CID Holdco (DAIC) risk factors, FY2025 10-K

General Business and Industry Risks

1. 01Risks Associated with the Company

Risks Related to Our Business and Industry

1. 02We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or fail to maintain an effective system of internal control over financial reporting
2. 03Our rapid growth makes it difficult to evaluate our future financial position and increases the risk that we will not continue to grow at or near historical rates
3. 04We face risks associated with the growth of our business in new use cases
4. 05If we fail to effectively manage our growth, our business and results of operations could be harmed
5. 06If we are unable to attract new customers, our future revenue and results of operations will be harmed
6. 07If we are unable to retain and expand our relationships with existing customers, our financial position and results of operations will be harmed
7. 08Certain estimates of market opportunity and forecasts of market growth included in this Annual Report may prove to be inaccurate
8. 09We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals
9. 10Our dependence on a limited number of joint design manufacturers and suppliers of manufacturing services and critical components within our supply chain for our IoT devices may adversely affect our results of operations
10. 11Our dependence on a key supplier in Israel and the possibility of having to switch suppliers may adversely affect our results of operations
11. 12If we are not able to develop and timely introduce new solutions and features for our Dot Cloud SaaS platform that achieve market acceptance, keep pace with technological developments, and meet emerging regulatory requirements, our business, financial condition, and results of operations would be harmed
12. 13Our sales pipeline is immature, and as such, revenue forecasts and projections are likely to be unstable through fiscal year 2026
13. 14The length of our sales cycle can be unpredictable, particularly with respect to sales to large customers, and our sales efforts may require considerable time and expense
14. 15If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, or changing customer needs, requirements or preferences, our Dot Cloud SaaS platform may become less competitive
15. 16We face intense and increasing competition, and we may not be able to compete effectively, which could reduce demand for our solution and adversely affect our business, revenue growth, and market share
16. 17If we do not develop devices that are compatible with third-party hardware, software and infrastructure, including the many evolving wireless industry standards, our ability to introduce and sell new subscriptions to access our Dot Cloud SaaS platform could suffer
17. 18Our ability to grow our business is dependent in part on strategic relationships we develop and maintain with third parties
18. 19Changes in our subscription or pricing models could adversely affect our business, financial condition and results of operations
19. 20Our results of operations and our business metrics are likely to fluctuate significantly on a quarterly basis in future periods and may not fully reflect the underlying performance of our business, which makes our future results difficult to predict and could cause our results of operations to fall below expectations
20. 21If we are unable to achieve and sustain a level of liquidity sufficient to support our operations and fulfill our obligations, our business, financial condition, and results of operations could be adversely affected
21. 22Our business is exposed to risks related to third-party financing of our customers’ subscriptions to our Dot Cloud SaaS platform
22. 23We may not be able to maintain and expand our business if we are not able to hire, retain and manage qualified personnel, and in particular, our key personnel
23. 24Our ability to achieve customer renewals and increase sales of our products is dependent on the quality of our customer success and support teams, and our failure to offer high quality support would have an adverse effect on our business, reputation, and results of operations
24. 25If we are not able to maintain and enhance our brand, our business, financial condition, and results of operations may be harmed
25. 26If we cannot maintain our company culture as we grow, our success and our business and competitive position may be harmed
26. 27A real or perceived defect, security vulnerability, error, or performance failure in our Dot Cloud SaaS platform could cause us to lose revenue, damage our reputation, and expose us to liability, and our product liability insurance may not adequately protect us
27. 28Challenges in implementation or incorrect use of, or our customers’ failure to update, our solution could result in customer dissatisfaction and negatively affect our business and growth prospects
28. 29Acquisitions, strategic investments, partnerships, or alliances could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our business, financial condition, and results of operations
29. 30We may require additional capital to fund our business and support our growth, and any inability to generate or obtain such capital may adversely affect our business and financial condition
30. 31We may not generate sufficient cash to service our indebtedness, and the terms of our new senior secured convertible facility could materially and adversely affect us
31. 32We may be subject to product liability, warranty and recall claims that may increase the costs of doing business and adversely affect our business, financial condition, and results of operations
32. 33If currency exchange rates fluctuate substantially in the future, the results of our operations, which are reported in U.S. dollars, could be adversely affected
33. 34Managing the supply of our devices is complex. Insufficient supply and inventory may result in lost sales opportunities or delayed revenue, while excess inventory may harm our gross margins
34. 35Our business may be materially and adversely impacted by U.S. and global market and economic conditions adverse to industries that depend on physical operations
35. 36Business disruptions could have serious adverse consequences on our future revenue and financial condition and result in losses that may not be covered by insurance
36. 37Our current operations are international in scope, and we plan further geographic expansion, creating a variety of operational challenges
37. 38Our wholly-owned subsidiary in Puerto Rico has been granted certain incentives under Act 60 (described below), and the validity of these incentives are conditioned on our continuous compliance with the terms and conditions of the grant
38. 39We have entered into, or expect to enter into, various arrangements with our subsidiary in Puerto Rico regarding the intercompany provision of services. Applicable taxing authorities could challenge the prices for these services

Legal, Regulatory or Compliance Risks

1. 40Changes in applicable tax laws, regulations or administrative interpretations thereof may materially adversely affect our financial condition, results of operations and cash flows
2. 41Failure to comply with anti-corruption and anti-money laundering laws, including the FCPA and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences
3. 42The federal government or independent standards organizations may implement significant regulations or standards that could adversely affect our ability to produce or market our products
4. 43Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business
5. 44Our failure to comply with the requirements of applicable environmental legislation and regulation could have a material adverse effect on our revenue and profitability
6. 45Failure to comply with laws, regulations, or contractual provisions applicable to our business could cause us to lose government customers or our ability to contract with the U.S. and other governments
7. 46We are required to comply with governmental export control, economic sanctions and import laws and regulations. Our failure to comply with these laws and regulations could have an adverse effect on our business, financial condition, and results of operations
8. 47Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our products
9. 48Regulation changes in the use of artificial intelligence are unpredictable and therefore we are not able to accurately predict how potential regulatory changes in artificial intelligence space may affect our current and future offerings
10. 49We may face fines, penalties, or other costs, either directly or vicariously, if any of our partners, resellers, contractors, vendors or other third parties fail to adhere to their compliance obligations under our policies and applicable law

Risks Related to Cybersecurity and Technology

1. 50Security incidents or real or perceived errors, failures or bugs in our systems or our website could impair our operations, result in loss of personal customer information, damage our reputation, and brand, and harm our business and operating results
2. 51If we experience a security breach or incident affecting our customers’ assets or data, our data or devices, our Dot Cloud SaaS platform, or other systems, our Dot Cloud SaaS platform may be perceived as not being secure, our reputation may be harmed and our business could be materially and adversely affected
3. 52Abuse or misuse of our internal platform controls and system tools could cause significant harm to our business and reputation
4. 53Business disruptions or performance problems associated with our technology and infrastructure, including interruptions, delays, or failures in service from our third-party data center hosting facilities and other third-party services, could adversely affect our results of operations
5. 54We may be unable to prevent or address the misappropriation of our data
6. 55We rely on third-party software for certain essential financial and operational services, and a failure or disruption in these services could materially and adversely affect our ability to manage our business effectively
7. 56Failure to protect our proprietary technology and intellectual property rights could substantially harm our business and results of operations
8. 57There can be no assurance that our patents or patent applications will be enforceable or otherwise upheld as valid
9. 58Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information
10. 59We may become subject to intellectual property disputes, which are costly and may subject us to significant liability and increased costs of doing business
11. 60Our exposure to risks associated with the use of intellectual property may be increased as a result of acquisitions
12. 61Issues in the use of artificial intelligence (“AI”) in our solution may result in reputational harm or liability
13. 62Our use of open source software could negatively affect our ability to sell subscriptions to our Dot Cloud SaaS platform and subject us to possible litigation
14. 63Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement, misappropriation, violation, and other losses
15. 64We rely on the availability of licenses to third-party technology that may be difficult to replace or that may cause errors or delay implementation of our solution should we not be able to continue or obtain a commercially reasonable license to such technology

Risks Related to Being a Public Company

1. 65The market price and trading volume of our Common Stock and Public Warrants may be highly volatile and could decline significantly
2. 66Our management team has limited experience managing a public company
3. 67If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our shares or if our results of operations do not meet their expectations, our share price and trading volume could decline
4. 68As a company with publicly traded securities, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of the Nasdaq and other applicable securities laws and regulations
5. 69Failure to meet the continued listing requirements of Nasdaq could result in a delisting of our Common Stock, which could have a material adverse effect on the liquidity of our Common Stock
6. 70Our quarterly operating results and other operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict
7. 71Any one of the factors above or the cumulative effect of some of the factors above may result in significant fluctuations in our operating results
8. 72We are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting
9. 73Taking advantage of the reduced disclosure requirements applicable to “emerging growth companies” may make our Common Stock less attractive to investors
10. 74The requirements of being a public company, including maintaining adequate internal control over our financial and management systems, may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members
11. 75Our ability to raise capital in the future may be limited
12. 76The forecasts of market growth and other projections included in this Annual Report may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, we cannot assure you that our business will grow at a similar rate, if at all
13. 77Our business and operations could be negatively affected if it becomes subject to any securities litigation or stockholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact its stock price