UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO SECTION 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of December
Commission File Number:
(Exact Name of Registrant as Specified in Its Charter)
2 Kaplan St.
Tel Aviv 6473403, Israel
+972-3-924-4074
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
CONTENTS
On December 4, 2024, HUB Cyber Security Ltd. issued interim condensed consolidated financial statements (unaudited) as of June 30, 2024, a copy of which is furnished with this Report of Foreign Private Issuer on Form 6-K as Exhibit 99.1 and is incorporated herein by reference.
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Hub Cyber Security Ltd. | ||
Date: December 4, 2024 |
By: | /s/ Noah Hershcoviz |
| Noah Hershcoviz | ||
| Chief Executive Officer | ||
2
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Interim Condensed Consolidated Financial Statements (unaudited) as of June 30, 2024. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
3
Exhibit 99.1
HUB CYBER SECURITY LTD.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2024
(UNUDITAED)
INDEX
- - - - - - - - - - -
- 1 -
HUB CYBER SECURITY LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
USD in thousands
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash and bank deposits | ||||||||
| Trade receivables, net of allowance for credit losses of $ | ||||||||
| Other assets | ||||||||
| NON-CURRENT ASSETS: | ||||||||
| Long-term receivables | ||||||||
| Long-term restricted deposit | ||||||||
| Long-term deposit | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| $ | $ | |||||||
- 2 -
HUB CYBER SECURITY LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) (Cont.)
USD in thousands
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term loans | $ | $ | ||||||
| Convertible loans | ||||||||
| Warrants liabilities | * | |||||||
| Trade payables | ||||||||
| Current maturities of lease liabilities | ||||||||
| Current maturities of other liabilities | ||||||||
| Other accounts payable | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Long-term liabilities | ||||||||
| Lease liabilities | ||||||||
| Deferred tax liabilities | ||||||||
| Net employee defined benefit liabilities | ||||||||
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: | ||||||||
| Share capital and premium | ||||||||
| Share options | ||||||||
| Treasury shares | ( | ) | ( | ) | ||||
| Other reserves | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| ( | ) | ( | ) | |||||
| Non-controlling interests | ( | ) | ||||||
| Total shareholders’ equity (deficit) | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| * |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 3 -
HUB CYBER SECURITY LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS (UNAUDITED)
USD in thousands, except share and per share data
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross profit (loss) | ( | ) | ||||||
| Research and development expenses, net | ||||||||
| Sales and marketing expenses | ||||||||
| General and administrative expenses | ||||||||
| Other expenses (income), net | ( | ) | ||||||
| Operating loss | ( | ) | ( | ) | ||||
| Finance income | ( | ) | ( | ) | ||||
| Finance expenses | ||||||||
| Loss before taxes on income | ( | ) | ( | ) | ||||
| Taxes on income | ||||||||
| Net loss from continuing operation | ( | ) | ( | ) | ||||
| Net (loss) income from discontinued operation | ( | ) | ||||||
| Attributable to: | ||||||||
| Equity holders of the Company | ( | ) | ( | ) | ||||
| Non-controlling interests | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Net loss per share attributable to equity holders of the Company: | ||||||||
| Basic and diluted net loss per share from continuing operation | $ | ( | ) | $ | ( | )* | ||
| Basic net profit (loss) per share from discontinued operation | $ | ( | ) | $ | * | |||
| Diluted net profit (loss) per share from discontinued operation | $ | ( | ) | $ | * | |||
| Weighted average number of shares outstanding used in computation of basic profit or loss per share | * | |||||||
| Weighted average number of shares outstanding used in computation of diluted profit or loss per share | * | |||||||
| *) |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 4 -
HUB CYBER SECURITY LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
USD in thousands
| Six month ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net loss from continuing operation | $ | ( | ) | $ | ( | ) | ||
| Net (loss) profit from discontinued operation | ( | ) | ||||||
| ( | ) | ( | ) | |||||
| Other comprehensive loss, net of taxes: | ||||||||
| Amounts that will be or that have been reclassified to profit or loss when specific conditions are met: | ||||||||
| Foreign currency translation adjustments | ||||||||
| Total other comprehensive income | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||
| Attributable to: | ||||||||
| Equity holders of the Company | ( | ) | ( | ) | ||||
| Non-controlling interests | ||||||||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 5 -
HUB CYBER SECURITY LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
USD in thousands
| Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||||||||||||||
| Share capital and premium | Treasury shares | Share options | Reserve for transactions with non-controlling interests | Reserve for share-based payment transactions | Reserve for remeasurement of defined benefit plan | Foreign currency translation adjustments | Accumulated deficit | Total | Non- controlling interests | Total shareholders’ equity (deficit) | ||||||||||||||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2024 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||
| Total loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Warrants exercise | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible loans | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares and warrants, net of issuance expenses | ||||||||||||||||||||||||||||||||||||||||||||
| Cost of share-based payment | ||||||||||||||||||||||||||||||||||||||||||||
| Transactions with non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
- 6 -
HUB CYBER SECURITY LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (UNAUDITED) (Cont.)
USD in thousands
| Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||||||||||||||
| Share capital and premium | Treasury shares | Share options | Warrants payable | Reserve
for share-based payment transactions | Reserve
for remeasurement of defined benefit plan | Foreign currency translation adjustments | Accumulated deficit | Total | Non- controlling interests | Total shareholders’ equity (deficit) | ||||||||||||||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2023 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||
| Total loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | - | |||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Warrants exercise | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Options exercise | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares to Equity line of Credit (“ELOC’) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares and warrants related to the PIPE, net of issuance expenses | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares and warrants | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares related to RNER merger transaction | ||||||||||||||||||||||||||||||||||||||||||||
| Cost of share-based payment | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 7 -
HUB CYBER SECURITY LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
USD in thousands
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Adjustments to the profit or loss items: | ||||||||
| Finance expenses, net | ||||||||
| Financial liabilities recorded as listing expenses | ||||||||
| Finance expenses related to convertible loans and warrants | ||||||||
| Revaluation of liability to Legacy | ( | ) | ||||||
| Equity Line of Credit (“ELOC”) | ||||||||
| Share listing expenses | ||||||||
| Issuance of shares to consultants | ||||||||
| Depreciation and amortization | ||||||||
| Impairment of goodwill and intangible assets | ||||||||
| Change in employee benefit liabilities, net | ( | ) | ( | ) | ||||
| Change in deferred tax | ( | ) | - | |||||
| Cost of share-based payment | ||||||||
| Changes in asset and liability items: | ||||||||
| Decrease (increase) in trade receivables | ||||||||
| Decrease (increase) in other assets | ( | ) | ( | ) | ||||
| Increase (decrease) in trade payables | ( | ) | ( | ) | ||||
| Decrease (increase) in inventories | ||||||||
| Change in balances of government grants | ( | ) | ||||||
| Increase in other accounts payable | ||||||||
| Cash paid and received during the year for: | ||||||||
| Interest paid, net | ( | ) | ( | ) | ||||
| Taxes paid | - | ( | ) | |||||
| ( | ) | ( | ) | |||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 8 -
HUB CYBER SECURITY LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Cont.)
USD in thousands
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from investing activities: | ||||||||
| Withdrawal from restricted bank deposit | $ | $ | ||||||
| Investment in restricted bank deposit | ( | ) | ||||||
| Change in long-term deposits | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Disposals of property and equipment | ||||||||
| Credit line to a related party | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Issuance of ordinary shares, net of issuance expenses | ||||||||
| Short-term loans, net | ||||||||
| Repayment of lease liabilities | ( | ) | ( | ) | ||||
| Exercise of options and warrants | ||||||||
| Receipt of short-term loans | ||||||||
| Acquisition of non-controlling interest | ( | ) | ||||||
| Receipt of convertible loans | ||||||||
| Net cash provided by financing activities | ||||||||
| Exchange rate differences on cash and cash equivalents | ( | ) | ||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents at the beginning of the period | ||||||||
| Cash and cash equivalents at the end of the period | $ | $ | ||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 9 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1:- GENERAL
| a. | Operation HUB Cyber Security Ltd. was incorporated under the laws of the State of Israel in 1984 and it’s headquarter is located in Tel-Aviv, Israel. HUB Cyber Security Ltd. (formerly: Hub Cyber Security (Israel) Ltd.) (“the Company”) was incorporated under the laws of the State of Israel in 1984 and is engaged in developing and marketing quality management software tools and professional services solutions. The Company’s software tools aim to allow their users to scientifically predict system failures and prevent them during the design stage. The Company and its subsidiaries (“the Group”) are engaged in developing reliable quality assurance systems that support process and product enhancement. The Group’s main customers are organizations and institutions operating in the security, electronics, aviation, telecommunications, banking, and other sectors in Israel and worldwide. Following the merger between the Company and HUB Cyber Security Ltd (“HUB”), the Company also operates in the Confidential Computing and network security industry. The Company’s ordinary shares have been listed on the Tel-Aviv stock exchange (TASE) since January 23, 2000 and began trading on Nasdaq Capital Market since March 1, 2023. The Company was delisted from TASE on February 28, 2023. On May 20, 2024, the Company received a letter from Nasdaq regarding the Company’s failure to timely file the Form 20-F for the fiscal year ended December 31, 2023 (the “Form 20-F”) with the Securities and Exchange Commission (the “SEC”), as required by Nasdaq Listing Rule 5250(c)(1) (the “Filing Requirement”). The Form 20-F was filed on August 16, 2024. |
| b. | Merger between the Company and Mount Rainier
Acquisition Corp.: On March 23, 2022, the Company entered into a definitive business combination agreement (the “Business Combination Agreement”) with Mount Rainier Acquisition Corp., a Delaware corporation (“RNER”) and Rover Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of HUB (“Merger Sub”). Pursuant to the Business Combination Agreement, Merger Sub merged with and into RNER, with RNER surviving the merger (the “Reverse Recapitalization”). Upon consummation of the Reverse Recapitalization and the other transactions contemplated by the Business Combination Agreement (the “Transactions”) on February 28, 2023 (the “Closing Date”), RNER became a wholly owned subsidiary of HUB. |
Prior to the Closing Date, in connection with the closing of
the Transactions, the Company and its shareholders recapitalized the Company’s equity securities whereby each ordinary share of
the Company was converted into
- 10 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1:- GENERAL (Cont.)
| c. | Going Concern |
The Company’s financial statements have been prepared on a basis that assumes that it will continue as a going concern and the ordinary course of business will continue in alignment with management’s 2024-2025 business plan. However, the Company faces significant uncertainty regarding the adequacy of its liquidity and capital resources and its ability to repay its obligations as they become due.
As of June 30, 2024, the Company has incurred accumulated losses
in the amount of $
The Company’s management is closely monitoring the situation and has been attempting to alleviate the liquidity and capital resources concerns through interim financing facilities and other capital raising efforts. However, such efforts remain uncertain and are predicated upon events and circumstances which are outside the Company’s control.
The unaudited interim condensed consolidated financial statements for the six months ended June 30, 2024 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern. Such adjustments could be material.
| d. | Credit line to a related party |
The Company has provided Blackswan Technologies,
Inc (“BST”), a related party, an aggregated amount of $
| e. | Israel Securities Authority and the Israel Tax Authority – On September 17, 2024, the Israel Securities Authority and the Israel Tax Authority conducted a search of the Company’s office in the context of investigating former and current officers in connection with suspicions regarding violations of securities, penal and tax laws. To the Company’s best knowledge, the suspicions are related, among other things, to the subject matter of the previously reported internal investigation conducted by the special committee appointed by the Company’s board of directors in April 2023. |
- 11 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2:- BASIS OF PREPARATION
| a. | The accompanying unaudited interim condensed consolidated financial statements for the six months ended June 30, 2024 have been prepared in accordance with (IAS) 34 — “Interim Financial Reporting”. |
The unaudited Group’s interim condensed consolidated financial statements as of June 30, 2024 and for the six months then ended (these “interim financial statements”) should be read in conjunction with the audited consolidated financial statements of the Group as of December 31, 2023 and for the year then ended which have been prepared in accordance with IFRS.
| b. | Significant accounting policy: |
The significant accounting policies, presentation and methods of computation adopted in the preparation of these interim financial statements are consistent with those followed in the preparation of the Company’s consolidated audited financial statements for the year ended December 31, 2023.
| c. | Basic and diluted net profit (loss) per share: |
In computing diluted loss
per share for the six months ended June 30, 2024, no account was taken of the potential dilution that could occur upon the exercise of
employee and investors stock options, amounting to
| d. | Initial application of new financial reporting and accounting standards and amendments to existing financial reporting and accounting standards: |
| 1. | Amendment to IAS 1, “Presentation of Financial Statements”: |
In January 2020, the IASB issued an amendment to IAS 1, “Presentation of Financial Statements” regarding the criteria for determining the classification of liabilities as current or non-current (“the Original Amendment”). In October 2022, the IASB issued a subsequent amendment (“the Subsequent Amendment”).
According to the Subsequent Amendment:
| ● | Only financial covenants with which an entity must comply on or before the reporting date will affect a liability’s classification as current or non-current. |
| ● | In respect of a liability for which compliance with financial covenants is to be evaluated within twelve months from the reporting date, disclosure is required to enable users of the financial statements to assess the risks related to that liability. The Subsequent Amendment requires disclosure of the carrying amount of the liability, information about the financial covenants, and the facts and circumstances at the end of the reporting period that could result in the conclusion that the entity may have difficulty in complying with the financial covenants. |
According to the Original Amendment, the conversion option of a liability affects the classification of the entire liability as current or non-current unless the conversion component is an equity instrument.
The Original Amendment and Subsequent Amendment are both effective for annual periods beginning on or after January 1, 2024 and must be applied retrospectively.
The Amendments did not have impact on the Company’s interim condensed consolidated financial statements, other than for the warrant liabilities which the Company classified as a current liability beginning on January 1, 2024 with a retrospective effect.
- 12 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2:- BASIS OF PREPARATION (Cont.)
| 2. | Amendment to IFRS 16, “Leases”: |
In September 2022, the IASB issued an amendment to IFRS 16, “Leases” (“the Amendment”), which provides guidance on how a seller-lessee should measure the lease liability arising in a sale and leaseback transaction with variable lease payments that do not depend on an index or rate. The seller-lessee has to choose between two accounting policies for measuring the lease liability on the inception date of the lease. The accounting policy chosen must be applied consistently.
The Amendment is applicable for annual periods beginning on or after January 1, 2024. Early adoption is permitted. The Amendment is to be applied retrospectively.
The application of the Amendment did not have a material impact on the Company’s consolidated financial statements.
| 3. | Amendments to IAS 7, “Statement of Cash Flows”, and IFRS 7, “Financial Instruments: Disclosures”: |
In May 2023, the IASB issued amendments to IAS 7, “Statement of Cash Flows”, and IFRS 7, “Financial Instruments: Disclosures” (“the Amendments”) to address the presentation of liabilities and the associated cash flows arising out of supplier finance arrangements, as well as disclosures required for such arrangements.
The disclosure requirements in the Amendments are intended to assist users of financial statements in understanding the effects of supplier finance arrangements on an entity’s liabilities, cash flows and exposure to liquidity risk.
The Amendments are effective for annual reporting periods beginning on or after January 1, 2024. Early adoption is permitted but will need to be disclosed.
The application of the Amendment did not have a material impact on the Company’s consolidated financial statements.
| e. | Changes in accounting policies - initial application of new financial reporting and accounting standards and amendments to existing financial reporting and accounting standards in the period prior to their adoption: |
| 1. | Amendments to IAS 21, “The Effects of Changes in Foreign Exchange Rates”: |
In August 2023, the IASB issued “Amendments to IAS 21: Lack of Exchangeability (Amendments to IAS 21, “The Effects of Changes in Foreign Exchange Rates”)” (“the Amendments”) to clarify how an entity should assess whether a currency is exchangeable and how it should measure and determine a spot exchange rate when exchangeability is lacking.
The Amendments set out the requirements for determining the spot exchange rate when a currency lacks exchangeability. The Amendments require disclosure of information that will enable users of financial statements to understand how a currency not being exchangeable affects or is expected to affect the entity’s financial performance, financial position and cash flows.
The Amendments apply for annual reporting periods beginning on or after January 1, 2025. The Company believes that the amendments are not expected to have a material impact on its consolidated financial statements.
- 13 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2:- BASIS OF PREPARATION (Cont.)
| 2. | IFRS 18 “Presentation and Disclosure in Financial Statements” (IFRS 18) |
IFRS 18 replaces IAS 1 “Presentation of Financial Statements”. The main changes in the new standard are as below:
| i. | Improved comparability in the statement of profit or loss. IFRS 18 requires entities to classify all income and expenses within their statement of profit or loss into one of five categories: operating; investing; financing; income taxes; and discontinued operations. The first three categories are new, to improve the structure of the income statement, and requires all entities to provide new defined subtotals, including operating profit or loss. The improved structure and new subtotals will give investors a consistent starting point for analyzing entities’ performance and make it easier to compare entities. |
| ii. | Enhanced transparency of management-defined performance measures. IFRS 18 requires entities to disclose explanations of those entity-specific measures that are related to the income statement, referred to as management-defined performance measures. |
| iii. | Useful grouping of information in the financial statements. IFRS 18 sets out enhanced guidance on how to organize information and whether to provide it in the primary financial statements or in the notes. The changes are expected to provide more detailed and useful information. IFRS 18 also requires entities to provide more transparency about operating expenses, helping investors to find and understand the information they need. |
The Amendments apply for annual reporting periods beginning on or after January 1, 2027. Earlier adoption is permitted. The Company is still evaluating the effect of this amendment on its consolidated financial statements.
- 14 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3:- FINANCIAL LIABILITIES
| a. | Convertible loans |
| 1. | On each of February 23, 2023, June 11, 2023 and July 7, 2023, the Company entered into Convertible Loan Agreements (together the “Shayna Loan Agreements”) with Shayna LP, a Cayman Islands company(“Shayna”), in the amounts of NIS |
Following an amendment that the Company entered into with
Shayna on August 17, 2023, the Shayna Loans will each be convertible at the option of Shayna at a conversion price equal to a $
Under
the first Shayna Loan Agreement, the Company agreed to issue to the Shayna warrants to purchase a number of ordinary shares, equal to
an amount of shares converted by the Shayna (in the event that the Shayna elects to convert a portion of the first Shayna loan), at an
exercise price equal to the conversion price determined pursuant to the first Shayna Loan Agreement, which is
Pursuant to the Shayna Loan Agreements, the Company agreed to file a registration statement on Form F-1 (the “Registration Statement”) to register (i) the shares issuable upon conversion of the Shayna Loans; (ii) any warrants issuable under the Shayna Loan Agreements and (iii) the shares issuable upon exercisable of the warrants to be issued under the Shayna Loan Agreements, no later than 7 days following the filing our Annual Report on Form 20-F for the fiscal year ended December 31, 2022. The Company also agreed to make every effort and take all the necessary actions so that the aforementioned registration statement will be declared effective by the SEC as early as possible after its submission to the SEC and in order for it to remain effective until all shares held by Shayna are sold or freely tradable under Rule 144. The Company agreed to bear all the costs associated with such registration.
In addition, Shayna will not be allowed to convert the Shayna Loans, and we will not issue shares in respect of a conversion notice, if the conversion would require the approval of the Company’s shareholders in accordance with section 270(5) and section 274 of the Companies Law 5759–1999 (the “Companies Law”), and this conversion and allocation will be postponed to the earliest date given in accordance with section 270(5) and Article 274 of the Companies Law.
- 15 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3:- FINANCIAL LIABILITIES (Cont.)
If, at any point following the conversion of the Shayna Loans, Shayna were to own 7% or more of our issued and outstanding shares, Shayna will be entitled to require the Company- to register for resale all of the Company’s shares for resale by Shayna, as well as ordinary shares that may be issued upon the exercise of warrants, which Shayna will be entitled to as a result of the conversion of the Shayna Loans, on Form F-1 or Form F-3, as applicable, within 21 days after receiving a written notice from Shayna. Additionally, pursuant to the Shayna Loan Agreements, Shayna will be entitled to standard “piggyback registration rights” in any case that the Company submit a registration document to the SEC to register our shares for sale by the Company or any other party and will also be entitled to participate in any sale of shares under that registration statement.
In
connection with the Shayna Loans, the Company agreed to pay commission totaling NIS
Both loans were classified as short-term loans due to violation of the financial covenants in which the Company had to register the ordinary shares subject to the loan agreements within a period of 90 days of execution, however the Company failed to file such registration statements within such time periods.
In order to guarantee Shayna’s rights under the Shayna Loans and to receive the brokerage and consulting fees set forth above, each of Vizerion Ltd., A-Labs and Uzi Moskovich, the Company’s former chief executive officer, (together the “Pledgors”), agreed to pledge all shares and warrants of the Company held by them in favor of Shayna. If the Company fails to register the shares issuable upon conversion of the Shayna Loans within 90 days of the signing of the Shayna Loan Agreements, then Shayna may, at its sole option, foreclose on the shares, in proportion of the holdings of each of the Pledgors, in exchange for assigning Shayna’s rights under the Shayna Loan Agreement to the Pledgors for the allocation of shares in the same number that was exercised by Shayna, and all other rights of Shayna under the Shayna Loan Agreements will remain in effect. If the registration of the shares is completed and Shayna is paid in full for the consulting fee noted above, the pledges on the shares will be canceled.
- 16 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3:- FINANCIAL LIABILITIES (Cont.)
Pursuant to an agreement dated March 3, 2024 between Shayna and Akina Holding Limited (“Akina”), most of the rights of Shayna under the Shayna Loan Agreements were assigned to Akina. Thereafter, in March-May 2024, the Company made several amendments to the Shayna Loan Agreements involving Shayna and Akina, which are summarized below.
First Amendment – March 31, 2024
| ● | Conversion price: Shayna and Akina will be entitled to convert the loan amounts in their entirety, for up to a total of | |
| ● | Warrant coverage: total warrant coverage for the entire loan amounts, with the same number of shares and division between Akina and Shayna as detailed above, and an exercise price of $ | |
| ● | Limitation on Beneficial Ownership: standard clause limiting each of Shayna and Akina to | |
| ● | Condition to effectiveness: only when duly approved by the Board of Directors of the Company, at its sole discretion |
Second Amendment – May 9, 2024
(i) conversion of a cash payment of $
| 2. | On May 4, 2023, the Company signed a Securities Purchase Agreement (“SPA”) to issue Lind Global Asset Management VI LLC, an investment fund managed by The Lind Partners, a New York based institutional fund manager (together, “Lind”) to up to two (2) secured convertible promissory notes in three tranches (the “Notes” and each a “Note”) for proceeds up to $ |
On August 23,2023, As consideration for the amendments to
the First Funding Amount, the Company agreed to amend the Note and increase the principal amount of the Note from $
The
initial funding of $
- 17 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3:- FINANCIAL LIABILITIES (Cont.)
| 3. | On February 26, 2023, the Company entered into two convertible notes agreements with Alliance Global Partners (“AGP”), the representative of the underwriters in RNER’s IPO and a stockholder of RNER, and another vendor involved in the Reverse Recapitalization (the “Vendor”). Pursuant to the convertible notes’ agreements, AGP and the Vendor purchased an aggregate principal amount of $
During the six months ended June 30, 2024, AGP converted an amount of $ |
In
November and December 2023, the Company entered into Securities Purchase Agreements (the “2023 Accredited Investor SPAs”)
providing for the sale by the Company to certain Accredited investors (the “2023 Accredited Investors”), in unregistered
private transactions, of convertible notes with an aggregate principal amount of $
The
aggregate principal amount of the 2023 Accredited Investor Notes is convertible into the Company’s ordinary shares at a rate of
the lower of (i) $
In January 2024, the Company raised an additional $
As
of December 31, 2023, certain 2023 Accredited Investors have converted the 2023 Accredited Investor Notes held thereby into the Company’s
ordinary shares, pursuant to which conversions the Company issued
Pursuant
to the 2023 Accredited Investor SPAs, The Company issued 2023 Accredited Investor Warrants which are exercisable into
- 18 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3:- FINANCIAL LIABILITIES (Cont.)
In
March 2024, the Company entered into Securities Purchase Agreements (the “Second 2023-2024 Accredited Investor SPAs”) providing
for the sale by the Company to certain accredited investors (the “Second 2023-2024 Accredited Investors”), in unregistered
private transactions, of convertible notes with an aggregate principal amount of $
The loans described above include conversion options. According to IAS 32, the conversion options are classified as financial liability, as the conversion rate does not comply with the fixed-to-fixed requirements since the conversion ratio to ordinary share is not fixed and depend on the share price of the Company.
The instrument as a whole constitutes a hybrid contract that include non-derivative host contract (“the loan”) and embedded derivative (the conversion option).
| b. | Tomas Gottdiener In March-June 2024, the Company sold to an accredited investor (the “March-June 2024 Investor”), in a series of unregistered private transactions, notes (the “March-June 2024 Notes”) with an aggregate principal amount of $ |
The
loan amount under the March-June 2024 Notes is repayable by the Company on the earlier of (i) August 10, 2024 with respect to
- 19 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3:- FINANCIAL LIABILITIES (Cont.)
If the March-June 2024 Notes are not repaid prior to the applicable maturity date, the March-June 2024 Investor may convert the applicable portion of the outstanding loan amount into the Company’s ordinary shares at a rate equal to the arithmetic average of the closing price of the ordinary shares in the five trading days prior to the date of conversion, provided that such conversion rate shall not be lower than $0.50. The loan amount is secured by a pledge on the shares of the Qpoint group. Additionally, for so long as the loan amount under the March-June 2024 Notes is outstanding, the Company has undertaken to cause the Qpoint group to adopt a dividend policy and designate dividend proceeds for the repayment of the loan amount.
The
March-June 2024 Warrants issued under the March-June 2024 Purchase Agreement are exercisable as follows:
The
conversion of the March-June 2024 Notes and the exercise of the March- June 2024 Warrants will be limited to the extent that, upon the
conversion or exercise, the March-June 2024 Investor and its affiliates would in aggregate beneficially own more than
| c. | Warrants Liabilities |
In
February 2023, at the effective time of the Reverse Recapitalization (the “Effective Time”), each unit of RNER (a “RNER
Unit”) issued and outstanding immediately prior to the Effective Time automatically detached and the holder of each such RNER Unit
became deemed to hold one share of RNER common stock (each a “RNER Share”) and one warrant of RNER entitling the holder to
purchase three-fourths of one RNER Share per warrant at a price of $
In
addition, each RNER Share issued and outstanding immediately prior to the Effective Time automatically converted into the right to receive
The warrants were classified as financial liability and measured at fair value as of the issuance date. After the initial recognition, at each period end date, the warrants measured at fair value and all changes in fair value are recognized through profit or loss.
Through June 30, 2024, no warrants were exercised into ordinary shares of the Company.
- 20 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3:- FINANCIAL LIABILITIES (Cont.)
| d. | Fair Value measurements The carrying amounts of cash and cash equivalents, restricted cash and bank deposits, trade receivables, other assets, inventories, short term loans, trade payables, other account payables and other long term loans approximate their fair values due to the short-term maturities of such instruments. |
| June 30, 2024 | ||||||||
| Level 1 | Level 3 | |||||||
| Public warrants | $ | $ | - | |||||
| Private warrants | ||||||||
| Conversion component of convertible loans | ||||||||
| Total | $ | $ | ||||||
| December 31, 2023 | ||||||||
| Level 1 | Level 3 | |||||||
| Public warrants | ||||||||
| Private warrants | ||||||||
| Conversion component of convertible loans | ||||||||
| Total | ||||||||
The Company classifies its public warrants as Level 1 based on quoted market price in active markets.
The Company measures the fair value of private warrants by the Black-Scholes model, which are classified as Level 3.
As of June 30, 2024 and December 31, 2023, the Company did not have any instrument measures at fair value, which was classified as Level 2.
The Company measures the fair value of Conversion component of convertible loans and warrants by using a Black-Scholes and Monte Carlo simulation models. All of those components are classified, as Level 3, due to the use of unobservable inputs.
Shyana- Loan Agreements -Black Scholes- option
Input
| June 30, 2024 | ||||
| Risk- free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Underlying share price | $ | |||
- 21 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3:- FINANCIAL LIABILITIES (Cont.)
Lind- Conversion component
Input
| June 30, 2024 | ||||
| Risk- free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Underlying share price | $ | |||
Lind-Black Scholes- option
Input
| June 30, 2024 | ||||
| Risk- free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Underlying share price | $ | |||
2023 Accreditor Investors- Conversion component
Input
| June 30, 2024 | ||||
| Risk- free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Underlying share price | $ | |||
Gottdiener-Black Scholes- option
Input
| June 30, 2024 |
||||
| Risk- free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Underlying share price | $ | |||
- 22 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3:- FINANCIAL LIABILITIES (Cont.)
| Public Warrants | Private Warrants | Conversion Component | Total | |||||||||||||
| Fair value as of December 31, 2022 | $ | $ | $ | $ | ||||||||||||
| Warrants issued in related to the RNER transaction | ||||||||||||||||
| Issuance of conversion component related to the convertible loans. | ||||||||||||||||
| Issuance of warrants related to the convertible loans | ||||||||||||||||
| Conversion of convertible loans into ordinary shares | ( | ) | ( | ) | ||||||||||||
| Change in fair value | ( | ) | ||||||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | ||||||||||||||||
| Fair value as of December 31, 2023 | ||||||||||||||||
| Issuance of conversion component related to the convertible loans. | ||||||||||||||||
| Issuance of warrants related to the convertible loans | ||||||||||||||||
| Exercise of warrants | ( | ) | ( | ) | ||||||||||||
| Conversion of convertible loans into ordinary shares | ( | ) | ( | ) | ||||||||||||
| Change in fair value | ( | ) | ||||||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | ( | ) | ( | ) | ( | ) | ||||||||||
| Fair value as of June 30, 2024 | $ | $ | $ | $ | ||||||||||||
- 23 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4:- EQUITY
| 1. | Accredited Investors During January 2024, pursuant to Accredited Investor Notes as described in Note 3(a)(4) certain Accredited Investors converted an aggregated amount of $ |
| 2. | Lind |
During 2024, pursuant to Lind SPA as described in Note 3(a)(2)
Lind converted an aggregated amount of $
| 3. | AGP |
During March and April 2024, pursuant to
AGP Convertible Loan Agreement as described in Note 3(a)3 A.G.P converted an aggregated amount of $
| 4. | Shayna |
During November and December 2023, pursuant
to Shayna Convertible Loan Agreement as described in Note 3(a)(1) Akina converted an aggregated amount of $
| 5. | Finders Fee |
| a. | In April 2024, pursuant to a Finder Fee Agreement, the Company allocated an aggregated amount of |
| b. | In April 2024, pursuant to a Finder Fee Agreement, the Company allocated an aggregated amount of |
| 6. | Investors Settlement Agreement |
In order to settle various claims by the Company past investors,
several allocations were made during 2023 to such past investors, Elyakim Shmuel Baruch Kislev –
| 7. | IR Services Agreements |
During March and June 2024, pursuant to the Hybrid IR Services,
the Company granted an aggregated amount of
| 8. | Consulting Agreement In June 2024, pursuant to a Consulting Agreement, the consultant was allocated an aggregated amount of |
| 9. | Accredited Investors During 2023, pursuant to Accredited Investor Notes as described in Note 3(a)(b) certain Accredited Investors converted an aggregated amount of $ |
| 10. | Private warrants exercise During the six months ended June 30, 2024, |
- 24 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5:- DISCONTINUED OPERATION
In November 2021, the Company completed the acquisition of Comsec Ltd. and its subsidiaries. During 2023, one of the subsidiaries, Comsec Distribution Ltd. (“Comsec Distribution”) had financial, operational and commercials difficulties, cessation of sales starting July 2023, layoffs and departures of employees so that as of December 31, 2023 there were no employees in this activity.
As of December 31, 2023, there were no business activities in Comsec Distribution.
As of December 31, 2023 and based on the analysis performed by the Company’s management it has been determined that Comsec Distribution is considered as an abandoned business operation in accordance with IFRS 5, constitutes a component of the Company that represents a separate major line of business and therefore meets the criteria for classification as a discontinued operation.
Prior to the classification of Distribution
as a discontinued operation, the recoverable amount of certain items of account receivables and inventory were estimated and an impairment
loss in an amount of $
| Six month ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Revenues from sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Sales and marketing expenses | ||||||||
| General and administrative expenses | ||||||||
| Operating income | ||||||||
| Finance expenses, net | ||||||||
| Income (loss) for the period | $ | ( | ) | $ | ||||
| Six month ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Net cash provided by discontinued operating activities | $ | $ | ||||||
| Net cash used in discontinued investing activities | ( | ) | ||||||
| Net cash used in discontinued financing activities | ( | ) | ( | ) | ||||
| Total net cash used in discontinued operation | $ | ( | ) | $ | ( | ) | ||
- 25 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6:- SIGINIFICANT EVENTS OCCURRED DURING THE PERIOD
| 1. | Qpoint Acquisition |
On April 3, 2024 the Company acquired for
NIS
Following this acquisition the Company holds
Qpoint, which was established in 2009, comprises five subsidiaries and provides solutions and consulting across various verticals, including innovative data management and security solutions.
| 2. | Dominion A Schedule 13D was jointly filed by (i) Dominion Capital LLC, a Connecticut limited liability Company (“Dominion”), (ii) DC Rainier SPV LLC, a Delaware limited liability Company, (iii) Dominion Capital Holdings LLC, a Delaware limited liability Company, (iv) Mikhail Gurevich and (v) Gennadiy Gurevich (collectively, the “Reporting Persons”) with the SEC on March 18, 2024 (the “Schedule 13D Filing”) with respect to the Reporting Persons’ beneficial ownership of shares of Hub Cyber Security Ltd. (the “Company”). In the Schedule 13D Filing, the Reporting Persons made several inaccurate statements regarding the Company. Notably, they alleged that on February 14, 2024, Dominion commenced insolvency proceedings against the Company under Israeli law. Contrary to this claim, the Company has not received any related motion at the time. The Company has filed a counterclaim against Dominion in the commercial litigation proceedings between the parties in the United States referenced in the Schedule 13D Filing. The Company maintains the right to hold the Reporting Persons accountable for their malicious and detrimental actions aimed at harming the Company. |
The claim by Dominion to initiate insolvency proceedings was actually filed by Dominion in Israel on April 9, 2024.
| 3. | Debt Arrangement with Comsec Creditors and a vendor Settlement |
The Comsec Group’s total liabilities
sum up to NIS
Comsec Group and the Company have reached a settlement agreement with a vendor, which is one of the creditors, and whose debt is also covered by a guarantee by the Company.
According to the settlement agreement, a
vendor will receive an amount of NIS
| (i) | NIS 5,000 thousand until April 7, 2024 | |
| (ii) | NIS 4,328 thousand until May 15, 2024 | |
| (iii) | NIS 4,328 thousand until July 15, 2024 |
As the Company was guarantor to the debt to a vendor, the Company has paid the first two payments, and is expected to pay the third one as well. For further information refer also to Note10 (g).
- 26 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6:- SIGINIFICANT EVENTS OCCURRED DURING THE PERIOD (Cont.)
| 4. | Credit Line to Blackswan The Company entered into a Loan and Security Agreement with BST, with an effective date of December 4, 2023 (the “BST Loan Agreement”). Under the BST Loan Agreement, upon the request of BST, the Company may make, at its sole discretion, cash advances to BST, from time to time, until June 30, 2024, in an aggregate principal amount of up to $ |
The principal amounts the Company lends
to BST under the BST Loan Agreement accrue interest at a fixed rate per annum equal to fifteen percent (
Through June 30, 2024, the Company has provided
to BST an aggregated amount of $
NOTE 7:- COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES
The Company is and may be subject to various legal proceedings, contingencies and claims that arise in the course of business, including some claims from current or former employees, as well as governmental and other regulatory investigations and proceedings. If determined adversely to the Company, then such claims could cause the Company to be subject to fines, penalties, and other contingencies.
There is no pending litigation or proceeding against any of HUB Security’s office holders as to which indemnification is currently being sought, and, except as described below, HUB Security is not aware of any pending or threatened litigation, the outcome of which, the Company believes, if determined adversely to the Company, would individually or taken together have a material adverse effect on its business, operating results, cash flows or financial condition or may result in claims for indemnification by any office holder. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.
The below is a brief summary of the litigation and other proceedings the Company is currently facing:
| 1. | Insurance reimbursement claim–- During May 2018, a company named Rotem filed to the District Court in Tel Aviv an Insurance reimbursement claim against approximately 16 defendants, with HUB Security being among them, with respect to damages caused by a fire in the plaintiff’s factory. The Company believes that its liability with regards to this claim seems remote and possesses insurance coverage to cover any liabilities that may arise from this case, based on legal counsel assessment a provision was not recorded. |
| 2. | Contract Tender Litigation – On March 29, 2022, two plaintiffs petitioned the District Court in Tel Aviv for certification of a class of plaintiffs in a class action suit against the Company and seven individuals serving as its officers and directors as of such date. The request for certification is based on a delay in HUB’s making a public announcement of the cancellation of a contract tender whose award to HUB had been previously announced. The canceled contract represented revenue to HUB of NIS |
- 27 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7:- COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES (Cont.)
| The plaintiff’s request to the court cites total damages at NIS |
| On January 30, 2023, the amount requested was increased to NIS |
| Though the Company believes that the request for certification on this claim will be denied by the court, and that it has strong defenses to any class action that may ultimately be allowed to proceed, there can be no assurance that a court will not find the Company liable for significantly greater amounts. At this stage of the proceedings, it is not possible to assess the chances of the application being accepted or rejected in part or in full. A court’s finding of significant liability against us could negatively affect our share price and have a material effect on our business and financial condition. The hearings were conducted on May 22-23, 2024, and at the court’s suggestions a mediator was appointed on June 16, 2024 in order to attempt to reach a settlement between the parties. Two mediation meetings were conducted separately with each party on July 7, 2024 and on July 9, 2024. On August 7, 2024 the appointed mediator announced that the mediation attempt did not yield a settlement. On September 3, 2024 the parties notified the court the mediation attempt has failed. On October 1, 2024 the plaintiffs filed their summaries with the defenders scheduled to file their summaries by December 9, 2024- A provision was recorded in the financial statements at the amount of $ |
| 3. | PIPE Financing Litigation – On March 6, 2023, Mr. Maj’haj Avner (the “Applicant”) filed a class action certification motion (the “Motion to Certify”) against the Company and eight additional respondents in the District Court in Tel Aviv, alleging that the Company’s public announcement that it received irrevocable investment commitments as part of the PIPE Financing was false. The Applicant seeks to represent anyone who purchased the Company’s ordinary shares after the announcement of the Business Combination in March 2022 until the end of February 23, 2023, which was the last trading day of the Company’s ordinary shares on the TASE. The Applicant claims personal damages in the amount of NIS 50,752, while the claim for the alleged damage for the members of the affected group was valued at a total of more than NIS 2,500 thousand. The Motion to Certify also asserts that the Company’s alleged actions demonstrate a violation of the duties of care and trust imposed on the officers and the directors of the Company by the Companies Law, a violation of disclosure obligations under the Israeli Securities Law, and a violation of other statutory duties. On January 30, 2024, eight respondents filed a motion to dismiss outright the Motion to Certify (the “Motion to Dismiss”) as well as a Motion to extend the deadline for filing the Company’s response to the Motion to Certify. The court ultimately rejected the Motion to Dismiss at a hearing on March 24, 2024. On June 2, 2024, eight respondents filed their response to the Motion to Certify in which they requested that the confidentiality of certain items of its response be maintained, which request was subsequently granted by the court. On July 2, 2024, the Applicant responded to the response filed by the eight respondents and on July 9, 2024, sent the eight respondents a demand for disclosure of documents (the “Disclosure Request”). At a hearing held on July 10, 2024, the court recommended that three respondents be removed from the Motion to Certify and the Applicant waive all cause of action that do not relate to the Securities Law which recommendations the Applicant subsequently adopted. At the same hearing, the court ordered five of the respondents to respond to the Disclosure Request by August 11, 2024 and that if the Applicant does not receive a satisfactory response to the Disclosure Request by such date, the Applicant should submit to the court a motion for discovery of documents by September 1, 2024, to which the respondents would be required to respond by September 30, 2024. The Company was also instructed to inform the court by September 23, 2024, if it still stands by its motion regarding confidentiality. A preliminary hearing was held on November 4, 2024. The next hearing was not yet scheduled. |
- 28 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7:- COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES (Cont.)
| 4. | Oppenheimer Suit - On June 12, 2023, Oppenheimer & Co., Inc. (“Oppenheimer”) filed a claim against the Company in the United States District Court for the Southern District of New York alleging, among other things, breach of contract, breach of covenant of good faith and fair dealing and quantum meruit, in connection with investment banking advice and services provided by Oppenheimer in connection with the Company’s business combination with Mount Rainier Acquisition Corp. The complaint alleges that the Company owes Oppenheimer in excess of $ |
| 5. | Dominion Capital Suit - In December 2023, Dominion Capital LLC, a sponsor of the SPAC, Mount Rainier Acquisition Corp., sued the Company in a New York State Court alleging that the Company failed to repay $ |
| 6. | Dominion Insolvency Petition – On April 10, 2024, Dominion Capital LLC, based upon the lawsuit filed in New York, submitted to the Tel Aviv District Court a petition to declare the Company insolvent. A response by the Company objecting to the petition was filed by the Company on May 26, 2024, and a response to the response was filed by Dominion on June 13, 2024. The preliminary hearing is set for October 14, 2024. On August 26, 2024 Dominion filed a motion for temporary relief, and On September 5, 2024 the court ruled that a response to the motion would be filed by the Company by September 9, 2024 and scheduled a hearing to discuss the motion on September 30, 2024. The court further ruled that the Parties would try to reach a mutual understanding and would notified the court of the results of such an attempt by September 24, 2024. The parties notified the court that negotiations are still in progress, and the court ruled on September 29, 2024 that the parties would notify the court of possible dates for the next court hearings. The Parties are currently in negotiations to settle the claim, based on legal counsel assessment a provision was not recorded. |
- 29 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7:- COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES (Cont.)
| 7. | All Ways Gateport Ltd - On November 6, 2023, All Ways Gateport Ltd. submitted to the Tel Aviv District Court a petition to declare the Comsec Distribution Ltd. (a subsidiary of the Company) insolvent due to unpaid debt of $ |
| 8. | Tufin Software Technologies Ltd – A similar petition was submitted on December 14, 2023, by Tufin Software Technologies Ltd against Comsec Ltd, (a subsidiary of the Company) and against the Company claiming an unpaid debt of $ |
| 9. | The Phoenix Insurance Company Ltd – On October 27, 2024 a claim was filed against Comsec Ltd. for missing social benefits payment to Comsec employees insured by the Phoenix Insurance Company Ltd, in the amount of $ |
| 10. | Class Action Suit HUB Cyber Security Ltd. 1:23-cv-05764 (S.D.N.Y.): This case consolidates into one securities class action the complaints filed in the cases styled Efrat Investments LLC et al. v. Hub Cyber Security Ltd., and Green v. Hub Cyber Security Ltd. f/k/a Hub Cyber Security (Israel) Ltd., et al. This action names the Company and current and former officers and directors of the Company (including Eyal Moshe, Hugo Goldman, Uzi Moscovich, Zeev Zell, Moshe Raines, Manish Agarwal, and Moti Franko, “Individual Defendants”) as defendants (collectively, “Class Action Defendants”). Certain shareholders—individuals and entities that purchased or otherwise acquired Company securities pursuant to and/or traceable to the offering materials issued in connection with the Transaction—have alleged that the Class Action Defendants made material misstatements and omissions in the offering materials issued in connection with the Transaction. The shareholders have alleged that the offering materials incorrectly stated that Hub Cyber Security (Israel) Ltd. had secured a committed financing arrangement, contained material misstatements and omissions concerning the Company’s internal controls and misuse of Company funds, and contained materially misleading information concerning the Company’s product. The shareholders seek damages from the Class Action Defendants and/or tender their shares to Class Action Defendants for recovery of the consideration paid therefor. The Company is defending itself vigorously, and has moved to dismiss the action on the grounds that the shareholders lack standing to sue and have failed to state a claim against the Company, based on legal counsel assessment a provision was not recorded. |
- 30 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7:- COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES (Cont.)
| 11. | Employee Claims - Two of the Company’s former US employees filed claims in the cumulative amount of approximately $ |
Additionally, a few former Israeli employees filed a claim in the Tel Aviv Labor Court:
| (a) | A former employee filed a claim against Comsec Ltd. (a subsidiary of the Company) in the amount of NIS |
| (b) | An additional former Israeli employee filed a claim in the Tel Aviv Labor Court against the Company in the amount of NIS |
- 31 -
HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 7:- COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES (Cont.)
Following the finding of the Special Committee, the Company has also filed a claim against two former employees:
| (a) | On June 1, 2023, the Company filed a claim against its former Chief of Staff and VP HR and wife of the Company’s former CEO, in the Tel Aviv Labor Court for a declaratory judgment and an order to release severance pay funds accumulated in provident funds back to the employer. On January 2024 a preliminary hearing was held during which, the parties agreed that a consent judgment would be given stating that the amounts accumulated in the former employee’s name in the provident funds will not be released to either of the parties or to any third party until a final judgment is rendered in the Company’s claim against the former employee. A judgment was issued in accordance with the parties’ agreements as stated. On February 26, 2024, the Company filed a new claim against the former employee for a declaratory judgment and an order to release severance pay funds accumulated in provident funds back to the employer. On June 26, 2024, the former employee filed her statement of defense. On July 21, 2024, the former employee filed a counterclaim in the amount of NIS 1,268,481. The former employee alleges that this amount is owed to her due to an unlawful termination process carried out against her, which was accompanied by rude behavior, disrespect, and humiliation. In all, the former employee demands the following payments and compensation from the Company: (i) release of severance pay funds accumulated in her favor, (ii) completion of severance pay in the amount of NIS 30,008, (iii) compensation for delayed severance pay, (iv) six months’ advance notice pay amounting to NIS 460,590, (v) compensation for gender discrimination and damage to reputation and good name in the amount of six salaries amounting to NIS 460,590, (vi) compensation for dismissal in bad faith, arbitrarily and without a hearing, and workplace bullying in the amount of NIS 230,295, (vii) an annual bonus of NIS 76,765, and (viii) reimbursement of expenses for a business trip abroad on behalf of Hub amounting to at least NIS 10,233. The Company filed its Statement of Defense. A preliminary hearing is expected to be held on February 23, 2025. |
| (b) | On November 11, 2023, the Company filed a claim against its former CEO in the Tel Aviv Labor Court for a declaratory judgment and an order to release severance pay funds accumulated in provident funds back to the employer. On February 18, 2024, the former employee filed his statement of defense. On June 4, 2024, the Company submitted a request to the court to consolidate the Company’s claim against its former CEO and claim against his wife, the Company’s former Chief of Staff and VP HR described above. Both former employees submitted their response to such request and on June 26, 2024, the court decided that both claims will be handled by a panel of the court but it did not yet decide whether to consolidate the claims. On August 4, 2024, Hub submitted a request to complete the discovery and inspection proceedings by October 15, 2024. |
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HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 8:- BALANCES AND TRANSACTIONS WITH INTERESTED AND RELATED PARTIES
| a. |
June 30, 2024
| Directors | Key management personnel | |||||||
| USD in thousands | ||||||||
| Other accounts payable | $ | |||||||
| Loan | $ | |||||||
December 31, 2023
| Directors | Key management personnel | |||||||
| USD in thousands | ||||||||
| Other accounts payable | ||||||||
| Loan | ||||||||
In addition, as described in note 6(4), the Company provided a credit line to blackswan, a company that one of it’s board members is the Company’s Chief Executive Officer.
| b. |
| Six months ended June 30, | Year ended December 31, | |||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Cost of sales, research and development expenses, sales and marketing expenses and general and administrative expenses, net: | ||||||||
| Salary and related benefits to CEO and director employed by the Company (controlling shareholder) including cost of share-based payment (1) | ||||||||
| Fees of directors not employed by the Company including cost of share-based payment (4) | ||||||||
| Salary and related benefits to formerly Deputy CEO including cost of share-based payment (2) | ||||||||
| Salary and related benefits to the former VP Human Resources including cost of share-based payment (3) | ||||||||
| (1) |
| (2) |
| (3) |
| (4) |
Mr. Hershcoviz holds
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HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 9:- SEGMENTS
| a. | Business segments – chief reporting: |
The operating segments are identified on
the basis of information that is reviewed by the chief operating decision maker (“CODM”) to make decisions about resources
to be allocated and assess its performance. Accordingly, for management purposes, the Group is organized into
| 1. | Product and Technology Segment – the Company develops and markets integrated cybersecurity hardware/software solutions that allow organizations to protect their RAM or confidential computing data to create a reliable work environment. The Company offers data and cybersecurity and system security and reliability solutions and related services such as consulting, planning, training, integrating and ongoing servicing of cybersecurity, risk management, system quality, reliability and security projects and fully managed corporate cybersecurity services. | |
| 2. | Professional Services Segment – the Company offers data and cybersecurity and system security and reliability solutions and related services such as consulting, planning, training, integrating and ongoing servicing of cybersecurity, risk management, system quality, reliability and security projects and fully managed corporate cybersecurity services. These segments share a unified product development, operations, and administrative resources. |
Revenues and part of the expenses are allocated directly to business segments whereas joint expenses are not allocated to segments. The assets and liabilities that are not allocated consist of joint operational assets and liabilities that are shared by the various operating segments. The Company deems it is impractical to separate them. Segment asset and liability performances and segment income (loss) are estimated based on the operating income (loss) presented in the financial statements.
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HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 9:- SEGMENTS (Cont.)
| Six months ended June 30, 2024 | ||||||||||||||||
| Professional services | Products and technology | Unallocated | Total | |||||||||||||
| USD in thousands | ||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | ||||||||||||
| Total revenues | ||||||||||||||||
| Segment results (operating loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Finance expenses, net | ( | ) | ||||||||||||||
| Loss before taxes on income | $ | ( | ) | |||||||||||||
| Six months ended June 30, 2023 | ||||||||||||||||
| Professional services | Products and technology | Unallocated* | Total | |||||||||||||
| USD in thousands | ||||||||||||||||
| Revenues from external customers | $ | $ | $ | $ | ||||||||||||
| Total revenues | ||||||||||||||||
| Segment results (operating loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Finance expenses, net | ||||||||||||||||
| Loss before taxes on income | $ | ( | ) | |||||||||||||
| * |
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HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 9:- SEGMENTS (Cont.)
| b. | Geographical segments: |
Six months ended June 30, 2024
| Israel | America | Europe | Asia Pacific | Total | ||||||||||||||||
| USD in thousands | ||||||||||||||||||||
| Revenues | $ | $ | | $ | | $ | | $ | | |||||||||||
Six months ended June 30, 2023
| Israel | America | Europe | Asia Pacific | Total | ||||||||||||||||
| USD in thousands | ||||||||||||||||||||
| Revenues | $ | $ | | $ | $ | | $ | | ||||||||||||
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HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10:- SUBSEQUENT EVENTS
| a. | On August 18, 2024, the Company entered into Securities Purchase Agreements (the “August 2024 Purchase Agreements”) with multiple private investors to raise gross proceeds of approximately $ |
The August 2024 Warrants
are exercisable for a period of three years at an exercise price of $
The placement agent for
this transaction is entitled to receive a fee of approximately $
The exercise of the August
2024 Notes and the exercise of the August 2024 Warrants and the Placement Agent Warrant will be limited to the extent that, upon conversion
or exercise, the holder and its affiliates would in the aggregate beneficially own more than
| b. | On August 22, 2024, the Company announced it has entered into a written collaboration agreement with BST, formalizing the terms of the collaboration between the parties (the “BST Collaboration Agreement”). |
The BST Collaboration
Agreement, which is effective retroactively as of November 1, 2023 and
pursuant to the terms thereof, BST agreed to conduct activities directed by the Company to integrate BST technology with the Company’s
technology. In addition, the Company agreed to provide advisory services to BST in connection with BST’s performance under specified
commercial agreements. Pursuant to the BST Collaboration Agreement, the Company receives all rights to any deliverables created under
the BST Collaboration Agreement and an irrevocable, perpetual license to any BST background intellectual property created or developed
before or after the effective date of the BST Collaboration Agreement. The BST Collaboration Agreement further grants the Company with
the exclusive right available until August 22, 2025 to elect to acquire all of the outstanding share capital of BST or assets of BST
to be selected by the Company, in consideration for the Company’s ordinary shares representing up to thirty percent (
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HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10:- SUBSEQUENT EVENTS (Cont.)
| c. | On July 16, 2024, the Company was notified by the Listing Qualifications department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) that the Company was no longer in compliance with Nasdaq Listing Rule 5450(a)(1), because for the preceding |
| d. | On August 23, 2024, the Company was notified by the Listing Qualifications department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) that the Company is no longer in compliance with Nasdaq Listing Rule 5450(b)(3) (the “Total Assets and Total Revenue Requirement”) because the Company’s total assets and total revenue for the most recently completed fiscal year and two of the last three most recently completed fiscal years were each below the minimum $ |
The Staff’s notice has no immediate effect on the listing of the Company’s ordinary shares, and the Company’s ordinary
shares will continue to trade on Nasdaq under the symbol “HUBC.”
In accordance with Nasdaq
Listing Rule 5810(c)(2)(A), the Company has 45 calendar days, or until October 7, 2024, to submit a plan to Nasdaq to evidence compliance
with Nasdaq’s continued listing criteria (the “Compliance Plan”). If the Staff accepts the Company’s Compliance
Plan, the Staff can grant the Company an extension of up to
The Company is considering available options to regain compliance with the continued listing standards.
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HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10:- SUBSEQUENT EVENTS (Cont.)
| e. | On August 18, 2024, the Company, multiple non-U.S. investors introduced by the placement agent Claymore Capital PTY Ltd. (the “Claymore Investors”) entered into Securities Purchase Agreements, Notes and Warrants (the “Claymore Transaction”), according to which the Claymore Investors provided the Company with an amount of $ The Face Value of (Loan Amount) of the Convertible Notes are |
| f. | Claymore Capital PTY Ltd. |
On November 8, 2024, Claymore
Investors agreed to extend a loan to the Company in the amount of $
On November 22, 2022, the Company and Claymore Investors agreed
to a follow-on investment in the amount of $
| g. | The Comsec Group total liabilities sum up to NIS |
According to the settlement
agreement, the vendor was entitled to receive an amount of NIS
| (i) | NIS |
|
| (ii) | NIS |
|
| (iii) | NIS |
As the Company was guarantor to the debt to a vendor, the Company
has paid the first two payments, but did not execute the third payment on time. As a result, starting from October 2024, the vendor has
petitioned the court and received warrants for the foreclose of funds of the Company and of Comsec, held by third parties and at the bank
accounts of the Company and of Comsec. As of the date of this report, an amount NIS
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HUB CYBER SECURITY LTD.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10:- SUBSEQUENT EVENTS (Cont.)
| h. | AGP Settlement |
The Company has entered into a settlement
with AGP with respect to the convertible note of the Company issued to AGP on February 28, 2023 (the “Original Note”). The
Original Note has a principal amount of $
The Original Note provided for amortization
payments commencing on June 1, 2023, with final maturity on March 1, 2024. The obligations under the Original Note are recorded in the
Company’s balance sheet as of June 30, 2024 at $
| i. | The Company has entered into another agreement with Mr. Tomas Gottdiener (the “Investor”), dated as of November 5, 2024, for the sale in an unregistered private transaction, of a note (the “Note”) with an aggregate principal amount of $1,000,000 and a warrant (the “Warrant”). |
The Note is repayable
by the Company on November 29, 2024.
If
the Note is not repaid prior to November 29, 2024, the Investor may convert any portion of the outstanding principal amount into Ordinary
Shares of the Company at a rate equal to the arithmetic average of the closing price of the Ordinary Shares in the five (5) trading days
prior to the date of conversion, provided that such conversion rate shall not be lower than $
The Warrant is exercisable
into
The conversion of the
Note and the exercise of the Warrant will be limited to the extent that, upon the conversion or exercise, the Investor and his affiliates
would in aggregate beneficially own more than
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