Business Context and Reporting Period
This Form 6-K filing by Hub Cyber Security Ltd. covers the month of February 2025, with a report date of February 10, 2025. The filing discloses a material financing transaction entered into on February 4, 2025, with Julestar LLC.
Key Financial Metrics and Transaction Details
The filing details a specific loan agreement rather than providing comprehensive financial statements for the period.
- Loan Proceeds: $2,650,000 received from Julestar LLC.
- Principal Amount: $3,117,647 (reflecting the loan amount plus accrued interest or fees).
- Interest Rate: 10% per annum.
- Repayment Terms: 40 weekly installments over a 10-month term.
- Collateral: Subordinated pledge over shares of certain subsidiaries (subject to senior lender consent within 60 days).
- Warrants Issued: Five-year warrants to purchase 5,300,000 Ordinary Shares at an exercise price of $0.50 per share.
- Warrant Limitation: Ownership capped at 4.99% of outstanding share capital.
Material Changes and Adjustments
The transaction includes several material adjustments and conditions affecting the company's capital structure:
- Prepayment Triggers: Net proceeds from any single subsequent financing or asset sale exceeding $5.0 million, or aggregate proceeds exceeding $7.0 million, must be used to prepay the Note in full.
- Early Repayment Incentives: The company may prepay a minimum of $100,000 at any time without penalty. Early full repayment reduces the principal amount and the number of warrant shares issuable.
- Default/Non-Repayment Penalty: If the Note is not repaid in full within 90 days, the number of warrant shares increases, and the exercise price for additional shares may drop to half the lowest 10-day average market price (subject to a floor).
- Impact on Prior Warrants: The exercise price of 1,294,118 warrants issued on December 30, 2024, automatically decreased from $0.85 to $0.50 per share due to this new issuance.
Guidance, Risks, and Contingencies
The filing contains forward-looking statements regarding the company's intent and expectations, which are not guaranteed. Key risks and contingencies include:
- Registration Requirement: The company must register the shares issuable upon warrant exercise on Form F-1 or Form F-3.
- Dilution Risk: Significant dilution may occur if the Note is not repaid within 90 days, triggering an increase in warrant shares and a potential reduction in exercise price.
- Liquidity Constraints: Future fundraising or asset sales above specific thresholds are contractually obligated to prepay this debt, potentially limiting capital allocation flexibility.
- Collateral Consent: The pledge of subsidiary shares is contingent on obtaining consent from a senior lender within 60 days.
Investor Verification Checklist
- Verify the status of the senior lender consent required for the subordinated pledge on subsidiary shares.
- Confirm the registration status of the 5,300,000 new warrants and the 1,294,118 adjusted warrants on Form F-1 or F-3.
- Monitor the company's cash burn rate to assess the ability to meet weekly repayment installments without triggering the 90-day penalty clause.
- Review the impact of the $0.50 exercise price on the company's fully diluted share count and potential future dilution scenarios.