Hub Cyber Security settles lawsuits, restructures debt

Published 20/02/2025, 23:36
Hub Cyber Security settles lawsuits, restructures debt

TEL AVIV, Israel – Hub Cyber Security Ltd. (NASDAQ:HUBC), currently trading at $0.75 with a market capitalization of $30.3 million, has announced the settlement of two significant lawsuits and a comprehensive debt restructuring, as detailed in a recent SEC Form 6-K filing. The company’s financial health score from InvestingPro indicates significant challenges, with a weak overall rating and concerning metrics including a current ratio of 0.21, suggesting potential liquidity concerns.

The company has resolved a lawsuit with Dominion Capital LLC, which alleged failure to repay a $2.5 million promissory note. The settlement, reached on February 20, 2024, involves Hub Cyber Security paying $4.5 million, with an initial payment of $400,000 due by February 21, 2025, and subsequent payments extending through December 2025. Dominion will move to stay and then cancel the insolvency proceedings in Israel upon receipt of the first two installments. This settlement comes as InvestingPro data shows the company burning through cash rapidly, with negative free cash flow of $14.5 million in the last twelve months.

To facilitate this settlement, Claymore Capital Pty Ltd. has agreed to cover the payments on behalf of Hub Cyber Security, in exchange for a convertible note issued by the company valued at $7.5 million, maturing on February 20, 2030, or earlier at Claymore’s discretion. The note’s conversion rate into ordinary shares is set at 25% below the market price, within a specified range.

Additionally, Hub Cyber Security has settled a breach of contract claim by Oppenheimer & Co., Inc. related to the company’s 2023 business combination with Mount Rainier Acquisition Corp. The settlement amount is $3 million, with $1.1 million paid on the settlement date, and the rest scheduled for monthly payments through December 2025. Claymore Capital will also handle these payments, receiving a $6 million convertible note under similar terms as the Dominion settlement note.

Furthermore, the company has amended the terms of its convertible notes and warrants with investor Tamas Gottdiener. The maturity date for the notes, totaling $11 million with accrued interest, is now August 16, 2025, and the interest rate will increase from 15% to 20% per annum if not paid or converted by April 1, 2025. Warrants exercisable for over 12 million ordinary shares have been unified to an exercise price of approximately $0.50 per share, with extended terms until February 17, 2030. The investor has also committed to selling a significant portion of the notes to a third party for conversion and sale.

These strategic financial maneuvers, as reported in the SEC filing, are aimed at resolving legacy liabilities and securing financing on favorable terms for Hub Cyber Security. The company’s statement in the SEC filing emphasized that these forward-looking statements are subject to various risks and uncertainties and should not be unduly relied upon. The information provided in this article is based on the company’s Form 6-K filing with the SEC. Despite recent challenges, HUBC’s stock has shown significant volatility, with a 66% gain over the past six months but a 17% decline in the past week. InvestingPro subscribers have access to 11 additional key insights about HUBC’s financial position and market performance, along with comprehensive valuation metrics and peer comparison tools.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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