HUB Cyber Security Secures Six-Month Extension on $11M Notes, and Strengthens Shareholder Equity

Rhea-AI Summary

HUB Cyber Security (NASDAQ: HUBC) has secured a six-month extension on $11 million in convertible notes plus accrued interest. The agreement includes the reclassification of warrants to purchase 13 million ordinary shares from debt to equity, strengthening the company's balance sheet. In exchange, the investor received warrants to purchase 2 million ordinary shares and pre-funded warrants for 10 million ordinary shares.

The company's CEO, Noah Hershcoviz, stated that this extension demonstrates their commitment to financial discipline and asset optimization. The restructuring aims to enhance operational flexibility and support the company's long-term growth strategy in the cybersecurity market.

Positive

• Secured 6-month extension on $11M convertible notes
• Reclassification of warrants from debt to equity improves balance sheet
• Enhanced financial flexibility through debt restructuring

Negative

• Potential future dilution from new warrants for 12M shares
• Need for debt extension suggests possible cash flow concerns

Insights

Financial Analyst

The secured six-month extension on $11 million in convertible notes represents a critical financial maneuver that merits careful analysis. The restructuring involves three key components that significantly impact the company's financial position:

1. The debt extension provides important breathing room for operations, but also signals potential cash flow challenges that necessitated this negotiation. The six-month timeframe suggests this is a tactical move to bridge immediate financial needs while pursuing longer-term solutions.

2. The reclassification of warrants for 13 million ordinary shares from debt to equity strengthens the balance sheet by reducing liability exposure. This accounting adjustment improves key financial ratios and could enhance the company's ability to secure additional financing if needed.

3. The issuance of new warrants (2 million shares) and pre-funded warrants (10 million shares) represents a significant potential dilution factor that existing shareholders should monitor. Pre-funded warrants, which require minimal additional payment for exercise, essentially represent deferred equity issuance.

The restructuring appears to be a defensive move to maintain operational flexibility while managing debt obligations. While it provides temporary relief, the combination of debt extension and warrant modifications suggests HUB is trading future equity dilution for immediate financial stability. The pre-funded warrant structure, in particular, indicates a sophisticated approach to raising capital while minimizing immediate cash requirements.

This financial engineering, while necessary for near-term stability, raises questions about the company's organic growth capabilities and cash generation potential. The six-month extension timeline will be important for HUB to demonstrate operational improvements and establish a more sustainable financial foundation.

TEL AVIV, Israel, Feb. 19, 2025 (GLOBE NEWSWIRE) -- HUB Cyber Security Ltd. (NASDAQ: HUBC) (“HUB” or the “Company”), a global leader in confidential computing and advanced cybersecurity solutions, has secured a six-month extension on $11 million aggregate principal amount of convertible notes (plus accrued interest). This agreement enhances financial stability, optimizes the Company’s capital structure, and supports long-term growth.

As part of the agreement, the investor’s warrants to purchase 13 million ordinary shares were amended to reclassify them from debt to equity, strengthening HUB’s balance sheet. In return, the investor has received warrants to purchase 2 million ordinary shares and pre-funded warrants to purchase 10 million ordinary shares, ensuring long-term shareholder alignment.

Noah Hershcoviz, CEO of HUB Cyber Security, commented: “This extension reflects our ongoing commitment to financial discipline, asset optimization, and sustained corporate growth. By reinforcing our capital structure, we are confident that HUB is well-positioned to accelerate our market expansion, drive cybersecurity innovation, and create lasting value for our shareholders."

This financial adjustment marks another step in HUB’s strategy to enhance operational flexibility and drive long-term success.

About HUB Cyber Security Ltd.

HUB Cyber Security Ltd (“HUB”) was established in 2017 by veterans of the elite intelligence units of the Israeli Defense Forces. The Company specializes in advanced cybersecurity solutions that protect sensitive commercial and government information. HUB’s offerings include encrypted computing technologies that prevent hardware-level intrusions and innovative data theft prevention solutions. Operating in over 30 countries, HUB serves a diverse client base with its cutting-edge cybersecurity appliances and services.

Forward-Looking Statements

This press release contains forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995, including statements regarding the anticipated benefits to HUB of the acquisition of BlackSwan, anticipated market opportunity, and projected revenues from the combined operations. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “future,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “seem,” “should,” “will,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on the current expectations of the management of HUB Security, as applicable, and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties, or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those discussed and identified in public filings made with the SEC by the HUB Security and the following: (i) significant uncertainty regarding the adequacy of HUB Security’s liquidity and capital resources and its ability to repay its obligations as they become due; (ii) the war between Israel and Hamas, and the expansion of hostilities to other fronts, which may harm Israel’s economy and HUB Security’s business; (iii) expectations regarding HUB Security’s strategies and future financial performance, including its future business plans or objectives, prospective performance and opportunities and competitors, revenues, products and services, pricing, operating expenses, market trends, liquidity, cash flows and uses of cash, capital expenditures, and HUB Security’s ability to invest in growth initiatives and pursue acquisition opportunities; (iv) the outcome of any legal or regulatory proceedings against HUB Security in connection with our previously announced internal investigation or otherwise; (v) the ability to cure and meet stock exchange continued listing standards and remain listed on the Nasdaq; (vi) competition, the ability of HUB Security to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; (vii) limited liquidity and trading of HUB Security’s securities; (viii) geopolitical risk, including military action and related sanctions, and changes in applicable laws or regulations; (ix) the possibility that HUB Security may be adversely affected by other economic, business, and/or competitive factors; and (x) other risks and uncertainties set forth in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” in HUB Security’s Annual Report on Form 20-F/A filed on October 22, 2024.

Should one or more of these risks or uncertainties materialize, or should any of the assumptions made by the management of HUB Security prove incorrect, actual results may vary in material respects from those expressed or implied in these forward-looking statements.

All subsequent written and oral forward-looking statements concerning the business combination or other matters addressed in this press release and attributable to HUB Security or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in the press release. Except to the extent required by applicable law or regulation, HUB Security undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release to reflect the occurrence of unanticipated events.

Investor Relations:

Lytham Partners
Ben Shamsian
646-829-9701
shamsian@lythampartners.com

FAQ

What is the value of HUB Cyber Security's debt extension announced in February 2024?

HUB Cyber Security secured a six-month extension on $11 million in convertible notes, plus accrued interest.

How many new warrants did HUBC issue as part of the debt restructuring?

HUBC issued warrants to purchase 2 million ordinary shares and pre-funded warrants for 10 million ordinary shares.

How does the warrant reclassification affect HUBC's balance sheet?

The reclassification of warrants for 13 million shares from debt to equity strengthens HUBC's balance sheet by improving the company's shareholder equity position.

What is the purpose of HUBC's debt extension and restructuring?

The restructuring aims to enhance financial stability, optimize capital structure, and support long-term growth while providing operational flexibility.