Financial Performance - The company reported net losses of $39.1 million, $86.6 million, and $80 million for the years ended December 31, 2024, 2023, and 2022, respectively[60]. - The company is generating negative cash flow and requires constant cash injections to continue operations, leading to a hold on certain bank accounts[61]. - The company has reached a settlement with unsecured creditors and is in the process of addressing insolvency applications[61]. - The company is currently in default under certain debt obligations, with overdue amortization payments totaling approximately $1.2 million and an aggregate principal amount of approximately $5.9 million[79]. - The company is required to raise additional funds to execute its business plan, which may not be available when needed[82]. - The company may face significant cash expenditures and liabilities related to acquisitions, including potential security vulnerabilities and compliance issues[117]. - The company’s growth prospects may be hindered by economic downturns, particularly in core markets like the Middle East and Europe[130]. - The company may face additional costs and liabilities from litigation, which could negatively affect its business operations and financial position[211]. Internal Controls and Compliance - The company has identified material weaknesses in internal control over financial reporting, which have not been remedied as of December 31, 2024[63]. - The company is engaged in a costly process to document and evaluate internal controls, which may divert management's attention from other business matters[224]. - The company has identified material weaknesses in internal control over financial reporting, which could impair the accuracy of financial statements[219]. - The company could face adverse market reactions if it fails to remediate identified material weaknesses in internal controls[225]. Investigations and Legal Issues - The company has incurred substantial costs related to an internal investigation, which has diverted management resources and caused delays in filing Annual Reports[58]. - Approximately NIS 2 million (approximately $582,000) was misappropriated by the former CEO for personal use, leading to his termination and legal actions against him and a former staff member[48]. - The internal investigation is subject to regulatory review, exposing the company to potential investigations by authorities in Israel and the United States[52]. - The company has appointed a Special Committee to oversee the internal investigation and has replaced all management involved during the period of misappropriation[51]. Market and Competition - The network security market is rapidly evolving, and if the company's solutions fail to adapt, sales may not continue to grow or may decline[91]. - Competition in the secured data fabric and technology solutions market is intense, with major players like IBM, Oracle, and Microsoft posing significant challenges[99][100]. - The ability to acquire large enterprise customers is crucial for future revenue growth, and failure to do so may harm operating results[108]. - The market's acceptance of secured data fabric and confidential computing is not fully proven, and its development may be slower than expected[113]. Operational Challenges - The company may face challenges in attracting new customers and retaining existing ones, which could adversely impact revenue and results of operations[86]. - The company has implemented a workforce reduction plan starting in March 2023 to improve operational efficiencies and align investments with strategic priorities[88]. - The company has taken measures to reduce costs, but these may not result in anticipated savings or operational efficiencies[88]. - The company is experiencing intense competition for skilled personnel, which may impact its ability to execute growth plans[126]. Regulatory and Compliance Risks - The company is subject to complex and uncertain tax regulations across multiple jurisdictions, which may materially impact its effective tax rate[135]. - Changes in OECD guidelines could increase the company's tax obligations and worldwide effective tax rate due to its international business activities[136]. - The company faces risks related to cybersecurity threats, which could harm its reputation and result in financial losses or liabilities[140]. - Compliance with evolving privacy and data protection laws, such as GDPR and CCPA, may require significant resources and could impact operational efficiency[177]. - The company may face increased scrutiny regarding cross-border data transfers, which could restrict its ability to store and process data[178]. Acquisitions and Growth Strategy - The company acquired four companies in the past three years, significantly increasing its employee count and operational fields[115]. - The acquisition of BST in January 2025 is expected to solidify the company's position in secured data fabric solutions, targeting banks and financial institutions[115]. - The company has yet to recognize any revenues from the acquisition of Legacy Technologies Gmbh, with uncertainty regarding future customer acquisition[117]. Intellectual Property and Technology Risks - The company has six patents registered in the U.S. and one pending application, but enforcement of proprietary rights may be challenging, potentially allowing competitors to copy its technology[155]. - The company faces challenges in protecting its intellectual property rights, with potential unauthorized copying or reverse engineering of its products[158]. - Legal actions may be necessary to enforce patents and protect trade secrets, which could incur substantial costs and divert resources[161]. - The process of securing patent protection can take five or more years, and there is uncertainty regarding the approval of pending applications[163]. Financial Market and Investor Relations - The company completed a business combination with a special purpose acquisition company (SPAC) on February 28, 2023, becoming publicly traded in the U.S. on March 1, 2023[228]. - The market price and trading volume of the company's ordinary shares and warrants on Nasdaq may be volatile, with significant fluctuations already observed since trading began[231]. - The company does not intend to pay dividends for the foreseeable future, focusing on retaining funds for business operations instead[236]. - The company’s actual financial results may differ materially from any guidance provided, influenced by various business and economic factors[238].
HUB CYSEC(HUBCZ) - 2024 Q4 - Annual Report