Revenue Growth - HUB Security's annual revenue increased by 145% from $32,520 thousand in 2021 to $79,743 thousand in 2022[500] - Revenue for the year ended December 31, 2022, was $79,743 thousand, representing a 145.2% increase from $32,520 thousand in 2021[533] - Following the acquisition of Comsec, HUB Security's revenue contribution was $32,347 thousand in 2021 and $79,521 thousand in 2022[512] - The Professional Services Segment revenue increased by 147.0% to $78,004 thousand in 2022, driven by the HUB-ALD Merger and Comsec Acquisition[551] Customer Retention - The company achieved a gross retention rate of 92% in 2021 and 84% in 2022 for customers generating over $79,743 thousand in revenue[502] Expenses - HUB Security's research and development expenses were approximately 7% of revenue for the year ended December 31, 2022[515] - Selling and marketing expenses accounted for approximately 29% of revenue for the year ended December 31, 2022[520] - Cost of revenue increased to $73,297 thousand in 2022, up 167.3% from $27,424 thousand in 2021[539] - Gross profit for 2022 was $6,446 thousand, a 26.5% increase compared to $5,096 thousand in 2021[533] - Research and development expenses, net of government grants, decreased to $5,574 thousand in 2022, down 3.83% from $5,796 thousand in 2021[543] - Selling and marketing expenses surged to $22,800 thousand in 2022, an increase of 721.92% from $2,774 thousand in 2021[544] - General and administrative expenses rose significantly to $57,579 thousand in 2022, a 514.7% increase from $9,367 thousand in 2021[545] Losses and Financial Performance - Operating loss for 2022 was $79,507 thousand, compared to a loss of $12,841 thousand in 2021, reflecting a 519.17% increase[533] - Net loss for the year ended December 31, 2022, was $80,000 thousand, a 487.24% increase from $13,623 thousand in 2021[533] - Adjusted EBITDA for 2022 was $(21,128) thousand, a decrease of 361.3% from $(4,580) thousand in 2021[557] - The net loss for the year ended December 31, 2022, was $80,000 thousand, a significant increase of 487.2% compared to a net loss of $13,623 thousand in 2021[558] - Adjusted EBITDA for 2022 was $(21,128) thousand, reflecting a 361.3% increase in losses from $(4,580) thousand in 2021[558] Cash Flow and Financing - Net cash used in operating activities was $23,432 thousand for 2022, compared to $5,280 thousand in 2021, marking a 343.8% increase in cash outflow[572] - Cash and cash equivalents as of December 31, 2022, were $4 million, with expectations of increased capital expenditures and working capital requirements in the near future[562] - The company plans to finance operating costs over the next twelve months through a combination of future equity and/or debt issuances, reducing operating spend, and potentially divesting assets[563] - Total material cash requirements for the years 2023 to 2027 amount to $21,188 thousand, with $15,306 thousand due in 2023[569] - Net cash provided by financing activities decreased to $20,660 thousand in 2022 from $32,703 thousand in 2021, a decline of 36.8%[577] Transaction Costs and Defaults - The company incurred significant transaction costs of $15,829 thousand in 2022, a dramatic increase of 2,997.7% from $511 thousand in 2021[558] - The company faces substantial doubt about its ability to continue as a going concern due to liquidity and capital resource uncertainties[565] - The company is currently in default under the Lind Note and Lind SPA due to the failure to timely file the Annual Report and Registration Statement[606] - The company is also in default under the Purchase Agreement for failing to file the Dominion Registration Statement within 45 days of the Effective Date[615] - The company is currently in default under the Secured Promissory Note due to failure to provide security, with Dominion demanding full payment of the ELOC Upfront Commitment[617] - The company is currently in default under the A-Labs Loan, having failed to make required quarterly interest payments[622] - The company is in default under the Convertible Notes Agreements and is in discussions to find solutions to cure the defaults[619] Impairment and Goodwill - The company recorded an impairment loss of $8,738 thousand for assets acquired from Legacy Technologies due to lack of expected progress[511] - The company has recognized an impairment of goodwill amounting to $9,202,000 in Comsec and $5,048,000 in ALD as of December 31, 2022[645] Market and Strategic Focus - The confidential computing market is expected to grow at a CAGR of 40-45% to 90-95% through 2026, potentially reaching approximately USD 52 billion[506] - HUB Security plans to invest in growth across Europe, Asia, and North America, focusing on expanding its customer base and technology development[518] - HUB Security's solutions are marketed to government entities, militaries, and large enterprises to enhance market acceptance[504] - HUB Security's business segments include Product and Technology and Professional Services, focusing on integrated cybersecurity solutions[496] Currency and Market Risks - The company is exposed to market risks primarily due to foreign currency exchange rates and interest rates, impacting its financial position[623] - The U.S. dollar strengthened against the Israeli Shekel (ILS) by approximately 13.2% during 2022, impacting operational costs negatively[917] - The company's financial results are reported in U.S. dollars, and fluctuations in foreign currency exchange rates may affect operational results[916] - The most significant foreign currency exposure is related to operations in Israel[917] Employee Incentives - The company operates a share option scheme and RSU scheme for employee incentives, with share-based compensation expenses measured based on grant-date fair value[635] Regulatory Considerations - The company is evaluating the benefits of relying on reduced reporting requirements under the JOBS Act as an "emerging growth company"[629]
HUB CYSEC(HUBCZ) - 2022 Q4 - Annual Report