated mPKI revenue from remaining performance obligations as at December 31, 2019	USD'000
2020	344
2021	12
Total remaining performance obligation	356

Note 30. Other operating income

Other operating income consisted of the following:

	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Other operating income from related parties	140	-	88
Other operating income - other	40	289	1,438
Total other operating income	180	289	1,526

In the year 2019, other operating income from related parties was made up of the amounts invoiced by WISeKey to the OISTE Foundation for the use of its premises and equipment.

F-33

In 2019, the Group recorded gains of respectively USD 23,387 and USD 16,538 on the liquidation of its subsidiaries WISeKey Italia s.r.l. and WISeKey Singapore Pte Ltd, classified as other operating income.

Note 31. Stock-based compensation

Employee stock option plans

The Stock Option Plan (“ESOP 1”) was approved on December 31, 2007 by the stockholders of WISeKey SA, representing 2,632,500 options convertible into WISeKey SA shares with an exercise price of CHF 0.01 per share.

The Stock Option Plan (“ESOP 2”) was approved on December 31, 2011 by the stockholders of WISeKey SA, representing 16,698,300 options convertible into WISeKey SA shares with an exercise price of CHF 0.01 per share.

At March 22, 2016 as part of the reverse acquisition transaction, both ESOP plans in existence in WISeKey SA were transferred to WISeKey International Holding AG at the same terms, with the share exchange term of 5:1 into WIHN class B shares.

Grants

In the 12 months to December 31, 2017, the Group granted a total of 782,012 options exercisable on WISeKey International Holding AG’s class B shares. Each warrant is exercisable into one class B share.

The warrants granted consist of:

- 159,996 warrants with immediate vesting granted to external advisors, all of which had been exercised as of December 31, 2017;

- 23,016 warrants with immediate vesting granted to external advisors, all of which had been exercised as of December 31, 2017;

- 265,666 warrants with immediate vesting granted to external advisors, none of which had been exercised as of December 31, 2017.

- 166,667 warrants vesting on July 05, 2018

- 166,667 warrants vesting on July 05, 2019

The warrants granted were valued at grant date using the Black-Scholes model. Unexercised warrants to external advisers at December 31, 2017 were revalued to their fair value at December 31, 2017 using the same model.

In the 12 months to December 31, 2018, the Group granted a total of 851,131 options exercisable on WIHN class B shares. Each warrant is exercisable into one class B share.

The warrants granted consist of:

- 113,750 options with immediate vesting granted to employees, all of which had been exercised as of December 31, 2018;

- 100,000 options with immediate vesting granted to an external advisor, all of which had been exercised as of December 31, 2018;

- 214,000 options with immediate vesting granted to external advisors, none of which had been exercised as of December 31, 2018;

- 13,167 options granted to an employee, which vested on February 01, 2018 but were not exercised and were forfeited on September 30, 2019;

- 13,167 options granted to an employee, which vested on August 01, 2018 but were not exercised and were forfeited on September 30, 2019.

- 132,346 options vesting on December 31, 2018 granted to employees, none of which had been exercised as of December 31, 2018;

- 132,349 options vesting on December 31, 2019 granted to employees;

- 132,352 options vesting on December 31, 2020 granted to employees.

The warrants granted were valued at grant date using the Black-Scholes model. Unexercised warrants to external advisers at December 31, 2018 were revalued to their fair value at December 31, 2018 using the same model.

In the 12 months to December 31, 2019, the Group granted a total of 2,292,539 options exercisable in WISeKey International Holding AG’s class B shares. Each warrant is exercisable into one class B share.

The warrants granted consisted of:

- 2,074,770 options with immediate vesting granted to employees and Board members, none of which had been exercised as of December 31, 2019.

- 145,854 options with immediate vesting granted to employees and Board members, all of which had been exercised as of December 31, 2019;

- 60,394 options with immediate vesting granted in exchange for WISeKey SA shares, all of which had been exercised as of December 31, 2019; and

- 11,521 options with immediate vesting granted to an external advisor and which had not been exercised as of December 31, 2019.

The warrants granted were valued at grant date using the Black-Scholes model.

Stock option charge to the income statement

The Group calculates the fair value of options granted by applying the Black-Scholes option pricing model. Expected volatility is based on historical volatility of WIHN class B shares.

In the fiscal year 2019, a total charge of USD 5,414,487 was recognized in the consolidated income statement calculated by applying the Black-Scholes model at grant, in relation to options:

- USD 5,475,763 for options granted to employees and Board members;

- USD 178,983 for options granted to nonemployees; and

- a credit of USD 240,259 in relation to the forfeiture following the sale of QuoVadis of a total of 333,905 options granted to former employees, out of which 79,256 had vested and 254,649 remained unvested at the date of forfeiture. In line with ASU 2016-09, the compensation cost previously recognized in relation to unvested forfeited options were reversed to the income statement upon forfeiture. This resulted in a credit to the income statement of USD 240,259. There was no credit recorded for the forfeiture of vested options.

F-34

The following assumptions were used to calculate the compensation expense and the calculated fair value of stock options granted:

Assumption	December 31, 2019	December 31, 2018	December 31, 2017
Dividend yield	None	None	None
Risk-free interest rate used (average)	1.00%	1.00%	1.00%
Expected market price volatility	51.59% - 56.86%	46.11% - 58.22%	57.88%
Average remaining expected life of stock options (years)	3.01	3.10	3.37

As a result of the entry into force of ASU 2018-07 and its transitional guidance, unvested options to external advisers which were previously revalued to their fair value at reporting date, are no longer revalued in 2019.

Unvested options to employees as at December 31, 2019 were recognized prorata temporis over the service period (grant date to vesting date).

The following table illustrates the development of the Group’s non-vested options for the years ended December 31, 2019 and 2018.

Non-vested options	Number of WIHN Class B Shares under options	Weighted-average grant date fair value (USD)
Non-vested options as at December 31, 2017	333,334	1.78
Granted	851,131	3.67
Vested	(753,097)	3.22
Non-vested forfeited or cancelled	-	-
Non-vested options as at December 31, 2018	431,368	2.99
Granted	2,292,539	2.45
Vested	(2,464,232)	2.47
Non-vested forfeited or cancelled	(254,649)	3.75
Non-vested options as at December 31, 2019	5,026	3.65

As at December 31, 2019, there was a USD 10,652 unrecognized compensation expense related to non-vested stock option-based compensation arrangements. Non-vested stock options outstanding as at December 31, 2019 were accounted for using the graded-vesting method, as permitted under ASC 718-10-35-8, and we therefore recognized compensation costs calculated using the Black-Scholes model and the market price of WIHN class B shares at grant date, over the requisite service period.

The following table summarizes the Group’s stock option activity for the years ended December 31, 2019 and 2018.

Options on WIHN Shares	WIHN Class B Shares under options	Weighted-average exercise price (USD)	Weighted average remaining contractual term (in years)	Aggregate intrinsic value (USD)
Outstanding at December 31, 2017	731,772	3.61	2.59	(1,149,461)
Of which vested	398,438	3.07	2.65	(410,792)
Of which non-vested	333,334	-	-	-
Granted	851,131	1.56	-	-
Exercised or converted	(213,750)	0.98	-	238,614
Forfeited or cancelled	(26,334)	0.05	-	-
Expired	-	-	-	-
Outstanding as at December 31, 2018	1,342,819	2.76	3.00	(895,404)
Of which vested	911,451	3.28	2.26	(1,082,233)
Of which non-vested	431,368	-	-	-
Granted	2,292,539	0.99	-	-
Exercised or converted	(259,338)	1.00	-	581,477
Forfeited or cancelled	(333,905)	0.05	-	-
Expired	(199,000)	5.17	-	-
Outstanding as at December 31, 2019	2,843,115	0.99	5.19	3,693,941
Of which vested	2,838,089	1.00	5.19	3,682,672
Of which non-vested	5,026	-	-

F-35

Summary of stock-based compensation expenses

Stock-based compensation expenses	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD’000	2019	2018	2017
In relation to Employee Stock Option Plans (ESOP)	5,386	1,278	2,147
In relation to non-ESOP Option Agreements	28	382	85
Total	5,414	1,660	2,232

Stock-based compensation expenses are recorded under the following expense categories in the income statement.

Stock-based compensation expenses	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD’000	2019	2018	2017
Research & development expenses	786	121	-
Selling & marketing expenses	1,269	571	466
General & administrative expenses	3,359	967	1,765
Total	5,414	1,660	2,232

Note 32.Non-operating income

Non-operating income consisted of the following:

	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Foreign exchange gain	1,761	1,664	687
Financial income	74	85	31
Other	83	432	42
Total non-operating income from continuing operations	1,918	2,181	762

Note 33. Non-operating expenses

Non-operating expenses consisted of the following:

	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Foreign exchange losses	2,401	1,984	477
Financial charges	341	104	1,120
Interest expense	643	244	-
Other components of defined benefit plans, net	132	140	143
Other	153	354	11
Total non-operating expenses from continuing operations	3,670	2,826	1,751

F-36

Note 34. Income taxes

The components of income before income taxes are as follows:

Income / (Loss)	As at December 31,	As at December 31,	As at December 31,
USD'000	2019	2018	2017
Switzerland	(19,179)	(11,428)	(24,363)
Foreign	(3,838)	(4,989)	(1,424)
Less discontinued operations	-	6,562	15,732
Income/(loss) before income tax	(23,017)	(9,855)	(10,055)

Income taxes relating to the Group are as follows:

Income taxes	As at December 31,	As at December 31,	As at December 31,
USD'000	2019	2018	2017
Switzerland	(42)	328	(293)
Foreign	13	(479)	(744)
Less discontinued operations	42	205	1,108
Income tax expense	13	53	71

Deferred income tax assets/(liabilities)	As at December 31,	As at December 31,	As at December 31,
USD'000	2019	2018	2017
Switzerland	-	134	307
Foreign	6	708	134
Less discontinued operations	-	(834)	(399)
Deferred income tax assets/(liabilities)	6	8	42

Income tax at the Swiss statutory rate compared to the Group’s income tax expenses as reported are as follows:

Income taxes at the Swiss statutory rate	As at December 31,	As at December 31,	As at December 31,
USD'000	2019	2018	2017
Net income/(loss) from continuing operations before income tax	(23,017)	(9,855)	(10,055)
Statutory tax rate	24%	24%	24%
Expected income tax (expense)/recovery	5,524	2,365	2,433
Income tax (expense)/recovery	(13)	(53)	(71)
Change in valuation allowance	(2,129)	4,228	(4,487)
Permanent Difference	0	(9)	(344)
Change in expiration of tax loss carryforwards	(3,395)	(6,584)	2,397
Income tax (expense) / recovery	(13)	(53)	(71)

The Group assesses the recoverability of its deferred tax assets and, to the extent recoverability does not satisfy the “more likely than not” recognition criterion under ASC 740, records a valuation allowance against its deferred tax assets. The Group considered its recent operating results and anticipated future taxable income in assessing the need for its valuation allowance.

F-37

The Group’s deferred tax assets and liabilities consist of the following:

Deferred tax assets and liabilities	As at December 31,	As at December 31,	As at December 31,
USD'000	2019	2018	2017
Stock-based compensation	-	9	344
Defined benefit accrual	1,100	1,272	1,289
Tax loss carry-forwards	11,264	10,606	14,888
Deferred Income tax liability	-	(1,356)	(1,476)
Deferred tax asset from acquisition	-	477	477
Other temporary adjustments	-	2,426	1,396
Less discontinued Operations	-	(3,196)	(2,418)
Valuation allowance	(12,358)	(10,230)	(14,458)
Deferred tax assets / (liabilities)	6	8	42

As of December 31, 2019, the Group’s operating cumulated loss carry-forwards of all jurisdictions for its continuing operations are as follows:

Operating loss-carryforward as of December 31, 2019
USD'000	USA	Switzerland	Spain	France	UK	India	Total
2020	-	441	-	860	31	-	1,332
2021	-	8,123	206	-	2	-	8,331
2022	-	6,519	1,197	1,121	2	-	8,839
2023	-	6,877	1,227	5,170	-	-	13,274
2024	-	4,041	-	-	-	-	4,041
2025	-	9,789	-	-	-	378	10,167
2026	-	5,376	-	-	-	290	5,666
2027	-	-	-	-	-	443	443
2028	91	-	-	-	-	-	91
2029	9	-	23	-	-	-	32
2030	2	-	23	-	-	-	25
2031	54	-	69	-	-	-	123
2032	89	-	79	-	-	-	168
2033	-	-	181	-	-	-	181
2034	-	-	141	-	-	-	141
2035	247	-	-	-	-	-	247
2036	-	-	-	-	-	-	-
2037	159	-	-	-	-	-	159
2038	-	-	-	-	-	-	-
2039	221	-	-	-	-	-	221
2040	-	-	-	-	-	-	-
Total operating loss carry-forwards / Year of expiration if applicable to jurisdiction
	872	41,166	3,146	7,151	35	1,111	53,481

The following tax years remain subject to examination:

Significant jurisdictions	Open years
Switzerland	2015 - 2018
USA	2016 - 2018
France	2017 - 2019
Spain	2016 - 2019
Japan	2019
Taiwan	2018 - 2019
India	2018 - 2019
UK	2018 - 2019

F-38

As at December 31, 2019, WISeKey Semiconductors SAS had recorded a USD 118,294 tax provision following a tax audit started in 2018 in relation to prior years. Although the final conclusions have not yet been communicated formally, management believes that it is more probable than not that the entity will have to pay additional taxes and has calculated the provision based on preliminary discussions with the tax authorities. As at December 31, 2018, WISeKey Semiconductors SAS had recorded a USD 90,831 tax provision which was neither utilized nor released and is therefore included in the USD 118,294 tax provision as at December 31, 2019.

The Group has no unrecognized tax benefits.

Note 35. Segment information and geographic data

The Group has two segments: Internet of Things (“IoT”, previously referred to as “Semiconductors”) and managed Public Key Infrastructure (“mPKI”, previously referred to as “Others”). The Group’s chief operating decision maker, who is its Chief Executive Officer, reviews financial performance according to these two segments for purposes of allocating resources and assessing budgets and performance.

The IoT segment encompasses the design, manufacturing, sales and distribution of microprocessors operations. The mPKI segment includes all operations relating to the provision of secured access keys, authentication, signing software, certificates and digital security applications.

12 months to December 31,	2019			2018			2017
USD'000	IoT	mPKI	Total	IoT	mPKI	Total	IoT	mPKI	Total
Revenues from external customers	20,504	2,148	22,652	29,404	4,876	34,280	30,435	3,239	33,674
Intersegment revenues	344	6,169	6,513	725	2,563	3,288	209	1,496	1,705
Interest revenue	36	38	74	37	167	204	-	-	-
Interest expense	29	695	724	275	2,608	2,883	224	20	244
Depreciation and amortization	1,298	57	1,355	1,299	16	1,315	1,542	1,043	2,585
Segment income /(loss) before income taxes	130	(22,837)	(22,707)	(1,232)	(8,466)	(9,698)	4,214	(14,188)	(9,974)
Profit / (loss) from intersegment sales	16	294	310	35	122	157	10	71	81
Income tax recovery /(expense)	-	(13)	(13)	2	(55)	(53)	109	(180)	(71)
Other significant non cash items
Share-based compensation expense	-	5,414	5,414	-	1,660	1,660	-	2,232	2,232
Gain/(loss) on derivative liability	-	214	214	-	-	-	-	(98)	(98)
Interest and amortization of debt discount and expense	-	742	742	-	150	150	-	(543)	(543)
Segment assets	15,794	29,919	45,713	19,082	52,675	71,757	19,578	33,590	53,168

12 months to December 31,	2019	2018	2017
	USD'000	USD'000	USD'000
Revenue reconciliation
Total revenue for reportable segment	29,165	37,568	35,379
Elimination of intersegment revenue	(6,513)	(3,288)	(1,705)
Total consolidated revenue	22,652	34,280	33,674
Loss reconciliation
Total profit / (loss) from reportable segments	(22,707)	(9,698)	(9,974)
Elimination of intersegment profits	(310)	(157)	(81)
Loss before income taxes	(23,017)	(9,855)	(10,055)

F-39

As at December 31,	2019	2018	2017
	USD'000	USD'000	USD'000
Asset reconciliation
Total assets from reportable segments	45,713	71,757	53,168
Elimination of intersegment receivables	(6,794)	(6,430)	(6,414)
Elimination of intersegment investment and goodwill	10,985	(19,533)	(10,907)
Total assets held for sale from discontinued operations	-	32,659	31,309
Consolidated total assets	49,904	78,453	67,156

Revenue and property, plant and equipment by geography

The following tables summarize geographic information for net sales based on the billing address of the customer, and for property, plant and equipment.

Net sales by region from continuing operations	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Switzerland	2,137	2,512	4,629
Rest of EMEA*	8,046	14,122	11,342
North America	9,691	15,165	12,714
Asia Pacific	2,504	2,306	3,664
Latin America	274	175	1,325
Total Net sales from continuing operations	22,652	34,280	33,674

* EMEA includes Europe, Africa and the Middle-East

Property, plant and equipment, net of depreciation, by region	As at December 31,	As at December 31,
USD'000	2019	2018
Switzerland	44	57
Rest of EMEA*	1,742	2,289
North America	1	1
Asia Pacific	14	23
Total Property, plant and equipment, net of depreciation	1,801	2,370

* EMEA includes Europe, Africa and the Middle-East

Note 36. Earnings/(Loss) per share

The computation of basic and diluted net earnings/(loss) per share for the Group is as follows:

	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
Earnings / (loss) per share	2019	2018	2017
Net income / (loss) attributable to WISeKey International Holding AG (USD'000)	8,187	(16,278)	(24,267)
Effect of potentially dilutive instruments on net gain (USD'000)	335	N/A	N/A
Net income / (loss) attributable to WISeKey International Holding AG after effect of potentially dilutive instruments (USD'000)	8,522	N/A	N/A
Shares used in net earnings / (loss) per share computation:
Weighted average shares outstanding - basic	36,079,000	33,904,659	29,505,629
Effect of potentially dilutive equivalent shares	1,399,458	N/A	N/A
Weighted average shares outstanding - diluted	37,478,458	N/A	N/A
Net earnings / (loss) per share
Basic weighted average loss per share attributable to WIHN (USD)	0.23	(0.48)	(0.82)
Diluted weighted average loss per share attributable to WIHN (USD)	0.23	(0.48)	(0.82)

For purposes of the diluted net loss per share calculation, stock options, convertible instruments and warrants are considered potentially dilutive securities and are excluded from the calculation of diluted net loss per share, because their effect would be anti-dilutive.

F-40

The following table shows the number of stock equivalents that were excluded from the computation of diluted earnings per share because the effect would have been anti-dilutive.

Dilutive vehicles with anti-dilutive effect	2019	2018	2017
Total stock options	-	1,342,819	731,772
Warrants	-	2,942,374	2,534,127
Redeemable preferred stock		-	860,000
Total convertible instruments	-	6,821,804	3,922,438
Total number of shares from dilutive vehicles with anti-dilutive effect	-	11,106,997	8,048,337

The following table shows the number of stock equivalents that were included in the computation of diluted earnings per share:

Dilutive vehicles	2019	2018	2017
Total stock options	2,327,115	-	-
Warrants	-	-	-
Redeemable preferred stock		-	-
Total convertible instruments	693,230	-	-
Total number of shares from dilutive vehicles	3,020,345	-	-

Note 37. Divestiture and Discontinued operations

Classification as discontinued operations of the QuoVadis Group

On December 21, 2018 the Group signed a sale and purchase agreement (the “SPA”) to sell WISeKey (Bermuda) Holding Ltd and its affiliates to Digicert Inc, excluding the ISTANA product line. The group subsidiaries making up the QuoVadis Group in scope for the sale were WISeKey (Bermuda) Holding Ltd, QuoVadis Trustlink Schweiz AG, WISeKey (UK) Ltd, QuoVadis Trustlink BVBA, QuoVadis Trustlink BV, QV BE BV, QuoVadis Trustlink GmbH, QuoVadis Services Ltd, and QuoVadis Ltd.

The completion of the sale was conditional on: (i) the release of liens on QuoVadis companies held by ExWorks; (ii) consent from Edmund Gibbons Ltd, the joint venture partner holding 49% of QuoVadis Services Ltd; (iii) consent from the Bermuda Monetary Authority; and (iv) consent from the Regulatory Authority in Bermuda (the “RAB”) (the “RAB Consent”) to the change in ultimate beneficial ownership of QuoVadis Services Ltd, being the entity holding the Communications Operating Licence in Bermuda. The SPA states that should the RAB Consent not have been obtained when the other completion conditions are satisfied, WISeKey or Digicert Inc may require to complete the transaction except for QuoVadis Services Ltd, in which case the transfer of ownership of all QuoVadis entities to Digicert Inc would occur except for the shares held by WISeKey (Bermuda) Holding Ltd in QuoVadis Services Ltd which would be transferred to WISeKey International Holding AG until the RAB Consent is obtained.

We assessed the SPA under ASC 205 and concluded that the operation met the requirement to be classified as held for sale and as such qualifies as a discontinued operation from the date of the SPA, December 21, 2018. In line with ASC 205-20-45-3A and ASC 205-20-45-10 respectively, we reported the results of the discontinued operations as a separate component of income for the years 2019, 2018, and 2017, and we classified their assets and liabilities separately as held for sale in the balance sheet for the year to December 31, 2018.

No gain or loss on classification as held for sale was recorded in 2018.

The table below shows the reconciliation of the major classes of line items constituting income / (loss) on discontinued operations to the income / (loss) on discontinued operations reported in discontinued operations in the income statement:

	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Net sales from discontinued operations	1,934	19,412	9,404
Cost of sales from discontinued operations	(791)	(6,196)	(4,516)
Gross profit	1,143	13,216	4,888
Other operating income	-	28	-
Research & development expenses	(121)	(2,801)	(2,047)
Selling & marketing expenses	(142)	(2,826)	(1,795)
General & administrative expenses	(337)	(10,509)	(6,544)
Non-operating income	36	62	7
Non-operating expenses	(103)	(2,676)	(2,772)
Gain / (loss) on debt extinguishment	(1,093)	-	(6,511)
Interest and amortization of debt discount	(41)	(1,056)	(958)
Gain on disposal of a business	31,100	-	-
Total operating and non-operating expenses from discontinued operations	29,299	(19,778)	(20,620)
Income / (loss) from discontinued operations before income tax	30,442	(6,562)	(15,732)
Income tax (expense) / recovery from discontinued operations	42	205	1,108
Income / (loss) on discontinued operations	30,484	(6,357)	(14,624)
Less: Net income on discontinued operations attributable to noncontrolling interests	58	309	82
Net income / (loss) on discontinued operations attributable to WISeKey International Holding AG	30,426	(6,666)	(14,706)

F-41

The depreciation charge from discontinued operations for the years 2018 and 2017 was respectively USD 581,757 and USD 481,467. In line with ASC 205, the depreciation of property, plant and equipment from discontinued operations stopped on the day that they qualified as held for sale. As a result, we did not record any depreciation charge from discontinued operations for the year 2019.

The amortization charge from discontinued operations for the years 2018 and 2017 was respectively USD 1,587,895 and USD 1,953,606. In line with ASC 205, the amortization of intangible assets from discontinued operations stopped on the day that they qualified as held for sale. As a result, we did not record any amortization charge from discontinued operations for the year 2019.

WISeKey considered guidance on allocation of interest to discontinued operations per ASC 205-20-45-6 to 205-20-45-8. In the year 2017, the Group secured an acquisition line of credit agreement with ExWorks with an annual interest rate of 12% (see note 24 for detail). The purpose of this line of credit was the acquisition of the QuoVadis group which was completed on April 03, 2017. Although the debt and interest on debt will not be assumed by Digicert Inc nor is required to be repaid upon disposal, we have assessed that the amount of debt and related interest contracted for the acquisition of the QuoVadis Group is not directly attributable to or related to other operations of WISeKey, and elected to allocate those interests relating to the debt to acquire QuoVadis to discontinued operations. We reviewed the method of allocation based on net assets proposed under ASC 205-20-45-7 and considered that such allocation would not provide meaningful results because it would spread the interest onto other operations of the entity to which the interest is not directly attributable or related. Therefore, WISeKey further elected to apply ASC 205-20-45-8 and to allocate interest to the discontinued operations based on the debt that can be identified as specifically attributed to the operations of QuoVadis.

The interest amounts allocated to and included in discontinued operations were respectively USD 1,233,324, USD 3,602,553 and USD 9,903,009 for the years 2019, 2018 and 2017.

In previous annual and interim reports, the results of the discontinued operations were included in the mPKI segment.

The table below shows the total operating, investing and financing cash flows of the discontinued operation:

	12 months ended December 31,	12 months ended December 31,	12 months ended December 31,
USD'000	2019	2018	2017
Net cash provided by (used in) operating activities	783	(6,164)	(6,526)
Net cash provided by (used in) investing activities	-	1,245	(440)
Net cash provided by (used in) financing activities	-	3,678	18,592

There were no significant operating and investing noncash items from discontinued operations in the years 2019, 2018 and 2017.

Divestiture of the QuoVadis Group

The sale was completed on January 16, 2019, when all QuoVadis entities except QuoVadis Services Ltd were transferred to Digicert Inc. The transfer of ownership of QuoVadis Services Ltd was conditional on receiving the consent from the Regulatory Authority in Bermuda (the “RAB”) (the “RAB Consent”) to the change in ultimate beneficial ownership of QuoVadis Services Ltd, being the entity holding the Communications Operating Licence in Bermuda. The RAB Consent was obtained in February 2019 and the transfer of ownership of QuoVadis Services Ltd from WISeKey to Digicert Inc. was effective on February 28, 2019. We assessed the SPA under ASC 810-10-40-6 and concluded that the terms and conditions of the SPA met the definition to account for the sale as a single transaction effective on January 16, 2019.

The purchase price set in the SPA was USD 45,000,000 to be split USD 40,500,000 at completion of the sale and USD 4,500,000 to be paid into an escrow account used for the settlement of any post-completion claims and released in an amount up to USD 2,500,000 on the first anniversary of the completion and the remaining amount on the second anniversary of completion. The net purchase price of USD 35,839,960 paid to WISeKey was adjusted for the following items: (a) all accounts payable items and other liability items due for payment on or before December 31, 2018 were paid in full; (b) the QuoVadis Group companies was transferred free of indebtedness including any loan with WISeKey; and (c) the equivalent of USD 4,000,000 in cash in aggregate was retained in the bank accounts of the QuoVadis companies.

ISTANA-related contracts and rights were transferred to WISeKey SA prior to December 31, 2018.

F-42

The table below shows the reconciliation of the cash inflow from divestiture presented in the consolidated statement of cash flows to the net purchase price:

USD'000
Net cash inflow from divestiture	40,919
Less:	-
Payment of all accounts payable items and other liability items due for payment on or before December 31, 2018	(6,541)
Debt repayment	(869)
Plus:
Net assets divested	2,331
Net purchase price	35,840

The gain from divestiture recorded in the reporting period is USD 31,099,632, shown as a separate line within discontinued operations in the income statement.

WISeKey did not have any involvement with the QuoVadis Group or Digicert Inc after it had been deconsolidated. Digicert Inc was not and is not a related party of WISeKey, and neither the QuoVadis Group nor Digicert Inc are related parties to WISeKey after the deconsolidation.

Note 38. Legal proceedings

We are currently not party to any legal proceedings and claims.

Note 39. Related parties disclosure

Subsidiaries

The consolidated financial statements of the Group include the entities listed in the following table:

Group Company Name	Country of	Year of	Share Capital		% ownership  as of December 31,	% ownership  as of December 31,	Nature of business
	incorporation	incorporation			2019	2018
WISeKey SA	Switzerland	1999	CHF	933,436	95.58%	95.35%	Main operating company. Sales and R&D services
WISeKey Semiconductors SAS	France	2010	EUR	1,298,162	100.0%	100.0%	Chip manufacturing, sales & distribution
WiseTrust SA	Switzerland	1999	CHF	680,000	100.0%	100.0%	Non-operating investment company
WISeKey (Suisse) SA**	Switzerland	2002	CHF	100,000	100.0%	100.0%	Dormant
WISeKey ELA SL	Spain	2006	EUR	4,000,000	100.0%	100.0%	Sales & support
WISeKey SAARC Ltd	U.K.	2016	GBP	100,000	51.0%	51.0%	Non trading
WISeKey USA Inc*	U.S.A	2006	USD	6,500	100%*	100%*	Sales & support
WISeKey India Private Ltd***	India	2016	INR	1,000,000	45.9%	45.9%	Sales & support
WISeKey KK	Japan	2017	JPY	1,000,000	100.0%	100.0%	Sales & distribution
WISeKey Taiwan	Taiwan	2017	TWD	100,000	100.0%	100.0%	Sales & distribution
WISeCoin AG	Switzerland	2018	CHF	100,000	90.0%	90.0%	Sales & distribution
WISeKey Equities AG	Switzerland	2018	CHF	100,000	100.0%	100.0%	Financing, Sales & distribution
WISeCoin France R&D Lab SAS	France	2019	EUR	10,000	90.0%	not incorporated	Research & development
WISeKey Semiconductors GmbH	Germany	2019	EUR	25,000	100.0%	not incorporated	Sales & distribution
WISeKey Arabia - Information Technology Ltd	Saudi Arabia	2019	SAR	200,000.00	51.0%	not incorporated	Sales & distribution

* 50% owned by WISeKey SA and 50% owned by WiseTrust SA

** dormant or in the process of being liquidated

*** 88% owned by WISeKey SAARC which is controlled by WISeKey International Holding AG

F-43

Related party transactions and balances

	Receivables as at		Payables as at		Net expenses to			Net income from
Related Parties	December 31,	December 31,	December 31,	December 31,	in the year ended December 31,			in the year ended December 31,
(in USD'000)	2019	2018	2019	2018	2019	2018	2017	2019	2018	2017
1 CarlosMoreira	-	8	-	-	-	-	12	-	209	-
2 Maryla Shingler-Bobbio	-	-	-	-	123	80	-	-	-	3
3 Philippe Doubre	-	-	40	54	114	80	-	-	-	-
4 Juan Hernández Zayas	-	-	37	62	165	88	-	-	-	-
5 Thomas Hürlimann	-	-	16	24	63	24	-	-	-	-
6 Dourgam Kummer	-	-	2	68	52	264	81	-	-	-
7 David Fergusson	-	-	22	31	161	47	224	-	-	-
8 Roman Brunner	-	-	-	418	426	242	-	87	-	-
9 Anthony Nagel	-	-	-	-	5	164	-	58	-	-
10 Harald Steger	-	-	-	-	-	445	-	-	-	-
11 Don Tapscott	-	-	-	200	-	394	-	-	-	-
12 Wei Wang	-	-	-	-	-	187	-	10	-	-
13 OISTE	119	-	-	92	219	221	219	140	-	88
14 Todd Ruppert	-	-	-	-	-	353	-	-	-	-
15 Edmund Gibbons Limited	-	-	-	451	479	173	130	36	434	431
16 Terra Ventures Inc	-	-	33	31	-	-	-	-	-	-
17 SAI LLC (SBT Ventures)	-	-	33	32	-	-	-	-	-	-
18 GSP Holdings Ltd	-	-	17	16	-	-	-	-	-	-
19 Indian Potash Limited	-	-	-	-	-	-	-	-	42	-
20 ACXIT Capital	-	-	-	-	-	-	1,302	-	696	-
21 Philippe Gerwill	-	-	-	-	14	-	-	-	-	-
22 Related parties of Carlos Moreira	-	-	2	-	360	-	-	-	-	-
23 Thomas J. Egger	-	-	-	-	-	-	129	-	-	-
Total	119	8	202	1,479	2,181	2,762	2,097	331	1,381	522

1. Carlos Moreira is the Chairman of the Board and CEO of WISeKey. A short-term receivable in an amount of CHF 7,713.14 (USD 7,844) from Carlos Moreira was outstanding as at December 31, 2018, made up of short-term cash advances to Carlos Moreira for his travel expenses. This short-term receivable was cleared in 2019 when expense claims were processed.

A credit of CHF 204,633 (USD 209,314) was recorded in the income statement in 2018 in relation to a loan of 322,900 WIHN class B shares from Carlos Moreira to WISeKey on September 25, 2018. The equivalent of 100,000 WIHN class B shares was repaid by WISeKey in cash at market price CHF 3.22 per share, hence a repayment of CHF 322,000 on November 13, 2018, and the remaining 222,900 WIHN class B shares were delivered back to M. Moreira on December 28, 2018 as full and final repayment of the loan. The credit recorded in the income statement correspond to the accounting revaluation of the loan at market price at each transaction date, there was and will not be any cash paid to Carlos Moreira for this credit entry.

2. Maryla Shingler Bobbio is a former Board member of the Group, and former member of the Group’s audit committee and nomination & compensation committee. Ms. Shingler Bobbio resigned from WISeKey’s Board on November 21, 2019. The expenses recorded in the income statement in the year to December 31, 2019 relate to her Board fees.

3. Philippe Doubre is a Board member of the Group, and member of the Group’s nomination & compensation committee, as well as a shareholder. The payable to Philippe Doubre as at December 31, 2019 and expenses recorded in the income statement in the year to December 31, 2019 relate to his Board fee.

4. Juan Hernandez-Zayas is a Board member of the Group, and member of the Group’s audit committee and the strategy committee, as well as a shareholder. The payable to Juan Hernandez-Zayas as at December 31, 2019 and expenses recorded in the income statement in the year to December 31, 2019 relate to his Board fees.

5. Thomas Hürlimann is a former Board member of the Group. Mr. Hürlimann did not seek reelection at the Group’s last Annual General Meeting on May 21, 2019. The payable to Thomas Hürlimann as at December 31, 2019 and expenses recorded in the income statement in the year to December 31, 2019 relate to his Board fees.

6. Dourgam Kummer is a Board member of the Group, as well as a shareholder. Since January 2019, Dourgam Kummer serves as Head of M&A of WISeKey and has therefore become an executive member of the Board. The payable to Dourgam Kummer as at December 31, 2019 relates to unpaid business expenses. The expenses recorded in the income statement in the year to December 31, 2019 relate to his Board fees up until December 31, 2018.

7. David Fergusson is a Board member of the Group, and member of the Group’s audit committee and nomination & compensation committee, as well as a shareholder. The payable to David Fergusson as at December 31, 2019 and expenses recorded in the income statement in the year to December 31, 2019 relate to his Board fees.

8. Roman Brunner is the former Chief Revenue Officer of the Group and a shareholder. He entered into a loan agreement with WISeKey (Bermuda) Holding Ltd in 2007 and has made loans to WISeKey (Bermuda) Holding Ltd of varying amounts since 2004. The loan carried an interest rate of 5% per annum and had no fixed repayment date. Upon the divestiture of the QuoVadis Group on January 16, 2019, WISeKey repaid in full the loan from Mr. Brunner in an amount of USD 418,832.

9. Anthony Nagel is the former Chief Operations Officer of QuoVadis.

10. Harald Steger is a former member of the Group’s advisory committee.

F-44

11. Don Tapscott is a member of the Group’s advisory committee, and cofounder of The Tapscott Group Inc.

The Blockchain Research Institute (the “BRI”) is a division of The Tapscott Group Inc. On December 20, 2018 WISeKey and the BRI entered into an agreement to establish BlockChain Centers of Excellence and promote BlockChain technology worldwide.

12. Wei Wang is a former member of the Group’s advisory committee.

13. The Organisation Internationale pour la Sécurité des Transactions Electroniques (“OISTE”) is a Swiss non-profit making foundation that owns a cryptographic rootkey. In 2001 WISeKey SA entered into a contract with OISTE to operate and maintain the global trust infrastructures of OISTE. In line with the contract, WISeKey pays a regular fee to OISTE for the use of its cryptographic rootkey. A member of the Board of Directors of WISeKey is also a member of the Counsel of the Foundation which gives rise to the related party situation.

OISTE is also the minority shareholder in WISeCoin AG with a 10% ownership.

The receivable from OISTE as at December 31, 2019 and income recorded in the income statement in the year to December 31, 2019 relate to the facilities and personnel hosted by WISeKey SA on behalf of OISTE. In the year 2019, WISeKey SA invoiced OISTE CHF 138,610 (USD 139,506).

The expenses relating to OISTE recognized in 2019 are made up of license and royalty fees for the year 2019 under the contract agreement with WISeKey SA.

14. Todd Ruppert is a former investor in WISeKey.

15. Edmund Gibbons Limited had a 49% shareholding in QuoVadis Services Ltd which was 51% owned by WISeKey until the divestiture of the QuoVadis Group on January 16, 2019. QuoVadis Services Ltd had issued a promissory note to Edmund Gibbons Limited for USD 450,000 outstanding as at December 31, 2018. The note was non-interest bearing. Upon the divestiture of the QuoVadis Group on January 16, 2019, WISeKey repaid in full the loan from Edmund Gibbons Limited in an amount of USD 450,134.

16. Terra Ventures Inc has a 49% shareholding in WISeKey SAARC Ltd. Terra Ventures granted a GBP 24,507 loan to WISeKey SAARC Ltd on January 24, 2017. The loan is non-interest bearing and has no set repayment date.

17. SAI LLC, doing business as SBT Ventures, is a former shareholder in WISeKey SAARC Ltd. SAI LLC granted a GBP 25,000 loan to WISeKey SAARC Ltd on January 25, 2017. The loan is non-interest bearing and has no set repayment date.

18. GSP Holdings Ltd is a former shareholder in WISeKey SAARC Ltd. GSP Holdings Ltd granted a GBP 12,500 loan to WISeKey SAARC Ltd on February 02, 2017. The loan is non-interest bearing and has no set repayment date.

19. Indian Potash Limited has a 10% shareholding in WISeKey India Private Ltd.

20. ACXIT Capital Partners, an international corporate finance and investment advisory firm, has provided advisory services to WISeKey since 2014.

21. Philipp Gerwill is an external consultant for the group. On November 21, 2019, WISeKey granted options to Philipp Gerwill which were valued using the Black-Scholes model and the market price of the WIHN class B shares at grant. The stock-based expense recorded in 2019 was USD 14,197.

22. Two immediate family members of Carlos Moreira are employed by WISeKey SA and WISeKey USA respectively. In line with ASC 850-10-50-5, transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis. The aggregate employment remuneration of these two immediate family members amounted to USD 356,096 recorded in the income statement in 2019. The payable as at December 31, 2019 relates to unpaid business expenses.

Additionally, one other immediate family member of Carlos Moreira has access to WISeKey’s facilities for a cost of CHF 2,760 (USD 2,778) per annum, whilst another immediate family member was remunerated CHF 1,204 (USD 1,212) for services provided to WISeKey in January 2019.

23. Thomas J. Egger is a former Board member of the Group, and former member of the Group’s audit committee, as well as a shareholder.

Note 40. Subsequent events

Capital increase

On January 09, 2020, the Company made an Authorised Share Capital increase by issuing 378,788 WIHN Class B shares against an investment of USD 1,000,000.32 from a private fund.

Crede Convertible Loan

On January 09, 2020 Crede exercised a conversion in the amount of USD 259,436 in exchange for 150,000 WIHN class B shares issued out of treasury share capital.

F-45

Release of restricted cash

On January 16, 2020, as per the terms of the SPA relating to the sale of WISeKey (Bermuda) Holding Ltd and its affiliates to Digicert Inc, USD 2.5 million of the consideration retained on an escrow account was released to WISeKey.

LSI Convertible Facility

In January 2020, WISeKey:

- paid an additional CHF 24,527 legal fees qualifying as debt issue costs, and

- transferred the 400,000 WIHN class B shares owed as commitment fee to LSI out of treasury stock.

Extension of share buyback program

On February 03, 2020, WISeKey announced that its Board of Directors had approved the expansion of its existing WIHN class B share buyback program to include its recently NASDAQ-listed ADSs. Class B shares or ADSs repurchased under the buyback program will be used, as previously announced, for potential future M&A transactions and in addition for (1) WISeKey’s existing employee share incentive program, (2) convertible loans entered into by WISeKey and (3) on demand equity lines available to WISeKey.

Extension of the SEDA

On March 04, 2020, WISeKey signed with Yorkville the extension of the SEDA agreement for a further 24 months, until March 31, 2023.

New facility with Yorkville

On March 04, 2020, WISeKey executed with Yorkville a new convertible loan agreement for a total amount of USD 4 million repayable in monthly instalments starting March 30, 2020. This new USD 4 million agreement replaces the existing Yorkville Convertible Loan signed on June 27, 2019 and the USD 2,337,393 remaining balance under the Yorkville Convertible Loan was rolled over into the new agreement. The new convertible loan agreement bears an interest rate of 6% per annum payable monthly in arrears and matures on April 30, 2021.Yorkville has the right to convert the outstanding loan amount or any portion thereof, and any accrued interest, into class B shares at an initial conversion price of CHF 3.00, subject to customary adjustments.

Options granted under WISeKey ESOP

After December 31, 2019 a total of 54,000 options were granted under the Group’s ESOP.

EX-2.5

Exhibit 2.5

DESCRIPTION OF SECURITIES

REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT

As of December 31, 2019 WISeKey International Holding AG (“WISeKey,” “we,” “us,” and “our”) had the following series of securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbols	Name of each exchange and on which registered
American Depositary Shares, each representing five Class B Shares, par value CHF 0.05 per share Class B Shares, par value CHF 0.05 per share*	WKEY	The Nasdaq Stock Market LLC

____________________
* Not for trading, but only in connection with the registration of the American Depositary Shares.

Our American Depositary Shares (“ADSs”), each representing five (5) Class B Shares of WISeKey, par value CHF 0.05 per share (the “Class B Shares”), have been available in the United States through an American Depositary Share (“ADS”) program established pursuant to the deposit agreement (“Deposit Agreement”) that we entered into with Bank of New York Mellon, as depositary (the “Depositary”). Our ADSs have been listed on the Nasdaq Stock Market LLC (“NASDAQ”) since December 2019 and are traded under the symbol “WKEY.” Our Class B Shares are listed in Switzerland on the SIX Swiss Exchange Ltd (“SIX”). In connection with this listing (but not for trading), the Class B Shares are registered under Section 12(b) of the Exchange Act. This exhibit contains a description of the rights of (i) the holders of Class B Shares and (ii) the holders of ADSs. Class B Shares underlying the ADSs are held by the Depositary, and holders of ADSs will not be treated as holders of Class B Shares.

We have further issued registered shares with a par value of CHF 0.01 each (“Class A Shares”). Class A Shares have a par value (CHF 0.01 per share) that is five times lower than the par value of Class B Shares (CHF 0.05 per share). While dividends and other distributions are made proportionally to the par value of the respective shares, each Class A Share and each Class B Share carries one vote at a general meeting of shareholders, irrespective of the difference in par value of Class A Shares and Class B Shares. Class A Shares are not registered under Section 12(b) of the Exchange Act.

The following summary is subject to and qualified in its entirety by our Articles of Association (the “Articles”) and by Swiss laws and regulations. This is not a summary of all the significant provisions of the Articles or of Swiss laws and regulations and does not purport to be complete. Capitalized terms used but not defined herein have the meanings given to them in WISeKey’s annual report on Form 20-F for the fiscal year ended December 31, 2019 and in the Deposit Agreement, which is an exhibit to our registration statement on Form 20-F filed with the SEC on November 8, 2019.

CLASS B SHARES

Item 9. General

9.A.3 Pre-emptive rights

Pursuant to the Swiss Code of obligations (the "CO"), shareholders have pre-emptive rights (Bezugsrechte) to subscribe for new issuances of shares in an amount proportional to the nominal value of the shares they already hold. With respect to conditional capital in connection with the issuance of conversion rights, convertible bonds or similar debt instruments, shareholders have advance subscription rights (Vorwegzeichnungsrechte) for the subscription of conversion rights, convertible bonds or similar debt instruments in an amount proportional to the nominal value of the shares they hold.

If pre-emptive rights are granted, but not exercised, our board of directors may allocate the pre-emptive rights as it elects, subject to the particulars of the relevant shareholders' resolution or board resolution.

Pre-emptive rights, if not excluded (as further described below), are transferable during the subscription period relating to a particular offering of shares. Depending on the particulars of the offering, the pre-emptive rights may be tradable on the SIX. US holders of shares, or US holders of ADSs, may not be able to exercise the pre-emptive rights attached to the shares or to the shares underlying their ADSs unless a registration statement under the US Securities Act of 1933, as amended (the “Securities Act”), is effective with respect to such rights and the related shares, or an exemption from this registration requirement is available. If pre-emptive rights could not be exercised by an ADS holder, the depositary would, if possible, sell the holder’s pre-emptive rights and distribute the net proceeds of the sale to the holder. If the Depositary determines, in its discretion, that the rights could not be sold, the Depositary might allow such rights to lapse.

The general meeting of shareholders may resolve to withdraw or limit pre-emptive rights in certain limited circumstances for valid reasons. The relevant majority for such approval is two-thirds of the shares represented and the absolute majority of the par value of the shares represented.

With respect to our authorized share capital, our board of directors is authorized by our Articles to withdraw or to limit the pre-emptive rights of shareholders, and to allocate them to third parties or to us, in the event that the newly issued shares are used for the purpose of:

· issuing new shares if the issue price of the new shares is determined by reference to the market price;

· the acquisition of an enterprise, parts of an enterprise or participations or for new investment projects or for purposes of financing or refinancing any such transactions;

· broadening the shareholder constituency in certain financial or investor markets or in connection with the listing of new shares on domestic or foreign stock exchanges;

· national and international offerings of shares for the purpose of increasing the free float or to meet applicable listing requirements;

· the participation of strategic partners;

· an over-allotment option ("greenshoe") being granted to one or more financial institutions in connection with an offering of shares;

· the participation of directors, officers, employees, contractors, consultants of, or other persons providing services to the Company or a group company; or

· raising capital in a fast and flexible manner which could only be achieved with great difficulty without exclusion of the pre-emptive rights of the existing shareholders.

Our current authorized share capital relates to 8,503,041 Class B Shares. Our current authority to issue shares out of the authorized share capital will expire on May 25, 2020. A renewal of our authority under the authorized share capital requires approval by our shareholders at our 2020 annual general meeting, expected to be held on May 5, 2020. The relevant majority for such approval is two-thirds of the shares represented and the absolute majority of the par value of the shares represented.

9.A.5 Type and class of securities

The Class B Shares are registered shares with a par value of CHF 0.05 each. Our Class B Shares have been trading under the symbol "WIHN" on the SIX since March 2016. As of December 31, 2019, we had 30,052,924 Class B Shares issued, 28,850,733 of which were outstanding. All Class B Shares, except for the Class B Shares held by our affiliates and certain Class B Shares sold in private placement transactions in the U.S. exempt from registration under the Securities Act, are freely transferrable in the U.S. The Company estimates that (as of December 31, 2019) the total number of Class B Shares held by affiliates together with privately placed Class B Shares that remain subject to resale restrictions in the U.S. is approximately 1,424,000 Class B Shares. None of the Class B Shares are subject to lock-up agreements.

The Class B Shares are fully paid-up. Except for 105,040 Class B Shares, which have been issued in certificated form and not been dematerialized hereof, the Class B Shares have been issued in uncertificated form in accordance with article 973c of the CO as uncertificated securities (Wertrechte), which have been entered into the main register of the SIX SIS Ltd (“SIS”) and constitute intermediated securities within the meaning of the FISA. In accordance with article 973c of the CO, we maintain a register of uncertificated securities (Wertrechtebuch).

So long as our shares constitute intermediated securities within the meaning of the FISA, the person deemed to be the holder of any share will be the person holding such share in a securities account in his, her or its own name or, in the case of intermediaries, the intermediary holding such share in a securities account that is in his, her or its name. No share certificates will be issued, and share certificates will not be available for individual physical delivery. A shareholder may, however, at any time request us to deliver an attestation of the number of shares held by him, her or it, as reflected in the share register.

So long as our shares constitute intermediated securities within the meaning of the FISA, shares may be transferred by crediting the relevant transferred shares to a securities account of the transferee or as otherwise permitted under applicable law. Class B Shares traded on the SIX will settle and clear through SIS.

Item 9.A.6. Limitations or qualifications

Not applicable.

Item 9.A.7. Other rights

Not applicable.

Item 10.B Memorandum and articles of association

10.B.3 Shareholder rights

Voting Right

Each Class B Share carries one vote at a general meeting of shareholders. Voting rights may be exercised by registered shareholders or by a duly appointed proxy of a registered shareholder or nominee, which proxy need not be a shareholder, up to a specific qualifying day before the relevant general meeting (the "Record Date") designated by the board of directors. The Articles do not limit the number of shares that may be voted by a single shareholder.

Voting Requirements

Shareholder resolutions and elections (including elections of members of the board of directors) require the affirmative vote of an absolute majority of the votes represented (in person or by proxy) at a general meeting of shareholders, unless otherwise stipulated by law or our Articles. The following matters require approval by a majority of the par value of the shares present or represented at the general meeting:

· electing our auditor;

· appointing an expert to audit our business management or parts thereof;

· adopting any resolution regarding the instigation of a special investigation; and

· adopting any resolution regarding the initiation of a derivative liability action.

Under Swiss corporate law and our Articles, approval by two-thirds of the shares present or represented at the meeting, and by the absolute majority of the par value of the shares present or represented is required for:

· amending our corporate purpose;

· creating or cancelling shares with preference rights;

· restricting the transferability of registered shares;

· restricting the exercise of the right to vote or the cancellation thereof;

· creating authorized or conditional share capital;

· increasing the share capital out of equity, against contributions in kind or for the purpose of acquiring specific assets and granting specific benefits;

· limiting or withdrawing shareholder's pre-emptive rights;

· relocating our registered office;

· our dissolution or liquidation; and

· transactions among corporations based on Switzerland's Federal Act on Mergers, Demergers, Transformations and the Transfer of Assets of 2003, as amended (the "Swiss Merger Act") including a merger, demerger or conversion of a corporation.

In accordance with Swiss law and generally accepted business practices, our Articles do not provide attendance quorum requirements generally applicable to general meetings of shareholders.

Dividends and Other Distributions

We have never declared or paid cash dividends to our shareholders and we do not intend to pay cash dividends in the foreseeable future. However, on July 9, 2019, we commenced a public share repurchase program, whereby repurchase shares will be used for potential acquisitions and/or other future M&A transactions. On February 3, 2020, we expanded our share repurchase program to include our ADSs. Shares and ADSs repurchased under our repurchase program may be used as consideration in future potential M&A transactions and for (1) our existing employee share incentive program, (2) convertible loans entered into by us, and (3) on demand equity lines available to us. Otherwise, we currently intend to reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors.

Our board of directors may propose to shareholders that a dividend or other distribution be paid but cannot itself authorize the distribution. Under our Articles, dividend payments require a resolution passed by an absolute majority of the votes present or represented at a general meeting of shareholders. In addition, our auditor must confirm that the dividend proposal of our board of directors relating to an appropriation of available earnings conforms to Swiss statutory law and our Articles.

Under Swiss law, we may pay dividends only if we have sufficient distributable profits brought forward from the previous business years, or if we have distributable reserves, each as evidenced by our audited stand-alone financial statements prepared pursuant to Swiss statutory law, and after allocations to reserves required by Swiss law and the Articles have been deducted. We are not permitted to pay interim dividends out of profit of the current business year. Dividends and other distributions are made relative to nominal value of the shares.

Dividends paid on our shares out of available earnings are subject to Swiss withholding tax. See Item 10.E. Taxation of WISeKey’s annual report on Form 20-F for the fiscal year ended December 31, 2019.

Distributions out of issued share capital (i.e. the aggregate par value of our issued shares) may be made only by way of a share capital reduction. Such a capital reduction requires a resolution passed by an absolute majority of the shares present or represented at a general meeting of shareholders. The resolution of the shareholders must be recorded in a public deed and a special audit report must confirm that claims of our creditors remain fully covered despite the reduction in the share capital recorded in the commercial register. The share capital may be reduced below CHF 100,000 only if and to the extent that at the same time the statutory minimum share capital of CHF 100,000 is reestablished by sufficient new fully paid-up capital. Upon approval by the general meeting of shareholders of the capital reduction, the board of directors must give public notice of the capital reduction resolution in the Swiss Official Gazette of Commerce three times and notify creditors that they may request, within two months of the third publication, satisfaction of or security for their claims. The reduction of the share capital may be implemented only after expiration of this time limit.

Distributable reserves are booked either as "retained earnings" (Bilanzgewinn; Gewinnvortrag; freie Reserven) or as reserves from capital contributions (Kapitaleinlagereserven). Under the CO, if our general reserves (allgemeine gesetzliche Reserven) amount to less than 20% of our share capital recorded in the commercial register (i.e., 20% of the aggregate par value of our issued capital), then at least 5% of our annual profit must be retained as general reserves. In addition, if our general reserves amount to less than 50% of our share capital, 10% of the amounts distributed beyond payment of a dividend of 5% must be retained as general reserves. The CO permits us to accrue additional general reserves. Further, a purchase of our own shares (whether by us or a subsidiary) reduces the equity and thus the distributable dividends in an amount corresponding to the purchase price of such own shares. Finally, the CO under certain circumstances requires the creation of revaluation reserves which are not distributable.

Dividends are usually due and payable shortly after the shareholders have passed a resolution approving the payment, but shareholders may also resolve at the annual general meeting of shareholders to pay dividends in quarterly or other instalments. The Articles provide that dividends that have not been claimed within five years after the due date become our property and are allocated to the general reserves. Dividends paid are subject to Swiss withholding tax, all or part of which can potentially be reclaimed under the relevant tax rules in Switzerland or double taxation treaties concluded between Switzerland and foreign countries. Distributions of cash or property that are based upon a capital reduction or that are made out of statutory capital reserves (Kapitaleinlagereserve) are not subject to Swiss withholding tax.

Transfer of Shares

Our shares constitute intermediated securities (Bucheffekten) based on uncertificated securities (Wertrechte) and entered into the main register of SIS or such other custodian as the case may be. Any transfer of Shares is effected by a corresponding entry in the securities deposit account of a bank or a depository institution. Shares cannot be transferred by way of assignment, nor can a security interest in any Shares be granted by way of assignment.

Voting rights may be exercised only after a shareholder has been entered in our share register (Aktienbuch) with his, her or its name and address (in the case of legal entities, the registered office) as a shareholder with voting rights.

We maintain, through Computershare Switzerland Ltd., a share register, in which the full name, address and nationality (in the case of legal entities, the company name and registered office) of the shareholders and usufructuaries are recorded. A person entered into the share register must notify the share registrar of any change in address. Until such notification occurs, all written communication from us to persons entered in the share register is deemed to have been validly made if sent to the relevant address recorded in the share register.

Share Repurchase Program

On July 9, 2019, the Company commenced a public repurchase program with respect to our shares, which on February 3, 2020 was expanded to also include ADSs. Shares and ADSs repurchased under our repurchase program may be used as consideration in potential future M&A transactions and for (1) our existing employee share incentive program, (2) convertible loans entered into by us and (3) on demand equity lines available to us. Our share repurchase was approved by the Swiss Takeover Board under its notification procedure, will last up to 3 years, and allows us to repurchase up to 3,682,848 Class B shares equivalent to 10% of the registered share capital of the Company at the relevant time.

Activity under the program is monitored on a daily basis, with all transactions being published on our website in line with Swiss Law.

Inspection of Books and Records

Under the CO, a shareholder has a right to inspect our share register with respect to his, her or its own shares and otherwise to the extent necessary to exercise his, her or its shareholder rights. No other person has a right to inspect our share register. Our books and correspondence may be inspected with the express authorization of the general meeting of shareholders or by resolution of the board of directors and subject to the safeguarding of our business secrets.

Special Investigation

If the shareholder inspection rights as outlined above prove to be insufficient in the judgment of the shareholder, any shareholder may propose to the general meeting of shareholders that specific facts be examined by a special auditor in a special investigation. If the general meeting of shareholders approves the proposal, we or any shareholder may, within 30 calendar days after the general meeting of shareholders, request a court at our registered office in Zug, Switzerland, to appoint a special auditor. If the general meeting of shareholders rejects the request, one or more shareholders representing at least 10% of the share capital or holders of shares in an aggregate par value of at least CHF 2,000,000 may request that the court appoint a special auditor. The court will issue such an order if the petitioners can demonstrate that the board of directors, any member of the board of directors or our executive management infringed the law or our Articles and thereby caused damages to us or the shareholders. The costs of the investigation would generally be allocated to us and only in exceptional cases to the petitioners.

Repurchases of Shares and Purchases of Own Shares

The CO limits our right to purchase and hold our own shares. We and our subsidiaries may purchase shares only if and to the extent that (1) we have freely distributable reserves in the amount of the purchase price; and (2) the aggregate par value of all shares held by us does not exceed 10% of our share capital. Pursuant to Swiss law, where shares are acquired in connection with a transfer restriction set out in the articles of association of a company, the foregoing upper limit is 20%. We currently do not have any transfer restriction in our Articles. If we own shares that exceed the threshold of 10% of our share capital, the excess must be sold or cancelled by means of a capital reduction.

Shares held by us or our subsidiaries are not entitled to vote at the general meeting of shareholders but are entitled to the economic benefits applicable to the shares generally, including dividends and pre-emptive rights in the case of share capital increases, unless resolved otherwise by the general meeting of shareholders.

In addition, selective share repurchases are only permitted under certain circumstances. Within these limitations, as is customary for Swiss corporations, we may purchase and sell our own shares from time to time in order to meet our obligations under our equity plans, to meet imbalances of supply and demand, to provide liquidity and to even out variances in the market price of shares.

10.B.4 Changes to shareholder rights

Ordinary Capital Increase, Authorized Share Capital and Conditional Share Capital

Under Swiss law, we may increase our share capital (Aktienkapital) with a resolution of the general meeting of shareholders (ordinary share capital increase) that must be carried out by the board of directors within three months in order to become effective. Under our Articles of Association (the "Articles"), in the case of subscription and increase against payment of contributions in cash, when shareholders' statutory pre-emptive rights are safeguarded, a resolution passed by an absolute majority of the votes represented at the general meeting of shareholders is required. In the case of subscription and increase against contributions in kind or to fund acquisitions in kind, when shareholders' statutory pre-emptive rights are withdrawn or where transformation of reserves into share capital is involved, a resolution passed by two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented is required.

Furthermore, under the Swiss Code of Obligations (the "CO"), our shareholders, by a resolution passed by two-thirds of the shares present or represented at a general meeting of shareholders and the absolute majority of the par value of the shares present or represented, may authorize our board of directors to issue shares of a specific aggregate par value up to a maximum of 50% of the share capital registered in the commercial register in the form of:

· conditional share capital (bedingtes Aktienkapital) for the purpose of issuing shares in connection with, among other things, (1) option and conversion rights granted in connection with warrants and convertible bonds of ours or one of our subsidiaries or (2) grants of rights to employees, members of our board of directors or consultants or our subsidiaries to subscribe for new shares (conversion or option rights); or

· authorized share capital (genehmigtes Kapital) to be utilized by our board of directors within a period determined by the shareholders but not exceeding two years from the date of the shareholder approval.

Our Authorized Share Capital

Under our Articles in effect as of December 31, 2019, our board of directors is authorized at any time until May 25, 2020, to increase our share capital by a maximum aggregate amount of CHF 444,091.45 through the issuance of not more than 8,881,829 shares, which would have to be fully paid-in, with a par value of CHF 0.05 each.

Increases in partial amounts are permitted. Our board of directors has the power to determine the type of contributions, the issue price and the date on which the dividend entitlement starts.

Our board of directors is also authorized to withdraw or limit pre-emptive rights as described above. This authorization is exclusively linked to the particular available authorized share capital set out in the respective article. If the period to increase the share capital lapses without having been used by our board of directors, the authorization to withdraw or to limit the pre-emptive rights lapses simultaneously with such capital.

Our Conditional Share Capital

Our conditional share capital as registered with the commercial register of the Canton of Zug as at December 31, 2019 amounts to CHF 592,004.50, corresponding to 11,840,090 new Class B Shares, whereby CHF 352,692 of the conditional share capital is available for the issuance of up to 7,053,840 Class B Shares in connection with rights granted to third parties or shareholders in connection with Rights Bearing Obligations (as defined in art. 4b para. 1(a) of the Articles) and CHF 239,312.50, corresponding to 4,786,250 Class B Shares, is available for the issuance of Class B Shares in connection with the issuance of Class B Shares or Rights-Bearing Obligations granted to the members of the board of directors, members of the executive management, employees, consultants or other persons providing services to us or another company of the Group (art. 4b para. 1 (b) of the Articles).

10.B.6 Limitations

There are no limitations under the Swiss CO or our Articles on the right of non-Swiss residents or nationals to own or vote shares other than the restrictions applicable to all shareholders.

10.B.7 Change in control

Compulsory Acquisitions; Appraisal Rights

Business combinations and other transactions that are governed by the Swiss Merger Act, are binding on all shareholders. A statutory merger or demerger requires approval of two-thirds of the shares represented at a general meeting of shareholders and the absolute majority of the par value of the shares represented.

If a transaction under the Swiss Merger Act receives all of the necessary consents, all shareholders are compelled to participate in such transaction.

Swiss corporations may be acquired by an acquirer through the direct acquisition of shares. The Swiss Merger Act provides for the possibility of a so-called "cash-out" or "squeeze-out" merger if the acquirer controls 90% of the outstanding shares. In these limited circumstances, minority shareholders of the corporation being acquired may be compensated in a form other than through shares of the acquiring corporation (for instance, through cash or securities of a parent corporation of the acquiring corporation or of another corporation).

For business combinations effected in the form of a statutory merger or demerger and subject to Swiss law, the Swiss Merger Act provides that if equity rights have not been adequately preserved or compensation payments in the transaction are unreasonable, a shareholder may request the competent court to determine a reasonable amount of compensation. A decision issued by a competent court in this respect can be acted upon by any person who has the same legal status as the claimant.

In addition, under Swiss law, the sale of all or substantially all of our assets may be construed as a de facto dissolution of our company, and consequently require the approval of two-thirds of the shares present or represented at a general meeting of shareholders and the absolute majority of the par value of the shares present or represented. Whether a shareholder resolution is required depends on the particular transaction, whereas the following circumstances are generally deemed relevant in this respect:

· a core part of the company's business is sold without which it is economically impracticable or unreasonable to continue to operate the remaining business;

· the company's assets, after the divestment, are not invested in accordance with the company's statutory business purpose; and

· the proceeds of the divestment are not earmarked for reinvestment in accordance with the company's business purpose but, instead, are intended for distribution to the company's shareholders or for financial investments unrelated to the company's business.

A shareholder of a Swiss corporation participating in certain corporate transactions governed by the Swiss Merger Act may, under certain circumstances, be entitled to appraisal rights. As a result, such shareholder may, in addition to the consideration (be it in shares or in cash) receive an additional amount to ensure that the shareholder receives the fair value of the shares held by the shareholder. Following a statutory merger or demerger, pursuant to the Swiss Merger Act, shareholders can file an appraisal action against the surviving company. If the consideration is deemed inadequate, the court will determine an adequate compensation payment.

10.B.8 Disclosure of shareholdings

Notification and Disclosure of Substantial Share Interests

Under the applicable provisions of the Swiss Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading of 2015, or the Financial Market Infrastructure Act ("FMIA"), as amended, persons who directly, indirectly or in concert with other parties acquire or dispose of our shares, purchase rights or obligations relating to our shares (the "Purchase Positions") or sale rights or obligations relating to our shares (the "Sale Positions"), and thereby, directly, indirectly or in concert with other parties reach, exceed or fall below a threshold of 3%, 5%, 10%, 15%, 20%, 25%, 331⁄3%, 50% or 662⁄3% of our voting rights (whether exercisable or not) must notify us and the Disclosure Office of the SIX of such acquisition or disposal in writing within four trading days. Within two trading days of the receipt of such notification, we must publish such information via the SIX's electronic publishing platform. For purposes of calculating whether a threshold has been reached or crossed, shares and Purchase Positions, on the one hand, and Sale Positions, on the other hand, may not be netted. Rather, the shares and Purchase Positions and the Sale Positions must be accounted for separately and may each trigger disclosure obligations if the respective positions reach, exceed or fall below one of the thresholds. In addition, actual share ownership must be reported separately if it reaches, exceeds or falls below one of the thresholds.

Pursuant to Article 663c of the CO, Swiss corporations whose shares are listed on a stock exchange must disclose their significant shareholders and their shareholdings in the notes to their balance sheet, where this information is known or ought to be known. Significant shareholders are defined as shareholders and groups of shareholders linked through voting rights who hold more than 5% of all voting rights.

Mandatory Bid Rules

Pursuant to the applicable provisions of the FMIA, any person that acquires shares of a listed Swiss company, whether directly or indirectly or acting in concert with third parties, which shares, when taken together with any other shares of such company held by such person (or such third parties), exceed the threshold of 33 1/3% of the voting rights (whether exercisable or not) of such company, must make a takeover bid to acquire all the other newly issued shares of such company. A company's articles of association may either eliminate this provision of the FMIA or may raise the relevant threshold to 49% ("opting-out" or "opting-up", respectively).

We have an opting-out provision in Article 6 para. 9 of our Articles. Accordingly, an acquirer of Shares is not obliged to make a public offer pursuant to article 135 and 163 of the Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading.

The Swiss laws applicable to Swiss corporations and their shareholders differ from laws applicable to U.S. corporations and their shareholders. The following table summarizes significant differences in shareholder rights between the provisions of the CO and the Compensation Ordinance and the Delaware General Corporation Law applicable to companies incorporated in Delaware and their shareholders. Please note that this is only a general summary of certain provisions applicable to companies in Delaware. Certain Delaware companies may be permitted to exclude certain of the provisions summarized below in their charter documents.

10.B.9 Differences in the law

DELAWARE CORPORATE LAW	SWISS CORPORATE LAW
Mergers and similar arrangements
Under the Delaware General Corporation Law, with certain exceptions, a merger, consolidation, sale, lease or transfer of all or substantially all of the assets of a corporation must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon. A shareholder of a Delaware corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration such shareholder would otherwise receive in the transaction. The Delaware General Corporation Law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of each class of capital stock without a vote by the shareholders of such subsidiary. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights.	Under Swiss law, with certain exceptions, a merger or a division of the corporation or a sale of all or substantially all of the assets of a corporation must be approved by two-thirds of the shares represented at the relevant general meeting of shareholders as well as the absolute majority of the par value of the shares represented at such shareholders' meeting. A shareholder of a Swiss corporation participating in a statutory merger or demerger pursuant to the Swiss Merger Act can file an appraisal right lawsuit against the surviving company. As a result, if the consideration is deemed "inadequate," such shareholder may, in addition to the consideration (be it in shares or in cash) receive an additional amount to ensure that such shareholder receives the fair value of the shares held by such shareholder. Swiss law also provides that a parent corporation, by resolution of its board of directors, may merge with any subsidiary, of which it owns at least 90.0% of the voting rights without a vote by shareholders of such subsidiary, if the shareholders of the subsidiary are offered the payment of the fair value in cash as an alternative to shares.

DELAWARE CORPORATE LAW	SWISS CORPORATE LAW
Shareholders' suits
Class actions and derivative actions generally are available to shareholders of a Delaware corporation for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys' fees incurred in connection with such action.	Class actions and derivative actions as such are not available under Swiss law. Nevertheless, certain actions may, to a limited extent, have a similar effect. An appraisal lawsuit won by a shareholder can be acted upon by any person who has the same legal status as the claimant. Also, a shareholder is entitled to bring suit against directors for breach of, among other things, their fiduciary duties and claim the payment of damages. However, unless the company is subject to bankruptcy proceedings, or if the relevant shareholder can demonstrate having suffered a loss in a personal capacity, a shareholder will only be allowed to ask for payment of damages to the corporation. Under Swiss law, the winning party is generally entitled to recover attorneys' fees incurred in connection with such action, provided, however, that the court has discretion to permit the shareholder whose claim has been dismissed to recover attorneys' fees incurred to the extent he acted in good faith.
Shareholder vote on board and management compensation
Under the Delaware General Corporation Law, the board of directors has the authority to fix the compensation of directors, unless otherwise restricted by the certificate of incorporation or bylaws.	Pursuant to the Swiss Ordinance against excessive compensation in listed stock corporations, the general meeting of shareholders has the non-transferable right, amongst others, to have a binding vote each year on the compensation due to the board of directors, executive management and advisory boards.
Annual vote on board renewal
Unless directors are elected by written consent in lieu of an annual meeting, directors are elected in an annual meeting of stockholders on a date and at a time designated by or in the manner provided in the bylaws. Re-election is possible.  Classified boards are permitted.	The general meeting of shareholders elects annually (i.e. for the period between two annual ordinary general meeting of shareholders) the members of the board of directors, the chairman of the board and the members of the compensation committee individually for a term of office of one year. Re-election is possible.

DELAWARE CORPORATE LAW	SWISS CORPORATE LAW
Indemnification of directors and executive management and limitation of liability
The Delaware General Corporation Law provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of directors (but not other controlling persons) of the corporation for monetary damages for breach of a fiduciary duty as a director, except no provision in the certificate of incorporation may eliminate or limit the liability of a director for: •   any breach of a director's duty of loyalty to the corporation or its shareholders; •    acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; •    statutory liability for unlawful payment of dividends or unlawful stock purchase or redemption; or •   any transaction from which the director derived an improper personal benefit. A Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any proceeding, other than an action by or on behalf of the corporation, because the person is or was a director or officer, against liability incurred in connection with the proceeding if the director or officer acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation; and the director or officer, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.	Under Swiss corporate law, an indemnification of a director or member of the executive management in relation to potential personal liability is not effective to the extent the director or member of the executive management intentionally or grossly negligently violated his or her corporate duties towards the corporation. Most violations of corporate law are regarded as violations of duties towards the corporation rather than towards the shareholders. In addition, indemnification of other controlling persons is generally not permitted under Swiss corporate law, including shareholders of the corporation. Nevertheless, a corporation may enter into and pay for directors' and officers' liability insurance which typically covers negligent acts as well.

DELAWARE CORPORATE LAW

SWISS CORPORATE LAW

Unless ordered by a court, any foregoing indemnification is subject to a determination that the director or officer has met the applicable standard of conduct: •    by a majority vote of the directors who are not parties to the proceeding, even though less than a quorum; •    by a committee of directors designated by a majority vote of the eligible directors, even though less than a quorum; •    by independent legal counsel in a written opinion if there are no eligible directors, or if the eligible directors so direct; or •     by the shareholders. Moreover, a Delaware corporation may not indemnify a director or officer in connection with any proceeding in which the director or officer has been adjudged to be liable to the corporation unless and only to the extent that the court determines that, despite the adjudication of liability but in view of all the circumstances of the case, the director or officer is fairly and reasonably entitled to indemnity for those expenses which the court deems proper.

DELAWARE CORPORATE LAW	SWISS CORPORATE LAW
Directors' fiduciary duties
A director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: •     the duty of care; and •     the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.	A director of a Swiss corporation has a fiduciary duty to the corporation only. This duty has two components: •     the duty of care; and •     the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent director would exercise under similar circumstances. The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits in principle self-dealing by a director and mandates that the best interest of the corporation take precedence over any interest possessed by a director or officer. The burden of proof for a violation of these duties is with the corporation or with the shareholder bringing a suit against the director. Directors also have an obligation to treat shareholders that are in similar situations equally.
Shareholder action by written consent
A Delaware corporation may, in its certificate of incorporation, eliminate the right of shareholders to act by written consent.	Shareholders of a Swiss corporation may only exercise their voting rights in a general meeting of shareholders and may not act by written consents.

DELAWARE CORPORATE LAW	SWISS CORPORATE LAW
Shareholder proposals
A shareholder of a Delaware corporation has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.	At any general meeting of shareholders any shareholder may put proposals to the meeting if the proposal is part of an agenda item. Unless the articles of association provide for a lower threshold or for additional shareholders' rights: •  one or several shareholders whose combined shareholdings represent the lower of (1) one tenth of the share capital or (2) an aggregate par value of at least CHF 1,000,000, may ask that a general meeting of shareholders be called for specific agenda items and specific proposals; and •    one or several shareholders representing 10.0% of the share capital or CHF 1.0 million of nominal share capital may ask that an agenda item including a specific proposal be put on the agenda for a regularly scheduled general meeting of shareholders, provided such request is made with appropriate notice. Any shareholder can propose candidates for election as directors at an annual general meeting without prior written notice. In addition, any shareholder is entitled, at a general meeting of shareholders and without advance notice, to (1) request information from the Board on the affairs of the company (note, however, that the right to obtain such information is limited), (2) request information from the auditors on the methods and results of their audit, (3) request the holding of an extraordinary general meeting of shareholders and (4) request, under certain circumstances and subject to certain conditions, a special audit.
Cumulative voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation's certificate of incorporation provides for it.	Cumulative voting would be permitted under Swiss corporate law; however, we are not aware of any company that has cumulative voting. An annual individual election of all members of the board of directors for a term of office of one year (i.e. until the end of the following annual general meeting) is mandatory for listed Swiss companies.
Removal of directors
A Delaware corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.	A Swiss corporation may remove, with or without cause, any director at any time with a resolution passed by an absolute majority of the shares represented at a general meeting of shareholders. The articles of association may require the approval by a qualified majority of the shares represented at a meeting for the removal of a director.

DELAWARE CORPORATE LAW	SWISS CORPORATE LAW
Transactions with interested shareholders
The Delaware General Corporation Law generally prohibits a Delaware corporation from engaging in certain business combinations with an "interested shareholder" for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or group who or which owns or owned 15.0% or more of the corporation's outstanding voting stock within the past three years.	No such specific rule applies to a Swiss corporation.
Dissolution; Winding up
Unless the board of directors of a Delaware corporation approves the proposal to dissolve, dissolution must be approved by shareholders holding 100.0% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation's outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.	A dissolution and winding up of a Swiss corporation requires the approval by two-thirds of the shares represented as well as the absolute majority of the par value of the shares represented at a general meeting of shareholders passing a resolution on such dissolution and winding up. The articles of association may increase the voting thresholds required for such a resolution.
Variation of rights of shares
A Delaware corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise.	A Swiss corporation may modify the rights of a classes of shares with (1) a resolution passed by an absolute majority of the shares represented at the general meeting of shareholders and (2) a resolution passed by an absolute majority of the shares represented at the special meeting of the affected preferred shareholders. The issuance of shares that are granted more voting power requires the approval by two-thirds of the shares represented as well as the absolute majority of the par value of the shares represented at the relevant general meeting of shareholders.

DELAWARE CORPORATE LAW	SWISS CORPORATE LAW
Amendment of governing documents
A Delaware corporation's governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise.	The articles of association of a Swiss corporation may be amended with a resolution passed by an absolute majority of the shares represented at such meeting, unless otherwise provided in the articles of association. There are a number of resolutions, such as an amendment of the stated purpose of the corporation and the introduction of authorized and conditional capital, that require the approval by two-thirds of the votes and an absolute majority of the par value of the shares represented at a shareholders' meeting. The articles of association may increase the voting thresholds.
Inspection of books and records
Shareholders of a Delaware corporation, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose, and to obtain copies of list(s) of shareholders and other books and records of the corporation and its subsidiaries, if any, to the extent the books and records of such subsidiaries are available to the corporation.	Shareholders of a Swiss corporation may only inspect books and records if the general meeting of shareholders or the board of directors approved such inspection and only if confidential information possessed by a corporation is protected. A shareholder is only entitled to receive information to the extent required to exercise such shareholders' rights, subject to the interests of the corporation. The right to inspect the share register is limited to the right to inspect that shareholder's own entry in the share register.
Payment of dividends
The board of directors may approve a dividend without shareholder approval. Subject to any restrictions contained in its certificate of incorporation, the board may declare and pay dividends upon the shares of its capital stock either: •     out of its surplus; or •     in case there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared or the preceding fiscal year. Stockholder approval is required to authorize capital stock in excess of that provided in the charter. Directors may issue authorized shares without stockholder approval.	Dividend payments are subject to the approval of the general meeting of shareholders. The board of directors may propose to shareholders that a dividend shall be paid but cannot itself authorize the distribution. Payments out of the Company's stated share capital (in other words, the aggregate par value of the Company's registered share capital) in the form of dividends are not allowed; payments out of stated share capital may be made by way of a capital reduction only. Dividends may be paid only from the profits brought forward from the previous business years or if the Company has distributable reserves, each as will be presented on the Company's audited annual stand-alone financial statements. The dividend may be determined only after the allocations to reserves required by the law and the articles of association have been made.

DELAWARE CORPORATE LAW	SWISS CORPORATE LAW
Creation and issuance of new shares
All creation of shares requires the board of directors to adopt a resolution or resolutions, pursuant to authority expressly vested in the board of directors by the provisions of the company's certificate of incorporation.	All creation of shares requires a shareholders' resolution. Authorized shares can be, once created by shareholder resolution, issued by the board of directors (subject to limitations of the authorization; the term of authorized share capital is at a maximum two years, and the amount of authorized share capital is capped at 50% of the share capital registered in the commercial register at the time the authorized share capital is adopted). Conditional share capital is the underlying for shares issued upon the exercise of options and conversion rights related to debt instruments issued by the board of directors or such rights issued to employees. The amount of conditional share capital is capped at 50% of the share capital registered in the commercial register at the time the conditional share capital is adopted.
Rights plans / poison pills
	Under Swiss corporation law, shareholders have pre-emptive rights to subscribe for new issuances of shares in proportion to the respective par values of their holdings. Under certain circumstances, shareholders limit or withdraw, or authorize the board of directors to limit or withdraw, pre-emptive rights or advance subscription rights in certain circumstances. However, limitation or withdrawal of shareholders' pre-emptive rights can only be decided for valid reasons. Preventing a particular shareholder to exercise influence over the company is generally believed not to be a valid reason to limit or withdraw shareholders' pre-emptive rights

10.B.10 Changes in capital

The requirements of the Articles regarding changes in capital are not more stringent than the requirements of Swiss law.

AMERICAN DEPOSITARY SHARES

Item 12. Other securities

Disclosures under Items 12.A, 12.B, and 12.C are not applicable.

12.D. American Depositary Shares.

The Bank of New York Mellon, as depositary, registers and delivers ADSs. Each ADS represents five (5) Class B Shares (or a right to receive five (5) Class B Shares) deposited with Credit Suisse Group AG, as custodian for the depositary in Switzerland. Each ADS also represents any other securities, cash or other property which may be held by the depositary. The depositary's corporate trust office at which the ADSs are administered is located at 101 Barclay Street, New York, NY 10286. The depositary's principal executive office is located at 225 Liberty Street, New York, New York 10286.

You may hold ADSs either (A) directly (i) by having an American Depositary Receipt, or ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having ADSs registered in your name in the Direct Registration System, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.

The Direct Registration System, or DRS, is a system administered by The Depository Trust Company, or DTC, pursuant to which the depositary may register the ownership of uncertificated ADSs, which ownership is confirmed by periodic statements sent by the depositary to the registered holders of uncertificated ADSs.

As an ADS holder, we do not treat you as one of our shareholders and you do not have shareholder rights. Swiss law governs shareholder rights. The depositary is the holder of Class B Shares underlying your ADSs. As a registered holder of ADSs, you have ADS holder rights. A deposit agreement among us, the depositary and you, as an ADS holder, and all other persons indirectly holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.

The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement which has been filed as an exhibit to this registration statement, and the form of ADR, attached thereto.

Dividends and Other Distributions

The depositary has agreed to pay to ADS holders the cash dividends or other distributions it or the custodian receives on Class B Shares or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class B Shares your ADSs represent.

· Cash. The depositary will convert any cash dividend or other cash distribution we pay on the Class B Shares underlying the ADSs into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest

Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See Item 10.E. Taxation of WISeKey’s annual report on Form 20-F for the fiscal year ended December 31, 2019. It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.

· Distribution of Class B Shares. The depositary may distribute additional ADSs representing any Class B shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It will try to sell Class B Shares which would require it to deliver a fractional ADS and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new Class B Shares. The depositary may sell a portion of the distributed Class B Shares sufficient to pay its fees and expenses in connection with that distribution.

· Rights to Purchase Additional Class B Shares. If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary may make these rights available to ADS holders. If the depositary decides it is not legal and practical to make the rights available but that it is practical to sell the rights, the depositary will use reasonable efforts to sell the rights and distribute the proceeds in the same way as it does with cash. The depositary will allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them.

If the depositary makes rights available to ADS holders, it will exercise the rights and purchase the shares on your behalf. The depositary will then deposit the Class B Shares and deliver ADSs to the persons entitled to them. It will only exercise rights if you pay it the exercise price and any other charges the rights require you to pay.

U.S. securities laws may restrict transfers and cancellation of the ADSs represented by Class B Shares purchased upon exercise of rights. For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliver restricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put the necessary restrictions in place.

· Other Distributions. The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution.

The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, Class B Shares, rights or anything else to ADS holders. This means that you may not receive the distributions we make on our Class B Shares or any value for them if it is illegal or impractical for us to make them available to you.

Deposit, Withdrawal and Cancellation

The depositary will deliver ADSs if you or your broker deposit Class B Shares or evidence of rights to receive Class B Shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.

You may surrender your ADSs at the depositary's corporate trust office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the Class B shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its corporate trust office, if feasible.

You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Alternatively, upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.

Voting Rights

ADS holders may instruct the depositary to vote the number of deposited Class B Shares their ADSs represent. The depositary will provide notice to ADS holders of shareholders' meetings and arrange to deliver our voting materials to them if we ask it to. Those materials will describe the matters to be voted on and explain how ADS holders must instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary.

Otherwise, you would not be able to exercise your right to vote unless you withdraw Class B Shares. However, you may not know about the meeting enough in advance to withdraw Class B Shares.

The depositary will try, as far as practical, subject to the laws of Switzerland and of our Articles or similar documents, to vote or to have its agents vote Class B Shares or other deposited securities as instructed by ADS holders.

If the depositary does not receive your voting instructions in a timely manner you will nevertheless be treated as having instructed the depositary to give a discretionary proxy to the independent proxy holder elected by the Company's shareholders to vote the Class B Shares represented by your ADSs . The depositary will deliver such discretionary proxy only to the extent permitted by applicable law and if:

(i) we instruct the depositary, and the depositary complies with such instruction, to disseminate the shareholders' meetings materials,

(ii) no voting instructions are received by the depositary from you by the deadline established by the depositary, and

(iii) we have timely delivered written confirmation to the depositary that:

a. we wish a discretionary proxy to be given,

b. we reasonably do not know of any substantial opposition to the matter(s) to be voted on, and

c. the matter(s) to be voted on is/are not materially adverse to the interests of the shareholders.

We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your Class B Shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote and there may be nothing you can do if your shares are not voted as you requested.

In order to give you a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Deposited Securities, if we request the Depositary to act, we agree to give the Depositary notice of any such meeting and details concerning the matters to be voted upon at least 30 days in advance of the meeting date.

Fees and Expenses

Persons depositing or withdrawing Class B Shares or ADS holders must pay:	For:
USD5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	• Issuance of ADSs, including issuances resulting from a distribution of Class B Shares or rights or other property • Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
USD0.05 (or less) per ADS	• Any cash distribution to ADS holders
A fee equivalent to the fee that would be payable if securities distributed to you had been Class B Shares and the Class B Shares had been deposited for issuance of ADSs	• Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS holders
USD0.05 (or less) per ADSs per calendar year	• Depositary services
Registration or transfer fees	• Transfer and registration of Class B Shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw Class B Shares
Expenses of the depositary	• Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) • Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes	• As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities	• As necessary

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing Class B Shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-based services until its fees for these services are paid.

From time to time, the depositary may make payments to us to reimburse and/or class B share revenue from the fees collected from ADS holders, or waive fees and expenses for services provided, generally relating to costs and expenses arising out of establishment and maintenance of the ADS program. In performing its duties under the deposit agreement, the depositary may use brokers, dealers or other service providers that are affiliates of the depositary and that may earn or share fees or commissions.

Depositary Payments

In 2019, we did not receive any payments or reimbursements from The Bank of New York Mellon, the depositary bank of our ADS program.

Payment of Taxes

You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.

Reclassifications, Recapitalizations and Mergers

If we:	Then:
• Change the nominal or par value of our Class B Shares	The cash, Class B Shares or other securities received by the depositary will become deposited securities. Each ADS will automatically represent its equal share of the new deposited securities.
• Reclassify, split up or consolidate any of the deposited securities	The depositary may distribute some or all of the cash, Class B Shares or other securities it received. It may also deliver new ADRs or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities.
• Distribute securities on Class B Shares that are not distributed to you
• Recapitalize, reorganize, merge, liquidate, sell all or substantially all of our assets, or take any similar action

Amendment and Termination

We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until thirty (30) days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.

The depositary will terminate the deposit agreement at our direction by mailing notice of termination to the ADS holders then outstanding at least ninety (90) days prior to the date fixed in such notice for such termination. The depositary may terminate the deposit agreement (i) by mailing notice of termination to us and the ADS holders if ninety (90) days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment, (ii) an insolvency event or delisting event (each as further described in the deposit agreement) occurs with respect to us, or (iii) a termination option event (as further described in the deposit agreement) has occurred or will occur.

After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions on the deposited securities, sell rights and other property, and deliver Class B Shares and other deposited securities upon cancellation of ADSs. After termination, the depositary may sell any remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will not invest the money and has no liability for interest. After making the sale, the depositary shall be discharged from all obligations under the deposit agreement, except to account for the net proceeds of such sale and other cash (after deducting fees and expenses and applicable taxes and governmental charges). The depositary's only obligations will be to account for the money and other cash. After termination our only obligations will be to indemnify the depositary and to pay fees and expenses of the depositary that we agreed to pay.

Limitations on Obligations and Liability

The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:

· are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;

· are not liable if we are or it is prevented or delayed by law or circumstances beyond our control from performing our or its obligations under the deposit agreement;

· are not liable if we or it exercises discretion permitted under the deposit agreement;

· are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;

· have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person;

· may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person.

In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.

Requirements for Depositary Actions

Before the depositary will deliver or register a transfer of an ADS, make a distribution on an ADS, or permit withdrawal of Class B Shares, the depositary may require:

· payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any Class B Shares or other deposited securities;

· satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and

· compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.

The depositary may refuse to deliver ADSs or register transfers of ADSs generally when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.

Your Right to Receive Class B Shares Underlying your ADSs

ADS holders have the right to cancel their ADSs and withdraw the underlying Class B Shares at any time except:

· When temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of Class B Shares is blocked to permit voting at a shareholders' meeting; or (iii) we are paying a dividend on our Class B Shares.

· When you owe money to pay fees, taxes and similar charges.

· When it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of Class B Shares or other deposited securities.

This right of withdrawal may not be limited by any other provision of the deposit agreement.

Waiver of Jury Trial

As a party to the deposit agreement, you irrevocably waive, to the fullest extent permitted by applicable law, your right to trial by jury in any legal proceeding arising out of the shares or other deposited securities, the ADSs or ADRs, as applicable, the deposit agreement or any transaction contemplated therein or any breach thereof against us and/or the depositary.

EX-4.19

Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.

Credit Agreement

dated as of April 4, 2019


by and between

ExWorks Capital Fund I, L.P. (Lender)

333 West Wacker Drive, Suite 1620, Chicago, Illinois 60606, USA

and

WISeCoin AG (Borrower)

c/o WISeKey International Holding AG, General-Guisan-Strasse 6, 6300 Zug, Switzerland

(the Lender and Borrower each a Party and together the Parties)

regarding

USD 4,000,000 Term Facility

TABLE OF CONTENTS

1.	Definitions and Interpretation		5
	1.1.	Definitions	5
	1.2.	Interpretation	12
2.	The Facility		12
3.	Purpose		12
4.	Documents to be delivered on the Date of this Agreement		12
5.	Conditions of Utilization		13
6.	Utilization Request		14
	6.1.	Delivery of the Utilization Request	14
	6.2.	Completion of the Utilization Request	14
	6.3.	Currency and amount	14
7.	Final Maturity		14
8.	Repayment		14
	8.1.	Repayment and Prepayment of Loan	14
	8.2.	Reborrowing	15
	8.3.	Illegality	15
	8.4.	Voluntary Prepayment of Loan	15
	8.5.	Restrictions	15
	8.6.	Option Right	15
9.	Interest and Fees		16
	9.1.	Interest Rates	16
	9.2.	Interest Payment Dates	16
	9.3.	Payment in Kind Interest	16
	9.4.	Default Interest	17
	9.5.	Computation	17
	9.6.	Minimum Interest Rate	17
	9.7.	Intent to Limit Charges to Maximum Lawful Rate	18
	9.8.	Success Fee	18
10.	Representations and Warranties		18
	10.1.	Organization	18
	10.2.	Financial Statements	19
	10.3.	Absence of Conflicting Obligations	19
	10.4.	Taxes	19
	10.5.	Non-Bank Rules	19

Page 2  of 38

	10.6.	Absence of Material Litigation	19
	10.7.	Full Disclosure	20
	10.8.	Compliance with Applicable Laws	20
	10.9.	Subsidiaries	20
11.	Negative Covenants		20
	11.1.	Restriction on Liens	20
	11.2.	Reserved Restriction on Indebtedness	20
	11.3.	Mergers; Consolidations; Organizational Changes	21
	11.4.	Contingent and Third Party Liabilities	21
	11.5.	Changes	21
	11.6.	Restricted Payments and Shareholder Loans	21
	11.7.	At Arm’s Length Transactions	21
	11.8.	Certain Debt Payments	22
	11.9.	Certain Agreements	22
	11.10.	Negative Pledge	22
	11.11.	Asset Transfers	22
	11.12.	Subsidiaries	22
12.	Affirmative Covenants		22
	12.1.	Existence; Payment of Taxes and Other Liabilities	22
	12.2.	Transaction Security	22
	12.3.	Accounting System	23
	12.4.	Accounting Records; Reports	23
	12.5.	Litigation	24
	12.6.	Compliance with Applicable Laws	24
	12.7.	Further Assurances	24
	12.8.	Notice	25
	12.9.	Use of Loan	25
	12.10.	Non-Bank Rules	25
	12.11.	Broker’s Fees	25
13.	Defaults		25
	13.1.	Default in Payment of Obligations Borrower fails to pay:	26
	13.2.	Default under Loan Documents	26
	13.3.	Representations or Statements False	26
	13.4.	Default on Other Debt	26
	13.5.	Judgments	26
	13.6.	Bankruptcy; Insolvency	27
	13.7.	Material Adverse Change	27
	13.8.	Levy or Attachment	27
	13.9.	Challenge to Loan Documents	27
14.	Remedies on Occurrence of an Event of Default		27

Page 3  of 38

	14.1.	Right and Remedies	27
	14.2.	No Waiver	27
15.	Tax Gross-Up and Indemnities		27
	15.1.	Tax Gross-Up	28
	15.2.	Tax Indemnity	28
16.	General Terms		28
	16.1.	Expenses, Fees and Costs; Indemnification; Confidentiality	28
	16.2.	Currency Conversions	29
	16.3.	Assignments and Participations	29
	16.4.	Right to Inspect and Audit	29
	16.5.	Exculpation and Indemnity	30
	16.6.	Remedies and Waivers	30
	16.7.	Amendments and Waivers	30
	16.8.	Counterparts	30
	16.9.	Notices	31
	16.10.	Loan Agreement Controls	31
	16.11.	Severability	31
	16.12.	Payment Mechanics	31
	16.13.	Set-Off	32
	16.14.	Patriot Act	32
	16.15.	Confidentiality	32
	16.16.	Entire Agreement of the Parties	32
	16.17.	Execution of the Agreement	33
	16.18.	Governing Law and Jurisdiction	33
Schedule 1:          Term Sheet			35
Schedule 2:          Documents to be delivered on the Date of this Agreement			36
Schedule 3:          Funding Conditions			37
Schedule 4:          Form of Utilization Request			38

Page 4  of 38

1. Definitions and Interpretation

1.1. Definitions

In addition to the terms defined in this Agreement, the following terms have the given definitions:

Affiliate means with respect to any entity, another Person that directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the applicable entity.

Agreement means this USD 4,000,000 term facility agreement.

Business Day means a day on which commercial banks are open for business in New York, New York, USA and Zurich, Switzerland, other than Saturdays and Sundays.

CHF means Swiss Francs, the lawful currency of Switzerland.

Claims means any demand, claim, action or cause of action, damage, liability, loss, cost, debt, expense, obligation, tax, assessment, charge, lawsuit, contract, agreement or undertaking, of any kind or nature, whether known or unknown, fixed, actual, accrued or contingent, liquidated or unliquidated (including interest, penalties, attorneys’ fees and other costs and expenses incident to proceedings or investigations relating to, or the defense of, any of the foregoing), whether or not litigation has commenced.

Collateral means all collateral security for the Obligations given to Lender by Borrower or the Security Grantor or a Lien on any of their property securing payment of the Obligations.

Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have correlative meanings.

Confidential Information means all information relating to Borrower or any of its Affiliates which Lender receives from Borrower or any of its Affiliates (whether prior to or after the date hereof) with regard to the entry in and the operation of this Agreement and the other Loan Documents but does not include information which (i) prior to delivery of such information to Lender, was already in the possession of Lender from sources other than Borrower or its Affiliates, (ii) was or becomes generally available to the public other than as a result of disclosure by Lender, (iii) becomes available to Lender on a non-confidential basis from a source other than Borrower or its Affiliates, provided that Lender was not aware that such source is bound by a confidentiality agreement with, or obligation of secrecy to, Borrower or any of its Affiliates or (iv) was or is independently developed by Lender without recourse to Confidential Information.

Page 5  of 38

Conversion Price means the price per Token at which the Tokens, based on the Term Sheet, have been issued by the Borrower to the initial Purchaser, converted into US dollars using the relevant exchange rates published in the U.S. national edition of the Wall Street Journal on the Business Day immediately preceding the date on which the Tokens have been issued.

Default means an event or occurrence that with the passage of time or the giving of notice will be an Event of Default.

Equity Interest means, with respect to any Person, the shares of capital stock, participations in profits or other equivalents (however designated and including any preferred stock of the Person or similar interests that is given preference to common shares in receiving dividends or distributions made by the Person), membership interests or units, partnership or entity units or other interests similar to capital stock.

Event of Default shall have the meaning ascribed to such term in Clause 13 (Defaults).

Excluded Taxes mean taxes and assessments that are imposed on Lender’s overall net income by the United States of America.

Expenses means all documented fees and out of pocket disbursements reasonably incurred by Lender, including out-of-pocket fees of counsel and court costs, in any way arising from or in connection with this Agreement, any other Loan Document, any of the Collateral, including, without limitation, (i) documented examination costs as well as the associated travel expenses of any examiners, if applicable; (ii) all documented fees and expenses (including recording fees and bank administration charges) of Lender and fees of counsel for Lender for the preparation, examination, approval, negotiation, execution and delivery of, or the closing of any of the transactions contemplated by, this Agreement or any other Loan Document; and (iii) all documented fees and out of pocket disbursements incurred by Lender, including attorneys’ fees, in any way arising from or in connection with any action taken by Lender to monitor, advise, administer, enforce or collect any of the Obligations under this Agreement or any other Loan Document, and (iv) all documented out-of-pocket expenses and fees (including attorneys’ fees) incurred in relation to, in connection with, in defense of or in prosecution of any litigation, instituted by Borrower (unless Borrower prevails in all respects in such litigation, in which case Borrower will not be obligated to pay Lender’s expenses and fees incurred with such litigation) or any third party against or involving Lender arising from, relating to, or in connection with any of the Obligations or any Loan Document provided, however, that the fees, expenses and costs incurred by Lender for its legal counsel in connection with establishing and negotiating the Loan Documents prior to the date hereof shall in no event exceed CHF 30,000.

Facility means the term credit facility made available under this Agreement as described in Clause 2 (The Facility).

Page 6  of 38

Facility Amount means USD 4,000,000, to the extent not cancelled or reduced.

Funding Conditions means the conditions precedent to the funding of the Loan as set forth in Schedule 3 (Funding Conditions).

Funding Date means the date on which Lender funds the Loan to Borrower in accordance with the terms and conditions of this Agreement.

GAAP means the general accounting principles as per the Swiss Code of Obligations.

Governmental Authority means any nation or government, and any political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any court, tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory organization.

Governmental Orders means any order, judgment, injunction, decree, stipulation or determination issued, promulgated or entered by or with any Governmental Authority of competent jurisdiction.

Guidelines means, together, guideline S-02.123 in relation to interbank loans of 22 September 1986 (Merkblatt S-02.123 vom 22 September 1986 betreffend Zinsen von Bankguthaben, deren Gläubiger Banken sind (Interbankguthaben)), guideline S-02.132 in relation to issuance stamp duty on fixed deposits of 1 April 1993 (Merkblatt S-02.132 vom 1. April 1993 betreffend Emissionsabgabe auf Festgeldanlagen bei inländischen Banken), guideline S-02.130.1 in relation to accounts receivables of Swiss debtors of April 1999 (Merkblatt S-02.130.1 vom April 1999 Geldmarktpapiere und Buchforderungen inländischer Schuldner), guideline S-02.122.1 in relation to bonds of April 1999 (Merkblatt S-02.122.1 vom April 1999 betreffend Obligationen), circular letter no. 34 in relation to customer credit balances of 26 July 2011 (Kreisschreiben Nr. 34 vom 26. Juli 2011 betreffend Kundenguthaben), guideline S-02.128 in relation to syndicated credit facilities of January 2000 (Merkblatt S-02.128 vom Januar 2000 Steuerliche Behandlung von Konsortialdarlehen, Schuldscheindarlehen, Wechseln und Unterbeteiligungen) and the circular letter no. 15 in relation to bonds and derivatives of 3 October 2017 (Kreisschreiben Nr. 15 vom 3. Oktober 2017 betreffend Obligationen und derivative Finanzinstrumente als Gegenstand der direkten Bundessteuer, der Verrechnungssteuer sowie der Stempelabgaben), all as issued, and as amended from time to time, by the Swiss Federal Tax Administration, or as substituted or superseded and overruled by any law, statute, ordinance, court decision, regulation or the like as in force from time to time, including the established practice of the Swiss Federal Tax Administration.

Insolvency Event means, with respect to any person or entity, that such person or entity: (a) becomes insolvent; (b) is unable, or admits in writing its inability, to pay debts as they generally mature; (c) makes a general assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its property; (d) files on its behalf or consents to an Insolvency Proceeding; (e) has an Insolvency Proceeding filed or instituted against it that is not stayed or dismissed within 60 days after it is filed or instituted; (f) applies to a court for the appointment of a receiver, trustee or custodian for any of its assets; (g) has a receiver, trustee or custodian appointed for any of its assets (with or without its consent); or (h) commences a self-liquidation of its assets.

Page 7  of 38

Insolvency Proceeding means any of the following events:

(a) any corporate action, legal proceedings or other procedure or step exists or is taken in relation to, or threatened that could result in:

(i) bankruptcy, insolvency, suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise) of any such Swiss entity;

(ii) a composition or assignment;

(iii) an arrangement with any creditor of such Swiss entity; or

(b) the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any such Swiss entity or such entity’s assets.

Interest Payment Date shall have the meaning ascribed to such term in Clause 9.2 (Interest Payment Dates).

Interest Rate shall have the meaning ascribed to such term in Clause 9.1 (Interest Rates).

Investment means, as applied to any Person, (i) any direct or indirect acquisition by the Person of any Equity Interest, other securities or other interests of, or investments in, any other Person, or all or any substantial part of the business or assets of any other Person, and (ii) any direct or indirect loan, gift, advance or capital contribution by such Person to any Person other than a Controlled subsidiary of Borrower.

Laws means any (i) federal, state, county, local or foreign constitution, treaty, statute, law, ordinance, regulation, interpretation, rule, code or rule of common and/or Swiss law, including all Foreign Ownership, Control or Influence and International Traffic In Arms regulations, of any Governmental Authority, including Customs Requirements, and laws and regulations imposed by the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC), the United Nations Security Council (UNSC), the European Union, Switzerland, Her Majesty’s Treasury (HMT), (ii) consent or similar agreements with any Governmental Authority, and (iii) any Governmental Orders.

Lien means any lien, charge, mortgage, security interest, pledge or other encumbrance on any property or interests in property of any Loan Party.

Page 8  of 38

Loan means a loan made or to be made under the Facility or the principal amount outstanding for the time being of that loan, but excluding – for the avoidance of doubt – the Success Fee.

Loan Documents means, collectively, this Agreement, a Security Agreement and any other agreements designated as such by a Loan Party and Lender.

Loan Parties means, collectively, Security Grantor and Borrower, each a Loan Party.

Material Adverse Change mean a material adverse effect on or material adverse change in, as the case may be, (i) the business, assets or financial condition of Borrower, (ii) the ability of the Loan Parties (taken as a whole) to perform or observe the payment obligations under this Agreement or any other Loan Document to which it is a party; or (iii) the material rights and remedies available to Lender under any Loan Document.

Non-Bank Rules means the Ten Non-Bank Rule and the Twenty Non-Bank Rule. Non-Qualifying Bank means a person other than a Qualifying Bank.

Non-Qualifying Bank means a person other than a Qualifying Bank.

Obligations means the Loan, and all other obligations owing by Borrower to Lender for the payment of money pursuant to any Loan Document, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and all Expenses which Borrower is required to pay or reimburse pursuant to the Loan Documents.

Participation Certificate means as the equity securities referred to as “Participation Certificate(s)” in the Term Sheet.

Patriot Act means the USA Patriot Act, Title III of Public Law 107-56 (signed October 26, 2001).

Permitted Liens means:

(a) Liens for taxes, assessments or governmental charges, and Liens incident to construction, which are not delinquent or are being contested in good faith by Borrower by appropriate proceedings, which will prevent foreclosure of those Liens, and against which adequate reserves have been provided, and upon demand, with adequate security being posted with Lender;

(b) Liens or deposits in connection with insurance or to secure customs duties, public or statutory obligations in lieu of surety, stay or appeal bonds, or to secure performance of contracts or bids (other than contracts for the payment of money borrowed), or deposits required by law or governmental regulations or by any court order, decree, judgment or rule as condition to the transaction of business or the exercise of any right, privilege or license; or other Liens or deposits of a like nature made in the ordinary course of business;

Page 9  of 38

(c) Liens, charges and security interests granted in the ordinary course of business;

(d) Liens, charges and security interests arising by operation of law; and

(e) Liens, charges and security interests granted to Lender.

Person means any individual, trustee, sole proprietorship, partnership (general or limited), joint venture, trust, unincorporated organization, association, corporation, limited liability company, limited liability partnership and other entity or any Governmental Authority.

PIK Interest has the meaning ascribed to such term in paragraph (a) of Clause 9.3 (Payment in Kind Interest).

Purchaser has the meaning ascribed to such term in the Term Sheet.

Qualifying Bank means a person or entity which (a) effectively conducts banking activities with its own infrastructure and staff as its principal purpose and (b) which has a banking license in full force and effect issued in accordance with the banking laws in force in its jurisdiction of incorporation, or if acting through a branch, issued in accordance with the banking laws in the jurisdiction of such branch, all in accordance with the Guidelines.

Restricted Payment means, with respect to any Person, any one or more of the following:

(a) any payment on account of the purchase, acquisition or redemption of any Equity Interests in the Person now or hereafter outstanding, or any other payment or distribution made in respect thereof, or other acquisition for value, directly or indirectly, or the purchase, acquisition or redemption, of any Equity Interests in the Person now or hereafter outstanding by the Person;

(b) any payment of management, consulting, servicing or advisory fees (or other fees of a similar nature) by the Person to any Affiliate, except for payments in the ordinary course of business;

(c) for as long as WISeCoin R&D has not guaranteed the Obligations and not provided security over its material assets pursuant to Clause 12.2, any payments to WISeCoin R&D which are not in the ordinary course of Borrower’s business; and

(d) any payment to holders of Tokens in respect thereto;

provided, however, that in no event shall the issuance of Tokens, and the conversion of Tokens into Participation Certificates, all as substantially set forth in the Term Sheet, be considered a Restricted Payment for purposes of this Agreement.

Page 10  of 38

In no event will any dividend, distribution, payment, prepayment or extension of credit between, or Investment in, any Loan Party or their direct or indirect Controlled subsidiaries be deemed to be a Restricted Payment.

Security Agreement means any agreement that grants or conveys a Lien that secures the Obligations.

Security Grantor means, with respect to the pledge of shares in the Borrower as specified in Schedule 2, WISeKey International Holdings AG, a stock corporation (Aktiengesellschaft) incorporated in Switzerland and registered in the commercial register of the Canton of Zug under registration number CHE-143.782.707, with its registered office at General-Guisan-Strasse 6, 6300 Zug, Switzerland, and any other entity that grants any Lien securing the Obligations, based on the procurement obligation set forth in Clause 12.2.

Swiss Federal Tax Administration means the tax authorities referred to in article 34 of the Swiss Withholding Tax Act.

Swiss Withholding Tax means taxes imposed under the Swiss Withholding Tax Act.

Swiss Withholding Tax Act means the Swiss Federal Act on the Withholding Tax of 13 October 1965 (Bundesgesetz Ober die Verrechnungssteuer), together with the related ordinances, regulations and guidelines, all as amended and applicable from time to time.

Tax means any tax, levy, impost, duty or other charge or withholding of a similar nature, including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same or any addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Authority, whether current or deferred, and whether disputed or not.

Tax Deduction means a deduction or withholding for or on account of Tax from a payment under this Agreement (or any Loan Documents).

Ten Non-Bank Rule means the rule that the aggregate number of creditors, other than Qualifying Banks under this Agreement must not at any time exceed ten (10), all in accordance within the meaning of the Guidelines.

Token means a security token known as “WISeSecurity Token” or “WCN Token” as may be issued by the Borrower from time to time after the date hereof, such issuance, and the principal terms applicable to such Tokens, substantially as set forth on the Term Sheet attached hereto in Schedule 1 (the Term Sheet).

Twenty Non-Bank Rule means the rule that the aggregate number of creditors, other than Qualifying Banks, of a Swiss person or entity (Inländer), under all outstanding written debt instruments relevant for classification as a cash debenture (Kassenobligation), such as loans, notes, facilities and/or private placements must not at any time exceed twenty (20), all in accordance within the meaning of the Guidelines.

Page 11  of 38

USD means United States dollars, the lawful currency of the United States of America.

Utilization Request means the notice substantially in the form set out in Schedule 4 (Form of Utilization Request).

1.2. Interpretation

(a) Unless a contrary indication appears, any reference in this Agreement to:

(i) Borrower, Lender or any Party shall be construed so as to include its successors in title, permitted assigns, and permitted transferees to, or of, its rights and/or obligations under the Loan Documents;

(ii) references to any agreement or other document are references to such agreement or document as amended, restated, novated, supplemented, extended or replaced, from time to time, in accordance with its terms;

(iii) references to any provisions of law, act or regulation or to any act, law or regulation is a reference to that provision of law, act or regulation or law, act or regulation as amended, supplemented or re-enacted from time to time;

(iv) references to Clauses and Schedules are references to clauses of and schedules to this Agreement;

(v) words importing the plural shall include the singular and vice-versa; and

(vi) “including” means “including without limitation”, not limiting the term(s) to which the word relates to the example(s) thereafter mentioned.

2. The Facility

Subject to the terms of this Agreement, Lender will make available to Borrower a USD term loan facility in an amount equal to the Facility Amount.

3. Purpose

(a) Borrower shall apply all amounts borrowed by it under the Facility towards its general working capital needs or for general business development purposes.

(b) Lender is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4. Documents to be delivered on the Date of this Agreement

On the date of this Agreement, Borrower shall deliver to Lender all of the documents and other evidence listed in Schedule 2 (Documents to be delivered on the Date of this Agreement) in form and substance satisfactory to Lender.

Page 12  of 38

5. Conditions of Utilization

Notwithstanding any other terms of this Agreement, the utilization and funding of the Loan by Lender is subject to the satisfaction of all the following conditions as of the Funding Date of the Loan:

(a) Lender has received the Utilization Request in accordance with Clause 6 (Utilization Request);

(b) the Funding Conditions are satisfied, in form and substance satisfactory to Lender. In connection with satisfaction of the Funding Conditions, all papers and other documents relating to the transactions contemplated by the Loan Documents (including the granting of Liens), are in form and substance satisfactory to Lender, and where appropriate, original signatures or copies certified by proper authorities, corporate officials and other Persons have been delivered to Lender;

(c) Borrower’s representations and warranties in this Agreement and any other Loan Document are in all respects true as of the Funding Date of the Loan, unless the applicable representation or warranty is made as of a specific date, in which case the representation shall have been true and correct in all material respects as of that date;

(d) no Default or Event of Default under this Agreement or any Loan Document exists;

(e) no Material Adverse Change has occurred since the earlier of (i) the date of the most recent financial statement of Borrower provided to Lender and (ii) the date on which this Agreement is signed;

(f) the consummation of the transactions contemplated by the Loan Documents and the funding of the Loan (i) is not prohibited by, and do not violate any Laws applicable to Borrower, (ii) is not enjoined (temporarily or permanently) under, or prohibited by or contrary to, any injunction, order, decree, ruling or other Governmental Order, and (iii) there is no action, suit, proceeding or investigation pending against Borrower that draws into question the validity, legality or enforceability of this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby;

(g) each of the covenants, agreements and obligations of the Loan Parties (or any them) under the Loan Documents to be performed or satisfied by them (or it) have been performed or satisfied by them (or it) in all material respects;

Page 13  of 38

(h) Borrower has paid to Lender, in immediately available funds, all Expenses and fees due and payable under the Loan Documents; and

(i) the Loan Parties have obtained all consents and made all public filings required to be obtained from, or filed with all Governmental Authorities and other Persons in connection with the transactions contemplated by the Loan Documents and all applicable waiting periods have expired.

6. Utilization Request

6.1. Delivery of the Utilization Request

Borrower may utilize the Facility by delivery to Lender of a duly completed Utilization Request not later than 10 a.m. CET two (2) Business Days before the proposed Funding Date, all in accordance with the terms and conditions of this Agreement.

6.2. Completion of the Utilization Request

(a) The Utilization Request is irrevocable and will not be regarded as having been duly completed unless:

(i) the proposed Funding Date is a Business Day; and

(ii) the currency and amount of the Utilization comply with Clause 6.3 (Currency and amount).

(b) Only one Utilization Request may be filed.

6.3. Currency and amount

(a) The currency specified in the Utilization Request must be USD.

(b) The amount of the proposed Loan must be an amount which is not more than the Facility Amount.

7. Final Maturity

Subject to the terms of this agreement, the final maturity date of the Facility shall be the date falling twelve (12) months from the date of this Agreement (the Termination Date).

8. Repayment

8.1. Repayment and Prepayment of Loan

(a) Notwithstanding anything to the contrary in this Agreement, the Loan shall become due and payable and Borrower shall repay the Loan together with accrued and unpaid interest thereon including, without limitations, any PIK Interest and all other amounts due by it under this Agreement in full on the earlier of:

(i) the Termination Date; or

(ii) the occurrence of an Event of Default in accordance with and as set out in Clause 13 (Defaults).

Page 14  of 38

8.2. Reborrowing

Borrower may not reborrow the Facility (or – for the avoidance of doubt – any part of it) which is repaid or prepaid.

8.3. Illegality

If, in any applicable jurisdiction, it becomes unlawful for Lender to perform any of its obligations as contemplated by this Agreement to fund or maintain its participation in any Loan:

(a) Lender shall promptly notify Borrower upon becoming aware of that event;

(b) the Facility will be immediately cancelled and reduced; and

(c) Borrower shall repay the outstanding Loan on the date specified by Lender in the notice delivered to Borrower (being no earlier than the last day of any applicable grace period permitted by law).

8.4. Voluntary Prepayment of Loan

Borrower may, if it gives Lender not less than ten (10) Business Days’ prior notice, prepay the whole or any part of the Loan.

8.5. Restrictions

(a) Any notice of prepayment given by any Party under this Clause 8 (Repayment ) shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant prepayment is to be made and the amount of that prepayment.

(b) Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid (other than any interest requested by the Borrower to be treated as PIK Interest in accordance with the terms of this Agreement), without premium or penalty.

(c) Borrower shall not repay or prepay all or any part of the Loan except in the manner expressly provided for in this Agreement.

8.6. Option Right

(a) The Loan as well as any payments of interest on the Loan and fees may be paid in either cash or, at Lender’s sole option, in Tokens, in case of Tokens applying the Conversion Price. The maximum number of Tokens the Borrower shall be required to issue and deliver upon exercise by the Lender of its option under this Clause 8.6(a) shall be 625,000. If Lender elects to have the Loan and/or interest accrued under the Loan for any particular month and/or Expenses or fees paid in Tokens, the Lender shall give notice to the Borrower at least five (5) Business Days prior to the due date of the relevant payment. For the avoidance of doubt, the Lender may exercise the option provided in this Clause 8.6 at its full discretion in respect of all or any part of the amounts outstanding under and/or in connection with this Agreement and the Lender may exercise such option repeatedly until any and all amounts owed by the Borrower under and/or in connection with this Agreement have been fully discharged by the Borrower in accordance with the terms of this Agreement.

Page 15  of 38

(b) In case the Lender elects to receive Tokens, the following shall apply:

(i) the Borrower shall issue the relevant number of Tokens within five (5) Business Days after submission of such notice by the Lender to the Borrower; the Tokens shall be credited to the “wallet” as designated by the Lender in such notice, provided, however, that Borrower shall in no event be required to issue to Lender Tokens on any date prior to the initial issuance of any Tokens to Purchasers, all as further set forth in the Term Sheet;

(ii) the Borrower represents as of the date of such issuance of Tokens to the Borrower that the Tokens have been validly issued, free and clear of any encumbrance (save as described in the relevant “white paper”) and meet any of the descriptions based on which the Tokens had been offered to Purchasers as

(iii) further set forth in the Term Sheet;

(iv) the Borrower represents as of any date on which Tokens are issued that the Tokens and their issuance by the Borrower comply with all applicable laws and regulations.

9. Interest and Fees

9.1. Interest Rates

The aggregate outstanding amount of the Loan will bear interest at a rate of [***] per year (the Interest Rate).

9.2. Interest Payment Dates

All interest shall be due and payable on the first day of each month (each an Interest Payment Date), pro rata, in arrears.

9.3. Payment in Kind Interest

(a) At Borrower’s request, up to USD 80,000 in the aggregate of accrued interest may be “paid in kind” by capitalizing such interest (the PIK Interest) and adding it to (and thereby increasing) the aggregate outstanding principal balance of the Loan, provided that

Page 16  of 38

(i) a request for an interest payment to be made as PIK Interest will be delivered by the Borrower to the Lender ten (10) Business Days prior to the date such interest payment would become due; and

(ii) the Lender does not exercise its option rights pursuant to Clause 8.6 (Option Right) with regard to the respective interest payment.

(b) PIK Interest shall be treated as principal and shall itself accrue interest from and after the date it was due. All PIK Interest shall be due and payable on the Termination Date.

9.4. Default Interest

The aggregate outstanding amount of the Loan will bear interest from and after the occurrence and during the continuation of an Event of Default, without constituting a waiver of any Event of Default, at the rate of 3.0% per annum above the otherwise applicable rate.

9.5. Computation

All interest chargeable under the Loan Documents will be computed on the basis of a 360 day year for the actual number of days elapsed.

9.6. Minimum Interest Rate

If a Tax Deduction is required by law in respect of any interest payable by Borrower and should it be unlawful for Borrower to comply with paragraph (a) of Clause 15.1 (Tax Gross-Up) for any reason, where this would otherwise be required by the terms of paragraph (a) of Clause 15.1 (Tax Gross-Up), then (i) the applicable interest rate in relation to that payment shall be the rate which would have applied to that payment as provided for by Clause 9.1 (Interest Rates) divided by one minus the rate at which the relevant Tax Deduction is required to be made under Swiss domestic tax law and/or applicable double taxation treaties (where the rate at which the relevant Tax Deduction is required to be made is for this purpose expressed as a fraction of one); and (ii) Borrower shall (A) pay the relevant interest at the adjusted rate in accordance with paragraph (i) above and (B) make the Tax Deduction on the interest so recalculated, and all references to an interest rate under this Agreement shall be construed accordingly. To the extent that an interest payable by Borrower becomes subject to Swiss Withholding Tax, the Loan Parties shall promptly cooperate in completing any procedural formalities (including submitting forms and documents required by the appropriate Tax authority) to the extent possible and necessary for Borrower to obtain authorization to make interest payments without being subject to Swiss Withholding Tax and/or for Lender to get a partial or full refund of Swiss Withholding Tax.

Page 17  of 38

9.7. Intent to Limit Charges to Maximum Lawful Rate

In no event shall the interest rates payable under the Loan Documents, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction, in a final determination, deems applicable. Borrower and Lender, in executing and delivering the Loan Documents, intend to agree upon the rate or rates of interest and manner of payment stated within the Loan Documents. However, if the rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto as of the date of this Agreement, Borrower is and will be liable only for the payment of the maximum as allowed by law, and payments received from Borrower in excess of the legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of the excess.

9.8. Success Fee

Borrower shall pay Lender a success fee of USD 160,000 (Success Fee) which will be fully earned and non-refundable on the Funding Date, but not payable until the sooner of (i) termination of this Agreement, (ii) the Termination Date, (iii) payment in full of all Obligations; and (iv) the occurrence of an Event of Default that is not cured or remedied within any cure or grace period. If Borrower voluntarily prepays the Loan prior to the Termination Date, the Success Fee will be reduced on a pro rata basis. If Borrower prepays only part of the Loan prior to the Termination Date, the Success Fee shall be reduced on a pro rata basis in an amount which is proportional to the amount prepaid.

10. Representations and Warranties

Borrower makes the representations and warranties set out in this Clause 10 (Representations and Warranties) to Lender on and as of the date of this Agreement, the date of any Utilization Request, as of the respective Funding Date and as of any Interest Payment Date.

10.1. Organization

(a) Borrower is a stock corporation (Aktiengesellschaft) duly formed and existing under the laws of Switzerland, and the execution, delivery and performance of the Loan Documents to which it is a party, including this Agreement, are within its organizational powers, have been duly authorized, are not in contravention of applicable law or its articles of association and do not require the consent or approval of any third party, including any governmental body, agency or authority.

(b) Borrower is , to the extent required under applicable law, duly licensed or qualified to do business in all jurisdictions in which Borrower has property or business operations, or the failure to be so licensed or qualified will not materially and adversely affect Borrower or its property.

Page 18  of 38

10.2. Financial Statements

Borrower’s balance sheets, the statements of profit and loss and surplus and the cash flow statements furnished to Lender from time-to-time will be prepared in accordance with GAAP and will fairly, in accordance with and subject to any limitations under GAAP, present Borrower’s financial condition as of the relevant dates and the results of its operations for the applicable time periods.

10.3. Absence of Conflicting Obligations

The making and execution of the Loan Documents and compliance with their terms will not

(a) result in a breach of any of the terms and conditions of any material indenture, agreement or instrument to which Borrower is a party or its assets are subject; or

(b) result in the imposition of any Lien upon any property of Borrower pursuant to, or constituting a default under, any indenture or other agreement or instrument to which Borrower is a party or by which it is bound, except as explicitly provided for in the Loan Documents.

10.4. Taxes

Borrower has no outstanding unpaid Tax liabilities (except for Taxes which are currently accruing from its current operations and ownership of property, and which are not delinquent), and no Tax deficiencies have been proposed or assessed against Borrower. There have been no audits of Borrower’s federal income tax returns, which have resulted in or are likely to result in the assessment of any material Tax liability against Borrower that has not been paid.

10.5. Non-Bank Rules

Borrower is and will remain in compliance with the Non-Bank Rules during the term of this Agreement. Lender confirms as of the date of this Agreement that it is considered as one (1) creditor only for the purposes of the Non-Bank Rules. There is no breach of this representation if the violation of the Non-Bank Rules results from (i) an incorrect confirmation given by a Lender under this Clause with respect to its status or (ii) from a Lender having violated its duties under paragraph (c) of Clause 16.3 (Assignments and Participations). For the purposes of its compliance with the Twenty Non-Bank Rule under this Clause 10.5 (Non- Bank Rules), the number of creditors under this Agreement which are not Qualifying Banks shall be deemed to be five (5), irrespective of whether or not there are, at any time, any such creditors.

10.6. Absence of Material Litigation

Borrower is not a party to any litigation or administrative proceeding, nor so far as is known by Borrower is any litigation or administrative proceeding threatened against it, which in either case, is likely to be adversely determined and, if so determined, would cause any Material Adverse Change, except as disclosed in writing to Lender.

Page 19  of 38

10.7. Full Disclosure

The written materials delivered by Borrower to Lender in connection with the transactions contemplated by this Agreement do not contain any statement that is false or misleading as to any material fact and do not omit to state any material fact necessary in order to make the statements therein not false or misleading. There are no additional facts that Borrower is aware of that have not been disclosed in writing to Lender that materially affect adversely or, so far as Borrower can reasonably foresee, will materially affect adversely Borrower’s financial condition or business prospects.

10.8. Compliance with Applicable Laws

Borrower is in compliance in all material respect with all applicable Laws. Borrower has all licenses, permits, orders and approvals that are required under any Governmental Authority in connection with Borrower’s business and properties (Permits), it being understood that any future issuance of Tokens may require further Permits for such issuance to become effective. No notice of any violation has been received with respect of any Permits and no proceeding is pending or, to the best of Borrower’s knowledge, threatened to terminate, revoke or limit any Permits that would cause a Material Adverse Change.

10.9. Subsidiaries

The Borrower does not hold shares or quotas in any subsidiaries other than WISeCoin R&D Lab. France SAS, a French company with its principal place of business at Arteparc Bachasson, Rue de la Carrière de Bachasson, 13590 Meyreuille, France (WISeCoin R&D).

11. Negative Covenants

While any of the Obligations remain unpaid, Borrower must not agree (and shall procure that each of its Controlled subsidiaries will not agree) to and must not (and shall procure that each of its Controlled subsidiaries will not) (without Lender’s prior written consent):

11.1. Restriction on Liens

Except for Permitted Liens, create or permit to be created or allow to exist any Lien upon on any property or assets now owned or acquired in the future by Borrower or its Controlled subsidiaries.

11.2. Reserved Restriction on Indebtedness

Create, incur, assume, or have outstanding any indebtedness for borrowed money except:

(a) The Obligations;

(b) Indebtedness incurred in the ordinary course of Borrower’s business;

Page 20  of 38

(c) Indebtedness to repay the Loan in full;

(d) Indebtedness in an amount up to CHF 150,000; and

(e) Indebtedness for Permitted Liens.

11.3. Mergers; Consolidations; Organizational Changes

Merge with or into or consolidate with or into any other corporation or entity; or change the country of its incorporation, formation or organization, except a merger or consolidation with an Affiliate.

11.4. Contingent and Third Party Liabilities

Guarantee or provide a surety (Bürgschaft) or become otherwise contingently liable for any obligations of others, or assume or become obligated for any obligations of others, except (i) in the ordinary course of business or (ii) up to an aggregate amount of CHF 100,000.

11.5. Changes

Make any substantial change in the nature of its business from that engaged in or already contemplated and disclosed to Lender on the date of this Agreement, engage in any other businesses other than those engaged in or already contemplated and disclosed to Lender on the date of this Agreement,

take any action (including as a result of any change to the Term Sheet) that would be materially detrimental to Lender’s security interest securing the Obligations, or cease a material portion of its operations.

11.6. Restricted Payments and Shareholder Loans

(a) Make any Restricted Payments.

(b) Grant a loan to any of its shareholders.

11.7. At Arm’s Length Transactions

Enter into, or permit or suffer to exist, any transaction or arrangement with any shareholder, employee, director, officer, or member of management, except on terms that are reasonably comparable to what Borrower could obtain in arm’s-length transactions, with persons who have no relationship with Borrower.

Page 21  of 38

11.8. Certain Debt Payments

Make any payments with respect to any of its indebtedness in violation of any subordination or similar agreement executed in favor of Lender.

11.9. Certain Agreements

Enter into any agreement containing any provisions which would be violated or breached by any Loan Party’s performance of its obligations under any Loan Document.

11.10. Negative Pledge

Grant or allow any Liens, or allow any of its Controlled subsidiaries to grant or allow any Liens on any of their assets or properties other than Permitted Liens.

11.11. Asset Transfers

Other than sales of assets in the ordinary course of business (including, for the avoidance of doubt, the issuance of Tokens and the conversion of the Tokens in Participation Certificates, as contemplated under the Term Sheet) or the sale of

obsolete assets, transfer, sell, assign, or convey, or allow any of its Controlled subsidiaries to transfer, sell, assign or convey, any assets or properties, except for fixed assets in the aggregate amount of CHF 200,000 per fiscal year.

11.12. Subsidiaries

Hold or acquire shares and/or quotas in another Person, other than WISeCoin R&D.

12. Affirmative Covenants

While any of the Obligations remain unpaid, Borrower must at all times:

12.1. Existence; Payment of Taxes and Other Liabilities

Maintain (and cause each of its Controlled subsidiaries to maintain) its corporate existence and pay all taxes, assessments and other governmental charges against it or its property, and all of its other liabilities, before they become delinquent and before penalties accrue on these debts and obligations, except to the extent and so long as they are being contested in good faith by appropriate proceedings in a manner as not to cause any material adverse effect upon its financial condition, with adequate reserves provided for such payments, and, upon demand by Lender, posting with Lender of adequate security to protect Lender.

12.2. Transaction Security

(a) Provide or procure for the providing of first ranking security interests on all material assets and personal property of every kind and nature of Borrower (including the security agreements listed in Schedule 2), whether existing on the date of this Agreement or thereafter organized or acquired, in each case securing the Obligations, as required by Lender.

Page 22  of 38

(b) Upon first request of the Lender, the Borrower will promptly grant security over its IP rights. The Lender may request such security, (a) (to the extent legally permissible) if an Even of Default has occurred; and/or (b) if the Borrower holds IP rights which have been registered in a public and/or official register. The Borrower shall inform the Lender of such a registration within 5 (five) Business Days of the filing of the IP right to the register.

(c) Upon first request of the Lender, the Borrower shall promptly grant security over its shares in WISeCoin R&D, procure that WISeCoin R&D provides a guarantee for the Obligations and grants security over its material assets for the benefit of the Lender. The Lender may request this additional security, (a) (to the extent legally permissible) if an Even of Default has occurred; and/or (b) if the value of WISeCoin R&D`s assets is more than 10% of Borrower`s assets (on a consolidated basis) and/or (c) the EBITDA of WISeCoin R&D is more than 10% of Borrower`s EBITDA (on a consolidated basis). The Borrower shall inform the Lender promptly upon the occurrence of one of the above ((a), (b) or (c)) events.

(d) Upon first request of the Lender, the Borrower will procure that WISeCoin R&D promptly grants security over its IP rights. The Lender may request such security, (a) (to the extent legally permissible) if an Even of Default has occurred; and/or (b) if WISeCoin R&D holds IP rights which have been registered in a public and/or official register. The Borrower shall inform the Lender of such a registration within 5 (five) Business Days of the filing of the IP right to the register.

12.3. Accounting System

Maintain (and cause its Controlled subsidiaries to maintain) a standard and modern system of accounting that enables Borrower to produce financial statements in accordance with GAAP.

12.4. Accounting Records; Reports

Borrower will provide to Lender the following in form satisfactory to Lender in its discretion:

(a) Quarterly Reports

Within 60 calendar days after the end of each quarter, a standalone balance sheet for Borrower as of the close of the calendar quarter, a standalone statement of cash flow of Borrower as of the close of the calendar quarter, standalone statements of income and surplus for the calendar month for Borrower, and a standalone summary schedule of cash positions and accounts payable and accounts receivable aging of Borrower.

Page 23  of 38

(b) Annual Reports

As soon as available and in any event within 150 calendar days after the close of Borrower’s fiscal year, a copy of Borrower’s standalone and consolidating financial statements, audited by Borrower`s statutory auditor.

(c) Additional Information

Borrower promptly will provide to Lender additional information concerning Borrower, the Collateral, the operation of Borrower and Borrower’s financial condition, as Lender may reasonably request from Borrower. Lender shall in particular have the right to conduct periodic due diligence to assess the on-going collateral value of the Borrower’s accounts receivable and other Collateral. For as long as no Default or Event of Default has occurred, the Lender (i) will not conduct more than three such examinations per year and (ii) will until the Termination Date not incur costs and expenses of more than USD 20,000.

(d) Electronic Reporting

At Lender’s option, information and reports required to be submitted by Borrower, to the extent practicable, will be transmitted by electronic mail and will be in a record layout format designated by Lender from time-to-time. All information sent by electronic mail will be deemed an authenticated record sent by the individual and entity whose electronic mail address is provided thereon as “sender” or initiating party.

(e) Accounting Standards

All financial statements to be provided to Lender under this Agreement must be prepared according to GAAP.

12.5. Litigation

Promptly furnish Lender, in writing, the details of all material litigation, legal or administrative proceedings, or other actions of any nature materially adversely affecting Borrower or any Controlled subsidiary, including, without limitation, any notices of violation, citation, commencement of administrative proceeding or similar notice, commenced after the date hereof, in which more than USD 200,000 is at issue.

12.6. Compliance with Applicable Laws

Comply in all material respects with all applicable material Laws and not permit the proceeds of any Loan or any other financial accommodation extended by Lender to be used in any way that violates any foreign asset control regulations of or other similar laws.

12.7. Further Assurances

At Lender’s reasonable request, promptly execute or cause to be executed and delivered to Lender all documents, instruments and agreements deemed necessary or appropriate to facilitate the collection of any of the Collateral, or otherwise to give effect to or carry out the terms, conditions or intent of this Agreement or any other Loan Document.

Page 24  of 38

12.8. Notice

Promptly provide Lender written notice of the occurrence of any of the following events, including reasonable particularity as to the relevant facts and circumstances:

(a) Any Material Adverse Change.

(b) The occurrence of an Event of Default.

12.9. Use of Loan

Use the proceeds of the Loan only as provided for in paragraph (a) of Clause 3 (Purpose).

12.10. Non-Bank Rules

Borrower will remain in compliance with the Non-Bank Rules during the term of this Agreement. Lender confirms as of the date of this Agreement that it is considered as one (1) creditor only for the purposes of the Non-Bank Rules. There is no breach of this covenant if the violation of the Non-Bank Rules results from (i) an incorrect confirmation given by a Lender under this Clause with respect to its status or (ii) from a Lender having violated its duties under paragraph (c) of Clause 16.3 (Assignments and Participations). For the purposes of its compliance with the Twenty Non-Bank Rule under this Clause 12.10 (Non-

Bank Rules), the number of creditors under this Agreement which are not Qualifying Banks shall be deemed to be five (5), irrespective of whether or not there are, at any time, any such creditors.

12.11. Broker’s Fees

Pay all broker’s, finder’s or similar fees payable to any persons or entities in connection with this Agreement and to defend and hold Lender harmless against any and all such fees.

13. Defaults

If any one or more of the following events (each an Event of Default) occurs (subject to any stated cure periods), then at Lender’s option as communicated to Borrower, the Loan together with accrued and unpaid interest thereon and all other amounts due by it under this Agreement in full will immediately become due and payable, without further notice of any kind, notwithstanding anything contained to the contrary in this Agreement or in any other agreement, note or document:

Page 25  of 38

13.1. Default in Payment of Obligations
Borrower fails to pay:

(a) interest within three (3) Business Days or, if the failure to pay is caused by administrative or technical error, five (5) Business Days of the Interest Payment Date; and

(b) Expenses within three (3) Business Days or, if the failure to pay is caused by administrative or technical error, five (5) Business Days of the date due (Expenses will be due ten (10) Business Days after Lender provides an invoice to Borrower or a written request for payment of the amount due and documents evidencing the Expenses).

13.2. Default under Loan Documents

(a) A default in the performance or observance of any term, condition or covenant in this Agreement made or given by Borrower to Lender required to be observed or performed by Borrower that is not cured within fifteen (15) Business Days of the earlier of (i) Lender giving notice to Borrower or (ii) Borrower becoming aware of the non-performance or non-observance; provided that the default is a curable default.

(b) A default in the performance or observance of any term, condition, or covenant in any Loan Document required to be observed or performed by Borrower that is not cured after any applicable cure period provided under that Loan Document, or if no cure period exists in the applicable Loan Document, then within fifteen (15) Business Days of the earlier of (i) Lender giving notice to Borrower or (ii) Borrower becoming aware of the non-performance or non-observance.

13.3. Representations or Statements False

Any representation or warranty made by Borrower in a Loan Document or any other document delivered in accordance with the Loan Agreements, or any financial statement delivered to Lender, proves to have been false as of the time when made or given.

13.4. Default on Other Debt

Borrower fails to pay all or any financial indebtedness in excess of USD 200,000 as and when due and payable, whether at maturity, by acceleration or otherwise, and the default is not cured within the period of grace, if any, specified in the documents(s) evidencing the indebtedness.

13.5. Judgments

A judgment (to the extent not covered by insurance) is entered against Borrower which exceeds in the aggregate USD 200,000 and remains outstanding and unsatisfied, unbonded or unstayed for until the judgment creditor is permitted to commence enforcement actions under applicable law.

Page 26  of 38

13.6. Bankruptcy; Insolvency

An Insolvency Event occurs with respect to a Loan Party.

13.7. Material Adverse Change

The occurrence of a Material Adverse Change.

13.8. Levy or Attachment

Any Loan Party’s assets having a value in excess of USD 200,000 in the aggregate are attached, seized, subjected to a writ or distress warrant, or are levied upon, or come into the possession of any judicial officer.

13.9. Challenge to Loan Documents

(a) Any challenge by or on behalf of any Loan Party to the validity of any Loan Document or the applicability or enforceability of any Loan Document strictly in accordance with the Loan Document’s terms or which seeks to void, avoid, limit, or otherwise adversely affect any Lien created by or in any Loan Document or any payment made pursuant thereto.

(b) Any final determination by any court or any other judicial or government authority that any Loan Document is not enforceable strictly in accordance with the Loan Document’s terms or which voids, avoids, limits, or otherwise adversely affects any Lien created by any Loan Document or any material payment made pursuant thereto.

14. Remedies on Occurrence of an Event of Default

14.1. Right and Remedies

Upon the occurrence and during the continuation of an Event of Default after any applicable cure period or grace period, Lender will have all rights and remedies provided by law, under this Agreement or under any of the other Loan Documents. All rights and remedies are cumulative.

14.2. No Waiver

No delay on the part of Lender in exercising any right, power or privilege under this Agreement or any Loan Document will operate as a waiver, nor will any single or partial exercise of any right, power or privilege under this Agreement or otherwise, preclude other or further exercise of the right, power or privilege or the exercise of any other right, power or privilege.

15. Tax Gross-Up and Indemnities

Page 27  of 38

15.1. Tax Gross-Up

(a) All payments by the Loan Parties under the Loan Documents must be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding any Excluded Taxes.

(b) If any Loan Party is required by law to deduct any non-excluded taxes from any sum payable by such Loan Party (i) the amount payable will be increased as may be necessary so that after the Loan Party and Lender have made all required deductions (including deductions applicable to additional sums payable under this paragraph (b)) Lender receives an amount equal to the sum it would have received had no such deductions been made, and (ii) the Loan Party will pay the full amount deducted to the relevant taxation authority or other authority in accordance with Applicable Law. Excluding Lender’s obligations for Excluded Taxes, Loan Parties will indemnify Lender for and hold it harmless against the full amount of taxes of any kind imposed by any jurisdiction, imposed on or paid by Lender and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within ten (10) Business Days from the date Lender makes written demand therefor.

(c) No additional amounts under this paragraph will be due with respect to a specific Lender if the violation of the Non-Bank Rules results from (i) an incorrect confirmation given by such Lender under Clause 10.5 (Non-Bank Rules) or Clause 12.10 (Non-Bank Rules) with respect to its status as one (1) creditor only for the purposes of the Non-Bank Rules or (ii) from this Lender having violated its duties under paragraph (c) of Clause 16.3 (Assignments and Participations).

15.2. Tax Indemnity

Borrower will (i) pay all present or future stamp, documentary, excise, property, transfer and other similar taxes (together in each case with interest and penalties, if any) payable or determined to be payable in connection with the execution and delivery of this Agreement, any payment made hereunder or any Loan Document and (ii) hold Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying, or omission to pay, taxes any Loan Party is obligated to pay under this Agreement or otherwise.

16. General Terms

16.1. Expenses, Fees and Costs; Indemnification; Confidentiality

(a) Borrower shall pay all Expenses.

(b) Borrower agrees to indemnify, defend and hold Lender harmless from and against any and all Claims that may be imposed on, incurred by or asserted against Lender in connection with this Agreement or any Loan Document or transaction contemplated hereby or thereby, except for Claims arising from Lender’s willful misconduct or gross negligence.

Page 28  of 38

(c) Borrower’s obligation to pay the Expenses and all of the reimbursement and indemnification obligations provided for in this Clause 16.1 (Expenses, Fees and Costs; Indemnification; Confidentiality) form, for the avoidance of doubt, part of the Obligations and shall be secured by all Collateral and Guaranties, as the case may be.

16.2. Currency Conversions

The Loan and payments due to Lender under any Loan Document shall be made in USD, unless otherwise provided in the relevant Loan Document. Any other references in any Loan Document to a local currency will be converted to the USD equivalent using the exchange rates published in the U.S. national edition of the Wall Street Journal for the last Business Day of the month prior to the month in which the currency conversion is to be made.

16.3. Assignments and Participations

(a) Borrower may not assign and/or transfer any of its rights and/or obligations under the Loan Documents without the prior written consent of Lender.

(b) Subject to paragraph (c) of this Clause 16.3 (Assignments and Participations) , Lender may not assign and/or transfer any of its rights and/or obligations under the Loan Documents without the prior written consent of Borrower, which shall not be unreasonably withheld

(whereby any non-compliance with the Non-Bank Rules and non-acceptability of any Non-Qualifying Bank shall constitute, without prejudice to any other reasons, legitimate reasons to withhold consent); provided that Borrower’s confirmation by consent and acceptance will not be required if an Event of Default has occurred and is continuing.

(c) Sub-participations may be made by Lender to Non-Qualifying Banks provided that Borrower has confirmed by consent that after completion of such sub-participation to a permissible Non-Qualifying Bank, Borrower is still and will remain in compliance with the Non-Bank Rules and that such Non-Qualifying Bank is acceptable to Borrower, which confirmation by consent and acceptance will not be unreasonably withheld or delayed; provided that Borrower’s confirmation by consent and acceptance will not be required if an Event of Default has occurred and is continuing. In connection with the sale of a participation or an assignment of any interest in the Obligations, Lender will be free to provide the participant or assignee, on a confidential basis, any financial or other information in its possession or control related to Borrower and/or any Controlled subsidiary.

16.4. Right to Inspect and Audit

Lender, through any of its officers, employees or agents and at Borrower’s sole cost and expense, will have the right at any time or times during business hours, or during the usual business hours of any third party having control over any of Borrower’s Business Records (to the extent that Borrower has such right), to inspect and audit the Business Records in order to verify compliance with Borrower’s obligations under the Loan Documents, subject to applicable Law, but for as long as no Default or Event of Default has occurred, not more than three times in a year. Borrower will reimburse Lender for all reasonable and documented out of pocket costs and expenses incurred by Lender for the referenced inspections, examinations and audits, but for costs and/or expenses incurred while no Default or Event of Default is continuing and before the Termination Date, up to an amount of USD 20,000.

Page 29  of 38

16.5. Exculpation and Indemnity

(a) Lender shall not be liable for any loss or damage suffered by Borrower by reason of Lender taking any action permitted by this Agreement, except in case of wilful misconduct (Absicht) or gross negligence (grobe Fahrlässigkeit) on the part of Lender (or any officer, employee, agent or delegate of, or appointed by, Lender for which it is responsible pursuant to mandatory applicable law) as determined by a court of competent jurisdiction by final and non-appealable judgement.

(b) Borrower shall fully release, discharge and indemnify Lender and any delegate and auxiliary person of Lender and keep them fully harmless for any claims raised or brought against them in connection with this Agreement, save in respect of loss or damage suffered as a result of the wilful misconduct (Absicht) or gross negligence (grobe Fahrlässigkeit) on the part of Lender (or any officer, employee, agent or delegate of, or appointed by, Lender for it is responsible pursuant to mandatory applicable law) as determined by a court of competent jurisdiction by final and non-appealable judgement.

16.6. Remedies and Waivers

No failure to exercise, nor any delay in exercising, on the part of Lender, any right, or remedy under a Loan Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any of the Loan Documents. No election to affirm any Loan Document on the part of Lender shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Loan Document are cumulative and not exclusive of any rights or remedies provided by law.

16.7. Amendments and Waivers

Any amendment or waiver of this Agreement and any other Loan Document or any provision of this Agreement or any other Loan Document (including this Clause 16.7 (Amendments and Waivers)) shall only be binding if agreed in writing by the Parties.

16.8. Counterparts

This Agreement may be signed in any number of counterparts with the same effect as if all signatures were upon the same instrument.

Page 30  of 38

16.9. Notices

(a) All communications or notices that are required or may be given under this Agreement will be made in writing (including telecommunications) and,

(i) if to Borrower, addressed to the address set forth at the beginning of this Agreement, with a copy to David Oser, Homburger AG, Hardstrasse 201, CH-8005 Zurich, Switzerland, fax +41 43 222 1015, david.oser@homburger.ch, and

(ii) if to Lender, addressed to it at the address specified at the beginning of this Agreement, and a copy to Alex Nikitine, Walder Wyss AG, Seefeldstrasse 123, CH-8008 Zurich, Switzerland, fax +41 58 658 59 59, alex.nikitine@walderwyss.com

and delivered by any of the following means: (i) hand delivery
(ii) Federal Express or other recognized overnight courier service, or
(iii) facsimile transmission with request for assurance of receipt in a manner typical with respect to communications of that type, with a paper copy of the electronic communication sent immediately thereafter by Federal Express or other recognized overnight courier service.

16.10. Loan Agreement Controls

Anything contained in any other agreement referred to in this Agreement or in any other agreement now existing between Lender and Borrower to the contrary notwithstanding, in the event of any express conflict between the terms and provisions of such other agreement and those contained in this Agreement, the terms of this Agreement will govern and control.

16.11. Severability

If any provision of this Agreement is or becomes illegal, invalid or unenforceable in any jurisdiction, such illegality, invalidity or unenforceability shall not affect:

(a) the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

(b) the legality, validity or enforceability in any other jurisdiction of that provision or of any other provision of this Agreement; and the parties to this Agreement shall negotiate in good faith a provision to replace the relevant provision which reflects as closely as possible the original intention and the purpose of this Agreement.

16.12. Payment Mechanics

(a) On each date on which Borrower is required to make a payment under a Loan Document, Borrower shall make the same available to Lender for value on the due date at the time and in such funds specified by Lender as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

Page 31  of 38

(b) Any payment which is due to be made on a day that is not a Business Day shall be made (i) on the next Business Day in the same calendar month, if there is one, or (ii) if there is not, on the immediately preceding Business Day.

(c) During any extension of the due date for payment of any principal under this Agreement interest is payable on the principal at the rate payable on the original due date.

16.13. Set-Off

(a) All payments to be made by Borrower under the Loan Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim and Borrower hereby waives its set-off right. For the avoidance of doubt, this waiver of set-off shall also be valid in the bankruptcy of Borrower and Lender.

(b) Lender may set-off any matured obligation due from Borrower under the Loan Documents against any matured obligation owed by Lender to Borrower, regardless of the place of payment, booking branch, or currency of either obligation. If the obligations are in different currencies, Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

16.14. Patriot Act

Lender may be subject to the requirements of the Patriot Act and hereby notifies Borrower that pursuant to the requirements of the Patriot Act, it may be required to obtain, verify and record information that identifies Borrower,

which information includes the name and address of Borrower and other information that will allow Lender to identify Borrower in accordance with the Patriot Act.

16.15. Confidentiality

Lender agrees to keep all Confidential Information confidential and not to disclose it to anyone other than its agents, Affiliates, and counsel, as it remains non-public, save to the extent required by law, regulation, administrative or court order.

16.16. Entire Agreement of the Parties

This Agreement, including all agreements referred to or incorporated into this Agreement and the other Loan Documents when duly executed and delivered, constitute the entire agreement between the parties relating to the subject matter of this Agreement. This Agreement supersedes all prior agreements, commitments and understandings between the parties relating to the subject matter of this Agreement and cannot be changed or terminated orally, and will be deemed effective as of the date noted above.

Page 32  of 38

16.17. Execution of the Agreement

This Agreement may be executed and delivered by each party in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute one and the same Agreement. This Agreement and any other transaction document relating to this Agreement, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or other electronic transmission (e.g., email delivery in .pdf format or similar format), shall be treated in all manner and respects as an original contract and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person.

16.18. Governing Law and Jurisdiction

(a) This Agreement shall in all respects be governed by and construed in accordance with the substantive laws of Switzerland (to the exclusion of conflict of law rules).

(b) Each Party submits to the exclusive jurisdiction of the competent courts of the city of Zurich, Switzerland.

[Signature page follows]

Page 33  of 38

Signatures

ExWorks Capital Fund I L.P.
/s/ Andy Hall
Name:	Andy Hall	Name:
Title:	CCO	Title:
WISEeCoin AG
/s/ Carlos Moreira		/s/ Peter Ward
Name:	Carlos Moreira	Name:	Peter Ward
Title:	CEO	Title:	CFO

Signature Page

Credit Agreement (USD 4m loan to W1SeCoin AG)

Page 34  of 38

Schedule 1: Term Sheet

Page 35  of 38

TERMS FOR PRIVATE PLACEMENT OF SECURITY TOKENS OF
WISECOIN LTD

March, 2019

The following is a summary of the principal terms with respect to the proposed Security Token Offering of WISeCoin AG, a Switzerland corporation (the “Company”). THIS SUMMARY OF TERMS DOES NOT CONSTITUTE A LEGALLY BINDING OBLIGATION. The parties intend to enter into a legally binding obligation only pursuant to definitive agreements to be negotiated and executed by the parties.

Offering Terms

Capitalization	The Company is a company limited by shares with its registered seat in Zug, Switzerland (registered under registration number CHE-410.898.50 with the Commercial Register of the Canton of Zug). with a share capital of CHF 100,000 divided into 10,000,000 fully paid-up registered (nominal) shares.
Securities to Issue:	Security Tokens of the Company, known as “WISeSecurity Token” or “WCN Token” (the “Security Tokens”). Any Purchaser in possession of 10,000 or more Security Tokens may convert their holding at a rate of 100 Security Tokens (WCN Tokens) for 1 Participation Certificate after a 12 month lock up period. Participation Certificate give holders the same rights as if they would hold the non-voting shares at nominal value of CHF 1.00 including the right to an equivalent share of profits made by the Company. 2,500,000 Security Tokens will be created. If WISeCoin AG issues a dividend, WCN token holders have the right to receive dividends on a pro-rata basis of the equity capital subject to the annual general assembly’s decision.
Aggregate Proceeds:	CHF 23,294,880 in aggregate, although the Company may increase or decrease this amount in its sole discretion.
Purchasers:	“Accredited Investors” within the meaning of Regulation D under the Securities Act of 1933, as approved by the Company (the “Purchasers”).
Price Per Token:	The Price per Security Token will be CHF 12,42 (the “Purchase Price”).
Payment of Purchase Price	The Purchasers may make payment for the Security Tokens in a currency of his or her choice from a list of pre-defined currencies (ETH, BTC, CHF).
Minimum Investment	CHF 1,000,000 (may be waived the Company in its sole discretion).
Restrictions on Sale:	The Security Tokens and any converted Participation Certificate are restricted, meaning that they may only be resold under limited circumstances. Investors must be willing to hold the Security Tokens and any converted Participation Certificate indefinitely. They are being acquired for investment purposes only. Each Purchaser has had the opportunity to consult with his or her own tax advisor regarding the Security Tokens and any converted Participation Certificate.

Voting Rights:	The Security Tokens do not grant any voting rights except as set forth below in Financial Information. Participation Certificates do not carry any voting rights under Swiss law.
Subscription Procedure:	To purchase the Security Tokens, the Purchasers must execute the Company’s subscription agreement. The Company may accept or reject any subscription in its sole discretion.
Financial Information:	Purchasers who have purchased at least 80,500 (eighty thousand and five hundred) Security Tokens will receive standard information and inspection rights.
KYC/AML:	Subject to the Company’s discretion, the Purchasers may be reviewed by the Company to comply with applicable Know Your Customer (“KYC”) and Anti-Money Laundering (“AML”) rules.
Legal Fees and Expenses:	Each party shall bear their own legal fees and expenses.
Information	The Company will provide additional information upon request.

THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE SUMMARY OF THE SECURITY TOKENS. EACH PURCHASER SHOULD READ THE SUBSCRIPTION AGREEMENT AND INFORMATION REGARDING THE SECURITY TOKENS. IN ADDITION, PURCHASERS SHOULD CONSULT THEIR TAX AND LEGAL ADVISORS AS TO THE IMPLICATIONS OF AN INVESTMENT IN THE SECURITY TOKENS.

Each of the undersigned has executed this term sheet as of the date first set forth above.

COMPANY:

WISECOIN LTD

By:

Name:

Title:

INVESTOR:

By:

Name:  

INVESTMENT PLEDGE

I intend to invest _______________ in the Offering, subject to verification of my “Accredited Investor” status within the meaning of Regulation D under the Securities Act of 1933 and the execution of other definitive investment documents.

Schedule 2: Documents to be delivered on the Date of this Agreement

No.	Document
1.	A certified excerpt of the commercial register and a copy of the articles of association of Borrower, in each case dated not more than five (5) Business Days prior to the date of this Agreement.
2.	A copy of a resolution of the board of directors of Borrower (i) approving the terms of, and the transactions contemplated by, the Loan Documents to which it is a party and resolving that it execute, deliver and perform the Loan Documents to which it is a party, (ii) authorizing a specified person or persons to execute the Loan Documents to which it is a party on its behalf and (ii) authorizing a specified person or persons, on its behalf, to sign and/or dispatch all documents and notices to be signed and/or dispatched by it under or in connection with the Loan Documents to which it is a party.
3.	A copy of a specimen of the signature of each person authorized by the resolution referred to in CP no. 2 above or otherwise in accordance with applicable law in relation to the Loan Documents and related documents.
4.	A copy of a certificate of two authorized signatories of Borrower certifying that each copy document relating to it specified above is correct, complete and in full force and effect and has not been amended or superseded as at a date no earlier than the date of this Agreement.
5.	Audited financial statements of Borrower for the financial year 2018 (and if the audited financial statements for the year 2018 are not available, the unaudited financial statements for 2018).
6.	Duly executed version of this Agreement.
7.	Duly executed Swiss law pledge agreement regarding the pledge of shares in the Borrower between WISeKey International Holding AG as pledgor and Lender as pledgee, including any deliverables identified therein.
8.	Duly executed Swiss law governed assignment agreement regarding the assignment of bank account claims of Borrower between Borrower as assignor and Lender as assignee, including any deliverables identified therein.
9.	Duly executed version of a Swiss law assignment agreement regarding the assignment of certain receivables, intra-group receivables, trade receivables and insurance claims of Borrower between Borrower as assignor and Lender as assignee, including any deliverables identified therein.
10.	A legal opinion of Borrower’s Swiss counsel relating to the capacity of Borrower and Security Grantor to enter into and the validity and enforceability of this Agreement and of any Swiss law governed Security Agreement listed in this Schedule 2 (Documents to be delivered on the Date of this Agreement).

Page 36  of 38

Schedule 3: Funding Conditions

CP No. Condition precedent
Corporate Documents
11.	A copy of a certificate of two authorized signatories of Borrower certifying that subject to CP no. 12 below, each document relating to Borrower referenced in Schedule 2 (Documents to be delivered on the Date of this Agreement) is correct, complete and in full force and effect and has not been amended or superseded as at a date no earlier than the Funding Date.
12.	Any necessary updates or amendments to the corporate documents of Borrower referenced in the Schedule 2 (Documents to be delivered on the Date of this Agreement), including, but not limited to, a resolution of the board of directors of Borrower (i) approving the terms of, and the transactions contemplated by, the documents representing Funding Conditions and resolving that it execute, deliver and perform all documents representing Funding Conditions to which it is a party, (ii) authorizing a specified person or persons to execute the documents representing Funding Conditions to which it is a party on its behalf and (iii) authorizing a specified person or persons, on its behalf, to sign and/or dispatch all documents and notices to be signed and/or dispatched by it under or in connection with the documents representing Funding Conditions to which it is a party.

Page 37  of 38

Schedule 4: Form of Utilization Request

To: ExWorks Capital Fund I, L.P. as Lender, 333 West Wacker Drive, Suite 1620, Chicago, Illinois 60606, USA

From: WISeCoin AG as Borrower, /o WISeKey International Holding AG, General-Guisan-Strasse 6, 6300 Zug, Switzerland

Place/Date: [...], [...]

Dear Madam, dear Sir

We refer to the USD 4,000,000 Term Facility Agreement dated [...] 2019 between WISeCoin AG as Borrower and ExWorks Capital Fund I, L.P. as Lender (each as defined therein, the Agreement).

1. This is the Utilization Request. Terms defined in the Agreement have the same meaning in this Utilization Request unless given a different meaning in this Utilization Request.

2. We wish to borrow a Loan on the following terms:

Borrower: WISeCoin AG

Proposed Funding Date: [...]

Currency: USD

Amount of Loan: 4,000,000

Payable to account: [...]

3. We confirm that (i) no Default is continuing or would result from the proposed Loan and (ii) all representations and warranties made under the Loan Documents are true and correct as of the date of this Utilization Request and as of the Funding Date.

4. We confirm that each condition specified in Clause 5 (Conditions of Utilization) of the Agreement is satisfied on the date of this Utilization Request and the Funding Date.

5. This Utilization Request is irrevocable.

Yours faithfully

WISEeCoin AG:
Name:	Name:
Title:	Title:

Page 38 of 38

EX-4.20

Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.

Convertible Term Loan Facility Agreement

dated as of December 16, 2019

by and between

Long State Investment Limited (hereinafter the Lender)

Room 508, 5th Floor Wing on House, 71 Des Voeux Road Cen-tral, Central, Hong Kong

and

WISeKey International Holding Ltd (hereinafter the Company)

General-Guisan-Strasse 6, 6300 Zug, Switzerland

(the Lender and the Company each a Party and collectively the Parties)

regarding a CHF 30,000,000 Convertible Term Loan Facility

Convertible Term Loan Facility Agreement  2 of 29

Table of Contents

1.	Definitions and Interpretations			4
2.	The Facility			4
3.	Purpose			4
4.	Drawdown			4
5.	Documents to be Delivered on or Promptly Following the Effective Date			4
6.	Conditions of Utilization			4
7.	Conversion			5
8.	Repayment			7
	8.1	Repayment and Prepayment of Loan		7
	8.2	Re-borrowing		7
	8.3	Voluntary Repayment of Loan		7
9.	Interest and Fees			7
	9.2	Default Interest		8
	9.3	Computation		8
	9.4	Minimum interest Rate		8
10.	Representations			8
	10.1	Representations of the Company		8
		10.1.1	Organization	8
		10.1.2	Conversion Shares, Security Shares and Fee Shares	9
		10.1.3	Financial Statements	9
		10.1.4	Absence of Conflicting Obligations	9
		10.1.5	Non-Bank Rules	9
		10.1.6	Absence of Material Litigation	9
		10.1.7	Compliance with Applicable Laws	9
		10.1.8	Full Disclosure	9
	10.2	Representations of the Lender		10
11.	Covenants			10
12.	Fee			11
13.	Security Shares			12
14.	Defaults			12
15.	Remedies on Occurrence of an Event of Default			13
	15.1	Right and Remedies		13
	15.2	No Waiver		13
	15.3	No Set-off		13
16.	Tax Gross-Up and Indemnities			14
	16.1	Tax Gross-Up		14
	16.2	Tax Indemnity		14
17.	Trading Limitations Disclosure of Trading Activities			14
18.	General Term			15
	18.1	Expenses; Confidentiality		15
	18.2	Assignments and Transfers		15

Convertible Term Loan Facility Agreement  3 of 29

18.3	Exposure Transfers	15
18.4	Exculpation and Indemnity	15
18.5	Remedies and Waivers	16
18.6	Amendments and Waivers	16
18.7	Counterparts; Electronic Transmission	16
18.8	Notices	16
18.9	Severability	17
18.10	Payment Mechanics	17
18.11	Confidentiality	17
18.12	Governing Law and Jurisdiction	18

Convertible Term Loan Facility Agreement  4 of 29

WHEREAS

(A) The Lender intends to provide the Company a convertible term loan facility pursuant to which the Company may, subject to the terms and conditions of this Agreement, make drawdowns in separate tranches in an amount of up to CHF 30,000,000 in the aggregate.

(B) The Lender shall have the right and the obligation to convert any drawdown tranche into Shares, subject to the terms and conditions of this Agreement;

(C) This Agreement documents the terms and conditions upon which the Lender is willing to extend to the Company, and the Company is willing to accept from the Lender, the convertible term loan facility.

Now, therefore, the Parties agree as follows:

1. Definitions and Interpretations

Capitalised terms used in this Agreement shall have the meaning assigned to them in Schedule 1 For purposes of this Agreement, the interpretational rules as set forth in Schedule 1 shall apply.

2. The Facility

Subject to the terms and conditions of this Agreement, the Lender will make available to the Company term loans (each a Loan and collectively the Loans) of up to a maximum amount of CHF 30,000,000 (the Maximum Commitment) over the course of a period of 24 (twenty-four) months starting from the Effective Date (the Commitment Period).

3. Purpose

The purpose of the Facility is to fund and support the Company's and its Affiliates' business matters, in particular with respect to the Company's and its Affiliates' expansion in Asia.

4. Drawdown

(a) The Company may, on any Trading Day during the Commitment Period, except during a Drawdown Restriction Period, require the Lender to lend to the Company an amount up to the Drawdown Amount (each such amount, a Drawdown) under this Facility by delivering a Drawdown Notice to the Lender (the Trading Day on which the Drawdown Notice is delivered, subject to Section 2.8(b), the Drawdown Notice Date). Any Drawdown Notice shall be irrevocable, absent consent of the Lender that the Drawdown Notice may be revoked.

(b) Subject to Section 6, the Lender must transfer the Drawdown Amount, less the Drawdown Reduction, if any, and the Commission, to the Company in clear funds in Swiss francs on the second Trading Day immediately following the end of the Initial Conversion Period (or the Subsequent Conversion Period, as applicable) (such date, the Drawdown Date).

5. Documents to be Delivered on or Promptly Following the Effective Date

On or promptly following the Effective Date (but in no event later than 7 (seven) Trading Days after the Effective Date), the Company shall deliver to the Lender all of the documents and other evidence listed in Schedule 5 in form and substance satisfactory to the Lender

6. Conditions of Utilization

Notwithstanding any other terms of this Agreement, provided that the Company has prior to the first Drawdown under this Agreement performed its delivery obligations pursuant to Section 5 (such requirement to qualify as a condition to the first Drawdown), each Drawdown shall be subject to the satisfaction of the following conditions as of the relevant Drawdown Notice Date and Drawdown Date:

Convertible Term Loan Facility Agreement  5 of 29

(a) The Drawdown Notice has been submitted outside a Drawdown Restriction Period and in any case in compliance with this Agreement;

(b) The Company's representations in this Agreement are in all material respects true as of the Drawdown Date (save any qualification agreed in writing by the Lender), unless the applicable representation is made as of a specific date, in which case the representation shall have been true and correct in all material respects as of such specific date;

(c) (i)(x) The Treasury Shares (if any) to be delivered or (y) the Conditional Shares (if any) to be issued as Conversion Shares are admitted to listing and trading on the SIX, or (ii) with respect to Authorized Shares or Conditional Shares (with respect to which no self-executing listing prospectus exemption applies based on applicable Laws) to be issued as Conversion Shares, a listing application has been filed with the competent listing authority, which can reasonably be expected to be approved (to the extent necessary) on or before the date of the delivery of a Conversion Notice by the Lender under the terms of this Agreement;

(d) No obstacle can be reasonably expected that the Class B Shares issuable or deliverable upon the delivery of a Conversion Notice by the Lender will be listed and become tradable without any restrictions on the Principal Market;

(e) The Company has not received any notice by the Principal Market threatening the continued trading of the Class B Shares on the Principal Market;

(f) The Company has not requested that the Principal Market on which the Shares to be delivered or issued are listed and traded discontinue listing and/or trading of the Shares on the Principal Market,

(g) No Default or Event of Default under this Agreement has occurred and continues uncured under the terms of this Agreement;

(h) The consummation of the transactions contemplated by this Agreement and the funding of the Loan (i) are not prohibited by, and do not violate, any Laws applicable to the Company, (ii) are not enjoined (temporarily or permanently) under, or prohibited by or contrary to, any injunction, order, decree, ruling or other Governmental Order, and (iii) there is no action, suit, proceeding or investigation pending against the Company that could reasonably likely have the effect that this Agreement or the consummation of the transactions contemplated under this Agreement is considered invalid, illegal and/or unenforceable;

(i) There has not been a Material Adverse Effect; and

(j) The Company has satisfied its Top-up Obligation (if any).

7. Conversion

(a) The Lender may, by delivering to the Company a Conversion Notice, request Conversion of a portion or all of the relevant Drawdown Amount, less the Drawdown Reduction, if any, into fully paid registered Shares at any time on or before the expiry of the Initial Conversion Period (or the Subsequent Conversion Period, as applicable) (any Shares issuable or deliverable upon Conversion pursuant to any provisions of this Section 7(a) and Section 7(b), the Conversion Shares).

(b) To the extent that the Lender has not requested Conversion of a portion or all of the Draw-down Amounts during the respective Initial Conversion Period, the Lender shall be deemed to have requested Conversion of any Loan that continues to be outstanding, including any interest accrued thereon and not yet repaid, on the commencement of the Subsequent Conversion Period.

(c) In case of an actual or deemed Conversion Notice by the Lender, the Lender shall, no later than on the close of the second Trading Day immediately after the Initial Conversion Period or, as the case may be, the Subsequent Conversion Period, deliver to the Company via facsimile or email notice a calculation sheet evidencing the calculation of the Conversion Price and the number of Conversion Shares issuable or deliverable to the Lender, such notice accompanied by screenshots of the relevant Bloomberg screens for the Principal Market. The Company shall review such calculation promptly upon receipt and shall notify the Lender no later than on the close of the third Trading Day immediately after the end of the Initial Conversion Period or, as the case may be, the Subsequent Conversion Period, by 5:00 p.m. (Geneva time), of any objections (which shall include a brief explanation of the objection(s)) (the Objections) it may have. Both Parties agree to settle any Objections in good faith and promptly.

Convertible Term Loan Facility Agreement  6 of 29

(d) In case of an actual or deemed Conversion Notice by the Lender, the Company shall (or cause its agent or bank to) deliver on the close of the third Trading Day immediately after the end of the Initial Conversion Period or, as the case may be, the Subsequent Conversion Period, by 5:00 p.m. (Geneva time) or, in case of Objections, promptly upon settlement by the Parties of the Objections (each a Conversion Closing Date), the Conversion Shares to the Lender in the form of Class B Shares (whereby the relevant number of Class B Shares shall be determined on the basis of the Conversion Price) by crediting the depository account of the Lender (as designated by the Lender no later than on the date of the expiry of the Initial Conversion Period or the Subsequent Conversion Period, as applicable) and register the Lender or its designee (provided the Company has given its prior written consent in accordance with Section 2.2first sentence), subject to applicable general limitations in the Company's articles of association as in effect from time to time, in the Company's share register for the relevant number of Conversion Shares.

(e) The Company hereby confirms and undertakes that any Conversion Shares issued to the Lender under this Agreement will, no later than 2 (two) Trading Days after the date on which the Conversion Shares have been delivered, be listed on the Principal Market and become tradable without any restrictions on the Principal Market.

(f) The Company further covenants that upon delivery of the Conversion Shares.

(i) shall be credited as fully paid;

(ii) rank equally in all respects with all other issued Class B Shares;

(iii) not be subject to any security interest created by the Company; and

(iv) be entitled to dividends declared subsequent to the date of issue unless any Share price used for purposes of calculating the Conversion Price with respect to the relevant Initial Conversion Period or Subsequent Conversion Period is quoted ex dividend.

(g) The Company's covenants with respect to the Conversion Shares shall apply mutatis mutandis to the Fee Shares, it being understood that the Fee Shares shall be subject to the limitations pursuant to Section 11(b)

(h) Any obligation, representation, covenant or other statement by the Company under this Section 7 relating to the Conversion Shares shall apply mutatis mutandis if the Lender uses Security Shares as a substitute to the delivery of the Conversion Shares as per the terms of Section 12 (in which case the relevant Security Shares become Substituted Conversion Shares).

(i) For the avoidance of doubt, the Parties agree that a Conversion into ADSs will not be available to the Lender, except upon specific request by the Lender and subject to the availability of ADSs under the terms of the deposit agreement for the issuance of ADSs and the written consent of the Company. Without limitation to the Company's right to withhold consent at its discretion, any Conversion into ADSs is only permissible if the Company concludes in its discretion that the Conversion Shares (in the form of ADSs), at the time of Conversion, are not "Restricted Securities" (as such is defined under the U.S. Securities Act of 1933, as amended (the Securities Act).

(j) The Lender acknowledges and understands that any Conversion Shares, any Fee Shares and any Security Shares acquired by it under the terms of this Agreement (for purposes of this Section 7(j) the Relevant Shares) may be issued as "Restricted Securities" as defined in Rule 144(a)(3) under the Securities Act, and agrees that so long as any Relevant Shares are "Restricted Securities" as defined in Rule 144(a)(3) under the Securities Act, it will segregate any Relevant Shares from any other shares that it holds that are not "Restricted Securities", will not deposit any Relevant Shares in an unrestricted depositary receipt facility (including the Company's ADSs facility in the United States) and will only transfer any Relevant Shares as further set forth below in this Section 7(j). The Lender acknowledges and understands that any Relevant Shares are being offered and sold to it pursuant to an exemption from registration under the Securities Act, or a transaction not subject to. the registration requirements of the Securities Act in a transaction not involving a public offering of securities in the United States and that any Relevant Shares have not been and will not be registered under the Securities Act or with any state or other jurisdiction of the United States. The Lender agrees and covenants that so long as any Relevant Shares are "Restricted Securities" as defined in Rule 144(a)(3) under the Securities Act, they may not be reoffered, resold, pledged or otherwise transferred except (i) outside the United States in an offshore transaction in accordance with Rule 903 or 904 of Regulation S under the Securities Act or (b) pursuant to Rule 144 under the Securities Act (if available) or pursuant to another available exemption, if any, from registration under the Securities Act, and that, in each case, such offer, sale, pledge or transfer must be made in accordance with all applicable securities Laws of each state of the United States and the securities Laws of any other relevant jurisdiction, as then in effect. The Investor agrees to notify any transferee to whom it subsequently reoffers, resells, pledges or otherwise transfers the Relevant Shares of the restrictions set forth herein. In addition, prior to any such subsequent reoffer, resell, pledge or otherwise transfer the Relevant Shares, the Investor will obtain from such transferee a written undertaking to comply with the transfer restrictions set forth herein.

Convertible Term Loan Facility Agreement  7 of 29

8. Repayment

8.1 Repayment and Prepayment of Loan

Notwithstanding anything to the contrary in this Agreement, any principal of any Loan outstanding hereunder not Converted in accordance with any of the provisions of Section 7(a) shall become due and payable and the Company shall repay the Lender any such outstanding principal, together with accrued and unpaid interest thereon as required to be paid pursuant to the terms of this Agreement, including, without limitations, all other amounts due by it under this Agreement, upon the occurrence of an Event of Default in accordance with and as set out in Section 13.

8.2 Re-borrowing

The Company may not re-borrow the Facility or any Loan or any part thereof available under such Facility which is repaid or prepaid.

8.3 Voluntary Repayment of Loan

(a) The Company shall be entitled to elect, at its full discretion, repayment in cash of the whole or any part of the Loan, together with any interest accrued thereon (the Voluntary Cash Repayment.

(b) The Company may make an election of a Voluntary Cash Repayment pursuant to Section 8.3(a) with respect to any Loan outstanding, including any interest thereon not yet paid, at any time during the Commitment Period until the Prepayment End Date, except on a Drawdown Notice Date and the related Initial Conversion Period, provided that any such election is made prior to the Lender submitting to the Company a Conversion Notice or prior to the date on which the Conversion Notice is deemed to have been given by the Lender pursuant to Section 7(b).

(c) Any Voluntary Cash Repayment notice given by the Company under this Section 8.3 shall be irrevocable and shall specify the date or dates upon which the relevant prepayment is to be made and the amount of that prepayment.

(d) Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and may be made without premium or penalty.

9. Interest and Fees

9.1 Interest Rate

Convertible Term Loan Facility Agreement  8 of 29

(a) The aggregate outstanding principal will bear interest at a rate of [***] per annum, compounded daily (the Interest Rate).

(b) All interest shall be due and payable in cash on 31 December and 30 June of the relevant year during the Commitment Period (each an Interest Payment Date) (or, if any such Interest Payment Date is not a Trading Day, on the next Trading Day). At the request of the Lender, such request to be submitted to the Lender 10 (ten) Trading Days prior to the relevant Interest Payment Date, may be "paid in kind" by capitalizing such interest (the PIK Interest) and adding it to (and thereby increasing) the aggregate principal balance of the Loan(s) outstanding.

9.2 Default Interest

The aggregate outstanding amount of the Loans will bear interest from and after the occurrence and during the continuation of an Event of Default, without constituting a waiver of any Event of Default, at the rate of 2.5% per annum above the otherwise applicable rate.

9.3 Computation

All interest chargeable under the Agreement will be computed on the basis of a 360-day year for the actual number of days elapsed.

9.4 Minimum interest Rate

If a Tax Deduction is required by law in respect of any interest payable by the Company and should it be unlawful for the Company to comply with Section 16.1(a) for any reason, where this would otherwise be required by the terms of Section 16.1(a), then (i) the applicable interest rate in relation to that payment shall be the rate which would have applied to that payment as provided for by Section 9 divided by one minus the rate at which the relevant Tax Deduction is required to be made under Swiss domestic tax law and/or applicable double taxation treaties (where the rate at which the relevant Tax Deduction is required to be made is for this purpose expressed as a fraction of one); and (ii) the Company shall (A) pay the relevant interest at the adjusted rate in accordance with paragraph (i) above and (B) make the Tax Deduction on the interest so recalculated, and all references to an interest rate under this Agreement shall be construed accordingly. To the extent that an interest payable by the Company becomes subject to Swiss Withholding Tax, the Parties shall promptly cooperate in completing any procedural formalities (including submitting forms and documents required by the appropriate Tax authority) to the extent possible and necessary for the Company to obtain authorization to make interest payments without being subject to Swiss Withholding Tax and/or for Lender to get a partial or full refund of Swiss Withholding Tax.

10. Representations

The Company and the Lender each make the representations as set out in this Section 10.1 and Section 10.2, respectively, to the Lender and the Company, respectively, on and as of the Effective Date, any Drawdown Notice Date, any Conversion Closing Date and as of any Interest Payment Date.

10.1 Representations of the Company

10.1.1 Organization

(a) The Company is a stock corporation (Aktiengesellschaft) duly formed and existing under the laws of Switzerland, and the execution and performance of this Agreement are within its organizational powers, have been duly authorized, are not in contravention of applicable law or its articles of association and do not require the consent or approval of any third party, including any Governmental Authority (except as so provided under this Agreement).

(b) The Company is, to the extent legally required under applicable Law, duly licensed or qualified to do business in all jurisdictions in which the Company has property or business operations, or the failure to be so licensed or qualified will not materially and adversely affect the Company or its property.

Convertible Term Loan Facility Agreement  9 of 29

10.1.2 Conversion Shares, Security Shares and Fee Shares

All Conversion Shares issuable or deliverable hereunder, upon submission by the Lender of a Conversion Notice and payment by Lender to the Company's designated account of the relevant Drawdown Amount (or the relevant portion thereof), will be duly authorized, validly issued, fully paid and non-assessable upon their issuance. The Security Shares and the Fee Shares (if any) have been be duly authorized, validly issued, fully paid and are non-assessable.

10.1.3 Financial Statements

The Company's audited financial statements (standalone and consolidated) for the financial year ended on 31 December 2018 and any subsequent financial year thereafter and falling within the term of this Agreement, has been, or will have been, prepared in accordance with the applicable accounting standards and fairly present, or will fairly present, in accordance with and subject to the applicable accounting standards, the Company's (or the group's, as applicable) financial condition as of the relevant financial year end and the results of operation for the period then ended or ending.

10.1.4 Absence of Conflicting Obligations

The making and execution of the Agreement and compliance with its terms will not

(a) result in a breach of any of the terms and conditions of any indenture, agreement or instrument to which the Company party or their assets are subject; or

(b) result in the imposition of any Lien upon any property of the Company pursuant to, or constituting a default under, any indenture or other agreement or instrument to which the Company is party or by which they are bound.

10.1.5 Non-Bank Rules

The Company is and will remain in compliance with the Non Bank Rules during the term of this Agreement. The Lender confirms as of the date of this Agreement and as of the Effective Date that it is considered as 1 (one) creditor only for the purposes of the Non-Bank Rules. There is no breach of this representation if the violation of the Non-Bank Rules results from an incorrect confirmation given by a Lender under this Section with respect to its status. For the purposes of its compliance with the Twenty Non-Bank Rule under this Section 10.1.5, the number of creditors under this Agreement which are not Qualifying Banks shall be deemed to be 5 (five), irrespective of whether or not there are, at any time, any such creditors.

10.1.6 Absence of Material Litigation

The Company is not party to any litigation or administrative proceeding involving an amount in dispute exceeding CHF 500,000, nor is any litigation or administrative proceeding threatened against the Company in writing, which in either case, is likely to be adversely determined and, if so determined, would cause any Material Adverse Change, except as disclosed in writing to the Lender.

10.1.7 Compliance with Applicable Laws

The Company is in compliance with applicable Laws in all material respects. The Company has all material licenses, permits, orders and approvals that are required under any Governmental Authority in connection with their business and properties (the Permits). No notice of any violation has been received with respect of any Permits and no proceeding is pending or has been threatened in writing to terminate, revoke or limit any Permits that would cause a Material Adverse Change.

10.1.8 Full Disclosure

The written material delivered by the Company to the Lender in connection with the transactions contemplated by this Agreement, including the documents as per Section 5, do not contain any statement that is false or misleading as to any material fact and do not omit to state any material fact necessary in order to make the statements therein not false or misleading. As per the initial Drawdown Notice Date, there are no additional facts that Company is aware of that has not been disclosed to the Lender that materially and adversely affects or, so far as Company can reasonably foresee, will materially and adversely affect the Company's financial condition.

Convertible Term Loan Facility Agreement  10 of 29

10.2 Representations of the Lender

(a) The Lender is a "Qualified Institutional Buyer" within the meaning of Rule 144A under the Securities Act.

(b) The Conversion Shares are being acquired by the Lender in the Lender's own name and for its own account for its own investment purposes;

(c) The Lender has not made a decision to make available Loans to the Company and will not make any decision to request any Conversion based on any non-public information that is subject to applicable insider Laws pursuant to the Swiss Financial Markets Infrastructure Act and the ordinances promulgated thereunder or any equivalent laws of any other jurisdiction, including the United States.

11. Covenants

The Company covenants and agrees, in respect of the period from the Effective Date and as long as any of the Obligations remain unpaid:

(a) It shall at all times have authorized and reserved a number of Shares as conditional share capital (bedingtes Aktienkapital) (Shares issued out of conditional share capital hereinafter the Conditional Shares) or as authorized share capital (genehmigtes Akttenkapital) (Shares issued out of authorized share capital hereinafter the Authorized Shares) or Shares held in treasury (the Treasury Shares) that is sufficient to effect a Conversion of the relevant Drawdown Amount.

(b) It shall take all action as may be necessary or appropriate, and the Lender shall cooperate as reasonably necessary and appropriate, to ensure that any Conversion Shares are issued or delivered as provided herein on the basis of one of the sources of Shares referred to in Section 11(a).

(c) It shall comply in all material respects with all applicable Laws and not permit the proceeds of any Loan or any other financial accommodation extended by the Lender to be used in any way that violates any foreign asset control regulations of or other similar laws.

(d) It shall provide the Lender with written notice of the occurrence (as well as the reasonably likely occurrence) of any of the following events, including reasonable particularity as to the relevant facts and circumstances:

(i) Any unforeseen event which limits the Company's ability to issue Conversion Shares in accordance with this Agreement;

(ii) Any Material Adverse Change; and

(iii) any Event of Default.

(e) It will promptly provide to Lender with any information regarding the Company, its operation and its financial condition as Lender may reasonably request from the Company, subject to applicable Law prohibiting such disclosure to the Lender or to the Lender only.

(f) It shall remain in compliance with the Non-Bank Rules during the term of this Agreement. The Lender confirms as of the date of this Agreement and as of the Effective Date that it is considered as one (1) creditor only for the purposes of the Non-Bank Rules. There is no breach of this covenant if the violation of the Non-Bank Rules results from an incorrect confirmation given by the Lender under this Section with respect to its status. For the purposes of its compliance with the Twenty Non-Bank Rule under this Section 11(f), the number of creditors under this Agreement which are not Qualifying Banks shall be deemed to be five (5), irrespective of whether or not there are, at any time, any such creditors

Convertible Term Loan Facility Agreement  11 of 29

(g) The Company will, and the Company will cause the other Group Companies to:

(i) use the proceeds of the Loan only as provided for in Section 3.

(ii) do all reasonable things necessary to preserve and keep in full force and effect their corporate existences; and

(iii) refrain from disclosing, and shall cause its officers, directors, employees, advisors and agents to refrain from disclosing, any material non-public information to the Lender without also disseminating such information to the public.

12. Fee

(a) As consideration for the grant of this Facility and as consideration for the Lender providing services and advice to the Company and its subsidiaries on strategic initiatives in China and other Asian markets, such as (i) through the identification and introduction of, and the arrangement of meetings with, potential partners with expertise, experience and a good reputation in cybersecurity product development, marketing and distribution for potential partnership, licensing, joint venture and strategic investments in the Company or (ii) through the introduction of financial investors in Asia, the Company shall pay to the Lender a fee in the amount of the CHF equivalent of [***] Class B Shares (determined on the basis of the VVVAP on the SIX during the [***] Trading Days immediately preceding the date of this Agreement) (the Fee), such fee at the election of the Company payable in cash or through the issuance or delivery of [***] Class B Shares (such Shares the Fee Shares) in accordance with Section 5 and Section 11(b

(b) If the Company elects to deliver or issue Fee Shares to satisfy its obligation to pay the Fee, the Company shall transfer immediately after the date hereof the total number of Fee Shares to a depository account as designated by the Lender (the Fee Share Account). In order to ease downwards pressure on the price of the Shares in view of the current limited trading volume of the Shares on the Principal Market, the Lender undertakes that:

(i) in each month during the Commitment Period it will engage in trading activities only with respect to 1/24^th of the total number of Fee Shares, whereby it shall be agreed between the Parties that any 1/24^th of the total number of Fee Shares (or any portion thereof, including any fractions of Fee Shares, the aggregate of which amounts to a full number of Fee Shares) with respect to which trading activities by the Lender in a particular month during the Commitment Period would have been permissible but with respect to which the Lender has not engaged in trading activities (any such portion of Fee Shares not used by the Lender for trading activities permissible hereunder during a month the Carry Over Fee Shares), the Lender shall be entitled to use any such Carry Over Fee Shares during any of the subsequent months during the Commitment Period cumulatively to the 1/24^th of the total number of Fee Shares otherwise reserved to any such subsequent month, provided, however, that in no event shall the Lender engage in any trading activities with respect to more than 1/8^th of the total number of Fee Shares; and

(ii) promptly upon engaging in any such trading activities, it will disclose to the Company particulars of such trading activity. The Parties agree that if the trading volume in the Shares on the Principal Market should significantly increase as compared to the date hereof, the Parties shall discuss in good faith a reasonable increase in the number of Shares to be sellable by the Lender.

(c) The Fee (or the related number of Fee Shares to be delivered) will be reduced accordingly for any Legal Fee, before VAT, paid by the Company exceeding CHF 25,000.

Convertible Term Loan Facility Agreement  12 of 29

13. Security Shares

(a) Prior to the initial Drawdown, the Company must have delivered to the Lender and the Lender must have received (by crediting the depository account of the Lender (as designated by the Lender) 300,000 Shares admitted to listing and trading in accordance with the applicable Admission Regulations (the Security Shares) for purposes of this Section 12

(b) Subject to Section 12(c)and Section 12(d) no later than two (2) Business Days after the end of the Commitment Period, the Lender must transfer the full number of Security Shares (but, to the extent the Lender has used Security Shares for trading, subject to and in compliance with the applicable Trading Limitations, not necessarily the identical Security Shares as received under Section 12(a) to the Company or the Company's designee, upon the transfer of which the Lender shall be deemed to have fulfilled all its obligations to the Company in relation to the Security Shares.

(c) Whenever the Company is obliged to issue or deliver Conversion Shares to the Lender under the terms of this Agreement, the Company may by mutual agreement with the Lender:

(i) not issue or deliver an agreed number of Conversion Shares (the Agreed Number) to the Lender;

(ii) reduce the number of Security Shares by the Agreed Number; and

(iii) provided that such Security Shares to be used as Conversion Shares are otherwise equal in any respects to Conversion Shares, be deemed to have satisfied the obligation to issue a number of Conversion Shares equal to the Agreed Number to the Lender for the purposes of Conversion pursuant to the terms of this Agreement (any Security Shares so used hereinafter the Mutually Agreed Substituted Conversion Shares).

(d) Whenever the Company is obliged to issue or deliver Conversion Shares to the Lender under the terms of this Agreement, and fails to do so when due, the Lender may, by written notice to the Company (the Substitution Notice), reduce the number of Security Shares by a number of Security Shares less than or equal to the number of Conversion Shares that the Company has failed to issue or deliver when due, and upon the Lender doing so, the Company, to the extent such Security Shares to be used as Conversion Shares (hereinafter the Default Substituted Conversion Shares, and together with the Mutually Agreed Substituted Conversion Shares, the Substituted Conversion Shares) are otherwise equal in any respects to Conversion Shares, will be deemed to have satisfied the obligation to issue or deliver the Conversion Shares for the purposes of Conversion pursuant to the terms of this Agreement to the extent of the number of Security Shares specified in the aforementioned written notice of the Lender.

(e) If the Lender at any time uses Substituted Conversion Shares for Conversion purposes in accordance and compliance with the terms and conditions of Section 13(c) and Section 13(d), respectively, the Company shall be required to deliver (the Top-up Obligation) to the Lender (by crediting the depository account designated by the Lender), within 15 (fifteen) Trading Days after (i), in case of Mutually Agreed Substituted Conversion Shares, the mutual agreement between the Parties as per Section 12(c), and (ii) in case of Default Substituted Conversion Shares, after receipt by the Company of the Substitution Notice, such number of Shares qualifying as Security Shares, subject to the terms and conditions of this Section 13, as is necessary to make up any difference between (x) 300.000 and (y) the number of Substituted Conversion Shares used by the Lender Shares for Conversion purposes in accordance and compliance with the terms and conditions of Section 13(c) and Section 12(d), respectively.

14. Defaults

If any one or more of the following events (each an Event of Default) occurs (subject to any stated cure periods), then at the Lender's option as communicated to the Company, any Loan outstanding, together with accrued and unpaid interest thereon (as required to be paid) under this Agreement, will immediately become due and payable in full, without further notice of any kind, notwithstanding anything contained to the contrary in this Agreement or in any other agreement, note or document:

Convertible Term Loan Facility Agreement  13 of 29

(a) The Company fails to pay:

(i) interest owed pursuant to the terms of this Agreement within five (5) Business Days or, if the failure to pay is caused by administrative or technical error, seven (7) Business Days of the interest Payment Date; and

(ii) Expenses within five (5) Business Days or, if the failure to pay is caused by administrative or technical error, seven (7) Business Days of the date due. Expenses shall be due fifteen (15) Business Days after the Lender provides an invoice to the Company or a written request for payment of the amount due and documents evidencing the Expenses

(b) A default in the performance or observance of any term, condition or covenant in this Agreement made or given by the Company to Lender required to be observed or performed by the Company that is not cured within twenty (20) Business Days of the earlier of (i) the Lender giving notice to the Company or (ii) the Company becoming aware of the non-performance or non-observance.

(c) Any representation made by the Company in the Agreement proves to have been materially inaccurate as at the time when made or given.

(d) Any material intentional misstatement in the Drawdown Notice;

(e) An Insolvency Event occurs with respect to the Company;

(f) A suspension from trading of the Shares on the Principal Market for a period of twenty (20) consecutive Trading Days or for more than an aggregate of twenty (20) Trading Days other than due to factors solely within the control or due to acts of the Lender,

(g) The delisting of the Shares on the Principal Market or the announcement of the intent or the filing of an application to delist the Shares by the Company on the Principal Market (except if the Company, at the time of the delisting, lists or has already listed its Shares on another stock exchange, provided however that all the transactions under this Agreement may still be legally performed at such other venue without there being any restrictions beyond those existing in Switzerland or the United States); or

(h) A Material Adverse Event has occurred.

15. Remedies on Occurrence of an Event of Default

15.1 Right and Remedies

Upon the occurrence and during the continuation of an Event of Default after any applicable cure period or grace period has lapsed, the Lender shall have all rights and remedies provided by law and under this Agreement. All rights and remedies are cumulative.

15.2 No Waiver

No delay on the part of Lender in exercising any right, power or privilege under this Agreement will operate as a waiver, nor will any single or partial exercise of any right, power or privilege under this Agreement or otherwise, preclude other or further exercise of the right, power or privilege or the exercise of any other right, power or privilege.

15.3 No Set-off

Except as expressly stated otherwise herein, including, for the avoidance of doubt, as part of a Conversion, none of the Parties shall be entitled to set off any of its claims it may have against the other Party against, or otherwise withhold the proper payment of, any amount payable by it hereunder, regardless of whether such claim or such right to withhold payment has arisen under or in connection with this Agreement or otherwise; provided, however, that the Lender has the right, without prior written notice to the Company (any required notice being expressly waived by the Company to the extent permitted by applicable law) upon the occurrence of any Event of Default and so long as an Event of Default is continuing, to set off and apply against any obligations, whether matured or unmatured, of the Company to the Lender, any amount owing by the Lender to the Company, provided, further, however, that in no event may the Lender declare a set off with respect to a particular Drawdown Amount if it has elected to give a Conversion Notice with respect to such particular Drawdown Amount.

Convertible Term Loan Facility Agreement  14 of 29

16. Tax Gross-Up and Indemnities

16.1 Tax Gross-Up

(a) All payments by the Company must be made free and clear of and without deduction for any and all present or future taxes, levies, imposts. deductions, charges or withholdings, and all liabilities with respect thereto.

(b) If any Party is required by law to deduct any non-excluded taxes from any sum payable by such Party (i) the amount payable will be increased as may be necessary so that after the Party and the Lender have made all required deductions (including deductions applicable to additional sums payable under this Section 16.1(b)) the Lender receives an amount equal to the sum it would have received had no such deductions been made, and (ii) the Party will pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. The Company will indemnify the Lender for and hold it harmless against the full amount of taxes of any kind imposed by any jurisdiction, imposed on or paid by Lender and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 10 (ten) Trading Days from the date the Lender makes written demand therefor.

(c) A payment shall not be increased under paragraph (b) above by reason of Swiss Withholding Tax with respect to the Lender, if an Event of Default has not occurred or is continuing and the Non-Bank Rules would not have been violated if^.

(i) such Lender, in relation to which the Company makes the payment, was a Qualifying Bank but on that date that Lender is not or has ceased to be a Qualifying Bank other than as a result of any change of law after the date it became a Lender under the Agreement;

(ii) such Lender, in relation to which the Company makes the payment, would be considered as one (1) creditor only for the purposes of the Non-Bank Rules but on that date that Lender is not or has ceased to be classified as one creditor only for the purposes of the Non-Bank Rules other than as a result of any change of law after the date it became a Lender under the Agreement; or

(iii) such Lender, in relation to which the Company makes the payment, had complied with its obligations in accordance with Section 18.2; or

(iv) the Lenders would have complied with their obligations in accordance with Section 18.2 and the Lender, in relation to which the Swiss Company makes the payment, became a Lender as a result of such breach of Section 18.2.

16.2 Tax Indemnity

The Company will (i) pay all present or future stamp, documentary, excise, property, transfer and other similar taxes (together in each case with interest and penalties, if any) payable or determined to be payable in connection with the execution and delivery of this Agreement and any payment made hereunder and (ii) hold Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying, or omission to pay, taxes any Party is obligated to pay under this Agreement or otherwise.

17. Trading Limitations Disclosure of Trading Activities

(a) With respect to the Security Shares, the Lender undertakes that it will not trade any of such Security Shares, except during an Initial Conversion Period or the Subsequent Conversion Period, during which the Lender shall be free to trade in any Security Shares, in each case without prejudice to the Lender's obligations pursuant to Section 13(b) and in compliance with any limitations applicable to the Lender, including as a result of the Conversion Shares constituting "Restricted Securities" (as such term is defined under the Securities Act.

Convertible Term Loan Facility Agreement  15 of 29

(b) At the request of the Company, the Lender must disclose to the Company any of its trading activities in the Shares.

18. General Term

18.1 Expenses; Confidentiality

(a) The Company shall pay the Expenses

(b) The Company's obligation to pay the Expenses provided for in this Section 17 (Expenses; Confidentiality) form part of the Obligations.

18.2 Assignments and Transfers

Neither Party may assign and/or transfer any of its rights and/or obligations under the Agreement or the Agreement without the prior written consent of the other Party. The Company will withhold its consent if, following such assignment or transfer, either the Ten Non-Bank Rule or the Twenty Non-Bank Rule would be violated.

18.3 Exposure Transfers

Subject to Section 18.2, no Lender shall enter into any arrangement with another person under which such Lender substantially transfers its exposure under this Agreement to that other person, unless under such arrangement throughout the life of such arrangement:

(a) the relationship between the Lender and that other person is that of a debtor and creditor (including in the bankruptcy or similar event of the Lender or an Obligor);

(b) the other person will have no proprietary interest in the benefit of this Agreement or in any monies received by the Lender under or in relation to this Agreement; and

(c) the other person will under no circumstances (other than permitted transfers and assignments under Section 18.2) (y) be subrogated to, or substituted in respect of, the Lender's claims under this Agreement; and (z) have otherwise any contractual relationship with, or rights against, the Company under or in relation to this Agreement.

18.4 Exculpation and Indemnity

(a) The Lender shall not be liable for any loss or damage suffered by the Company by reason of Lender taking any action permitted by this Agreement, except in case of a breach by the Lender of any of its obligations hereunder by willful misconduct (Absicht) or gross negligence (grobe Fahriassigkeit) on the part of Lender (or any officer, employee, agent or delegate of, or appointed by, Lender for which it is responsible pursuant to mandatory applicable law) as determined by a court of competent jurisdiction by final and non-appealable judgement.

(b) The Company shall fully release, discharge and indemnify the Lender and any delegate and auxiliary person of the Lender and keep each of them fully harmless for any claims raised or brought against them in connection with this Agreement, save in respect of loss or damage suffered as a result of any breach by the Lender of any of the obligations hereunder or the willful misconduct (Absicht) or gross negligence (grobe Fahrlassigkeit) on the part of Lender (or any officer, employee, agent or delegate of, or appointed by, the Lender for it is responsible pursuant to mandatory applicable law) as determined by a court of competent jurisdiction by final and non-appealable judgement.

Convertible Term Loan Facility Agreement  16 of 29

18.5 Remedies and Waivers

No failure to exercise, nor any delay in exercising, on the part of a Party, any right, or remedy under the Agreement shall operate as a waiver of any such right or remedy or constitute an election to affirm the Agreement. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in the Agreement are cumulative and not exclusive of any rights or remedies provided by law.

18.6 Amendments and Waivers

Any amendment or waiver of this Agreement or any provision of this Agreement (including this Section 18.6) shall only be binding if agreed in writing by the Parties.

18.7 Counterparts; Electronic Transmission

This Agreement may be executed and delivered by each Party in separate counterparts, each of which when so executed and delivered shall be deemed an original and all of which taken together shall constitute one and the same Agreement. This Agreement and any other transaction document relating to this Agreement, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, electronic signature or e-signature (irrespective of whether the relevant electronic signature or e-signature has been issued by a provider recognized or accredited under applicable Law or not) or other electronic transmission (e.g., email delivery in .pdf format or similar format), shall be treated in all manner and respects as an original contract and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person.

18.8 Notices

(a) All notices or other communications to be given under or in connection with this Agreement, including but not limited to any Drawdown Notice or any Conversion Notice, shall be in writing and delivered by hand or sent (postage prepaid) by registered, certified or express post (return receipt requested), courier, facsimile or by electronic transmission in pdf format or similar format as follows:

if to the Company: with a copy to:	WISeKey International Holding Ltd Attn.: Peter Ward, Chief Financial Officer General-Guisan-Strasse 6, CH-6300 Zug, Switzerland Email: pward@wisekey.com Fax: +41 22 594 3001 Homburger AG Attn.: David Oser Prime Tower Hardstrasse 201, CH-8005 Zurich, Switzerland Email: david.oser@homburgerch Fax: +41 43 222 15 00
if to the Lender	Long State Investment Limited
	Attn.: Philip Ho, Mike Holland and Jessie Chen
If by courier:	157 Columbus Avenue, 4th Floor, New York,
	NY 10023, USA
	Email: philip@longstateinvestment.com,
	mhollandglongstateinvestment.corn and
	jchen@longstate.com
	Fax: +1-801-659-3309

Convertible Term Loan Facility Agreement  17 of 29

with a copy to:	Walder Wyss AG
	Attn.: Alex Nikitine
	Seefeldstrasse 123, CH-8008 Zurich, Switzerland
	Email: alex.nikitine@walderwyss.com
	Fax. +41 58 658 59 59

(b) Notices delivered by hand shall be deemed delivered when actually delivered. Notices given by post or courier shall be deemed delivered on the second (2^nd) Business Day after posting or couriering them or in the case of airmail/air-courier on the fifth (5th) Business Day after posting or couriering them (except if delivery is promised by the post or the courier at a later date, then such notices shall be deemed delivered on the date that delivery is promised). Notices given by facsimile shall be deemed given on the date of receipt (if a Business Day), otherwise the first Business Day following receipt. Notices given by electronic submission shall be deemed to be received at the time confirmation that the electronic submission has been received by the recipient is received by the sender. Irrespective of the foregoing, with respect to any Drawdown Notice, such Drawdown Notice shall be deemed delivered on the applicable Business Day if and to the extent it is received (actually or, if by electronic submission, as confirmed to the Company) by the Lender on such Business Day prior to or at 9 a.m. New York time, and if received (actually or, if by electronic submission, as confirmed to the Company) by the Lender after 9 a.m. New York time, on the next Business Day.

18.9 Severability

If any part or provision of this Agreement or the application of any such part or provision to any Person or circumstance shall be held to be invalid, illegal or unenforceable in any respect by any competent arbitral tribunal, court, governmental or administrative authority, (a) such invalidity, illegality or unenforceability shall not affect any other part or provision of this Agreement or the application of such part or provision to any other Persons or circumstances, and (b) the Parties shall endeavour to negotiate a substitute provision that best reflects the economic intentions of the Parties without being invalid, illegal or unenforceable, and shall execute all agreements and documents required in this connection. For the avoidance of doubt, this Section 18.9 is not intended to modify or abrogate the authority of the competent court to replace an invalid provision of this Agreement in accordance with Swiss Law

18.10 Payment Mechanics

(a) On each date on which a Party is required to make a payment under this Agreement, such Party shall make the same available for value on the due date at the time and in such funds specified by other Party as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

(b) Any payment which is due to be made on a day that is not a Business Day shall be made (i) on the next Business Day in the same calendar month, if there is one, or (ii) if there is not, on the immediately preceding Business Day.

(c) During any extension of the due date for payment of any principal under th s Agreement interest is payable on the principal at the rate payable on the original due date_

18.11 Confidentiality

The Lender agrees to keep all Confidential Information confidential and not to disclose it to anyone other than its agents, Affiliates, and counsel, as it remains non-public, save to the extent required by law, regulation, administrative or court order.

Convertible Term Loan Facility Agreement  18 of 29

18.12 Governing Law and Jurisdiction

(a) This Agreement shall in all respects be governed by and construed in accordance with the substantive laws of Switzerland, to the exclusion of conflict of law rules that would cause the application of a law other than Swiss law.

(b) Each Party submits to the exclusive jurisdiction of the competent courts of the city of Zurich, Switzerland.

[signatures on the next page]

Convertible Term Loan Facility Agreement  19 of 29

Executed as of the date written on the cover page to this Agreement.

Long State Investment Limited
/s/ Jessie Chen		/s/ Philip Ho
Name:	Jessie Chen	Name:	Philip Ho
Title:	Director – LSI Advisors Ltd.	Title:	Director – LSI Advisors Ltd.
	On behalf of Long State Investment Ltd.		On behalf of Long State Investment Ltd.

Convertible Term Loan Facility Agreement  20 of 29

Executed as of the date written on the cover page to this Agreement.

WISeKey International Holding Ltd
/s/ Carlos Moreira		/s/ Peter Ward
Name:	Carlos Moreira	Name:	Peter Ward
Title:	Chief Executive Officer	Title:	Chief Financial Officer

Convertible Term Loan Facility Agreement  21 of 29

Schedule 1 I Definitions and Interpretation

1. Definitions

a. Terms in capital letters used in this Agreement shall have the meaning assigned to such term on the page referenced below:

Agreed Number	15	interest Rate	9
Authorized Shares	13	Lender	1
Carry Over Fee Shares	14	Loan	4
Class B Shares	32	Loans	4
Commitment Period	4	Maximum Commitment	4
Company	1	Maximum Drawdown Amount	28
Conditional Shares	13	Mutually Agreed Substituted Conversion
Conversion Closing Date	7	Shares	15
Conversion Shares	6	Objections	6
Converted Amount	36	Parties	1
Convertible Instrument	36	Party	1
Default Substituted Conversion		Permits	12
Shares	16	PIK Interest	9
Drawdown	4	Relevant Shares	8
Drawdown Date	5	Securities Act	8
Drawdown Notice Date	4	Security Shares	15
Event of Default	16	Substituted Conversion Shares	16
Fee	14	Substitution Notice	16
Fee Share Account	14	Top-up Obligation	16
Fee Shares	14	Treasury Shares	13
Interest Payment Date	9	Voluntary Cash Repayment	9

b. The following capitalized terms shall have the following meaning throughout this Agreement:

Admission Regulations shall mean the applicable laws and regulations, including as promulgated by the Principal Market, regarding admission to listing and trading of Conversion Shares.

ADS shall mean American Depositary Shares representing the Class B Shares.

Affiliate means with respect to any entity, another Person that directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the applicable entity.

Agreement means this Credit Facility Agreement, as amended from time to time, including its Schedules and Annexes.

Business Day means a day when banks in Switzerland are open for general banking business (other than over the internet only):

CHF means Swiss francs, the lawful currency of Switzerland.

Claims means any demand, claim, action or cause of action, damage, liability, loss, cost, debt, expense, obligation, tax, assessment, charge, lawsuit, contract, agreement or undertaking, of any kind or nature, whether known or unknown, fixed, actual, accrued or contingent, liquidated or unliquidated (including interest, penalties, attorneys' fees and other costs and expenses incident to proceedings or investigations relating to, or the defense of, any of the foregoing), whether or not litigation has commenced.

Closing Bid Price shall mean, with respect to Shares as of any date, the last closing bid price for such Shares on the Principal Market as reported by Bloomberg.

Convertible Term Loan Facility Agreement  22 of 29

Commission shall mean an amount equal to 2.5% of the Drawdown.

Commitment Period shall have the meaning set forth in Section 2.

Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have correlative meanings.

Confidential Information means all information relating to the Company or any of its Affiliates which Lender receives from the Company or any of its Affiliates (whether prior to or after the date hereof) but does not include information which (i) prior to delivery of such information to the Lender was already in the possession of Lender from sources other than the Company or its Affiliates without confidentiality undertaking on the part of the Lender or the source from which the Lender has received such information, (ii) was or becomes generally available to the public other than as a result of disclosure by the Lender, (iii) becomes available to the Lender on a non-confidential basis from a source other than the Company or its Affiliates, provided that Lender was not aware that such source is bound by a confidentiality agreement with, or obligation of secrecy to, the Company or any of its Affiliates or (iv) was or is independently developed by Lender without recourse to Confidential Information.

Conversion shall mean the conversion of (i) a Drawdown Amount, (ii) a portion thereof or (iii) any Loan, including interest accrued thereon, that remains outstanding after the Initial Conversion Period and is not being repaid by the Company in accordance with Section 8.3, into Shares at the Conversion Price, in each case in accordance with the relevant provision in Section 7.

Conversion Notice shall refer to the notice in the form as set out in Schedule 7(a)

Conversion Price shall be 95% of the higher of (i) the Market Price and (ii) the Minimum Conversion Price.

Default means an event or occurrence that with the passage of time or the giving of notice will be an Event of Default.

Drawdown Amount shall mean any amount in CHF up to CHF 500,000, as specified by the Company in its sole and exclusive discretion; provided, however, that subject to the prior written consent of the Lender, the Drawdown Amount may be up to CHF 2,500,000 (the Maximum Drawdown Amount), and provided, further, that in no event shall the Drawdown Amounts pursuant to Drawdown Notices delivered to the Lender during the Drawdown Period when aggregated with each other exceed the Maximum Commitment.

Drawdown Notice means the notice substantially in the form as set out in Schedule 4(a), specifying the Drawdown Amount (subject to the Maximum Drawdown Amount (unless otherwise agreed between the Parties)) and the Minimum Conversion Price if the Conversion Price is below CHF 1.80.

Drawdown Reduction shall mean, in the event of a Conversion Notice, as elected by the Lender, a reduction of the Drawdown Amount by up to 5% for each Trading Day during the Initial Conversion Period or the Subsequent Conversion Period on which (1) the Share is subject to trading halt or suspension in the Principal Market, or (ii) the VVVAP is equal to or below the Minimum Conversion Price, except in the event that the Company indicates to the Lender and the Lender agrees on or before the end of the Initial Conversion Period or the Subsequent Conversion Period that it waives the Minimum Conversion Price.

Drawdown Restriction Period shall mean:

(a) any time when any Conversion Shares to be issued or delivered to the Lender pursuant to Section 7 have not been admitted to listing and trading in accordance with the applicable Admission Regulations;

(b) any time when a prior Conversion Notice has been delivered by the Lender to the Company and any Conversion Shares that may be required to be issued or delivered to the Lender pursuant to the Conversion Notice and in accordance with this Agreement have not been received by the Lender and not been admitted to listing and trading in accordance with the applicable Admission Regulations;

Convertible Term Loan Facility Agreement  23 of 29

(c) any time during which Conversion into Conversion Shares is prohibited under applicable regulatory restrictions, including based on insider laws and regulations;

(d) any time during an Initial Conversion Period or the Subsequent Conversion Period.

Effective Date means the date on which the Parties have agreed on, and executed, a binding agreement to the effect that the Lender or one of its Affiliates will invest approximately USD 1,000,000 in the Company against issuance of new Class B Shares at an issue price of USD 2.64 per Class B Share for purposes of funding an Asian joint venture business of the Company.

Expenses means the non-accountable expense allowance payable by the Company to the Lender in the amount of CHF 10,000.

Facility means the convertible term loan facility made available under this Agreement as described in Section 2.

Governmental Authority means any nation or government, and any political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any court, tribunal or arbitrator(s) of competent jurisdiction.

Governmental Orders means any order, judgment, injunction, decree, stipulation or determination issued, promulgated or entered by or with any Governmental Authority of competent jurisdiction.

Guidelines means, together, guideline S-02.123 in relation to interbank loans of 22 September 1986 (Merkblatt S-02.123 vom 22 September 1986 betreffend Zinsen von Bankguthaben, deren Glaubiger Banken rind (Interbankguthaben)), guideline S 02.132 in relation to issuance stamp duty on fixed deposits of 1 April 1993 (Merkblatt S-02.132 vom 1. April 1993 betreffend Emissionsabgabe auf Festgeldanlagen bei inlandischen Banken), guideline S-02.130.1 in relation to accounts receivables of Swiss debtors of April 1999 (Merkblatt S-02.130.1 vom April 1999 Geldmarktpapiere und Buchforderungen inlandischer Schuidner), circular letter no. 34 in relation to customer credit balances of 26 July 2011 (Kreisschreiben Nr. 34 vom 26. Juli 2011 betreffend Kundenguthaben), and the circular letter no. 15 in relation to bonds and derivatives of 3 October 2017 (Kreis-schreiben Nr. 15 vom 3. Oktober 2017 betreffend Obligationen und derivative Finanzin-strumente als Gegenstand der direkten Bundessteuer, der Verrechnungssteuer sowie der Stempelabgaben), circular letter No. 46 of 24 July 2019 (1-046-DVS-2019) in relation to syndicated credit facilities (Kreisschreiben Nr. 46 betreffend steuerliche Behandlung von Konsortialdarlehen, Schuldscheindarlehen, Wechseln und Unterbeteiligungen vom 24. Juli 2019) and circular letter No. 47 of 25 July 2019 (1 -047-DVS-2019) in relation to bonds (Kreisschreiben Nr. 47 betreffend Obligationen vom 25. Juli 2019), all as issued, and as amended from time to time, by the Swiss Federal Tax Administration, or as substituted or superseded and overruled by any law, statute, ordinance, court decision, regulation or the like as in force from time to time, including the established practice of the Swiss Federal Tax Administration.

Indebtedness means any indebtedness for or in respect of

(a) any monies borrowed pursuant to one or more credit facility agreements or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(b) the amount of any liability in respect of any guarantee for any of the items referred to in paragraph (a) above,

Convertible Term Loan Facility Agreement  24 of 29

it being understood that any amount calculated under this definition may only be counted once, even if an item may qualify under various paragraphs.

Initial Conversion Period shall mean the period commencing on the Trading Day following the Drawdown Notice Date and ending on the date that is the 21^st Trading Days after the Drawdown Notice Date.

Insolvency Event means, with respect to any Person, that such Person. (a) becomes insolvent; (b) is unable, or admits in writing its inability, to pay debts as they generally mature; (c) makes a general assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its property; (d) files on its behalf or consents to an Insolvency Proceeding; (e) has an Insolvency Proceeding filed or instituted against it that is not stayed or dismissed within 60 days after it is filed or instituted, (f) applies to a court for the appointment of a receiver, trustee or custodian for any of its assets; (g) has a receiver, trustee or custodian appointed for any of its assets (with or without its consent), or (h) commences a self-liquidation of its assets.

Insolvency Proceeding means any of the following events:

(a) any corporate action, legal proceedings or other procedure or step exists or is taken in relation to, or threatened that could result in:

(i) bankruptcy, insolvency, suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise) of any such Swiss entity;

(ii) a composition or assignment;

(iii) an arrangement with any creditor of such Swiss entity^. or

(b) the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any such Swiss entity or such entity's assets.

Law shall mean any statute, law, subordinate legislation, constitutional provision, code, regulation, ordinance, instrument, bylaw, rule, judgment, decision, order, writ, injunction, decree, permit, concession, grant, directive, binding guideline or policy, requirement of, or other governmental restriction of or determination by, any Governmental Authority or any official interpretation of any of the foregoing by any Governmental Authority.

Legal Fees means the fees, expenses and costs incurred by Lender for its legal counsel in connection with establishing and negotiating this Agreement.

Lien means any lien, charge, mortgage, security interest, pledge or other encumbrance on any property or interests in property of the Company.

Market Price shall mean the average of the [***] VWAP of the Shares during, in the case of Section 7(a), the Initial Conversion Period or, in the event of Section 7(b), the Subsequent Conversion Period.

Material Adverse Change shall mean an event, change or occurrence of a fact that has a material adverse effect on (i) the business, assets or financial condition of the Company, (ii) the ability of the Company to perform or observe the obligations under this Agreement, or (iii) the material rights and remedies available to the Lender under this Agreement.

Minimum Conversion Price shall be [***].

Non-Bank Rules means the Ten Non-Bank Rule and the Twenty Non-Bank Rule.

Non-Qualifying Bank means a person other than a Qualifying Bank.

Obligations means all obligations owing by the Company to the Lender for the payment of monies pursuant to the Agreement, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including all Expenses which the Company is required to pay or reimburse pursuant to the Agreement.

Convertible Term Loan Facility Agreement  25 of 29

Person means any individual, trustee, sole proprietorship, partnership (general or limited), joint venture, trust, unincorporated organization, association, corporation, limited liability

company, limited liability partnership and other entity or any Governmental Authority.

Prepayment End Date shall mean the date that is twenty-one (21) Trading Days prior to the end of the Commitment Period

Principal Market means the International Reporting Standard of the SIX or any other

stock exchange on which the Shares are listed, registered, or traded, as applicable.

Qualifying Bank means a Person which (a) effectively conducts banking activities with its own infrastructure and staff as its principal purpose and (b) which has a banking license in full force and effect issued in accordance with the banking laws in force in its jurisdiction of incorporation, or if acting through a branch, issued in accordance with the banking laws in the jurisdiction of such branch, all in accordance with the Guidelines.

Shares shall mean the registered shares of the Company, par value of CHF 0.05 each (the Class B Shares).

SIX shall mean SIX Swiss Exchange Ltd and the stock exchange operated by it. If, at any time in the future, the Securities are primarily listed on a stock exchange other than SIX, any provision making reference to SIX shall be read as making reference to such other stock exchange, provided however that all the transactions under this Agreement may still be legally performed without there being any restrictions beyond those existing in Switzerland.

Subsequent Conversion Period shall mean the period commencing twenty (20) Trading Days prior to the end of the Commitment Period.

Swiss Federal Tax Administration means the tax authorities referred to in article 34 of the Swiss Withholding Tax Act.

Swiss Withholding Tax means taxes imposed under the Swiss Withholding Tax Act.

Swiss Withholding Tax Act means the Swiss Federal Act on the Withholding Tax of 13 October 1965 (Bundesgesetz Ober die Verrechnungssteuer), together with the related or dinances, regulations and guidelines, all as amended and applicable from time to time.

Tax means any tax, levy, impost, duty or other charge or withholding of a similar nature, including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same or any addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Authority, whether current or deferred, and whether disputed or not.

Tax Deduction means a deduction or withholding for or on account of Tax from a payment under this Agreement.

Ten Non-Bank Rule means the rule that the aggregate number of creditors, other than Qualifying Banks under this Agreement must not at any time exceed ten (10), all in accordance within the meaning of the Guidelines.

Trading Day means any day during which the Principal Market is open for business. Trading Limitations means the trading limitations referred to in Section 17.

Twenty Non-Bank Rule means the rule that the aggregate number of creditors, other than Qualifying Banks, of the Company, under all outstanding written debt instruments relevant for classification as a cash debenture (Kassenobligation), such as loans, notes, facilities and/or private placements must not at any time exceed twenty (20), all in accordance within the meaning of the Guidelines

Convertible Term Loan Facility Agreement  26 of 29

VWAP means, as of any date, the daily CHF volume-weighted average price per Share, as reported by Bloomberg displayed under the ticker symbol "WINN SW", through its "Historical Price Table Screen (HP)" with "Market: Weighted Ave" function selected, provided that a comparable publication may be agreed between the Parties in the event that Bloomberg ceases publication of such price during the term of this Agreement.

Interpretation

c. The words "hereof", "herein" and "hereunder," and words of similar import, when used bn this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Annex references are to this Agreement unless otherwise specified.

(i) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

(ii) All Annexes and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement, as if set forth in full herein

(iii) Any capitalized term used in any Annex or Schedule hereto, but not defined therein, shall have the meaning assigned to it in this Agreement.

(iv) Whenever the words "include," "includes", "including" or "in particular" are used in this Agreement, they shall be deemed to be followed by the words "without limitation."

(v) References to "or" shall be deemed to be disjunctive but not necessarily exclusive (i.e., unless the context dictates otherwise, "or" shall be interpreted to mean "and/or" rather than "either/or"). The words "other" and "otherwise" are not to be construed as being limited by any words preceding them.

(vi) If a period of time is specified and dates from a given day or the day of an act or event, it shall (unless expressly otherwise stated in this Agreement), be calculated excluding that day and a reference to a time of day is (unless this Agreement expressly states otherwise) a reference to the time in Switzerland.

(vii) If provisions in this Agreement include English terms after which either in the same provision or elsewhere in this Agreement German terms have been inserted in brackets and/or italics, the respective German terms alone and not the English terms shall be authoritative for the interpretation of the respective provisions.

Convertible Term Loan Facility Agreement  27 of 29

Schedule 4(a): Form of Drawdown Notice

[Drawdown Notice Date]

To:

[■]

Drawdown Notice

Ladies and Gentlemen:

This is a Drawdown Notice given pursuant to Section 4(a) of the Credit Facility Agreement.

Details of the Drawdown:
Amount^- CHF

Minimum Conversion Price in the Event of a Conversion by the Lender:

CHF

Thank you for your attention to this matter.

Yours sincerely,

WISeKey International Holding Ltd

Name: 

Title:

Convertible Term Loan Facility Agreement  28 of 29

Schedule 5 | Documents to be Delivered on the Date of the Initial Drawdown

1. A copy of a resolution of the board of directors of the Company (a) approving the terms of the Agreement and resolving that the Company executes, delivers and performs the Agreement and (b) authorizing a specified person or persons to execute the Agreement on behalf of the Company;

2. A copy of the ad hoc announcement of the Company regarding the entry into this Agreement by the Company;

3. Audited consolidated financial statements of the Company and its group for the financial year 2018;

4. A counterpart copy of this Agreement, duly executed by an authorized signatory of the Company;

5. A signature specimen of the persons authorized to execute this Agreement, any Drawdown Notice and any other notification under the terms of this Agreement;

6. A certified copy of the articles of association of the Company dating back no more than ten (10) Business Days before the date of execution of this Agreement;

7. Evidence as to the effective payment to the Lender of the Legal Fees and Expenses;

8. Evidence as to the payment of the Fee (at the election of the Company, by payment in cash or through delivery of the Fee Shares, subject to the terms and conditions of Section 12), it being understood that any payment by the Company of Legal Fees in excess of CHF 25,000 shall entitle the Company to reduce the Fee accordingly; and

9. Evidence that the Fee Shares (if any) have been admitted to trading and listing pursuant to the Admission Regulations.

Convertible Term Loan Facility Agreement  29 of 29

Schedule 7(a) | Form of Conversion Notice

To:

WISeKey International Holding Ltd (by email)

Copy to: [name of relevant bank]

Date: [■]

Conversion Request / Exercise Notice

Ladies and Gentlemen:

The undersigned is the holder of a convertible instrument (the Convertible Instrument) granted to it by the Lender on [■], 2019 pursuant to the terms of the Credit Facility Agreement (the Agreement), such Convertible Instrument representing the right of the Lender to purchase and receive from the Company, and the obligation of the Company to issue to the Lender, a specified number of registered shares, par value CHF 0.05 (the Class B Shares), at an issue price per Class B Share corresponding to the Conversion Price of CHF by way of payment in the form of a wire-transfer of the Drawdown Amount (or the portion thereof designated by the Lender to be Converted) corresponding to CHF [■]. A copy of the Convertible Instrument as included in the Agreement is attached hereto as Annex A.

Capitalized terms shall have the meaning set forth in the Agreement.

[We refer to the conditional share capital of the Company pursuant to article 4b of the Articles of Association of the Company and hereby exercise the right to Conversion pursuant to Section 7 of the Agreement in respect of [a portion of] the Drawdown Amount, corresponding to CHF (the Converted Amount).]

The newly issued Class B Shares shall be delivered to the following depository account of the Lender: ________________

Yours sincerely

Long State Investment Limited

___________________________
Name:
Title:

EX-4.21

Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.

CONVERTIBLE LOAN AGREEMENT

dated

4 MARCH 2020

between

WISEKEY INTERNATIONAL HOLDING AG

as Borrower

and

YAII PN, LTD

as Lender

regarding a US$4,000,000 single currency convertible loan

1

CONTENTS

Clause		Page
1.	DEFINITIONS AND INTERPRETATION	3
2.	FACILITY	13
3.	PURPOSE	13
4.	UTILISATION	13
5.	Conditions to Utilisation	14
6.	REPAYMENT	14
7.	CONVERSION	14
8.	PREPAYMENT AND rEPAYMENT RESTRICTIONS	16
9.	INTEREST	16
10.	FEES	18
11.	TAX GROSS UP AND INDEMNITIES	18
12.	OTHER INDEMNITIES	20
13.	Mitigation by the Lender	21
14.	COSTS AND eXPENSES	22
15.	REPRESENTATIONS	22
16.	INFORMATION UNDERTAKINGS	26
17.	GENERAL UNDERTAKINGS	27
18.	Events of Default	28
19.	Covenant of Lender	32
20.	Changes to the Parties	32
21.	PAYMENT MECHANICS	33
22.	SET-OFF	35
23.	NOTICES	35
24.	DAY COUNT CONVENTION	38
25.	PARTIAL INVALIDITY	38
26.	REMEDIES AND WAIVERS	38
27.	AMENDMENTS AND wAIVERS	38
28.	NON-DISCLOSURE OF NON-PUBLIC INFORMATION	38
29.	Confidential Information	38
30.	Entire Agreement	40
31.	Counterparts and Conclusion of Contract	41
32.	GOVERNING LAW AND JURISDICTION	41

Schedule 1	Conditions precedent	42
Part I	Conditions precedent to signing of the Agreement	42
Part II	Conditions precedent to Utilisation	42
Schedule 2	Adjustment mechanics	43
Schedule 3	Conversion Notice	51
Schedule 4	Repayment and Interest Schedule	53

2

Execution Copy: 4 March 2020

THIS AGREEMENT is dated as at the date stated at the beginning of this Agreement and made between:

(1)       WISEKEY INTERNATIONAL HOLDING AG, a company organised and existing under the laws of Switzerland whose registered address is at General-Guisan-Strasse 6, 6300 Zug, Switzerland, as borrower (the "Borrower"); and

(2)       YA II PN, LTD., an exempted company incorporated in die Cayman Islands with limited liability, with its registered office at ℅ Maples Corporate Services Limited, P.O. Box 309, Ugland House, South Church Street, George Town, Cayman Islands (the "Original Lender").

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Agreement:

"10 Non-Bank Rule" means the rule that the aggregate number of creditors under this Agreement which are not Qualifying Banks must not at any time exceed ten (10), if and as long as a violation of this rule results in Swiss Withholding Tax consequences for the Borrower, in each case in accordance with the meaning of the Guidelines or the applicable legislation or explanatory notes addressing the same issues that are in force at such time.

"20 Non-Bank Rule" means the rule that (without duplication) the aggregate number of lenders (including the Lender) other than Qualifying Banks, of the Borrower under all its outstanding debts relevant for classification as debenture (Kassenobligatiort) must not at any time exceed twenty (20), if and as long as a violation of this rule results in Swiss Withholding Tax consequences for the Borrower, in each case in accordance with the meaning of the Guidelines or the applicable legislation or explanatory notes addressing the same issues that are in force at such time.

"Additional Consideration" has the meaning ascribed to it in section 3 of Schedule 2 (Adjustment mechanics).

"Affiliate" means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

"Anti-Corruption Laws" means all laws, statutes, rules, regulations, orders, executive orders, directives, policies, guidelines and codes having the force of law, whether local, national, international, as amended from time to tune, including without limitation all applicable laws of Switzerland, the United Kingdom, the United States, or any other laws of another jurisdiction which may apply, that relate to anti-bribery, anti-corruption, books and records and internal controls, including the United States Foreign Corrupt Practices Act of 1977, the United Kingdom Bribery Act of 2010, and any other laws of another jurisdiction, in each case insofar as applicable to the Borrower and its Affiliates.

3

"Anti-Money Laundering Laws" means all applicable laws, statutes, rules, regulations, orders, executive orders, directives, policies, guidelines and codes having the force of law, whether local, national, international, as amended from time to time, including without limitation all applicable laws of Switzerland, the United Kingdom, the United States, or any other laws of another jurisdiction which may apply, that relate to money laundering, terrorist financing, financial record keeping and reporting requirements, in each case insofar as applicable to the Borrower and its Affiliates.

"Authorisation" means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

"Borrower" has the meaning ascribed to it in the recitals,

"Borrower Shares" means issued and fully paid registered common shares of the Borrower with a current nominal value of CHF 0.05 (Stammaktien), or any other shares or stock resulting from any subdivision, consolidation or reclassification of such shares, which as between themselves have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation or dissolution of the Borrower.

"Business Day" means a day (other than a Saturday or Sunday) on which banks are open for general business the whole day in New York (NY, United States) and Zurich (Switzerland).

"Confidential Information" means all information relating to the Finance Documents or the Facility of which a Party becomes aware in its capacity as, or for the purpose of becoming, a Party or which is received by the Party in relation to, or for the purpose of becoming a Party to, the Finance Documents or the Facility from tire other Party or any of its advisers in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:

(a) is or becomes public information other than as a direct or indirect result of any breach by the receiving Party of Clause 29 (Confidential Information); or

(b) is identified in writing at the time of delivery as non-confidential by the disclosing Party or any of its advisers; or

(c) is known by the receiving Party before the date the information is disclosed to it for the purpose of becoming a Party to the Finance Documents or the Facility from either the other Party or any of its advisers or is lawfully obtained by the receiving Parry after that date, from a source which is, as far as the receiving Party is aware, unconnected with the other Party and which, in either case, as far as the receiving Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.

4

"Conversion Amount" has the meaning ascribed to it in Clause 7.1 (Conversion Right, Conversion Ratio and Conversion Price).

"Conversion Price" means the Initial Conversion Price as the same and any subsequent Conversion Price may be adjusted in accordance with the terms and conditions set forth in Schedule 2 (Adjustment mechanics).

"Conversion Notice" means a notice substantially in the form set out in Schedule 3 (Conversion Notice).

"Current Market Price" means the average of the daily VWAP of one Borrower Share on each of the [***] consecutive Trading Days ending on (and including) the Trading Day immediately preceding the date by reference to which such average is calculated, provided that when calculating the average of the VWAPs the gross dividend amount (or any other entitlement), if any, of any dividend (or any other entitlement) paid during any of the above mentioned period of [***] consecutive Trading Days, shall be added back to the VWAPs on each of the Trading Days on which the Borrower Shares are traded ex-dividend (or any other entitlement).

"Default" means an Event of Default or any event or circumstance specified in Clause 18 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default,

"Disruption Event" means either or both of:

(a) a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments or deliveries of shares to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or

(b) the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:

(i) from performing its payment, settlement and/or delivery obligations under the Finance Documents; or

(ii) from communicating with other Parties in accordance with the terms of the Finance Documents, and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.

"Distribution" has the meaning ascribed to it in section 1(c) of Schedule 2 (Adjustment mechanics),

5

"Distribution Date" has the meaning ascribed to it in section 1(c) of Schedule 2 (Adjustment mechanics).

"Dividend" means a distribution per Borrower Share made by the Borrower to holders of the Borrower Shares at any time as (a) a cash dividend, (b) a repayment of paid-in capital, (c) a stock dividend in lieu of a cash dividend, or (d) tradable put options in lieu of a cash dividend.

"Effective Date" means the last date on which the Borrower Shares are traded cum-dividend on the Relevant Exchange or, in the case of a purchase, redemption or buy back of Borrower Shares or any depositary or other receipts or certificates representing Borrower Shares, the date on which such purchase, redemption or buy back is made or in the case of a spin-off, the last date on which the Borrower Shares are traded cum-the relevant spin-off on the Relevant Exchange.

"Event of Default" means any event or circumstance specified as such in Clause 18 (Events of Default).

"Ex-Date" means the first day on which the Borrower Shares are traded on the Relevant Exchange without entitlement (ex).

"Exercise Period" has the meaning ascribed to it in Clause 7.2 (Conversion Notices, Exercise of Conversion Eight ami Conversion Dale).

"Existing Facility Agreement" means that certain US$3,500,000 Single Currency Term Loan Facility Agreement entered into between the Borrower as borrower and the Lender as lender, dated 27 June 2019.

"Facility" means the term loan facility made available under this Agreement as described in Clause 2 (Facility).

"Finance Document" means this Agreement and any other document designated as a "Finance Document" by the Lender and the Borrower.

"Financial Indebtedness" means any indebtedness for or in respect of:

(a) moneys borrowed and debit balances at banks or other financial institutions;

(b) any acceptance under any acceptance credit or bill discounting facility (or dematerialised equivalent);

(c) any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;

(d) the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with the accounting principles applicable to the Borrower, be treated as a balance sheet liability;

6

(e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);

(f) any counter-indemnity obligation in respect of a guarantee, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution;

(g) any amount raised under any other transaction (including any forward sale or purchase, sale and sale back or sale and leaseback agreement) having the commercial effect of a borrowing;

(h) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value (or, if any actual amount is due as a result of the termination or close-out of that derivative transaction, that amount) shall be taken into account); and

(i) the amount of any liability in respect of any guarantee for any of the items referred to in paragraphs (a) to (g) above.

"Guidelines" means, together, guideline S-02.123 in relation to interbank loans of 22 September 1986 (Merkblatt "Verrechnungssteuer auf Zinscn von Bankguthaben, deren Glaubiger Banken sind (Interbankguthaben)" vom 22. September 1986), guideline S-02.130,1 in relation to money market instruments and book claims of April 1999 (Merkblatt vom April 1999 betreffend Geldmarktpapiere und Buchforderungen tnlandischer Schuldner), circular letter No. 34 of 26 July 2011 (1-034-V-2011) in relation to deposits (Kreisschreiben Nr. 34 "Kundenguthaben" vom 26. Juli 2011) and the circular letter No. 15 of 3 October 2017 in relation to bonds and derivative financial instruments as subject matter of taxation of Swiss federal income tax, Swiss withholding tax and Swiss stamp taxes (Kreisschreiben Nr. 15 "Obligationen und derivative Finanzinstrumente als Gegenstand der direkten Bundessteuer, der Verrechnungssteuer und der Stempelabgaben" vom 3. Oktober 2017), circular letter No. 46 of 24 July 2019 (1-046-DVS-2019) in relation to syndicated credit facilities (Kreisschreiben Nr. 46 betreffend steuerhche Behandlung von Konsortialdarlehen, Schuldscheindarlehen, Wechseln und Unterbeteifigungen vom 24. Juli 2019) and circular letter No. 47 of 25 July 2019 (1-047-DVS-2019) in relation to bonds (Kreisschreiben Nr. 47 betreffend Obligationen vom 25. Juli 2019), in each case as issued, amended or replaced from time to time, by the Swiss Federal Tax Administration or as substituted or superseded and overruled by any law, statute, ordinance, court decision, regulation or the like as in force from time to time.

"Holding Company" means, in relation to a person, any other person in respect of which it is a Subsidiary.

"Independent Expert" means an independent investment bank of international repute or an independent law firm or accounting firm of international repute or an independent financial advisor with relevant expertise of international repute (an "Expert") selected and instructed by the Borrower and the Lender by mutual agreement or in accordance with the procedure set forth in section 7 of Schedule 2 (Adjustment mechanics).

7

"Initial Conversion Price" means CHF 3.00.

"Intermediary" means SIS or any other indermediary in Switzerland recognized For the purposes of entering uncertificates securities (Werirechte) in the main register (Hauptregister) by the Relevant Exchange.

"Legal Reservations" means:

(a) the principle that certain remedies may be granted or refused at the discretion of a court and the limitation of enforcement by laws relating to bankruptcy, insolvency, liquidation, reorganisation, court schemes, moratoria, administration and other laws generally affecting the rights of creditors;

(b) the time hairing of claims under applicable limitation laws, the possibility that an undertaking to assume liability for or indemnify a person against non-payment of stamp duty may be void and defences of set-off or counterclaim under the laws of the applicable jurisdiction; and

(c) similar principles, rights and defences under the laws of any Relevant Jurisdiction.

"Lender" means:

(a) the Original Lender; and

(b) any other third party which has become a Party as a "Lender" in accordance with Clause 20.1 (Transfers by the Lender),

which in each case has not ceased to be a Lender in accordance with the terms of this Agreement.

"Lender's Spot Rate of Exchange" means any publicly available spot rate of exchange selected by the Lender (acting reasonably), for the purchase of CHF with US$ (USS/CHF) in the New York foreign exchange market at the time of determination.

"Loan" means the loan made or to be made under the Facility or the principal amount outstanding for the time being of that loan.

"Material Adverse Effect" means a material adverse effect on the ability of the Borrower to perform its obligations under the Finance Documents.

"Maturity Date" means 30 April 2021,

"Non-Bank Rules" means, together, the 10 Non-Bantk Rule and the 20 Non-Bank Rule.

8

"Original Lender" means YAIIPN, Ltd.

"Other Securities" means equity securities of the Borrower other than Borrower Shares.

"Party" means a party to this Agreement.

"Purchase Rights" has the meaning ascribed to it in section 1(b) of Schedule 2 (Adjustment mechanics).

"Put Option" has the meaning ascribed to it in section 1(d) of Schedule 2 (Adjustment mechanics).

"Record Date" means the last Business Day prior to the Ex-Date.

"Relevant Exchange" means (i) in the case of Borrower, SIX Swiss Exchange or any successor thereof or, if the Borrower Shares are no longer admitted to trading on the SIX Swiss Exchange, the principal stock exchange or securities market on which the Borrower Shares are traded, and (ii) in the case of other securities, the principal stock exchange or securities market on which such other securities are traded.

"Relevant Jurisdiction" means, in relation to the Borrower:

(a) Switzerland; and

(b) any jurisdiction where it conducts its business.

"Repayment Date" means each date set forth in column "Repayment Date" in Schedule 4 (Repayment and Interest Schedule).

"Repayment Instalment" means each repayment instalment set forth in column "Repayment Instalment" in Schedule 4 (Repayment and Interest Schedule).

"Repeating Representations" means each of the representations set out in Clause 15.1 (Status) to Clause 15.10 (No default) (inclusive) and Clause 15.12 (No proceedings) to Clause 15.15 (No violation of Sanctions) (inclusive).

"Representative" means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.

"Retroactive Adjustment" has the meaning ascribed to it in section 3 of Schedule 2 (Adjustment mechanics).

"Sanctions Laws" means all economic, financial or other sanctions laws or embargos administered or enforced by a competent governmental authority, in each case to the extent applicable to the Borrower, including without limitation: (i) the United Nations Security Council; (ii) the European Union; (iii) the governmental institutions and agencies of the United States, including the Office of Foreign Assets Control of the United States Department of the Treasury ("OFAC"), and including Public Law No. 115-44, the Countering America's Adversaries Through Sanctions Act; and (iv) the governmental institutions and agencies of the United Kingdom, including Her Majesty's Treasury ("HMT").

9

"SIS" means SIX SIS Ltd.

"SIX Swiss Exchange" means SIX Swiss Exchange Ltd (or any successor to SIX Swiss Exchange Ltd), or the Swiss stock exchange operated by that company, as the context requires.

"Standby Equity Distribution Agreement" means the standby equity distribution agreement entered into between the Borrower as company and the Lender as investor, originally dated 8 February 2018, as amended and/or amended and restated from time to time.

"Structuring Fee" has the meaning ascribed to it in Clause 10.1 (Structuring Fee).

"Subsidiary" of a person means any person:

(a) which is controlled, directly or indirectly, by the first-mentioned person; or

(b) more than half the issued (share) capital of which is beneficially owned, directly or indirectly, by the first-mentioned person; or

(c) which is a Subsidiary of another Subsidiary of the first-mentioned person;

and, for these purposes, a person shall be deemed to be "controlled" by another person if that other person is able to direct its affairs and/or to control the composition of its board of directors or equivalent body,

"Swiss Withholding Tax" means the tax imposed based on the Swiss Federal Act on Withholding Tax of 13 October 1965 (Bwulesgesetz iiber die Verrechmmgssteuer) together with the related ordinances, regulations and guidelines,

"Up-front Fee" has the meaning ascribed to it in Clause 10,2 (Up-front Fee).

"Qualifying Bank" means;

(a) any bank as defined in the Swiss Federal Code for Banks and Savings Banks dated 8 November 1934 (Bundesgeseti iiber die Banken tmd Sparkassen)', or

(b) a person or entity which effectively conducts banking activities with its own infrastructure and staff as its principal business purpose and which has a banking license in full force and effect issued in accordance with the banking laws in force in its jurisdiction of incorporation, or if acting through a branch, issued in accordance with the banking laws in the jurisdiction of such branch, all and in each case within the meaning of the Guidelines.

10

"Tax" means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same) imposed by any jurisdiction, government, state or agency of a state.

"Tax Deduction" means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

"Total Facility Amount" has the meaning ascribed to it in Clause 2 (Facility).

"Trading Day(s)" means any day (other than a Saturday or Sunday) on which (i) the Relevant Exchange is open for business and Borrower Shares may be dealt in or (ii) (if the Borrower Shares are not listed or admitted to trading on the Relevant Exchange) closing bid and offered prices are furnished for the Borrower Shares.

"Unpaid Sum" means any sum due and payable but unpaid by the Borrower under the Finance Documents.

"Utilisation" means the drawdown of the Loan to occur on the Utilisation Date.

"Utilisation Date" means the date on which the Loan is to be made.

"VAT" means:

(a) any tax imposed in compliance with the Council Directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112);

(b) any tax imposed based on the Swiss Federal Act on Value Added Tax of 12 June 2009 (Bimdesgesetz iiber die Mehnvertsteuer) together with the related ordinances, regulations and guidelines; and

(c) any other tax of a similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in paragraph (a) above, or imposed elsewhere.

"VWAP" means with respect to any Trading Day, the volume-weighted average price of one Borrower Share (or one Put Option) published by Bloomberg Page HP (setting Weighted Average Line) or, if there is none, such other source as shall be determined to be appropriate by the Independent Expert on such Trading Day, provided that on any Trading Day on which such price is not available or cannot otherwise be determined as provided above, the VWAP of a Borrower Share in respect of such Trading Day shall be the volume-weighted average price, determined as provided above, on the immediately preceding Trading Day on which the same can be so determined.

1.2 Construction

(a) Unless a contrary indication appears, a reference in this Agreement to:

(i) the "Lender", the "Borrower", any "Party" or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees to, or of, its rights and/or obligations under the Finance Documents;

11

(ii) "assets" includes present and future properties, revenues and rights of every description;

(iii) "Finance Document" or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated;

(iv) "guarantee" means any guarantee, letter of credit, bond, indemnity or similar assurance against loss, or any obligation, direct or indirect, actual or contingent, to purchase or assume any indebtedness of any person or to make an investment in or loan to any person or to purchase assets of any person where, in each case, such obligation is assumed in order to maintain or assist the ability of such person to meet its indebtedness;

(v) "indebtedness" includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

(vi) a "person" includes any individual, firm, company, corporation, government, state or agency of a slate or any association, trust, joint venture, consortium, partnership or other entity (whether or not having separate legal personality);

(vii) a "regulation" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation;

(viii) a "Clause", or a "Schedule" is a reference to a clause of or schedule to, this Agreement and Schedules shall form an integral part of this Agreement;

(ix) a provision of law is a reference to that provision as amended or re-enacted; and

(x) a time of day is a reference to Zurich time unless otherwise specified.

(b) Unless the context requires otherwise, definitions in singular shall include the plural and vice versa.

(c) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

12

(d) A Default (other than an Event of Default) is "continuing" if it has not been remedied or waived and an Event of Default is "continuing" if it has not bee waived.

1.3 Currency symbols and definitions

"US$" and "dollars" denote the lawful currency of the United States of America and "CHF" and "Swiss francs" denote the lawful currency of Switzerland,

2. FACILITY

Subject to the terms of this Agreement, the Lender makes available to the Borrower an unsecured convertible loan facility in an aggregate amount equal to US$4,000,000 (such amount, the "Total Facility Amount").

3. PURPOSE

(a) Subject to the other provisions of this Agreement (including, without limitation, Clause 15.15 (No violation of Sanctions) and Clause 17.3 (Use ofproceeds), the Borrower shall apply all amounts borrowed by it under the Facility to finance its general corporate purposes.

(b) The Lender is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4. UTILISATION

Upon signing of this Agreement, the Borrower shall be deemed to have (irrevocably) requested to utilise the Facility on the following terms:

(a) Utilisation Date: Not more than two (2) Business Days after the fulfilment of all conditions pursuant to Clause 5.1 (Initial conditions precedent).

(b) Currency of the Loan: US$.

(c) Amount: Total Facility Amount, of which:

(i) US$2,300,000 have already been funded and are outstanding under the Existing Facility Agreement and will, from the Utilisation Date, be rolled-in and deemed outstanding and subject to this Agreement in all respects; and

(ii) US$1,700,000 will be made available to the Borrower pursuant to para, (b) of Clause 21.1 (Payments in general).

13

5. CONDITIONS TO UTILISATION

5.1 Initial conditions precedent

(a) The Lender will only be obliged to make the Loan available if on or before the Utilisation Date the Lender has received all of the documents and other evidence listed in Part I and Part II of Schedule 1 (Conditions precedent) in form and substance satisfactory to the Lender. The Lender shall notify the Borrower promptly upon being so satisfied.

(b) The Lender is free to waive the requirement to receive any (or all) of the documents and other evidence listed in Part I and Part II of Schedule 1 (Conditions precedent). Such waiver is only valid and effective if made in writing.

5.2 Further conditions precedent

Subject to Clause 5.1 (Initial conditions precedent), the Lender will only be obliged to make the Loan available, if on the date of this Agreement and on the Utilisation Date:

(a) no Default is continuing or would result from the making of the Loan; and

(b) all the representations and warranties in Clause 15 (Representations) to be made by the Borrower are true in all material respects.

6. REPAYMENT

(a) Subject to the exercise of the Lender of its Conversion Right pursuant to Clause 7 (Conversion) with respect to any outstanding principal amount of the Loan, the Borrower shall repay the Loan in instalments by repaying on each Repayment Date the corresponding Repayment Instalment set forth in Schedule 4 (Repayment and Interest Schedule). For the avoidance of doubt, in addition to each Repayment Instalment, the Borrower shall pay accrued interest on the outstanding principal amount of the Loan on each Repayment Date as further set out in Clause 9.1 (Payment of interest).

(b) The Borrower may not re-borrow any part the Facility which is repaid.

7. CONVERSION

7.1 Conversion Right, Conversion Ratio and Conversion Price

(a) The Lender may, in its sole and absolute discretion elect any amount outstanding under this Agreement (irrespective of whether the relevant amount is part of the principal amount of the Loan or accrued interest) (the "Conversion Amount") to be settled by converting the Conversion Amount into Borrower Shares at the Conversion Ratio. Such right of the Lender to require a conversion of the Conversion Amount into Borrower Shares at the Conversion Ratio is herein referred to as the "Conversion Right" and the settlement of the Conversion Amount via the conversion of such amount into Borrower Shares at the Conversion Ratio is herein referred to as the "Conversion".

14

(b) The conversion ratio (the "Conversion Ratio") will be determined by converting the Conversion Amount into CHF, using the Lender's Spot Rate of Exchange on the Conversion Date (at a time determined by the Lender in its sole discretion) and dividing the resulting figure by the Conversion Price prevailing on the Conversion Date. The number of Borrower Shares to be delivered upon Conversion shall be rounded down to the next full number. Any remainder smaller" than CHF 10 shall not be paid,

7.2 Conversion Notices, Exercise of Conversion Right and Conversion Date

(a) Conversion Notices. The Lender may exercise its Conversion Right at any time between the date of this Agreement and the date that all amounts outstanding under the Finance Documents have been repaid in full (the "Exercise Period") by serving a Conversion Notice to the Borrower. The Conversion Notice, once delivered, shall be irrevocable. If the Conversion Notice is delivered after the end of normal business hours or on a day which is not a Business Day, such delivery shall be deemed for all purposes of tins Agreement to have been made on the following Business Day.

(b) Exercise of Conversion Right. The Conversion Right may be exercised at any time during the Exercise Period in one or multiple instances and with respect to any Conversion Amount (i.e. there is no "minimum" Conversion Amount to be converted). Upon the exercise of the Conversion Right by the Lender, the respective Conversion Amount shall be deemed to become immediately due and payable and upon delivery of the relevant number of Borrower Shares, the respective Conversion Amount shall be deemed to be settled.

(c) Conversion Date. The conversion date in respect of a Conversion Amount (the "Conversion Date") shall he the date on which a Conversion Notice has been received or is deemed to have been received in accordance with paragraph (a) above.

7.3 Delivery of Borrower Shares

(a) Issuance of Borrower Shares. The Borrower Shares to be delivered upon the exercise by the Lender of the Conversion Right pursuant to this Clause 7 shall be delivered from Borrower Shares held in treasury by the Borrower or its Subsidiaries, or newly issued from the Borrower's conditional share capital (bedingtes Aktienkapital) or the Borrower's authorized share capital (genehmigtes Aktienkapital) of the Borrower, with the same entitlements as the other outstanding Borrower Shares, except that the Borrower Shares so delivered will not give any rigid for any dividend or other distribution declared, paid or made by reference to a Record Date prior to the Conversion Date and except that the voting rights may not be exercised unless the person designated in the Conversion Notice as recipient of the Borrower Shares is registered as the holder of the Borrower Shares in the Borrower's share register (Aktienbuch),

15

(b) Delivery of Borrower Shares. The Borrower will effect delivery of the Borrower Shares within not more than two (2) Trading Days after the Conversion Date through the Intermediary in accordance with directions given by the Lender in the relevant Conversion Notice and enter the Lender (or any designee of the Lender to which relevant Borrower Shares are transferred in accordance with the Conversion Notice) into tire Borrower's share register (Aktienbuch).

(c) Taxes and other costs. Any Swiss Federal Stamp Duty, if due, as well as the fee of the Relevant Exchange, if any, payable upon the delivery of the Borrower Shares to the Lender (or any designee of the Lender) upon a Conversion will be paid or reimbursed by the Borrower.

7.4 Satisfaction of repayment obligations

The actual conversion in accordance with this Clause 7 of any outstanding principal amount of the Loan which is part of the Conversion Amount shall satisfy the obligations under Clause 6 (Repayment) in their actual order of payment.

8. PREPAYMENT AND REPAYMENT RESTRICTIONS

The Borrower shall not repay or prepay all or any part of the Loan except at the times and in the manner expressly provided for in this Agreement.

9. INTEREST

9.1 Payment of interest

The rate of interest on the Loan is [***] per cent, per annum. Subject to tire exercise of the Lender of its Conversion Right pursuant to Clause 7 (Conversion) with respect to any accrued interest, the Borrower shall pay accrued interest on the outstanding principal amount of the Loan on each Repayment Date as further set out in Schedule 4 (Repayment and Interest Schedule), it being understood that (a) in case of a repayment pursuant to Clause 6 (Repayment) the principal amount of the Loan to be repaid shall be deemed outstanding until and including the relevant Repayment Date and (b) in case of a Conversion pursuant to Clause 7 (Conversion) any outstanding principal amount of the Loan which shall be a part of the Conversion Amount and subject to the Conversion shall be deemed outstanding until and including the actual delivery of the required number of Borrower Shares to the Lender pursuant to Clause 7.3 (Delivery of Borrower Shares).

9.2 Default interest

If the Borrower fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which is [***] per cent, per annum higher than the rate of interest pursuant to Clause 9.1 (Payment of interest). Any interest accruing under this Clause 9.2 shall be immediately payable by the Borrower on demand by the Lender.

16

9.3 Minimum interest

By entering into this Agreement, the Parties have assumed in bona fide that the interest payable hereunder is not and will not become subject to any Tax Deduction on account of Swiss Withholding Taxes. Nevertheless, if a Tax Deduction is required by Swiss law to be made by the Borrower in respect of any interest payable under a Finance Document and should it be unlawful for the Borrower to comply with paragraph (c) of Clause 1l.l (Tax gross-up) for any reason (where this would otherwise be required by the terms of Clause 11.1 (Tax gross-up)) then:

(a) the applicable interest rate in relation to that interest payment shall be:

(i) [***] per cent, per annum, divided by

(ii) [***] minus the rate at which the relevant Tax Deduction is required to be made (where the rate at which the relevant Tax Deduction is required to be made is for this purpose expressed as a fraction of one (1) rather than as a percentage),

(b) that Borrower shall:

(i) pay the relevant interest at the adjusted rate in accordance with paragraph (a) above; and

(ii) make the Tax Deduction on the interest so recalculated;

(c) all references to a rate of interest under the Loan shall be construed accordingly; and

(d) if the Borrower pays the interest under this Clause, it shall cooperate with the Lender to enable the Lender to receive a full or partial refund of the Swiss Withholding Tax under an applicable double taxation treaty. If and to the extent the Lender receives a refund of Swiss Withholding Tax, it shall forward such amount, after deduction of costs, to the Borrower. Nothing in this Clause shall interfere with the Lender's right to arrange its tax affairs in whatever manner it thinks fit and, without limiting the foregoing, the Lender shall not be under any obligation to claim any Swiss Withholding Tax refund in priority to any other claims, relieves, credits or deductions available to it.

17

10. FEES

10.1 Structuring Fee

(a) The Borrower shall pay to the Lender (or its designee) a non-refimdable and non- recurring structuring fee in an amount of [***] (the "Structuring Fee"). The Parties acknowledge and agree that the amount payable as Structuring Fee shall not be reduced for any reason.

(b) The Structuring Fee has been paid by the Borrower prior to the date of this Agreement.

10.2 Up-front Fee

(a) The Borrower shall pay to the Lender a non-refundable and non-recurring up-front Fee in an amount of [***] (the "Up-front Fee"). The Parties acknowledge and agree that the amount payable as Up-front Fee shall not be reduced for any reason,

(b) The Up-front Fee shall be paid in monthly instalments of [***], such instalments to be paid on each Repayment Date.

11. TAX GROSS UP AND INDEMNITIES

11.1 Tax gross-up

(a) The Borrower shall make all payments to be made by it (including interest, principal, Interest for late payment and default) without any Tax Deduction, unless a Tax Deduction is required by law.

(b) The Borrower shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Lender accordingly. Similarly, the Lender shall notify the Borrower on becoming so aware in respect of a payment payable to itself.

(c) If a Tax Deduction is required by law to be made by the Borrower, the amount of tire payment due from the Borrower shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d) Provided that no Event of Default is continuing and that the Borrower has fully complied with its obligations regarding compliance with the Non-Bank Rules, a payment to any Lender other than the Original Lender shall not be increased under paragraph (c) above if on the date on which the payment falls due the payment could have been made to the relevant Lender (which is not the Original Lender) without any Tax Deduction on account of Swiss Withholding Tax if the Lender (which is not the Original Lender) had been a Qualifying Bank, but on that date that Lender is not or has ceased to be a Qualifying Bank (other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law, treaty or any published practice of any relevant taxing authority).

18

(e) If the Borrower is required to make a Tax Deduction, it shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(f) Within thirty (30) days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Borrower shall deliver to the Lender evidence satisfactory to the Lender that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority,

11.2 Tax indemnity

(a) The Borrower shall (within three (3) Business Days of demand by the Lender) pay to the Lender an amount equal to the loss, liability or cost which the Lender determines will be or has been (directly or indirectly) suffered for or on account of Tax by the Lender in respect of a Finance Document.

(b) Paragraph (a) above shall not apply:

(i) with respect to any Tax assessed on the Lender:

(A) under the law of the jurisdiction in which the Lender is incorporated or, if different, the jurisdiction (or jurisdictions) in which the Lender is treated as resident for tax purposes; or

(B) under the law of the jurisdiction in which the Lender's office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by the Lender; or

(ii) to the extent a loss, liability or cost is compensated for fay an increased payment under Clause 11.1 (Tax gross-up) or an increased interest as calculated pursuant to Clause 9.3 (Minimum interest),

(c) If the Lender makes or intends to make a claim under paragraph (a) above, it shall promptly notify the Borrower of the event which will give, or has given, rise to the claim.

19

11.3 Stamp taxes

The Borrower shall pay and, within three (3) Business Days of demand, indemnify the Lender against any cost, loss or liability the Lender incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

11.4 VAT

(a) All amounts expressed to be payable under a Finance Document by the Borrower to the Lender which (in whole or in part) constitute the consideration for any supply for VAT purposes are deemed to be exclusive of any VAT which is chargeable on that supply, and accordingly, if VAT is or becomes chargeable on any supply made by the Lender to the Borrower under a Finance Document and the Lender is required to account to the relevant tax authority for the VAT, the Borrower must pay to the Lender (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of the VAT (and the Lender must promptly provide an appropriate VAT invoice to the Borrower).

(b) Where a Finance Document requires the Borrower to reimburse or indemnify the Lender for any cost or expense, the Borrower shall reimburse or indemnify (as the case may be) the Lender for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that the Lender reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.

12. OTHER INDEMNITIES

12.1 Currency indemnity

(a) If any sum due from the Borrower under the Finance Documents (a "Sum"), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the "First Currency") in which that Sum is payable into another currency (the "Second Currency") for the purpose of:

(i) making or filing a claim or proof against the Borrower; or

(ii) obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

the Borrower shall as an independent obligation, within three (3) Business Days of demand, indemnify the Lender to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.

20

(b) The Borrower waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in another currency than dollars.

12.2 Other indemnities

The Borrower shall, within three (3) Business Days of demand, indemnify the Lender against any cost, loss or liability incurred by it as a result of:

(a) the occurrence of any Event of Default;

(b) a failure by the Borrower to pay any amount due under a Finance Document on its due date or to deliver any Borrower Shares to the Lender pursuant to the terms of this Agreement;

(c) funding, or making arrangements to fund the Loan but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by the Lender alone);

(d) investigating any event which it reasonably believes is a Default;

(e) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or

(f) instructing lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (including, for the avoidance of doubt, an Independent Expert) as permitted under this Agreement.

13. MITIGATION BY THE LENDER

13.1 Mitigation

(a) The Lender shall, in consultation with the Borrower, take all reasonable steps to mitigate any circumstances which arise and which would result in the Facility ceasing to be available or any amount becoming payable under or pursuant to any of Clause 9.3 (Minimum interest) or Clause 11 (Tax gross up and indemnities).

(b) Paragraph (a) above does not in any way limit the obligations of the Borrower under the Finance Documents.

13.2 Limitation of liability

(a) The Borrower shall promptly indemnify the Lender for half costs and expenses reasonably incurred by the Lender as a result of steps taken by it under Clause 13.1 (Mitigation).

(b) The Lender is not obliged to take any steps under Clause 13.1 (Mitigation) if, in the opinion of the Lender (acting reasonably), to do so might be prejudicial to it.

21

14. COSTS AND EXPENSES

14.1 Transaction expenses

The Borrower shall promptly on demand pay the Lender the amount of all costs and expenses reasonably incurred by it in connection with the negotiation, preparation, and execution of any Finance Document executed after the date of this Agreement.

14.2 Amendment costs

If the Borrower requests any material amendment, waiver or consent the Borrower shall, within ten (10) Business Days of demand, reimburse the Lender for the amount of all costs and expenses (including legal fees) reasonably incurred by the Lender in responding to, evaluating, negotiating or complying with that request or requirement.

14.3 Enforcement and preservation costs

The Borrower shall, within ten (10) Business Days of demand, pay to the Lender the amount of all costs and expenses (including legal fees) incurred by it in connection with the enforcement of or the preservation of any rights under any Finance Document and any proceedings instituted by or against the Lender as a consequence of enforcing these rights.

15. REPRESENTATIONS

The Borrower makes the representations and warranties set out in this Clause 15 to the Lender.

15.1 Status

(a) It is a corporation, duly incorporated and validly existing under the laws of Switzerland.

(b) It has the power to own its assets and carry on its business as it is being conducted.

15.2 Binding obligations

Subject to the Legal Reservations, the obligations expressed to be assumed by it in each Finance Document to which it is a party are legal, valid, binding and enforceable obligations.

15.3 Non-conflict with other obligations

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents do not and will not conflict with:

(a) any law or regulation applicable to it;

22

(b) its constitutional documents; or

(c) any agreement or instrument binding upon it or any of its assets or constitute a default or termination event (however described) under any such agreement or instrument.

15.4 Power and authority

(a) It has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents,

(b) No limit on its powers will be exceeded as a result of the borrowing or grant of security or giving of indemnities contemplated by the Finance Documents to which it is a party.

15.5 Validity and admissibility in evidence

All Authorisations required or desirable:

(a) to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party; and

(b) to make the Finance Documents to which it is a party admissible in evidence in its Relevant Jurisdictions,

have been obtained or effected and are in full force and effect.

15.6 Governing law and enforcement

(a) The choice of governing law of the Finance Documents will be recognized and enforced in Switzerland.

(b) (Any judgment obtained in relation to a Finance Document in the jurisdiction of the governing law of that Finance Document will be recognised and enforced in Switzerland.

15.7 Insolvency

No:

(a) corporate action, legal proceeding or other procedure or step described in paragraph (a) of Clause 18.7 (Insolvency proceedings); or

(b) creditors' process described in Clause 18.8 (Creditors' process), has been taken or, to the knowledge of the Borrower, threatened in relation to it; and none of the circumstances described in Clause 18.6 (Insolvency) apply to it.

23

15.8 No filing or stamp taxes

Under the laws of its incorporation it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.

15.9 Deduction of Tax

It is not required to make any deduction for or on account of Tax from any payment it may make under any Finance Document.

15.10 No default

(a) No Event of Default and, on the date of this Agreement and Utilisation, no Default is continuing or is reasonably likely to result from the making of the Loan or the entry into, the performance of, or any transaction contemplated by, any Finance Document.

(b) No other event or circumstance is outstanding which constitutes (or, with the expiry of a grace period, the giving of notice, the making of any determination or any combination of any of the foregoing, would constitute) a default or termination event (however described) under any other agreement or instrument which is binding on it or to which its assets are subject which has or is reasonably likely to have a Material Adverse Effect.

15.11 No misleading information

Any written factual information provided by the Borrower for the purposes of the transactions contemplated by this Agreement was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.

15.12 No proceedings

(a) No litigation, arbitration or administrative proceedings or investigations of, or before, any court, arbitral body or agency which, if adversely determined, are reasonably likely to have a Material Adverse Effect have (to the best of its knowledge and belief (having made due and careful enquiry)) been started or threatened against it or any of its Subsidiaries.

(b) No judgment or order of a court, arbitral body or agency which is reasonably likely to have a Material Adverse Effect has (to the best of its knowledge and belief (having made due and careful enquiry)) been made against it or any of its Subsidiaries.

24

15.13 No breach of laws

It has not breached any law or regulation which breach has or is reasonably likely to have a Material Adverse Effect.

15.14 Good title to assets

It and each of its Subsidiaries has a good, valid and marketable title to, or valid leases or licences of, and all appropriate Authorisations to use, the assets necessary to carry on its business as presently conducted.

15.15 No violation of Sanctions

(a) None of the Borrower, its joint venture WISeKey Arabia, the joint venture partner Saudi Advanced Technologies Company Ltd. nor, to the knowledge of the Borrower, any director, officer, agent, employee or Affiliate of any of them is a person or entity that is, or is owned 50 percent, or more or controlled by one or more persons or entities that are:

(i) on the list of Specially Designated Nationals and Blocked Persons maintained by the US Department of Treasury's Office of Foreign Asset Control ("OFAC SDN List");

(ii) he subject of any economic sanctions administered or enforced by OFAC or the US State Department, the United Nations Security Council ("UNSC"), the European Union ("EU"), Her Majesty's Treasury ("HMT"), or other relevant sanctions authority (collectively, "Sanctions"), nor has a place of business in, or is operating, organized, resident or doing business in, a country or territory that is, or whose government is, the subject of OFAC's sanctions programs (including, without limitation, Crimea, Cuba, Iran, North Korea, Sudan and Syria) ("Sanctions Programs"),

(b) None of the Borrower, its joint venture WISeKey Arabia, the joint venture partner Saudi Advanced Technologies Company Ltd. nor any of their Affiliates shall, directly or indirectly, use the proceeds received under this Agreement, or lend, contribute, facilitate or otherwise make available such proceeds, directly or indirectly, to any Person:

(i) to fund, directly or indirectly, any activities or business of or with any Person that is identified on the OF AC SDN List or that is an entity that is owned 50 per cent, or more by one or more persons that are on the OFAC SDN List, or in any country or territory, that, during the time of such funding activities, is, or whose government is, the subject of Sanctions or Sanctions Programs; or

(ii) in any other manner that will result in a violation of Sanctions.

25

(c) The Borrower is not in violation of any of the sanctions imposed pursuant to the Countering America's Adversaries Through Sanctions Act.

15.16 Valid issuance of Borrower Shares

If and when issued upon the exercise by the Lender of the Conversion Right, the Borrower Shares will have been validly issued to the Lender,

15.17 Compliance with laws governing the issuance of Borrower Shares

The Borrower has complied with and will at all times comply with all applicable laws and regulations (including, without limitation, stock exchange regulations) which are relevant in connection with the issuance and listing of any Borrower Shares to be delivered to the Lender upon the exercise by the Lender of the Conversion Right.

15.18 Times when representations made

(a) All the representations and warranties in tills Clause 15 are made by the Borrower on the date of this Agreement except for the representations and warranties set out in Clause 15.11 (No misleading information) which are deemed to be made by the Borrower on the date of this Agreement and on the date of Utilisation.

(b) The Repeating Representations arc deemed to be made by the Borrower on the first day falling after each Repayment Date.

(c) Each representation or warranty deemed to be made after the date of this Agreement shall be deemed to be made by reference to the facts and circumstances existing at the date the representation or warranty is deemed to be made.

16. INFORMATION UNDERTAKINGS

The undertakings in this Clause 16 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents.

16.1 Information: miscellaneous

The Borrower shall supply to the Lender:

(a) promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against the Borrower or any of its Subsidiaries, and which, if adversely determined, are reasonably likely to have a Material Adverse Effect;

(b) promptly upon becoming aware of them, the details of any judgment or order of a court, arbitral body or agency which is made against the Borrower or any of its Subsidiaries which is reasonably likely to have a Material Adverse Effect; and

26

(c) promptly, subject to any statutory or regulatory limitation under applicable law, on request, such farther information regarding the financial condition, assets and operations of the Borrower as the Lender may reasonably request.

16.2 Notification of default

The Borrower shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence.

17. GENERAL UNDERTAKINGS

The undertakings in this Clause 17 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents.

17.1 Authorisations

The Borrower shall promptly obtain, comply with and do all that is necessary to maintain in fall force and effect any Authorisation required under any Swiss law or regulation to:

(a) enable it to perform its obligations under the Finance Documents;

(b) ensure the legality, validity, enforceability or admissibility in evidence of any Finance Document; and

(c) carry on its business where failure to do so has or is reasonably likely to have a Material Adverse Effect.

17.2 Compliance with laws

The Borrower shall comply in all respects with all laws to which it may be subject, if failure so to comply has or is reasonably likely to have a Material Adverse Effect.

17.3 Use of proceeds

(a) The Borrower shall neither directly nor indirectly use the proceeds of the Facility for any purpose which would be in breach of any Anti-Corruption Laws, Anti-Money Laundering Laws or any Sanctions Laws.

(b) The Borrower shall not make available any proceeds of the Facility to its joint venture WISeKey Arabia, the joint venture partner Saudi Advanced Technologies Company Ltd. or any of their Subsidiaries, directors, officers, agents, employees, members or shareholders.

17.4 Pari passu ranking

The Borrower shall ensure that at all times any unsecured and unsubordinated claims of the Lender against it under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except those creditors whose claims are mandatorily preferred by laws of general application to companies.

27

17.5 Compliance with Non-Bank Rules

(a) The Borrower shall ensure that it is at all times in compliance with the Non-Bank Rules.

(b) With respect to any deduction on account of Swiss Withholding Tax, paragraph (a) above shall not be breached if the number of creditors of the Borrower in respect of either the 10 Non-Bank Rule or the 20 Non-Bank Rule is exceeded solely as a result of a failure by a Lender to comply with its obligations under Clause 17 (General undertakings, a Lender having given an incorrect information as to its status as Qualifying Bank or having lost its status as Qualifying Bank or as one (l) creditor only for the purposes of the Non-Bank Rules. For the avoidance of doubt, the Borrower acknowledges that it is aware of the fact that the Original Lender does not qualify as Qualifying Bank but counts as one (1) creditor for the purposes of the Non-Bank Rules.

17.6 Access

If an Event of Default is continuing or the Lender reasonably suspects an Event of Default is continuing or may occur, the Borrower shall permit the Lender and/or accountants or other professional advisers and contractors of the Lender, subject to any statutory or regulatory limitations under applicable law, free access at all reasonable times and on reasonable notice at the risk and cost of the Borrower to (a) the premises, assets, books, accounts and records of the Borrower and (b) meet and discuss matters with the senior management of the Borrower.

18. EVENTS OF DEFAULT

Each of the events or circumstances set out in this Clause 18 is an Event of Default (save for Clause 18.16 (Acceleration)).

18.1 Non-payment

The Borrower does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:

(a) its failure to pay is caused by:

(i) administrative or technical error; or

(ii) a Disruption Event; and

(b) payment is made within three (3) Business Days of its due date.

28

18.2 Failure to deliver Borrower Shares upon Conversion

The required number of Borrower Shares is not delivered to the Lender or its designee within five (5) Business Days after the Conversion Date in accordance with paragraph (b) of Clause 7.3 (Delivery of Borrower Shares) or the Borrower fails to comply with any of its other obligation under paragraph (b) of Clause 7.3 (Delivery of Borrower Shares) unless;

(a) the relevant failure to deliver the required number of Borrower Shares is caused by:

(i) administrative or technical error; or

(ii) a Disruption Event; and

(b) delivery is made within three (3) Business Days of its due date.

18.3 Other obligations

The Borrower does not comply with any provision of the Finance Documents (other than those referred to in Clause 18.1 (Non-payment) or Clause 18.2 (Failure to deliver Borrower Shares upon Conversion)) and such failure is, if capable of being remedied, not remedied within ten (10) Business Days of the earlier of (a) the Lender giving notice to the Borrower and (b) the Borrower becoming aware of die failure to comply.

18.4 Misrepresentation

Any representation or statement made or deemed to be made by the Borrower in the Finance Documents or any other document delivered by or on behalf of the Borrower under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made.

18.5 Cross default

(a) Any Financial Indebtedness of the Borrower is not paid when due nor within any originally applicable grace period.

(b) Any Financial Indebtedness of the Borrower is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

(c) Any commitment for any Financial Indebtedness of the Borrower is cancelled or suspended by a creditor of the Borrower as a result of an event of default (however described).

(d) Any creditor of the Borrower becomes entitled to declare any Financial Indebtedness of the Borrower due and payable prior to its specified maturity as a result of an event of default (however described).

29

(e) No Event of Default will occur under this Clause 18.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (d) above is less than US$500,000 (or its equivalent in any other currency or currencies).

18.6 Insolvency

(a) The Borrower:

(i) is unable or admits inability to pay its debts as they fall due;

(ii) is over-indebted (überschuldet) within the meaning of article 725 of the Swiss Code of Obligations and its board of directors becomes obliged to inform the competent bankruptcy court thereof; or

(iii) suspends or threatens to suspend making payments on any of its debts; or

(iv) by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors (excluding the Lender in its capacity as such) with a view to enter into a standstill or similar agreement,

(b) A moratorium is declared in respect of any indebtedness of the Borrower. If a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by that moratorium.

18.7 Insolvency proceedings

(a) Any corporate action, legal proceedings or other procedure or step is taken in relation to:

(i) the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of the Borrower;

(ii) a composition, compromise, assignment or arrangement with any creditor of the Borrower;

(iii) the appointment of a liquidator, receiver, administrative receiver, administrator compulsory manager or other similar officer in respect of the Borrower or any of the Borrower's assets,

or any analogous procedure or step is taken in any jurisdiction.

(b) Paragraph (a) shall not apply to any debt enforcement proceeding which is frivolous or vexatious or disputed by the Borrower acting diligently and in good faith and which is, in either case, discharged, stayed or dismissed within the applicable time frame under applicable iaw, but in any event within 30 calendar days.

30

18.8 Creditors' process

Any expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction affects any asset or assets of the Borrower having an aggregate value of US$500,000 and is not discharged within 30 calendar days.

18.9 Unlawfulness and invalidity

(a) It is or becomes unlawful for the Borrower to perform any of its obligations under the Finance Documents.

(b) Any material obligation or obligations of the Borrower under any Finance Documents are not (subject to the Legal Reservations) or cease to be legal, valid, binding or enforceable and the cessation individually or cumulatively materially and adversely affects the interests of the Lender under the Finance Documents.

18.10 Cessation of business

The Borrower suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business.

18.11 Repudiation and rescission of agreements

The Borrower rescinds or purports to rescind or repudiates or purports to repudiate a Finance Document or evidences an intention to rescind or repudiate a Finance Document.

18.12 Litigation

Any litigation, arbitration or administrative proceedings or investigations of, or before, any court, arbitral body or agency are started or threatened, or any judgment or order of a court, arbitral body or agency is made, in relation to the Finance Documents or the transactions contemplated In the Finance Documents or against the Borrower or its assets which have, or has, or are, or is, reasonably likely to have a Material Adverse Effect.

18.13 Material adverse change

Any event or circumstance occurs which the Lender reasonably believes has or is reasonably likely to have a Material Adverse Effect.

18.14 Non-compliance with Standby Equity Distribution Agreement

The Borrower does not comply with any of its material obligations under the Standby Equity Distribution Agreement.

31

18.15 Delisting of Borrower Shares

The Borrower Shares are delisted from the Relevant Exchange without being listed on another Relevant Exchange.

18.16 Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Lender may:

(a) by notice to the Borrower:

(i) declare that all or part of the Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, at which time they shall become immediately due and payable; and/or

(ii) declare that all or part of the Loan be payable on demand, at which time they shall immediately become payable on demand by the Lender; and/or

(b) exercise any or all of its rights, remedies, powers or discretions under the Finance Documents.

19. COVENANT OF LENDER

From the date of this Agreement for so long as any amount is outstanding under the Finance Documents, neither the Lender nor any of its Affiliates shall have any open short position in Borrower Shares, and the Lender agrees that it will not, and that it will cause its Affiliates not to, engage in any short sales with respect to the Borrower Shares.

20. CHANGES TO THE PARTIES

20.1 Transfers by the Lender

Subject to this Clause 20, the Lender (the "Existing Lender") may transfer by way of assumption of contract (Vertragsübemahme) any of its rights and obligations to any other third party (the "New Lender"), subject to the consent of the Borrower, which shall not be unreasonably withheld.

20.2 Conditions of transfer

(a) A transfer may be conducted on such terms and conditions as agreed between the Existing Lender and the New Lender.

(b) Following the transfer:

(i) the Borrower and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (being the "Discharged Rights and Obligations");

32

(ii) the Borrower and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as the Borrower and the New Lender have assumed and/or acquired the same in place of the Borrower and the Existing Lender; and

(iii) the New Lender shall become a Party as a "Lender".

20.3 Exposure transfers (including sub-participations)

In addition to transfers pursuant to 20.1 (Transfers by the Lender), a Lender may enter into any other arrangement with another person under which such Lender transfers all or any part of its exposure under the Finance Documents to that other person, provided that under such arrangement throughout the life of such arrangement:

(a) the relationship between the Lender and that other person is that of a debtor and creditor (including in the bankruptcy or similar event of the Lender or the Borrower);

(b) the other person will have no proprietary interest in the benefit of this Agreement or in any monies received by the Lender under or in relation to this Agreement; and

(c) the other person will under no circumstances (other than permitted transfers and assignments under Clause 20.1 (Transfers by the Lender)) (y) be subrogated to, or substituted in respect of, the Lender's claims under this Agreement; and (z) have otherwise any contractual relationship with, or rights against, the Borrower under or in relation to this Agreement.

20.4 Assignments and transfers by the Borrower

The Borrower may not assign any of its rights or transfer any of its rights or obligations under the Finance Documents, neither in form of a transfer of assets (Vermdgertsübertragung) pursuant to articles 69 et seq. Swiss Merger Law nor otherwise.

21. PAYMENT MECHANICS

21.1 Payments in general

(a) On each date on which the Borrower or the Lender is required to make a payment under a Finance Document, the funds shall he me made available (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Lender as being customary at the time for settlement of transactions in dollars in the place of payment.

33

(b) Subject to the provisions of Clause 4 (Utilisation) and the fulfilment of the conditions set out in Clause 5 (Conditions to Utilisation) Loan is to be made available for value on the Utilisation Date by transfer to the following account of die Borrower held with UBS Switzerland AG: IBAN: CH46 0024 3243 1843 2060 A / SWIFT: UBSWCHZH801A.

(c) All payments to the Lender under this Agreement shall be paid to an account as communicated by the Lender.

21.2 Partial payments

(a) If the Lender receives a payment for application against amounts due in respect of any Finance Documents that is insufficient to discharge all the amounts then due and payable by the Borrower under those Finance Documents, the Lender shall apply that payment towards the obligations of the Borrower under the Finance Documents in the following order:

(i) first, in or towards payment pro rata of any unpaid amount owing to the Lender under the Finance Documents;

(ii) secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under those Finance Documents;

(iii) thirdly, in or towards payment pro rata of any principal due but unpaid under those Finance Documents; and

(iv) fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

(b) The Lender may, in its absolute discretion, vary the order set out in paragraphs to (a)(iv) above.

(c) Paragraphs (a) and (b) above will override any appropriation made by the Borrower.

21.3 Business Days

(a) Any payment under the Finance Documents which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

(b) During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date,

34

21.4 Currency of account

(a) Subject to paragraphs (b) and (c) below, dollars is the currency of account and payment for any sum due from the Borrower under any Finance Document.

(b) Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

(c) Any amount expressed to be payable in a currency other than dollars shall be paid in that other currency.

22. SET-OFF

(a) The Lender may set off any obligation due from the Borrower under the Finance Documents or any other agreement against any obligation owed by the Lender to the Borrower (including, without limitation, obligations owed by the Lender to the Borrower under the Standby Equity Distribution Agreement, provided, however, that the Lender shall reasonably prior to the delivery of any shares of the Borrower under the terms of the Standby Equity Distribution Agreement indicate to the Borrower its intention to declare a set off such that the Borrower is in a position to obtain the audit confirmation required in connection with the capital increase effected to issue Borrower shares in performance of the Borrower's obligations under the Standby Equity Distribution Agreement), regardless of the place of payment or currency of either obligation and even before the maturity of such obligations.

(b) The Borrower waives its right to offset its obligations under the Finance Documents against any claims it may have against the Lender and/or any party acquiring rights under the Finance Documents, even if such claim by way of set-off against the Lender, or any party acquiring rights hereunder, may not be recoverable as a result of insolvency or over-indebtedness.

23. NOTICES

23.1 Communications in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by email or letter.

23.2 Addresses

The address and email address (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:

35

(a) in the case of the Borrower:

WISeKey International Holding AG
General-Guisan-Strasse 6
6300 Zug
Switzerland
Attn.: Peter Ward, Chief Financial Officer Email: peter.ward@ wisekey.com

with a copy to:

Homburger AG
Hardstrasse 201
8005 Zurich
Switzerland

Attn.: David Oser
Email: david.oser@homburger.ch

(b) in the case of the Lender:

YA II PN, Ltd.,
c/o Yorkville Advisors Global, LP
1012 Springfield Avenue
Mountainside, NJ 07092

Attn.: David Gonzalez, General Counsel
Email: Legal@yorkvilleadvisors,com

with a copy to:

Baker McKenzie Zurich
Holbeinstrasse 30
P.O. Box 8034
Zurich
Switzerland

Attn.: Matthias Courvoisier and Philip Spoerle
Email: matthias.courvoisier@bakermckenzie.com/
philip.spoerIe@bakermckenzie.com

or any substitute address or email address or department or officer as any Party may communicate to the other Party by not less than five (5) Business Days' notice.

23.3 Delivery

(a) Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

(i) if by way of letter, when it has been received by the addressee; or

(ii) if by way of email, when it has been received by the addressee in readable form;

36

and, if a particular department or officer is specified as part of its address details provided under Clause 23.2 (Addresses), if addressed to that department or officer.

(b) Any communication or document to be made or delivered to the Lender will be effective only when actually received by the Lender and then only if it is expressly marked for the attention of the department or officer identified with the Lender's signature below (or any substitute department or officer as the Lender shall specify for this purpose).

(c) Any communication or document which becomes effective, in accordance with paragraphs (a) and (b) above, after 5:00 p.m, in the place of receipt shall be deemed only to become effective on the following day.

23.4 Electronic communication

Both Parties agree that any communication and information made between them as well as between them and their external advisers and consultants may be made by encrypted or unencrypted electronic mail or other electronic means, as an accepted form of communication, unless and until notified to the contrary. Each Party confirms to have been made aware of the special risks involved in using email and acknowledges and agrees that the other Party does not accept any liability, warranty or responsibility in respect thereof.

23.5 English language

(a) Any notice given under or in connection with any Finance Document must be in English.

(b) All other documents provided under or in connection with any Finance Document must be:

(i) in English; or

(ii) if not in English, and if so required by the Lender, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

37

24. DAY COUNT CONVENTION

Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 365 days.

25. PARTIAL INVALIDITY

If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

26. REMEDIES AND WAIVERS

No failure to exercise, nor any delay in exercising, on the part of the Lender, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any Finance Document. No election to affirm any Finance Document on the part of the Lender shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law.

27. AMENDMENTS AND WAIVERS

Any term of the Finance Documents (including this Clause) may be amended or waived only with the consent of the Lender and the Borrower.

28. NON-DISCLOSURE OF NON-PUBLIC INFORMATION

The Borrower covenants and agrees that it shall refrain from disclosing, and shall cause its officers, directors, employees, advisors and agents to refrain from disclosing, any material non-public information to the Lender without also disseminating such information to the public.

29. CONFIDENTIAL INFORMATION

29.1 Confidentiality

Each Party agrees to keep ail Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 29.2 (Disclosure of Confidential Information), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.

38

29.2 Disclosure of Confidential Information

Each Party may disclose:

(a) to any of its Affiliates and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as the relevant Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph (a) is informed in writing of its confidential nature except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;

(b) in case of the Lender, to any person:

(i) to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents and to any of that person's Affiliates, Representatives and professional advisers;

(ii) with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or the Borrower and to any of that person's Affiliates, Representatives and professional advisers;

(iii) who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in paragraph (b)(i) or (b)(ii) above,

in each case, such Confidential Information as the Lender shall consider appropriate if in relation to paragraphs (b)(i), (b)(ii) and (b)(i) above, the person to whom the Confidential Information is to be given has entered into a confidentiality undertaking except that there shall be no requirement for a confidentiality undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information; and

(c) to any person:

(i) appointed by the relevant Party to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf;

(ii) to any person to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;

39

(iii) to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;

(iv) who is a Party; or

(v) with the consent of the other Party,

in each case, such Confidential Information as the disclosing Party shall consider appropriate if:

(A) in relation to paragraph (c)(i) above, the person to whom the Confidential Information is to be given has entered into a confidentiality undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;

(B) in relation to paragraphs (c)(ii) and (c)(iii) above, the person to whom the Confidential Information is to be given is informed of its confidential nature.

29.3 Entire agreement

This Clause 29 constitutes the entire agreement between the Parties in relation to the obligations of the Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.

29.4 Continuing obligations

The obligations in this Clause 29 are continuing and, in particular, shall survive and remain binding on the Lender for a period of twelve (12) months from the earlier of:

(a) the date on which all amounts payable by the Borrowers under or in connection with the Finance Documents have been paid in full; and

(b) the date on which the Lender otherwise ceases to be Lender,

30. ENTIRE AGREEMENT

This Agreement (including the Schedules hereto and the documents and instruments referred to in this Agreement that are to be delivered pursuant to this Agreement) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements or representations by or among the Parties, or any of them, written or oral, with respect to the subject matter of this Agreement.

40

31. COUNTERPARTS AND CONCLUSION OF CONTRACT

(a) This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

(b) This Agreement may be concluded by an exchange of signed signature pages, transmitted by way of fax or attached as an electronic photocopy (.pdf, .tif, etc.) to email.

32. GOVERNING LAW AND JURISDICTION

32.1 Governing law

This Agreement is governed by the laws of Switzerland.

32.2 Jurisdiction

Each Party agrees that any legal action arising out of or relating to this Agreement, including actions relating to disputes on the conclusion, validity or amendment of this Agreement, must be brought exclusively before the courts of the City of Zurich, Switzerland.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

41

Execution Copy: 4 March 2020

SCHEDULE 1

CONDITIONS PRECEDENT

PART I
CONDITIONS PRECEDENT TO SIGNING OF THE AGREEMENT

1. BORROWER

(a) A copy of the constitutional documents of the Borrower.

(b) A copy of a resolution of the board or, if applicable, a committee of the board of directors of the Borrower:

(i) approving the terms of, and the transactions contemplated by, the Finance Documents and resolving that it execute, deliver and perform the Finance Documents;

(ii) authorising a specified person or persons to execute the Finance Documents on its behalf; and

(iii) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with the Finance Documents.

2. FINANCE DOCUMENTS

This Agreement executed by the Borrower.

PART II
CONDITIONS PRECEDENT TO UTILISATION

Evidence that the fees, costs and expenses then due from the Borrower pursuant to Clause 10 (Fees) and Clause 14 (Costs and expenses) have been paid or wifi be paid by the Utilisation Date.

42

Execution Copy: 4 March 2020

SCHEDULE 2
ADJUSTMENT MECHANICS

1. EVENTS LEADING TO ADJUSTMENTS TO THE CONVERSION PRICE

(a) Increase of capital by means of capitalization of reserves, profits or premiums by distribution of Borrower Shares, or division or consolidation of Borrower Shares

In the event of a change in the Borrower's share capital as a result of capitalization of reserves, profits or premiums, by means of the distribution of Borrower Shares, save for a distribution of Borrower Shares as a Dividend as set out in section 1(d) of this Schedule 2, and in the event of division or consolidation of Borrower Shares, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such change by the result of the following formula:

where:

N_Old is the number of Borrower Shares existing before the change in share capital; and

N_New is the number of Borrower Shares existing after the change in share capital.

Such adjustment shall become effective on the date on which such Borrower Shares are distributed or, En the event of division or consolidation of Borrower' Shares, on the first day the Borrower Shares are traded on the new basis on the Relevant Exchange.

(b) Issue of Borrower Shares or Other Securities by way of conferring subscription or purchase rights

If (i) the Borrower grants to holders of Borrower Shares any rights or options, warrants or other rights to subscribe for or acquire Borrower Shares, Other Securities or securities convertible or exchangeable into Borrower Shares or Other Securities, or (ii) any third party with the consent of the Borrower issues to holders of Borrower Shares any rights, options or warrants to purchase any Borrower Shares, Other Securities or securities convertible or exchangeable into Borrower Shares or Other Securities (the rights referred to in (i) and (ii) collectively and individually being the "Purchase Rights"), the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such issue or grant by the result of the following formula:

(P curr – R)/P curr

where:

Pcurr is the Current Market Price by reference to whichever is the later of (x) the date on which the Borrower Shares are first traded ex-Purchase Rights on the Relevant Exchange and (y) the Trading Day when the subscription or purchase price for Borrower Shares or Other Securities under the Purchase Right is announced, or, if the day the subscription or purchase price is announced is not a Trading Day, the next following Trading Day; and

43

R is the value of the Purchase Right relating to one Borrower Share or Other Security, such value to be calculated as follows:

(A) In the event the Purchase Rights relate to Borrower Shares:

R = P_curr - TERP

where:

TERP = (Now x P_curr + N_new x (P_rights + Div)) / (N_old + N_new) and:

TERP is the theoretical ex-Purchase Rights price; and

N_old is the number of Borrower Shares existing before the change in share capital; and

N_new is the number of offered Borrower Shares contemplated to be newly issued; and

P_rights is the price at which one new Share can be subscribed, exercised or purchased; and

Div is the amount (in CHF) by which the entitlement to Dividends per existing Share exceeds the entitlement to Dividends per new Borrower Share, (x) if Dividends have already been proposed to the general meeting of shareholders but not yet paid, based on the proposed amount of the Dividends, or(y) if Dividends have not yet been proposed, based on the Dividends paid in the immediately preceding financial year;

provided, however, that no such adjustment shall be made if the subscription or purchase price at which one new Borrower Share can be subscribed or purchased is at least ninety (90) per cent of the Current Market Price on whichever is the later of (x) the date on which the Borrower Shares are first traded ex-Purchase Rights on the Relevant Exchange or (y) the Trading Day when the subscription or purchase price for the Purchase Right is announced, or, if the day the subscription or purchase price is announced is not a Trading Day, the next following Trading Day;

(B) in the event the Purchase Rights relate to Other Securities or to securities convertible or exchangeable into Borrower Shares or Other Securities and where such Purchase Rights are traded on a regulated stock exchange in Switzerland, the European Union, the United States of America, Canada or Japan:

where:

R = N_rights X P_rights

N_rights is the number of Purchase Rights granted per Borrower Share; and

P_rights is the VWAP of the Purchase Rights on the Relevant Exchange (or, if no dealing is recorded, the arithmetic mean of the bid and offered prices) during the time Purchase Rights are traded, but not longer than the first ten (10) Trading Days.

44

(C) in all other cases where neither of the previous paragraphs (A) or (B) is applicable, R will be determined by a Independent Expert.

Such adjustment shall become effective:

(i) in the case of sub-section (A) above, on the first day on which the Borrower Shares are traded ex-Purchase Rights on the Relevant Exchange;

(ii) in the case of sub-section (B) above, five (5) Trading Days after (x) the end of the period during which the Purchase Rights are traded or (y) the tenth (10th) Trading Day of the Purchase Rights, whichever is sooner; and

(iii) in the case of sub-section (C) above, on the date determined by the Independent Expert.

(c) Spin-offs and capital distributions other than Dividends

If, in respect of a spin-off or a capital distribution other than Dividends as set out in section 1(d) of this Schedule 2, the Borrower shall issue or distribute to holders of its Borrower Shares any assets, evidence of indebtedness of the Borrower, shares or other rights (other than as referred to in section 1(b) of this Schedule 2) (the "Distribution"), the Conversion Price shall be adjusted as follows:

(i) In case the Distribution (x) consists of securities that will be traded on a regulated stock exchange in Switzerland, the European Union, the United States of America, Canada or Japan, (y) consists of securities that are traded on a regulated stock exchange in Switzerland, the European Union, the United States of America, Canada or Japan or (z) has otherwise a value which is determinable by reference to a stock exchange quotation or otherwise, by multiplying the Conversion Price in force immediately prior to such issue or distribution by the result of the following formula:

(P_curr – D)/P_curr

where:

P_curr is the Current Market Price by reference to the date on which the Borrower Shares are first traded ex-Distribution on the Relevant Exchange following the relevant Distribution; and

45

D is equal to (i) in case of sub-paragraph (i)(x) above, the current market price of the Distribution (in CHF) on the Relevant Exchange, calculated on a per Borrower Share basis, as determined by the Lender, or (ii) in case of sub-paragraph (i)(y), the current market price of the Distribution (in CHF) on the Relevant Exchange on the date by reference to which P_curr has been determined, calculated on a per Borrower Share basis, as determined by the Lender, or (iii) in case of sub-paragraph (i)(z), as determined by a Independent Expert.

whereby for purposes of this provision, the current market price (to determine D) in case of sub-paragraph (i)(x) above shall be deemed to be the average of the VWAPs on the [***] consecutive Trading Days commencing on the date on which the Borrower Shares are first traded ex-Distribution on the Relevant Exchange, and in case of sub-paragraph (i)(y) shall be deemed to be the average of the VWAPs on the [***] consecutive Trading Days ending on and including the Trading Day preceding the day on which the Borrower Shares are first traded ex-Distribution. When calculating the average of the VWAPs the gross dividend amount (or any other entitlement), if any, of any dividend (or any other entitlement) paid during either of the above mentioned periods of [***] consecutive Trading Days, shall be added back to the VWAPs on each of the Trading Days on which the Borrower Shares are traded ex-dividend (or any other entitlement).

(ii) In all other cases and where there is one (but not more) Distribution on a given Trading Day, by multiplying the Conversion Price in force immediately prior to such issue or distribution by the result of the following formula:

P_after/P_before

where:

P_after is the current market price per Share after the date of such Distribution (the "Distribution Date"); and

P_before is the current market price per Borrower Share before the Distribution Date;

whereby for purposes of this provision the current market price per Borrower Share shall be deemed to be tire average of the VWAPs, (x) in the case ofPbefore, on the five (5) consecutive Trading Days before the Distribution Date, and (y) in the case of P_after on the live (5) consecutive Trading Days after the Distribution Date, as determined by the Lender. When calculating the average of the VWAPs the gross dividend amount (or any other entitlement), if any, of any dividend paid (or any other entitlement) during either of the above mentioned periods of five (5) consecutive Trading Days, shall be added back to the VWAPs on each of the Trading Days on which the Borrower Shares are traded ex-dividend (or any other entitlement).

46

(iii) If the Borrower issues or distributes to its shareholders tradable put options as a Dividend with respect to any financial year, the Conversion Price shall be adjusted according to the formula set out in section 1(d) of this Schedule 2.

(iv) In all other cases where there is more than one such Distribution on a given Trading Day, the Independent Expert will determine the necessary adjustment.

Such adjustment shall become effective, in the case of sub-paragraph (i)(y) above, on the date on which the Distribution is made and, in the case of sub-paragraph (i)(x), (ii) and (iii) above, on the sixth (6th) Trading Day after the Distribution Date and, in the case of sub-paragraph (i)(z) and (iii) above, as determined by a Independent Expert.

(d) Dividends

If the Borrower pays a Dividend, the Conversion Price shall be adjusted by multiplying the Conversion Price by the following fraction:

(P_curr-D)/ P_curr

where:

P_curr is the Current Market Price with respect to the Effective Date; and

D       is the portion of the Dividend attributable to one Borrower Share as set out

below

Any reference to D in the above formula shall be replaced by

(i) the cash amount in case of a cash dividend or a repayment of paid-in capital;

(ii) an amount as calculated by the following formula in case of a stock dividend in lieu of a cash dividend:

Current Market Price - (Current Market Price x (N_Old / N_New))

where:

Current Market Price is the average of the daily VWAP of one Borrower Share on each of the [***] consecutive Trading Days ending on and including the Trading Day immediately prior to the Ex-Date;

N_old is the number of Borrower Shares existing before the change in share capital; and

47

N_New is the number of Borrower Shares existing after the change in share capital;

(iii) an amount as calculated by the following formula in case of tradable put options in lieu of a cash dividend (the "Put Option"):

current market price x (P/N)

where:

current market price is the average of the daily VWAP of the Put Option on each of the five (5) consecutive Trading Days commencing on the Ex-Date;

P       is the number of Put Options to be issued; and

N       is the number of Borrower Shares existing prior to the Ex-Date.

Such adjustment shall become effective on the Ex-Date and in case of Put Options according to sub-paragraph, (iii) above, on the sixth (6^th) Trading Day following the Ex-Date.

2. CALCULATION OF ADJUSTMENTS

(a) Each adjustment to be made pursuant to this Schedule 2 shall be calculated by the Lender and shall (in the absence of manifest error) be binding on the Borrower. The Lender may engage the advice or services of any Independent Expert whose advice or services it may consider necessary and rely upon any advice so obtained, and the Lender shall incur no liability as against the Borrower in respect of any action taken, or not taken, or suffered to be taken, or not taken, in accordance with such advice and in exercising due care according to established market practice.

(b) If in case of any adjustment the resulting Conversion Price is not an integral multiple of CHF 0.01 (one hundredth of a Swiss franc), it shaft be rounded to the nearest whole or multiple of CHF 0.01 (one hundredth of a Swiss franc) with 0,005 being rounded upwards,

(c) The Borrower will procure that a notice is sent to the Lender as soon as practicable after either the date on which any adjustment to the Conversion Price becomes effective or, if no adjustment is required, the date on which it is possible to determine that such is the case.

3. RETROACTIVE ADJUSTMENTS

(a) If the Conversion Date in relation to any Conversion Amount is (i) before the relevant record date for any issue, sale, grant or offer leading to an adjustment pursuant to section 1 of this Schedule 2, (ii) before publication of the event leading to such Record Date, and (iii) before the relevant adjustment to the Conversion Price becomes effective under section 1 (b) of this Schedule 2, and (iv) provided that the Borrower Shares will be delivered to the Lender after the Record Date, the Borrower shall (conditional upon the relevant adjustment becoming effective) procure that there shall be issued to the converting Lender such an additional number of Borrower Shares or additional cash amount (the "Additional Consideration") as, together with the Borrower Shares delivered or to be delivered and the cash amounts to be transferred, if applicable, on conversion of the relevant Conversion Amount is equal to the consideration (in form of cash amounts or Borrower Shares as set out in sections 1 (b) and 1 (c) of this Schedule 2) which would have been required to be delivered on conversion of such Conversion Amount if the relevant adjustment to the Conversion Price had in fact been made and become effective prior to the Conversion Date (the "Retroactive Adjustment").

48

(b) Without prejudice to the provisions of Clause 7 (Conversion), upon a Retroactive Adjustment becoming effective in accordance with this section 3 of this Schedule 2, the delivery of the relevant Additional Consideration shall be made within ten (10) Business Days after the first date it is possible to calculate such adjustment but not earlier than the Record Date. Without prejudice to the foregoing and to mandatory provisions of applicable law, in the event that an issue, sale, grant or offer leading to an adjustment pursuant to section 1 of this Schedule 2 is effected between the above Conversion Date and the date of delivery of the relevant Additional Consideration, the Borrower shall request a Independent Expert to determine the amount of the further consideration to be made to the Lender, whether in kind or in cash, so that the Lender may be substantially treated as if it actually held the Additional Consideration on the Conversion Date.

4. EVENTS NOT GIVING RISE TO ADJUSTMENTS

No adjustment to the Conversion Price will be made:

(a) if Borrower Shares or Other Securities (including pre-emptive rights, options or warrants in relation to Borrower Shares or Other Securities) are issued, offered or granted to, or for the benefit of, members of the board of directors, officers, employees or advisors of the Borrower or any of its Subsidiaries or any associated company or to trustees to be held for the benefit of any such person in any such case pursuant to any employee share or option scheme; or

(b) if the Conversion Price would fall below the nominal value of a Borrower Share. In this case, the Conversion Price will be adjusted to the nominal value of a Borrower Share and any remaining reduction of the Conversion Price resulting from such adjustment or from any further adjustment will be carried forward and only be applied if and to the extent the nominal value of a Borrower Share will be reduced.

49

5. OTHER EVENTS

If the Lender determines after consultation with the Borrower, that notwithstanding sections 1 and 2 of this Schedule 2 an adjustment should be made to the Conversion Price as a result of one or more events or circumstances not referred to in section 1 of this Schedule 2 or circumstances including circumstances listed in section 4 of this Schedule 2 have arisen which have an adverse effect on the (economic value of the) Conversion Right and no adjustment to the Conversion Price under section 1 of this Schedule 2 would otherwise arise or is excluded according to section 4 of this Schedule 2, the Lender shall engage the advice or services of a Independent Expert to determine as soon as practicable what adjustment, if any, to the Conversion Price or amendment, if any, to the terms of this Schedule 2 is fair and reasonable to take account thereof and the date on which such adjustment should take effect. If several events occur which become effective on the same Trading Day and which would lead to an adjustment of the Conversion Price pursuant to section 1 of this Schedule 2, the decision as to the manner of calculating the adjustment of the Conversion Price shall be taken by the Independent Expert. The decision of the Independent Expert shall be conclusive and binding on the Lender and the Borrower.

6. CORRECTION OF ADJUSTMENTS

If an adjustment has been made in accordance with section 1 of this Schedule 2 based on events or circumstances that subsequently are not implemented or are implemented in a manner materially different than anticipated when calculating the adjustment, then the Borrower and the Lender shall determine whether and to what extent the adjustment previously made shall be corrected. The Lender may engage the services of a Independent Expert to determine whether and to what extent a correction shall be made. The decision of the Independent Expert shall be conclusive and binding.

7. APPOINTMENT OF INDEPENDENT EXPERT

If the Borrower and the Lender do not mutually agree on an Expert within seven (7) days from the beginning of the appointment process, each of the Borrower and the Lender shall select an Expert, whereby the so elected Experts shall select together a third Expert. In case the two selected Experts do not mutually agree on a third Expert within seven (7) days after being appointed, each of them shall select another Expert, whereby a Swiss Notary Public appointed by the Lender will pick one of these two Experts as third Expert by drawing lots. In the case of the appointment of three Experts references in this Agreement to an Independent Expert shall be deemed to refer to these three Experts, deciding by majority decision. Decisions of the Independent Expert shall be final and binding on the Borrower and the Lender. The Lender shall incur no liability against the Borrower in respect of any action taken, or suffered to be taken, in accordance with such decision and in good faith. The fees and costs of the Independent Expert shall be borne by the Borrower.

50

Execution Copy: 4 March 2020

SCHEDULE 3
CONVERSION NOTICE

To: WISeKey International Holding AG
General -Guisan-Strasse 6
6300 Zug
Switzerland

Attn.: Peter Ward, Chief Financial Officer
Email: peter.ward@wisekey.com

From: [Lender]

Dated: [•]

Dear Sirs

WISeKey - US$4,000,000 Convertible Loan Agreement
dated _______ 2020 (the "Agreement")

1. We refer to the Agreement. This is a Conversion Notice. Terms defined in the Agreement have the same meaning when used in this Conversion Notice unless given a different meaning in this Conversion Notice.

2. We herewith exercise our Conversion Right as follows:

(a) Conversion Amount: [•]

(b) Conversion Ratio: [Details of calculation]

(c) Number of Borrower Shares resulting from Conversion: [•]

(d) Directions for delivery of Borrower Shares resulting from Conversion:

Account: [•]

Account holder: [•]

Bank: [•]

IBAN share account: [•]

SWIFT/BIC: [•]

Address account holder: [•]

3. To the extent the Borrower Shares to be delivered are issued out of the conditional share capital (bedingtes Aktienkapital) of the Borrower, we herewith make reference to article [reference to article covering the conditional share capital] of the Borrower's articles of association.

4. We kindly ask you to enter [name of account holder] into the share register of the Borrower with voting rights with respect to the Borrower Shares referred to in this Conversion Notice.

51

5. This Conversion Notice is irrevocable.

Yours faithfully,

YAIIPN, LTD.
as Lender

By:	Yorkville Advisors Global, LP
Its:	Investment Manager
By:	Yorkville Advisors Global II, LLC
Its:	General Partner
By:
Name:
Title:	Member

52

Execution Copy: 4 March 2020

SCHEDULE 4
REPAYMENT AND INTEREST SCHEDULE

Repayment Date	Balance Owed	Repayment Instalment	Interest Owed Total Owed Per month
Utilisation Date	4'000'000.00			0
30. Mär 20	3'750'000.00	250'000	20'000.00	270'000
30. Apr 20	3'500'000.00	250'000	18'750.00	268'750
30. Mai 20	3'250'000.00	250'000	17'500.00	267'500
30. Jun 20	3'000'000,00	250'000	16'250.00	266'250
30. Jul 20	2'750'000.00	250'000	15'000,00	265'000
30. Aug 20	2'500'000.00	250'000	13'750.00	263'750
30. Sep 20	2'250'000.00	250'000	12'500.00	262'500
30. Okt 20	2'000'000.00	250'000	11'250.00	261'250
30. Nov 20	1'750'000.00	250'000	10'000.00	260'000
30. Dez 20	1'500'000.00	250'000	8'750.00	258'750
30. Jan 21	1'250'000.00	250'000	7'500.00	257'500
28. Feb 21	1'000'000.00	250'000	6'250.00	256'250
30. Mär 21	500'000.00	500'000	5'000.00	505'000
30. Apr 21	-	500'000	2'500.00	502'500
Total Repayments		4'000'000	165'000.00	4'165'000

53

Execution Copy: 4 March 2020

SIGNATURE PAGE
CONVERTIBLE LOAN AGREEMENT

WISEKEY INTERNATIONAL HOLDING AG
as Borrower
By:	/s/ Carlos Moreira
Name:	Carlos Moreira
Title:	Chairman of the board of directors
By:	/s/ Peter Ward
Name:	Peter Ward
Title:	Member of the board of directors
YA II PN, LTD.
as Lender
By:	Yorkville Advisors Global, LP
Its:	Investment Manager
By:	Yorkville Advisors Global II, LLC
Its:	General Partner
By:	/s/ David Gonzalez
Name:	David Gonzalez
Title:	Member

EX-8.1

List of significant subsidiaries of the Registrant

Group Company Name	Country of incorporation
WISeKey SA	Switzerland
WISeKey Semiconductors SAS	France
WiseTrust SA	Switzerland
WISeKey (Suisse) SA**	Switzerland
WISeKey ELA SL	Spain
WISeKey SAARC Ltd	U.K.
WISeKey USA Inc*	U.S.A
WISeKey India Private Ltd***	India
WISeKey KK	Japan
WISeKey Taiwan	Taiwan
WISeCoin AG	Switzerland
WISeKey Equities AG	Switzerland
WISeCoin France R&D Lab SAS	France
WISeKey Semiconductors GmbH	Germany
WISeKey Arabia - Information Technology Ltd	Saudi Arabia

 *50% owned by WISeKey SA and 50% owned by WiseTrust SA

** dormant or in the process of being liquidated

*** 88% owned by WISeKey SAARC which is controlled by WISeKey International Holding AG

EX-12.1

Exhibit 12.1

CERTIFICATION

I, Carlos Moreira, certify that:

1. I have reviewed this annual report on Form 20-F of WISeKey International Holding AG;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 12, 2020

By: /s/ CARLOS MOREIRA 

 Carlos Moreira

 Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATION

I, Peter Ward, certify that:

1. I have reviewed this annual report on Form 20-F of WISeKey International Holding AG;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: March 12, 2020

By: /s/ Peter Ward

 Peter Ward

 Chief Financial Officer

EX-13.1

Exhibit 13.1

CERTIFICATION

The certification set forth below is being submitted in connection with the annual report of WISeKey International Holding AG (the “Company”) on Form 20-F for the period ending December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Carlos Moreira, the Chief Executive Officer of the Company, certifies that, to the best of his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ CARLOS MOREIRA

       Carlos Moreira

       Chief Executive Officer

Date: March 12, 2020

EX-13.2

Exhibit 13.2

CERTIFICATION

The certification set forth below is being submitted in connection with the annual report of WISeKey International Holding AG (the “Company”) on Form 20-F for the period ending December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Peter Ward, the Chief Financial Officer of the Company, certifies that, to the best of his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ PETER WARD

       Peter Ward

       Chief Financial Officer

Date: March 12, 2020