Hub Cyber Security Ltd. Form 6-K Summary
Business Context and Reporting Period
Hub Cyber Security Ltd., an Israeli foreign private issuer, furnished this Form 6-K on June 16, 2023, reporting events during June 2023. The filing does not provide operating or financial statements for a reporting period.
Financing and Key Financial Terms
- On June 11, 2023, the Company entered into a loan agreement with Shayna LP for NIS 5 million, approximately $1.4 million.
- The loan is generally non-interest-bearing. If specified payments are not made on time, interest accrues at 8% annually until paid.
- Shayna may convert the loan at a price equal to a 40% discount to the lower of specified five-trading-day average share prices.
- The agreement also reduces the conversion price under Shayna’s February 2023 prior loan to the same formula.
- The Company agreed to pay commissions of NIS 375,000, approximately $105,000, to A-Labs Finance and Advisory Ltd., together with warrants of equivalent value, and an additional NIS 375,000, approximately $105,000, to an affiliate of Shayna.
- Beginning August 10, 2023, the Company agreed to pay Shayna $70,000 per month plus value added tax for 12 months, totaling $840,000.
- The filing does not provide revenue, profit, cash flow, margin, debt-balance, or liquidity metrics beyond the disclosed loan proceeds and related obligations.
Material Changes and Potential Dilution
- The Company agreed to file a Form F-1 registration statement for shares issuable upon conversion of the Shayna loans, warrants under the prior loan agreement, and shares issuable upon exercise of those warrants. The filing was required no later than seven days after submission of the Company’s 2022 Form 20-F.
- If Shayna owns at least 7% of the Company’s outstanding shares after conversion, it may require resale registration of its shares and shares issuable upon warrant exercise.
- Shayna also receives customary piggyback registration rights.
- Conversion may be delayed if shareholder approval is required under Israeli Companies Law provisions. The securities issuable upon conversion could materially dilute existing shareholders, although the filing does not provide a fixed number of shares.
- Vizerion Ltd., A-Labs, and Uzi Moskovich pledged their Company shares and warrants to secure Shayna’s rights and related fees. If the Company fails to register the conversion shares within 90 days, Shayna may have foreclosure rights subject to the agreement.
- Until specified shares and warrants are issued upon conversion, the Company is restricted from undertaking certain actions without Shayna’s approval, including certain amendments, dividends, related-party transactions, and additional liens.
Litigation, Outlook, and Risks
- On June 12, 2023, Oppenheimer & Co., Inc. sued the Company in the U.S. District Court for the Southern District of New York concerning investment banking services related to the Company’s business combination with Mount Rainier Acquisition Corp.
- Oppenheimer alleges that the Company owes more than $12 million, plus litigation costs and legal fees, under a December 2021 advisory agreement.
- The Company stated that it was still evaluating the claim, defenses, and counterclaims and could not assess the likelihood or outcome of the litigation. It expects to defend the claims vigorously.
- The litigation could adversely affect the Company’s financial performance, liquidity, and cash uses. Other disclosed risks include limited securities liquidity, business-combination integration and benefit-realization risks, competition, growth execution, geopolitical conditions, regulatory changes, and uncertainty in projected expenses and profitability.
- The filing provides no formal financial guidance or quantified operating outlook.
Important Facts for Investors to Verify
- Whether the $5 million NIS loan was funded and the Company’s resulting cash balance and liquidity.
- The filing status and effectiveness of the required Form F-1 registration statement.
- The potential number of shares and warrants issuable upon conversion and the resulting dilution.
- Whether the Company incurred or will incur the disclosed commissions, warrants, and $840,000 consulting obligation.
- The status, defenses, potential exposure, and accounting treatment of the Oppenheimer claim exceeding $12 million.
- The terms and outstanding balance of the February 2023 prior loan and any related warrants.