HUB Cyber Security Ltd. — Form 6-K Summary
Reporting period: Form 6-K furnished May 8, 2023, covering May 2023. The filing reports a financing transaction rather than periodic financial results. It does not provide revenue, profit, cash flow, margin, debt, or liquidity figures for a comparable period.
Business Context and Transaction
On May 4, 2023, HUB Cyber Security Ltd. entered into a Securities Purchase Agreement with Lind Global Asset Management VI LLC, managed by The Lind Partners. The agreement provides for up to $16.0 million of gross proceeds through secured convertible promissory notes issued in three funding amounts across two closings, together with warrants to purchase ordinary shares. Proceeds are intended for general working capital.
Key Financial and Security Terms
| Item | Reported terms |
|---|---|
| First Closing | Occurred May 8, 2023; $6.0 million purchase price for a $7.2 million principal amount note. |
| Initial funding received | $4.5 million at closing; an additional $1.5 million was expected within two business days after filing the 2022 Form 20-F. |
| First-close warrants | Warrants for 2,458,210 ordinary shares, exercisable at $0.9153 per share, subject to adjustments. |
| Potential Second Closing | $10.0 million purchase price for a $12.0 million principal amount note, plus additional warrants; subject to conditions and no event of default. |
| Second Closing timing | Expected 60 days after the related registration statement becomes effective, subject to the SPA conditions. |
| Maturity | First note matures May 8, 2025; the second note would mature two years after issuance. |
| Repayments | Generally twelve monthly installments of $600,000 beginning on the earlier of registration effectiveness or 120 days after issuance. The investor may increase one payment to as much as $1.5 million. |
| Payment method | The Company may pay cash, ordinary shares, or a combination. Cash payments equal the repayment amount multiplied by 1.05. Share repayment pricing is based on 90% of the average of the five lowest consecutive daily VWAPs over the preceding 20 trading days. |
| Conversion | Investor conversion price is the lower of $0.9763 and 1.6 times the prior trading day’s closing price, subject to adjustments. During an event of default, a lower VWAP-based conversion price may apply. |
| Interest | No stated interest unless specified payments are late; then interest is 2% per month, prorated for partial months. |
| Commitment fee | 3.5% of each funded amount. |
Material Changes and Dilution Considerations
- The transaction adds secured convertible debt with aggregate potential principal of $19.2 million against gross proceeds of up to $16.0 million.
- The Company issued warrants for 2,458,210 shares at the First Closing and may issue additional warrants. Subsequent warrant quantities are based on one-third of the applicable purchase price divided by the lower of $0.6102 and the applicable closing share price.
- Convertible repayment and conversion features may require the Company to issue ordinary shares, potentially causing substantial dilution. Warrants have five-year exercise periods and include anti-dilution protections in specified circumstances.
- The Investor’s conversion and warrant exercise rights are generally limited by a 4.99% beneficial ownership cap, which may increase to 9.99% in specified circumstances.
- The Company agreed to pay 20% of cash proceeds from certain future debt or equity issuances exceeding $10.0 million toward repayment of the notes, unless waived.
Outlook, Covenants, Risks, and Unusual Items
- The Company agreed to file a Form F-1 registration statement within 30 days of entering into the SPA to register shares issuable upon note conversion and warrant exercise.
- Until specified resale or repayment milestones, the Company is restricted from entering into certain variable-price, reset-price, equity-line, ATM, or similarly structured financings and from incurring certain additional indebtedness or issuing securities, subject to exceptions.
- The Investor may require inclusion of its shares in certain future Company registration statements.
- The Company may prepay a note, but only in full, at 105% of outstanding principal after specified timing conditions.
- Failure to make required payments can trigger 2% monthly interest and event-of-default conversion rights based on a potentially lower market-price formula.
- The filing does not state whether the Second Funding Amount was subsequently received, whether the registration statement became effective, or whether the Second Closing occurred.
- The filing text does not provide a clear estimate of the total number of ordinary shares potentially issuable under the notes and all warrants.
Investor Verification Items
- Verify receipt of the remaining $1.5 million First Closing funding and payment of related commitment fees.
- Review the 2022 Form 20-F for the Company’s actual liquidity, existing debt, operating performance, and going-concern or funding risks.
- Confirm whether the Form F-1 registration statement was filed and declared effective.
- Confirm whether the $10.0 million Second Closing occurred and determine the additional warrants issued.
- Calculate potential dilution using the applicable conversion formulas, warrant terms, anti-dilution provisions, and current share count.
- Review the complete SPA, note, and warrant exhibits for collateral, events of default, negative covenants, and remedies not fully described in this summary.