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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR SECTION 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number: 001-41634
HUB Cyber Security Ltd.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
State of Israel
(Jurisdiction of incorporation or organization)
2 Kaplan St.
Tel Aviv, Israel 6473403
(Address of principal executive offices)
Noah Hershcoviz
Chief Executive Officer
+972-3-791-3200
HUB Cyber Security Ltd.
2 Kaplan St.
Tel Aviv, Israel 6473403
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered, pursuant to Section 12(b) of the Act
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Ordinary shares, no par value | HUBC | Nasdaq Stock Market LLC | ||
| Warrants to purchase ordinary shares | HUBCW | Nasdaq Stock Market LLC | ||
| Warrants to purchase ordinary shares | HUBCZ | Nasdaq Stock Market LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report. As of December 31, 2024, the registrant had 3,553,818 ordinary shares outstanding, no par value. As of April 28, 2025, the registrant had 10,047,296 ordinary shares outstanding, no par value.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer | ☒ | Emerging growth company | ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| ☐ U.S. GAAP | ☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board | ☐ Other |
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
CONTENTS
ABOUT THIS ANNUAL REPORT
Except where the context otherwise requires or where otherwise indicated in this Annual Report, the terms “HUB Cyber Security Ltd.,”, “HUB,” the “Company,” “we,” “us,” “our,” “our company” and “our business” refer to HUB Cyber Security Ltd. and its subsidiaries.
All references in this Annual Report to “Business Combination” refer to the transactions effected under the merger agreement, dated as of March 23, 2022 (the “RNER Merger Agreement”), by and among Mount Rainier Acquisition Corp., a Delaware corporation (“RNER”), HUB and Rover Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of HUB (“RNER Merger Sub”). Pursuant to the RNER Merger Agreement, RNER Merger Sub merged with and into RNER, with RNER surviving the merger. Upon consummation of the Business Combination and the other transactions contemplated by the Merger Agreement on February 28, 2023, RNER became a wholly owned subsidiary of HUB.
All references in this Annual Report to “BST Merger” refer to the transactions effected under the merger agreement, dated as of January 15, 2025 (the “BST Merger Agreement”), by and among BlackSwan Technologies, Inc., a Delaware corporation (“BST”), HUB, BST Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of HUB (“BST Merger Sub”), and the Equityholders’ Representative thereto. Pursuant to the BST Merger Agreement, BST Merger Sub merged with and into BST, with BST surviving the merger. Upon consummation of the BST Merger and the other transactions contemplated by the BST Merger Agreement on January 27, 2025, BST became a wholly owned subsidiary of HUB.
All references in this Annual Report to “Israeli currency” and “NIS” refer to New Israeli Shekels, the terms “dollar,” “USD” or “$” refer to U.S. dollars and the terms “€” or “euro” refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the treaty establishing the European Community, as amended.
All information in this Annual Report on Form 20-F relating to shares or price per share reflects the 1-for-10 reverse share splits effected by us on December 14, 2023 and March 28, 2025.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Our financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the IASB (“IFRS”). We present our consolidated financial statements in U.S. dollars.
Our fiscal year ends on December 31 of each year. References to fiscal 2022 and 2022 are references to the fiscal year ended December 31, 2022, references to fiscal 2023 and 2023 are references to the fiscal year ended December 31, 2023, and references to fiscal 2024 and 2024 are references to the fiscal year ended December 31, 2024.
Market and Industry Data
Unless otherwise indicated, information contained in this Annual Report concerning our industry and the regions in which we operate, including our general expectations and market position, market opportunity, market share and other management estimates, is based on information obtained from various independent publicly available sources and other industry publications, surveys and forecasts, which we believe to be reliable based upon our management’s knowledge of the industry. We assume liability for the accuracy and completeness of such information to the extent included in this Annual Report. Such assumptions and estimates of our future performance and growth objectives and the future performance of our industry and the markets in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those discussed under the headings “Cautionary Statement Regarding Forward-Looking Statements” Item 3.D. “Key Information—Risk Factors” and Item 5. “Operating and Financial Review and Prospects” in this Annual Report.
Certain monetary amounts, percentages and other figures included in this Annual Report have been subject to rounding adjustments. Certain other amounts that appear in this Annual Report may not sum due to rounding. Revenue shown throughout this Annual Report is revenue from continuing operations, unless otherwise stated.
Unless otherwise noted, in this Annual Report we cite a source the first time a statement relying upon that source is made, and do not include citations subsequently when that statement is repeated.
Trademarks
This Annual Report contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this Annual Report may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical facts, this Annual Report contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are principally contained in the sections entitled Item 3.D. “Key Information—Risk Factors,” Item 4. “Information on the Company,” and Item 5. “Operating and Financial Review and Prospects.” In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “seek,” “believe,” “estimate,” “predict,” “potential,” “continue,” “contemplate,” “possible” or similar words. Statements regarding our future results of operations and financial position, growth strategy and plans and objectives of management for future operations, including, among others, expansion in new and existing markets, are forward-looking statements.
Forward-looking statements involve a number of risks, including potential impairments, uncertainties and assumptions, and actual results or events may differ materially from those projected or implied in those statements. Important factors that could cause such differences include, but are not limited to:
| ● | Our previously disclosed internal investigation was initiated to review allegations of misappropriation of Company funds and other potential fraudulent actions regarding the use of Company funds by a former senior officer of the Company. As a result of or in connection with the matters that were the subject of the investigation, we may become subject to certain regulatory scrutiny, which could have a material adverse effect on our business, financial condition and results of operation. |
| ● | We are a company with a history of net losses and anticipate that we may incur net losses for the foreseeable future. Moreover, our independent registered public accounting firm’s report, contained herein, includes an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern, indicating the possibility that we may not be able to continue to operate in the future. |
| ● | We have identified material weaknesses in our internal control over financial reporting. If our remediation of the material weaknesses is not effective, or we fail to develop and maintain effective internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired. |
| ● | Our acquisition of companies, including our most recent acquisition of BST, presents challenges that we may not overcome. If we are unable to successfully integrate recently acquired companies into our business, our operating results may be adversely affected. We may also become liable to unforeseen risks and liabilities associated with acquired companies. |
| ● | If we are not able to remain in compliance with the continued listing standards of the Nasdaq Stock Market LLC (“Nasdaq”), such failure could result in a delisting of our securities. |
| ● | We have financed our operations and certain capital needs through various debt, convertible debt and equity issuances. Our existing and future debt obligations could impair our liquidity and financial condition. If we are unable to meet our debt obligations, the lenders could foreclose on our assets which could cause us to curtail or cease operations or have an adverse impact on our business, results of operations and financial condition and the price of our ordinary shares. |
| ● | We need to raise additional funds in the near future in order to execute our business plan and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our business, prospects, financial condition and operating results could be negatively affected. |
| ● | An inability to attract new customers, retain existing customers and sell additional services to customers could adversely impact our revenue and results of operations. |
| ● | Actions that we have taken to reduce costs and rebalance investments may not result in anticipated savings or operational efficiencies, could result in total costs and expenses that are greater than expected, and could disrupt our business. |
| ● | Our limited operating history in the fields of secured data fabric and confidential computing makes it difficult to evaluate our business and future prospects and increases the risk of your investment. |
| ● | The network security market is rapidly evolving within the increasingly challenging cyber threat landscape. If our solutions fail to adapt to market changes and demands, sales may not continue to grow or may decline. |
| ● | Our reputation and business could be harmed based on real or perceived shortcomings, defects or vulnerabilities in our solutions or if our customers experience security breaches, which could have a material adverse effect on our business, reputation and operating results. |
| ● | Our ability to introduce new products, features, integrations and enhancements is dependent on adequate research and development resources. |
| ● | We currently have and target many customers that are large corporations and government entities, which are subject to a number of challenges and risks, such as increased competitive pressures, administrative delays and additional approval requirements. |
| ● | Our management team has limited experience managing a U.S. listed public company. |
| ● | Our business relies on the performance of, and we face stark competition for, highly skilled personnel, including our management, other key employees and qualified employees, and the loss of one or more of such personnel or of a significant number of our team members or the inability to attract and retain executives and qualified employees we need to support our operations and growth, could harm our business. |
| ● | Changes in tax laws or exposure to additional income tax liabilities could affect our future net profitability. |
| ● | As a cybersecurity provider, if any of our systems, our customers’ cloud or on-premises environments, or our internal systems are breached or if unauthorized access to customer or third-party data is otherwise obtained, public perception of our business may be harmed, and we may lose business and incur losses or liabilities. |
| ● | Undetected defects and errors may increase our costs and impair the market acceptance of our products and solutions. |
| ● | We may not be able to adequately protect or enforce our intellectual property rights or prevent unauthorized parties from copying or reverse engineering our products or technology. Our efforts to protect and enforce our intellectual property rights and prevent third parties from violating our rights may be costly. |
| ● | The dynamic regulatory environment around privacy and data protection may limit our offering or require modification of our products and services, which could limit our ability to attract new customers and support our existing customers and increase our operational expenses. We could also be subject to investigations, litigation, or enforcement actions alleging that we fail to comply with the regulatory requirements, which could harm our operating results and adversely affect our business. |
| ● | Our actual or perceived failure to adequately protect personal data could subject us to sanctions and damages and could harm our reputation and business. |
| ● | We may be required to indemnify our directors and officers in certain circumstances. |
| ● | A market for our securities may not develop or be sustained, which would adversely affect the liquidity and price of our securities. |
| ● | We are subject to a number of securities class actions and other litigations and could be subject to additional litigation in the United States, Israel or elsewhere that could negatively impact our business, including resulting in substantial costs and liabilities. |
| ● | Class action litigation due to stock price volatility or other factors could cause us to incur substantial costs and divert management’s attention and resources. |
| ● | If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price. |
| ● | Provisions of Israeli law and our articles of association may delay, prevent or make difficult an acquisition of us, prevent a change of control, and negatively impact our share price. |
| ● | Our ordinary shares and warrants may not continue to be listed on a national securities exchange, which could limit investors’ ability to make transactions in such securities and subject us to additional trading restrictions. |
| ● | If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our ordinary shares adversely, then the price and trading volume of our ordinary shares could decline. |
| ● | As we are a “foreign private issuer” and intend to follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements. |
| ● | The listing of our securities on Nasdaq did not benefit from the process undertaken in connection with an underwritten initial public offering, which could result in diminished investor demand, inefficiencies in pricing and a more volatile public price for our securities. |
| ● | Conditions in Israel, including the current war between Israel and Hamas, could materially and adversely affect our business. |
| ● | It may be difficult to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this Annual Report in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors and these experts. |
| ● | We may issue additional ordinary shares or other equity securities without seeking approval of our shareholders, which would dilute the ownership interests represented by our ordinary shares and may depress the market price of our ordinary shares. |
Our estimates and forward-looking statements are mainly based on our current expectations and estimates of future events and trends which affect or may affect our business, operations and industry. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to numerous risks and uncertainties.
These forward-looking statements are subject to a number of known and unknown risks, uncertainties, other factors and assumptions, including the risks described in Item 3.D “Key Information—Risk Factors” and elsewhere in this Annual Report.
You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk factors” and elsewhere in this Annual Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Annual Report. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. We qualify all of our estimates and forward-looking statements by these cautionary statements.
The forward-looking statements made in this Annual Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report to reflect events or circumstances after the date of this Annual Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A. [Reserved.]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
You should carefully consider the risks described below before making an investment decision. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. The trading price and value of our ordinary shares could decline due to any of these risks, and you may lose all or part of your investment. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this Annual Report. See “Cautionary Statement Regarding Forward-Looking Statements” on page v of this Annual Report. Such risks include, but are not limited to:
Risks Relating to the Internal Investigation,
Our Ability to Continue as a Going Concern, Our Internal
Controls and Related Matters
Our previously disclosed internal investigation was initiated to review allegations of misappropriation of Company funds and other potential fraudulent actions regarding the use of Company funds by a former senior officer of the Company. As a result of or in connection with the matters that were the subject of the investigation, we may become subject to certain regulatory scrutiny. We are unable to predict the effectiveness of any remediation measures recommended by the Special Committee. In addition, we have incurred and may continue to incur substantial costs in connection with the internal investigation, which could have a material adverse effect on our business, financial condition and results of operations.
As previously disclosed in our Report on Form 6-K on April 20, 2023, our board of directors appointed a Special Committee of Independent Directors (the “Special Committee”) to oversee an internal investigation (the “Internal Investigation”) in order to review certain allegations of misappropriation of Company funds and other potential fraudulent actions regarding the use of Company funds by a former senior officer of ours. During the course of the Internal Investigation, the Special Committee, together with its outside advisers, believed that it found sufficient evidence to support a determination that Mr. Eyal Moshe, our former Chief Executive Officer and President of U.S. operations and former member of the board of directors, and Ms. Ayelet Bitan, our former Chief of Staff and wife of Mr. Moshe, misappropriated (from a Company bank account over which Mr. Moshe had sole signatory rights) a total of approximately NIS 2 million (approximately $582,000) for personal use. Further, in certain instances, evidence reviewed by the Special Committee demonstrated that Mr. Moshe authorized payments to contractors without either (i) proper documentation and signatory approval; or (ii) required budget and expense reports. The employment of Eyal Moshe, was terminated effective July 24, 2023, for cause and Mr. Moshe resigned from our board on August 15, 2023. Additionally, we commenced two legal actions in Israel against Ms. Bitan and against Mr. Moshe to dispute their requests for severance payments in accordance with Israeli law in connection with these determinations by the Special Committee.
Additionally, the Special Committee believed that it found sufficient evidence to determine that, one of our controllers, with the permission of Mr. Moshe, used Company credit cards for personal use in the amount of approximately NIS 400,000 (approximately $110,000). These personal expenses were neither factored into the controller’s payroll nor properly documented in our financial books and records. Additionally, Mr. Moshe approved a bonus of NIS 250,000 to the controller. However, this bonus was not paid to the controller but instead was paid to a third-party at the controller’s direction. Prior to the commencement of legal proceedings, we reached a settlement with the controller whereby the amount of the bonus in the amount of NIS 250,000 plus VAT was repaid to us and all his options and RSUs were cancelled.
Since the completion of the Internal Investigation, the Company performed a rehaul of its top management and executive officers, in addition to enacting and enforcing tougher anti-fraud and anti-corruption policies, oversight, reviews and checks. All of the management and executive officers that served in the Company during the time when the misappropriation occurred have since left the Company and been replaced. To the best of the Company’s knowledge, the past misappropriation of funds has no current or further impact on the Company, its finances and its business, and is not expected to affect the Company or its expected growth in the future.
The Internal Investigation is complete, although we continue to aim to pursue recovery of the misappropriated funds. These events regarding the Special Committee and Internal Investigation are the subject of regulatory review and expose us and our directors and officers to possible investigations and possible enforcement actions by regulators both in Israel and the United States, including the Israel Securities Authority (“ISA”), Israel Tax Authority, U.S. Securities and Exchange Commission (“SEC”), Nasdaq and/or U.S. Department of Justice (“DOJ”). In September 2024, the Israel Securities Authority and the Israel Tax Authority conducted a search of HUB's office in the context of investigating former and current officers in connection with suspicions regarding violations of securities, penal and tax laws. To HUB's best knowledge, the suspicions are related, among other things, to the subject matter of the Internal Investigation. In addition, in April 2025, investigators from the Israeli Tax Authority visited the offices of the Company. To HUB’s best knowledge, said visit related to developments in the investigation related to the actions of a former Financial Controller of the Company, which were also addressed in the Internal Investigation. We have provided certain information and documentation to certain regulatory authorities and are prepared to respond to any regulatory inquiry it may receive. Our management and our board of directors do not currently believe there are any impacts on our financial statements. If we were to be subject to an investigation or enforcement action from a regulatory agency it could have a material adverse effect on our business, financial position and results of operations.
If any federal authorities were to ultimately determine that we violated any laws or regulations, we may be exposed to a broad range of civil and criminal sanctions including, but not limited to, injunctive relief, disgorgement, fines, penalties, modifications to business practices including the termination or modification of existing business relationships, the imposition of compliance programs and the retention of a monitor to oversee future compliance by us, which could be costly and burdensome to our management, and could adversely impact our business, prospects, reputation, financial condition, liquidity, results of operations or cash flows. Even if an inquiry or investigation does not result in any adverse determinations, it potentially could create negative publicity and give rise to third-party litigation or other actions, which could also have a material adverse effect on our business, financial condition, results of operations and cash flows.
The Special Committee is neither a civil nor a criminal court of law and no court has yet substantiated the findings of the Special Committee. It is possible that a court of law may find differently than the Special Committee has, which could expose us to counterclaims from Mr. Moshe, Ms. Bitan or others. Additionally, while we have informed Mr. Moshe that he has been summarily dismissed as an employee, Mr. Moshe resigned from our board of directors.
We have commenced legal actions in Israel against Ms. Bitan and against Mr. Moshe to dispute their requests for severance payments in accordance with Israeli law. Two actions were undertaken against Ms. Bitan. In the initial action, the court granted an injunction preventing her from accessing her accumulated severance package. In the second action, it was requested that the court order that these sums be returned to the Company. In the action against Mr. Moshe, the court was requested to grant an injunction against accessing the accumulated severance package and to order the return of the sums to us. These actions are time limited, so the initial action against Ms. Bitan was initiated prior to the completion of the Special Committee Report and as such was based upon the limited information known at that time. The preliminary hearing in both of these cases is set for the September 2025 and both will be heard in front of the same judge who granted the injunction against Ms. Bitan. For further details please refer to Item 8. “Financial Information—Consolidated Statements and Other Financial Information—Legal and Arbitration Proceedings” below.
There can be no assurance that Mr. Moshe, Ms. Bitan or others will not bring forth any claims or commence any litigation against us in connection with Mr. Moshe’s dismissal, his resignation from the board, our challenging Ms. Bitan’s severance payments or the publication of the Special Committee’s findings from the Internal Investigation.
Further, we incurred substantial costs and diverted management resources in connection with the Internal Investigation, and the Internal Investigation itself caused us to fail to timely file our Annual Reports on Form 20-F for the fiscal years ended December 31, 2022 and 2023 with the SEC. We may also incur material costs associated with our indemnification arrangements with our current and former directors and certain of our officers, as well as other indemnitees related to law suits or regulatory proceedings that have arisen and may arise in the future from the Internal Investigation.
Our reported material weaknesses in internal control over financial reporting subjects us to additional litigation and regulatory examinations, investigations, proceedings or court orders, including additional cease and desist orders, the suspension of trading of our securities, delisting of our securities, the assessment of civil monetary penalties and other equitable remedies. In addition, the remediation of the material weaknesses (set forth below in Item 15. “Controls and Procedures”) will require us to incur additional costs and to divert management resources in the upcoming periods, which could adversely affect our business, financial condition, results of operations, and growth prospects.
We are a company with a history of net losses and anticipate that we may incur net losses for the foreseeable future and may never be profitable. Moreover, our independent registered public accounting firm’s report, contained herein, includes an explanatory paragraph that expresses substantial doubt about our ability to continue as a going concern, indicating the possibility that we may not be able to continue to operate in the future.
We have incurred net losses in each year since our inception, including net losses (including discontinued operations) of $39.1 million, $86.6 million and $80 million in the years ended December 31, 2024, 2023, and 2022, respectively. In addition, we may continue to incur net losses for the foreseeable future, and we may not achieve or maintain profitability in the future. Because the market for our network security solutions and products is rapidly evolving and has not yet reached widespread adoption, it is difficult for us to predict our future results of operations or the limits of our market opportunity. We cannot be certain when, if ever, we will become profitable. Even if we were to become profitable, we might not be able to sustain such profitability on a quarterly or annual basis.
Primarily because of our losses incurred to date, our expected continued future losses, our independent registered public accounting firm has included in its report an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. We are generating negative cash flow, requiring constant and immediate cash injections to continue to operate, failing to meet obligations as they become due, including financial, suppliers debts and other ordinary course of operations costs. In addition, and as a result of our ongoing operating losses, we had outstanding liabilities that could not be met by our revenues, including payments due to our debt holders, vendors and service providers, which led into situation where a hold was placed on certain of our bank accounts. Since May 2024, we have been unable to make required deposits in employee pension and severance funds or to pay required withholding taxes on employee compensation payment. Certain of our subsidiaries also did not make timely tax filings with the ITA for several years. We have reached a settlement agreement with the unsecured creditors of Comsec creditors and are in process to remove two applications that were submitted to court to declare the Company and Comsec as insolvent. For more information about those application please refer to Item 8. “Financial Information—Consolidated Statements and Other Financial Information—Legal and Arbitration Proceedings” below. Our ability to continue as a going concern is contingent upon, among other factors, the sale of ordinary shares to obtain additional funding to support our operations and/or obtaining alternate financing and the ability to cure our outstanding defaults or that these obligations may be negotiated on terms that are favorable to us, if at all. Management currently believes that it will be necessary for us to secure additional funds to continue our existing business operations and to fund our obligations. We have raised and will continue to seek to raise additional funds during 2025 through a variety of equity and/or debt financing arrangements; however, there can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. If we cannot generate sufficient revenues, reduce cost and/or secure additional financing on acceptable terms, we may be required to, among other things, alter our business strategy, significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms. See “—We will be required to raise additional funds in the near future in order to execute our business plan and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our business, prospects, financial condition and operating results could be negatively affected” below for additional information.
We have identified material weaknesses in our internal control over financial reporting. If our remediation of the material weaknesses is not effective, or we fail to develop and maintain effective internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.
As described above, we appointed the Special Committee to oversee an internal investigation related to alleged misappropriation of Company funds and other potentially fraudulent actions regarding the use of Company funds by a former senior officer of the Company. As such, our management identified material weaknesses in our internal control over financial reporting as of December 31, 2022 and 2021 relating to deficiencies in the design and operation of the procedures relating to the closing of our financial statements. We continued to identify material weaknesses in our internal control over financial reporting as of December 31, 2023, which had not been remedied as of December 31, 2024. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
The material weaknesses included, but are not limited to:
| ● | Lack of sufficient number of personnel with an appropriate level of knowledge and experience in accounting for complex or non-routine transactions; |
| ● | The fact that our policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed, not properly put in place or not operating effectively; |
| ● | Deficiencies in the design and operations of the procedures relating to the timely closing of financial books at the quarter and fiscal year end; |
| ● | Insufficient oversight of certain signatory rights relating to our financial accounts; |
| ● | Ineffective design and implementation of Information Technology General Controls (“ITGC”) including improperly designed controls pertaining to change management and user access rights over systems that are critical to our system of financial reporting; and |
| ● | Incomplete segregation of duties in certain types of transactions and processes (excluding monetary transactions, where there is a clear distinction between the preparer and the signer vis-a-vis financial institutions). |
During the fourth quarter of 2024, we undertook certain corrective action in order to address and remediate these material weaknesses including (i) the recruitment of additional financial personnel in our finance department with an appropriate level of knowledge and experience; (ii) the establishment of risk and control matrices and implemented controls over material business processes; (iii) the design of operation of procedures related to timely closing of financial books, including the assignment of clear responsibilities, deadlines and appropriate segregation of duties; (iv) the formalization of signatory rights; and (v) establishment of controls over the change management process and permissions to the financial system. However, since the implementation of these controls only commenced in the fourth quarter of 2024, these controls were not in place a sufficient period of time to allow management to conclude they were operating effectively throughout a significant portion of the year. Accordingly, management concluded that internal control over financial reporting was not effective as of December 31, 2024 due to these material weaknesses.
Under the Companies Law, the board of directors is required to appoint an internal auditor recommended by the audit committee. Our current internal auditor is Joseph Ginossar of Fahn Kanne, an affiliate of Grant Thornton International. The role of the internal auditor is to examine, among other things, whether the company’s actions comply with applicable law and proper business procedures. The internal auditor may not be an interested party, a director or an officer of the company, or a relative of any of the foregoing, nor may the internal auditor be our independent accountant or a representative thereof.
Further, there can be no guarantee that the Internal Investigation and subsequent inquiries revealed all instances of inaccurate disclosure or other deficiencies, or that other existing or past inaccuracies or deficiencies will not be revealed in the future. Our failure to correct these deficiencies or our failure to discover and address any other deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our ordinary shares and warrants, may be materially adversely affected.
We cannot assure you the measures we have been taking or that we take in the future will be sufficient to remediate the material weaknesses or that they will prevent future material weaknesses. Additional material weaknesses or failure to maintain effective internal control over financial reporting could cause us to fail to meet our reporting obligations as a public company and may result in a restatement of our financial statements for prior periods. In addition, these deficiencies could cause investors to lose confidence in our reported financial information, limiting our access to capital markets, adversely affecting our operating results and leading to declines in the trading price of our ordinary shares and warrants.
Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event our internal controls over financial reporting do not operate effectively. If we are not able to complete our initial assessment of our internal controls and otherwise implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the effectiveness of our internal controls over financial reporting. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in its periodic reports that are filed with the SEC. If we are unable to remediate our existing material weaknesses or identify additional material weaknesses and are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of the financial reports and the market price of our ordinary shares and warrants could be negatively affected, and we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources. For more information regarding these remedial actions and enhancement measures, see “Item 15. Controls and Procedures—Material Weaknesses in Internal Control Over Financial Reporting”.
If we are not able to remain in compliance with the continued listing standards of the Nasdaq, such failure could result in a delisting of our securities.
If we fail to satisfy the continued listing requirements of Nasdaq such as the corporate governance requirements or the minimum closing bid price requirement, or certain value-based requirements, Nasdaq will take steps to delist our securities. Such a delisting would likely have a negative effect on the price of the securities and would impair shareholders’ ability to sell or purchase the securities when they wish to do so as well as adversely affect our ability to issue additional securities and obtain additional financing in the future.
On May 20, 2024, we received a notification letter from the Listing Qualifications Department of Nasdaq stating that we were not in compliance with the requirements of Nasdaq Listing Rule 5250(c)(1) (the “Reporting Rule”) as a result of not having timely filed our annual report for the fiscal year ended December 31, 2023 (the “2023 Annual Report”) with the SEC. Under the Nasdaq rules, the Company had 60 calendar days, or until July 19, 2024, to file the 2023 Annual Report or to submit to Nasdaq a plan to regain compliance with the Nasdaq Listing Rules. On July 19, 2024, we submitted a plan of compliance to achieve and sustain compliance with the Reporting Rule. Following submission of this plan of compliance, Nasdaq determined to grant an exception to enable us to regain compliance with the aforesaid rule, subject to our filing of the 2023 Annual Report with the SEC on or before August 19, 2024. We initially filed the 2023 Annual Report on August 16, 2024.
On July 16, 2024, we received a deficiency notice from Nasdaq informing us that our ordinary shares have failed to comply with the $1.00 minimum bid price required for continued listing under Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Price Requirement”) based upon the closing bid price of our ordinary shares for the 30 consecutive business days prior to the date of the deficiency notice. The deficiency notice did not result in the immediate delisting of our ordinary shares from Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were given 180 calendar days from, or until January 13, 2025, to regain compliance with the Minimum Bid Price Requirement.
In addition, on August 23, 2024 we received a deficiency notice from Nasdaq informing us that we are no longer in compliance with Nasdaq Listing Rule 5450(b)(3) (the “Total Assets and Total Revenue Requirement”) because our 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 $50 million threshold for continued listing on The Nasdaq Global Market. In accordance with Nasdaq Listing Rule 5810(c)(2)(A), we had 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”). On October 9, 2024, we submitted the Compliance Plan to Nasdaq. On December 11, 2024, we received another notice from Nasdaq stating that the Compliance Plan did not evidence our ability to achieve near term compliance with continued listing requirements or sustain such compliance over an extended period of time. Accordingly, we were notified that our securities would be delisted from the Nasdaq Global Market, unless we request a hearing before the Nasdaq Hearings Panel (the “Panel”), which request would stay any further action by the Staff at least until the hearing process concludes. On December 18, 2024, we requested a hearing before the Panel. On January 14, 2025, we received a notice from Nasdaq that we did not regain compliance with the Minimum Bid Price Requirement prior to January 13, 2025 and that such failure to regain compliance with the Minimum Bid Price Requirement served as an additional basis for delisting our securities from the Nasdaq Global Market. Our hearing before the Panel was held on February 6, 2025.
On February 27, 2025, we received a notice from Nasdaq informing us that Nasdaq granted our request to continue our listing on the Nasdaq Stock Market, subject to (i) on or before March 5, 2025, our filing of an application to transfer our securities to the Nasdaq Capital Market and (ii) on or before March 31, 2025, our demonstrating compliance with the Minimum Bid Price Requirement and the continued listing requirement that we maintain either a minimum of $2,500,000 in shareholders’ equity or $35,000,000 market value of listed securities or $500,000 of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years, as set forth in Nasdaq Listing Rule 5550(b)(2) (“MVLS Rules”). On February 26, 2025, Nasdaq confirmed to us via email that we had regained compliance with the MVLS Rules. In addition, on March 4, 2025, we filed an application to transfer our securities to the Nasdaq Capital Market. On March 28, 2025, we effected a 1-for-10 reverse share split of our ordinary shares in an effort to regain compliance with the Minimum Bid Price Requirement and since then our ordinary shares closed above $1.00. Accordingly, we believe that we have regained compliance with the Minimum Bid Price Requirement however as of the date of this Annual Report Nasdaq has not confirmed that we have regained compliance. In addition, as of the date of this Annual Report, Nasdaq has not transferred our securities to the Nasdaq Capital Market.
No assurance can be given that we will be able to maintain compliance with the Total Assets and Total Revenue Requirement, the Minimum Bid Price Requirement, the MVLS Rules, or comply with the other standards that we are required to meet in order to maintain a listing on such exchange or that Nasdaq will transfer our securities to the Nasdaq Capital Market. Our failure to meet these requirements or transfer our securities to the Nasdaq Capital Market may result in our securities being delisted from Nasdaq.
In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our securities from dropping below the Minimum Bid Price Requirement or prevent future non-compliance with Nasdaq’s listing requirements. Additionally, if our securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on OTC Markets, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of HUB’s securities may be more limited than if it were quoted or listed on Nasdaq or another national securities exchange as the liquidity that Nasdaq provides would no longer be available to investors. Shareholders may be unable to sell their securities unless a market can be established or sustained, and we could face a lengthy process to re-list the ordinary shares, if at all.
We financed our operations and certain capital needs through various debt, convertible debt and equity issuances. Our existing and future debt obligations could impair our liquidity and financial condition. We are currently in default under certain of our debt obligations. If we are unable to negotiate a solution for the payment of our outstanding debt or otherwise meet our debt obligations, the lenders could foreclose on our assets which could cause us to curtail or cease operations or have an adverse impact on our business, results of operations and financial condition and the price of our ordinary shares.
We are currently in default under certain of our debt and convertible obligations, including overdue amortization payments totaling approximately $1.2 million having an aggregate principal amount of approximately $5.9 million (the “Outstanding Debt”). Upon an event of default under the Outstanding Debt, the holders of such debt may exercise all rights and remedies available under the terms of the notes or applicable laws.
We are currently in discussions with certain holders of the Outstanding Debt regarding possible solutions for the payment of the overdue amortization payments, including the possible extension of the outstanding obligations and, in some cases, extinguishing the entire loan. However, there can be no assurance that our discussions will be successful and, if we are not successful in finding an acceptable resolution to the existing default or the impending event of default, the holders of the Outstanding Debt will be able to seek judgement for the full amount due and may seek to foreclose on our assets, which would adversely affect our business or possibly force us to cease operations and commence liquidation proceedings. Our debt and financial obligations:
| ● | impair our liquidity; |
| ● | make it more difficult for us to satisfy our other obligations; |
| ● | require us to dedicate cash flow to payments on our debt and financial obligations, which reduces the availability of our cash flow to fund working capital, capital expenditures and other corporate requirements; |
| ● | imposes restrictions on our ability to incur other indebtedness, grant liens on our assets, and impedes us from obtaining additional financing in the future for working capital, capital expenditures, acquisitions and general corporate purposes; |
| ● | adversely affects our ability to enter into strategic transactions, public or private equity offerings, and similar agreements, or requires us to obtain the consent to enter into such transactions; |
| ● | makes us more vulnerable in the event of a downturn in our business prospects and limits our flexibility to plan for, or react to, changes in our industry and markets; and |
| ● | places us at a competitive disadvantage when compared to our competitors. |
The existing defaults could enable the lenders to foreclose on certain of our assets and could significantly diminish the market value and marketability of our ordinary shares and could result in the acceleration of other payment obligations or default under other contracts or possibly force us to cease operations and commence liquidation proceedings. In addition, the conversion of some or all of the Outstanding Debt into ordinary shares will dilute the ownership interests of our existing shareholders. Any sales in the public market of our ordinary shares issuable upon such conversion could adversely affect prevailing market prices of our ordinary shares. In addition, the existence of the Outstanding Debt may encourage short selling by market participants because the conversion of the Outstanding Debt would likely depress the price of our ordinary shares.
We will need to raise additional funds in the near future in order to execute our business plan and these funds may not be available to us when we need them. If we cannot raise additional funds when we need them, our business, prospects, financial condition and operating results could be negatively affected.
We require additional capital in the future in order to fund our growth strategy or to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances. We may also determine to raise equity or debt financing for other reasons. For example, in order to further enhance business relationships with current or potential customers or partners, we may issue equity or equity-linked securities to such current or potential customers or partners.
We may not be able to timely secure additional debt or equity financing on favorable terms, or at all. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked securities, our existing shareholders could experience significant dilution. In addition, any debt financing obtained by us in the future, whether in the form of a credit facility or otherwise, could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. In addition, because our decision to issue debt or equity in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts.
Risks Related to Our Business and Industry
An inability to attract new customers, retain existing customers and sell additional services to customers could adversely impact our revenue and results of operations.
Currently, we generate the majority of our revenues from our Professional Services division, which, among other services, enables enterprise clients to identify, manage and respond to cybersecurity threats with comprehensive, bundled solutions that provide a crucial layer of protection for organizations as well as a means to manage associated risk and compliance. More recently, we have focused on providing a secured data fabric solution to the financial services sector.
The ability to penetrate the secured data fabric market and maintain or increase our revenues and achieve profitability may be impacted by a number of factors, including our ability to attract new customers, retain existing customers and sell our solutions and professional services to additional customers. We may incur higher customer acquisition or retention costs as we seek to grow our customer base and expand our markets. Moreover, to the extent we are unable to retain and sell additional services to existing customers, including as part of our initiative to address existing accounts that have substandard margins, our revenue and results of operations may decrease. The loss of business from any of our major customers, whether by the cancellation of existing contracts, the failure to obtain renewal of these contracts or win new business or lower overall demand for our services, could materially and adversely impact our revenue and results of operations.
Actions that we have taken to reduce costs and rebalance investments may not result in anticipated savings or operational efficiencies, could result in total costs and expenses that are greater than expected, and could disrupt our business.
Beginning in March 2023, we began implementing a plan to reduce our workforce in order to become more efficient in our costs and to optimize facilities-related costs. We adopted this plan to improve operational efficiencies and align our investments more closely with our strategic priorities. We may incur additional expenses associated with the reduction in our workforce not contemplated by our plan such as employment litigation costs, which may have an impact on other areas of our liabilities and obligations and contribute to losses in future periods. We may not realize, in full or in part, the anticipated benefits and savings from our plan due to unforeseen difficulties, delays or unexpected costs. If we are unable to realize the expected operational efficiencies and cost savings, our operating results and financial condition would be adversely affected.
Furthermore, ongoing implementation of our plan and reductions in force may be disruptive to our operations. For example, our workforce reduction could result in attrition beyond planned staff reductions, increased difficulties in our day-to-day operations and reduced employee morale. If employees who were not affected by the few rounds of reduction in force seek alternative employment, we could incur unplanned additional expense to ensure adequate resourcing and fail to attract and retain qualified management, sales and marketing personnel who are critical to our business. Our failure to do so could harm our business and our future performance.
Our limited operating history in the field of secured data fabric and confidential computing makes it difficult to evaluate our business and prospects and increases the risk of your investment.
We began operations in 1984 as A.L.D. Advanced Logistics Development Ltd. (“ALD”) and are engaged in developing and marketing quality management software tools and solutions. HUB Cyber Security Ltd (today HUB Cyber Security TLV) was founded in 2017 by veterans of the elite Unit 8200 and Unit 81 of the Israeli Defense Forces, with vast experience and proven track records in setting up and commercializing start-ups in a multi-disciplinary environment. HUB merged with ALD in June 2021 and began trading on the Tel Aviv Stock Exchange (the “TASE”). Following the merger with ALD, we have developed unique technology and products in the field of confidential computing, which is a rapidly evolving industry. Further, significant portions of our growth have been through mergers with, and acquisitions, of other companies. As a result, there is limited information that investors can use in evaluating our business, strategy, operating plan, results, and prospects. While we currently derive most of our revenues from our Professional Services division, we intend to derive most of our revenues in the future from the delivery of technology and products, including our secured data fabric and confidential computing protection solutions. It is difficult to predict future revenues and appropriately budget for expenses, and we have limited insight into trends that may emerge and affect our business. To date, we have only derived a small portion of our historical revenues from technology and product-oriented solutions, including our secured data fabric and confidential computing solution. In addition, we have encountered and expect to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, such as the risks and uncertainties described herein. As a result, if we do not address these risks successfully, or if the assumptions we use to plan and operate our business are incorrect or change, our results of operations could differ materially from our expectations, and our business, financial condition, and results of operations could be materially adversely affected.
The network security market is rapidly evolving within the increasingly challenging cyber threat landscape. If our solutions fail to adapt to market changes and demands, sales may not continue to grow or may decline.
We offer a combined hardware and software solutions that provides end-to-end data protection across all phases of data storage and processing. If customers do not recognize the benefit of our solutions as a critical layer of an effective security strategy, our revenues may fail to grow or otherwise decline. Security solutions such as ours create a protective envelope around each data processing component to protect data while it is being processed. However, advanced cyber attackers are skilled at adapting to new technologies and developing new methods of gaining access to organizations’ sensitive data and technology assets, including those of IT and cybersecurity providers. The techniques they use to access or sabotage networks or applications or to disrupt operations (for example, via ransomware) change frequently and are frequently not recognized until launched against a target. In addition, the COVID-19 pandemic significantly impacted online behavior and the security of businesses and individuals, and we have observed a significant increase in cyber-attack activity since the beginning of the pandemic. We expect that our customers, and thereby our solutions, will face new and increasingly sophisticated methods of attack, particularly due to the increased use by attackers of tools and techniques that are designed to circumvent security controls, to avoid detection and to remove or obfuscate evidence. We face significant challenges in ensuring that our solutions effectively identify and respond to sophisticated attacks while avoiding disruption to our customers’ businesses. As a result, we must continually modify and improve our products and solutions in response to market and technology trends and evolvement, including obtaining interoperability with existing or newly introduced technologies and systems, to ensure we are meeting market needs and continuing to provide valuable solutions that can be deployed in a variety of IT environments. If we fail to identify and respond to new and increasingly complex methods of attack or to update our solutions to detect or prevent such threats in time to protect our customers’ critical business data, the integrity of our solutions and reputation, as well as our business and operating results, could suffer.
We cannot guarantee that we will be able to anticipate future market needs and opportunities or be able to develop or acquire product enhancements or new products or solutions to meet such needs or opportunities in a timely manner or at all. Additionally, we cannot guarantee that we will be able to comply with new regulatory requirements (see “Item 3.D. “Key Information—Risk Factors—Risks Related to Our Legal and Regulatory Environment—The dynamic regulatory environment around privacy and data protection may limit our offering or require modification of our products and services, which could limit our ability to attract new customers and support our existing customers and increase our operational expenses. We could also be subject to investigations, litigation, or enforcement actions alleging that we fail to comply with the regulatory requirements, which could harm our operating results and adversely affect our business.”). Furthermore, new technologies and solutions that may be introduced into the market may make our solutions obsolete, lowering the demand for our products and reducing our sales. Even if we are able to anticipate, develop and commercially introduce new features and solutions and ongoing enhancements to our existing solutions, there can be no assurance that such enhancements or new solutions will achieve widespread market acceptance. Delays in developing, completing or delivering new or enhanced solutions could cause our offerings to be less competitive, impair customer acceptance of our solutions and result in delayed or reduced revenue.
Our reputation and business could be harmed based on real or perceived shortcomings, defects or vulnerabilities in our solutions or if our customers experience security breaches, which could have a material adverse effect on our business, reputation and operating results.
Network security products, solutions and services such as ours are complex in development, design and deployment and may contain errors, bugs, misconfigurations or vulnerabilities that are potentially incapable of being remediated or detected until after their deployment, if at all. Any real or perceived errors, bugs, design failures, defects, vulnerabilities, misconfigurations in our solutions or untimely or insufficient remediation thereof, could cause our solutions to not meet specifications, be vulnerable to security attacks or fail to secure networks or applications which could negatively impact customer operations and consequently harm our business and reputation.
In addition, we may suffer significant adverse publicity and reputational harm if our solutions are associated, or are believed to be associated with, or fail to reasonably protect against, a security attack or a breach at a high-profile customer. Moreover, any actual or perceived cyber-attack, other security breach, exposure or theft of ours or our customers’ data, regardless of whether the breach or theft is attributable to the failure of our solutions, could:
| ● | adversely affect the market’s perception of our solutions, |
| ● | cause current or potential customers to look to our competitors for alternatives, |
| ● | require us to expend significant financial resources to analyze, correct or eliminate any vulnerabilities, and |
| ● | lead to investigations, litigation, fines and penalties, any of which could have a material adverse effect on our operations, financial condition and reputation. |
Furthermore, security breaches or defects in our solutions could result in loss or alteration of, or unauthorized access to, customers’ data and compromise our customers’ networks and applications that are secured by our solutions. If such a security breach results in the disruption or loss of availability, integrity or confidentiality of customers’ data, we could incur significant liability to our customers and to businesses or individuals whose information was being handled by our customers, in addition to regulatory agencies. There can be no assurance that limitation of liability, indemnification or other protective provisions that we attempt to include in our contracts would be applicable, enforceable or adequate in connection with a security breach, or would otherwise protect us from any such liabilities or damages with respect to any particular claim.
There is no guarantee that our solutions will be free of flaws or vulnerabilities. Our customers may also misuse or improperly install our solutions, which could result in vulnerabilities to a breach or theft of business data.
Competition in the market for secured data fabric and other technology solutions, in general, is intense. If we are unable to compete effectively, our business, financial condition and results of operations could be harmed.
The markets in which we operate are characterized by intense competition, constant innovation, rapid adoption of different technological solutions and services, and evolving security threats. We compete with a multitude of companies that offer a broad array of network security products and that employ different approaches and delivery models to address these evolving threats.
The data fabric market is rapidly evolving, with major players including Informatica, IBM, Oracle, Microsoft, Talend, Snowflake, and others offering a variety of solutions across integrated data platforms, cloud-native architectures, and data virtualization technologies. Established technology giants like IBM and Oracle leverage their deep expertise, broad tool portfolios, and strong industry presence, while newer entrants like Snowflake and Denodo emphasize cloud-native flexibility and real-time analytics. Companies like SAP and Palantir focus on niche strengths such as security and entity-based data organization. Open-source alternatives, such as Apache Atlas and Airflow, also pose a competitive threat by offering cost-effective and customizable solutions. However, the crowded field and overlapping capabilities create a highly competitive environment where innovation, integration, and scalability are key differentiators.
Our primary competitors in the network security industry consist of Cisco Systems, Inc., Juniper Networks, Inc., Fortinet Inc., Check Point Software Technologies Ltd. and Palo Alto Networks, Inc., as well as companies that have network security capabilities as part of broader IT solutions offerings, such as Microsoft Corporation, McAfee, Inc., International Business Machines Corporation, Hewlett-Packard Enterprise Company and FireEye, Inc. Competitors in the data fabric market include Atlan, IBM, Oracle, Talend, SAP, Informatica, Cloudera, TIBCO, Amazon Web Services and data.world.
The cybersecurity professional services markets are experiencing heightened competition driven by rapid technological advancements, evolving regulatory landscapes, and increasing client demands. Major players like IBM, Microsoft, SAP, Oracle, and SAS Institute are expanding their offerings through strategic acquisitions and the integration of AI and machine learning to provide comprehensive, cloud-based GRC solutions. This technological innovation enables more efficient risk management and compliance processes, allowing organizations to automate regulatory adherence reports and detect threats more effectively. Simultaneously, the cybersecurity consulting sector is witnessing a shift as clients may favor technology firms over traditional consultancies. This trend underscores the importance for traditional firms to demonstrate their unique value propositions.
In addition, IT security spending is spread across a wide variety of solutions and strategies, including, for example, endpoint, network and cloud security, vulnerability management and identity and access management. Organizations continually evaluate their security priorities and investments and may allocate their IT security budgets to other solutions and strategies and may not adopt or expand use of our solutions. Accordingly, we may also compete for budgetary reasons with additional vendors that offer threat protection solutions in adjacent or complementary markets to ours.
Most of our competitors have greater financial, personnel and other resources than we have, which may limit our ability to effectively compete with them. We also expect to continue to face additional competition as new participants enter the market or extend their portfolios into related technologies. Current and future participants may also be able to respond more quickly to new or emerging technologies and changes in customer demands and to devote greater resources to the development, promotion and sale of their products than we can. Larger companies with substantial resources, brand recognition and sales channels may form alliances with or acquire competing security solutions and emerge as significant competitors.
Competition may result in lower prices or reduced demand for our solutions and a corresponding reduction in our ability to recover costs, which may impair our ability to achieve, maintain and increase profitability. Furthermore, the dynamic market environment poses a challenge in predicting market trends and expected growth. We cannot assure you that we will be able to implement our business strategy in a manner that will allow us to be competitive. If any of our competitors offer products or services that are more competitive than ours, we could lose market share and our business, financial condition and results of operations could be materially and adversely affected as a result.
Our ability to introduce new products, features, integrations and enhancements is dependent on adequate research and development resources.
To remain competitive, we must maintain adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of the market. If we are unable to offer high level and new services in our Professional Services division, develop new products, features, integrations and enhancements internally due to certain constraints, such as employee turnover, a lack of management ability or a lack of other research and development resources, our business may be harmed. Moreover, research and development projects can be technically challenging and expensive. The nature of these research and development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we are able to offer compelling features, integrations and enhancements and generate revenue, if any, from such investment. If we expend a significant amount of resources on research and development and our efforts do not lead to the successful introduction or competitive improvement of products, features, integrations and enhancements, it could harm our business, results of operations and financial condition. For example, we are in the process of developing our “single chip” solution, which is a complicated process and there is no assurance that we will be able to successfully release this solution as planned. In addition, our failure to maintain adequate research and development resources or to compete effectively with the research and development programs of our competitors may harm our business, results of operations and financial condition.
If we are unable to acquire large enterprise customers for our security solutions or sell additional products and services to our existing customers, our future revenues and operating results will be harmed.
Our success and continued growth will depend in part on our ability to convince large enterprises to adopt our technologies and solutions and selling incremental or new solutions to existing customers. If we are unable to succeed in such efforts, we will likely be unable to generate revenue growth at desired or projected rates.
In addition, competition in the industry may lead us to acquire fewer new customers or result in our providing more favorable commercial terms to new or existing customers. Macro-economic effects may also affect our ability to maintain our customer base and expand it.
Additional factors that impact our ability to acquire new customers or sell additional products and services to our existing customers include the consumption of their past purchases, a reduction in the perceived need for network security, the size of our prospective and existing customers’ IT budgets, the utility and efficacy of our solution offerings, whether proven or perceived, changes in our pricing models, and general economic conditions. These factors may have a material negative impact on future revenues and operating results.
We currently have and target many customers that are large corporations and government entities, which are subject to a number of challenges and risks, such as increased competitive pressures, administrative delays and additional approval requirements.
Many of our existing and potential customers are large corporations and government agencies who store sensitive data. Selling to large corporations and government entities can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that HUB will complete a sale. Large enterprise customers frequently demand terms of sale which are less favorable than the prevailing market terms. In addition, government demand and payment for our products and services may be impacted by public sector budgetary cycles and funding authorizations, funding reductions, government shutdowns or delays, such that any of these occurrences may adversely affect public sector demand for our products. Finally, some large corporations and government entities require products such as ours to be certified by industry-approved security agencies or regulatory bodies that govern them as a pre-condition of purchasing them. We cannot be certain that any certificate or regulatory approval will be granted or that we would be able to satisfy the technological and other requirements to maintain certifications or regulatory approvals. The loss of any of our existing certificates or regulatory approvals, or the failure to obtain new ones, could result in the imposition of various penalties, reputational harm, loss of existing customers or could deter new and existing customers from purchasing our solutions, any of which could adversely affect our business, operating results or financial condition.
The market’s acceptance of secured data fabric and confidential computing as implemented by our solutions is not fully proven, is evolving and this market may develop more slowly than or differently from our expectations.
The market adoption of our solutions is relatively new, rapidly evolving and not fully proven. Accordingly, it is difficult to predict customer adoption and renewals and demand for our products and services, or the future growth rate, expansion, longevity and the size of the market for our products. Our ability to penetrate our target market depends on a number of factors, including: our ability to educate our target customers of the benefits of our solutions, the cost, performance and perceived value associated with our solutions and the extent to which our solutions improve network security and are easy to use for our customers. If our solutions do not achieve market acceptance, or there is a reduction in demand caused by decreased customer acceptance, technological challenges, weakening economic conditions, privacy, data protection and data security concerns, governmental regulation, competing technologies and products or decreases in information technology spending or otherwise, the market for our solutions may not continue to develop or may develop more slowly than we expect, which could adversely affect our business, financial condition and results of operations.
We may fail to fully execute, integrate or realize the benefits expected from acquisitions, which may require significant management attention, disrupt our business and adversely affect our results of operations.
As part of our business strategy and in order to remain competitive, we continually evaluate acquiring or making investments in complementary companies, products or technologies. We may not be able to find suitable acquisition candidates or complete such acquisitions on favorable terms. We may incur significant expenses, divert employee and management time and attention from other business-related tasks and our organic strategy and incur other unanticipated complications while engaging with potential target companies where no transaction is eventually completed.
If we do complete acquisitions, it may not ultimately strengthen our competitive position or achieve our goals or expected growth, and any acquisitions we complete could be viewed negatively by our customers or experience unexpected competition from market participants. Any integration process may require significant time and resources. HUB may not be able to manage the process successfully and may experience a decline in our profitability as it incurs expenses prior to fully realizing the benefits of the acquisition. We acquired four companies and certain assets within the past three years and greatly increased our number of employees and fields of operation. The smooth integration into HUB of the operations of these companies and of their employees is an important part of our sales and growth plan. The staff of the first company that was acquired, ALD Advanced Logistics Development Ltd., is the foundation upon which HUB will build our Professional Services business, and the strengths of the second acquired company, COMSEC Ltd, and the third one Qpoint Technologies Ltd. (“QPoint”), in marketing, support, sales and cybersecurity consulting are the foundation of our sales efforts. Finally, we believe that our January 2025 acquisition of BST, the fourth company, has the potential to solidify our position as a leading provider of secured data fabric solutions in the future, offering a critical safeguard for banks, financial institutions and other industries navigating an increasingly complex regulatory and cybersecurity environment. We believe that the above mentioned acquisitions will also give us direct access to a large number of blue-chip customers around the world, which can save us a significant amount of time that would be needed to penetrate these markets organically. Our failure to smoothly integrate the operations and employees of these companies into our goals and plans will reduce our prospects for growth. There is no assurance that the acquired companies, including their personnel and operations, can be successfully integrated with our existing employees and operations.
We could also expend significant cash and incur acquisition-related costs and other unanticipated liabilities associated with the acquisition, the product or the technology, such as contractual obligations, potential security vulnerabilities of the acquired company and our products and services and potential intellectual property infringement. For example, during 2023, one of Comsec’s subsidiaries, Comsec Distribution, had financial, operational and commercial difficulties, cessation of sales starting July 2023, layoffs and departures of employees so that as of December 31, 2023 there were no business activities in Comsec Distribution. In addition, we acquired assets of Legacy Technologies Gmbh (“Legacy”), a European cyber firm, however we have yet to recognize any revenues or acquire new customers from the Legacy assets and it remains extremely uncertain as to when, if at all, we may be able to do so. In addition, any acquired technology or product may not comply with legal or regulatory requirements and may expose us to regulatory risk and require us to make additional investments to make them compliant. Due to the significance of the BST Merger, we are also required to amend the registration statement on Form F-1 that we recently amended and filed on December 31, 2024, to include certain historical and pro forma financial statements required under Regulation S-X under the Securities Act which we have not yet completed and this could result in demands by investors for us to pay liquidated damages under registration rights agreements with such investors.
We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges and tax liabilities. We could become subject to legal claims following an acquisition or fail to accurately forecast the potential impact of any claims. Any of these issues could have a material adverse impact on our business and results of operations.
The market for our solutions may not continue to grow.
Continued growth of the industries in which we compete will depend, to a great extent, upon:
| ● | the adoption of data security measures for data encryption and data loss-prevention technologies; |
| ● | continued access to mobile application program interface, applications and application stores; |
| ● | expansion of government regulation of the internet and governmental and non-governmental requirements and standards with respect to data security and privacy; |
| ● | general economic conditions in the markets in which we and our customers operate; |
| ● | the continued expansion of internet usage and the number of organizations that allow for remote working; |
| ● | the continued adoption of “cloud” infrastructure by organizations; |
| ● | the ability of the infrastructures implemented by organizations to support an increasing number of users and services; |
| ● | the continued development of new and improved services for implementation across the internet and between the internet and intranets; and |
| ● | the continued media attention on penetration of supposedly secure networks by cyber attackers and other malicious intruders. |
A failure or slowdown in one or more of the trends listed above may delay the purchase by large organizations of network security equipment and may reduce demand for our products.
Our operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.
Our results of operations have fluctuated in the past and may vary significantly in the future. As such, historical comparisons of our operating results may not be meaningful. Accordingly, the results of any fiscal year should not be relied upon as an indication of future performance. Our financial results may fluctuate as a result of a variety of factors, many of which are outside of our control and may not fully reflect the underlying performance of our business. These fluctuations could adversely affect our ability to meet expectations or those of securities analysts or investors. If we do not meet these expectations for any period, the value of our business and our securities, or those of the combined company, could decline significantly. Factors that may cause these quarterly fluctuations include, without limitation, those listed below:
| ● | The timing of revenues generated and/or recognizable in any period; |
| ● | Pricing changes we may adopt to drive market adoption or in response to competitive pressure; |
| ● | Loss of customers, our ability to retain existing customers and attract new customers; |
| ● | Our ability to develop, introduce and sell services and products in a timely manner that meet customer requirements; |
| ● | Disruptions in our sales efforts or termination of our relationship with suppliers or subcontractors; |
| ● | Delays in customers’ purchasing cycles or deferments of customers’ purchases in anticipation of new services or updates from us or our competitors; |
| ● | Fluctuations in demand pressures for our products; |
| ● | The timing and rate of broader market adoption of our solutions; |
| ● | Any change in the competitive dynamics of our markets, including consolidation of competitors, regulatory developments and new market entrants; |
| ● | Changes in the source, cost or availability of hardware components we use; |
| ● | Adverse litigation, judgments, settlements or other litigation-related costs, or claims that may give rise to such costs; and |
| ● | General economic, industry and market conditions, including trade disputes. |
Our management team has limited experience managing a U.S. listed public company.
Some of our management team has limited experience managing a U.S. listed publicly traded company, interacting with U.S. public company investors and complying with the increasingly complex laws pertaining to U.S. listed public companies. Our management team may not successfully or efficiently manage their relatively new roles and responsibilities. Our transition to being a U.S. listed public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and operating results.
Due to our limited resources, we may be forced to focus on a limited number of commercial opportunities which may force us to pass on opportunities that could have a greater chance of success.
Due to our current cash situation and our overall limited resources and capabilities, we will have to decide to focus on pursuing a limited number of commercial opportunities. As a result, we may forego or delay pursuit of certain business opportunities that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on profitable market opportunities. Additionally, our spending on research and development programs may not yield any commercially viable products. If we make incorrect determinations regarding the viability or market potential of any or all of our products and offerings or misread trends in the cybersecurity industry, our business, prospects, financial condition and results of operations could be materially adversely affected.
Our business relies on the performance of, and we face stark competition for, highly skilled personnel, including our management and other key employees, and the loss of one or more of such personnel or of a significant number of our team members or the inability to attract and retain executives and qualified employees we need to support our operations and growth, could harm our business.
Our success and future growth depend upon the continued services of our management team and other key employees, including in companies we acquired. Our leadership team are critical to our overall management, as well as the continued development of our solutions, culture and strategic direction. From time to time, there may be changes in our management team resulting from the hiring or departure of executives and key employees, which could disrupt our business. Though sometimes new management can contribute and provide a new beneficial approach, we are currently conducting a global search for a permanent Chief Financial Officer and we have recently made other significant changes to our executive management team in an effort to reduce costs and increase efficiency. We are also dependent on the continued service of our existing engineering team because of the complexity of our product and solutions. We may terminate any employee’s employment at any time, with or without cause, and any employee may resign at any time, with or without cause, subject only to the notice periods prescribed by their respective agreements if done without cause. The loss of one or more members of our senior management or key employees could harm our business, and we may not be able to find adequate replacements. There is no assurance that we will be able to retain the services of any members of our senior management or key employees.
In addition, we must attract and retain new highly qualified personnel in order to execute our growth plan. We have had difficulty quickly filling certain open positions in the past and expect to have significant future hiring needs. Competition is intense, particularly in Israel and other areas in which we have offices, for engineers experienced in designing and developing IT products, research and development specialists, providers of professional services in the cyber field and experienced sales professionals. In order to continue to access top talent, we may continue to grow our footprint of office locations, which may add to the complexity and costs of our business operations. From time to time, we have experienced, and expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have and we may not succeed in recruiting additional experienced or professional personnel, retaining personnel or effectively replacing current personnel who may depart with qualified or effective successors. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees, or we, have breached their legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, experiences significant volatility, such that prospective employees believe there is limited upside to the value of our equity awards, it may adversely affect our ability to offer competitive compensation packages and thereby adversely impact our ability to recruit and retain key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects would be harmed. In addition, as a result of the intense competition for highly qualified personnel, the high-tech industry has also experienced and may continue to experience significant wage inflation. Accordingly, our efforts to attract, retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability.
We enter into non-competition agreements with our employees in certain jurisdictions. These agreements prohibit our employees from competing with us or working for our competitors for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which those employees work, and it may be difficult for us to restrict our competitors from benefiting from the expertise our former employees developed while working for us. For example, Israeli labor courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer that have been recognized by the courts, such as the protection of a company’s trade secrets or other intellectual property.
We will be educating our target market on the benefits of our technology and the need for our products, and such education will be expensive and time consuming.
Our technology is new and not widely understood among our customer base. We will have to educate our customers of the benefits of our technology and the difference between our solution and other available solutions. Educating customers is frequently time consuming and expensive and requires expertise, patience and a delicate touch. There can be no assurance that we will be able to educate the market of the benefits of our solution, or that potential customers will understand or appreciate the superior performance of our products. Delays in the market’s understanding of our products will delay the expected pace of our growth in revenues.
Prolonged economic uncertainties or downturns in certain regions or industries could materially adversely affect our business.
Our business depends on our current and prospective customers’ ability and willingness to invest money in network security, which in turn is dependent upon their overall economic health. Negative economic conditions in the global economy or certain regions, including conditions resulting from financial and credit market fluctuations, exchange rate fluctuations, or inflation, could cause a decrease in corporate spending on network security solutions and services. Other matters that influence consumer confidence and spending, including political unrest, public health crises, terrorist attacks, armed conflicts (such as the conflict between Russia and Ukraine) and natural disasters could also negatively affect our customers’ spending on our solutions and services. A significant portion of our business operations are concentrated in core geographic areas such as the Middle East and Europe, and if they were to experience economic downturns, this could severely affect our business operations. In addition, some of our business operations depend on emerging markets that are less resilient to fluctuations in the global economy. In 2024, we generated 94% of our revenues from Israel, 4% of our revenues from Europe and less than 2% from the rest of the world.
In addition, a significant portion of our revenue is generated from customers in the financial services industry, including banking and insurance. Negative economic conditions may cause customers generally, and in that industry in particular, to reduce their IT spending. Customers may delay or cancel IT projects perceived to be discretionary, choose to focus on in-house development efforts or seek to lower their costs by renegotiating contracts. Further, customers may be more likely to make late payments in worsening economic conditions, which could lead to increased collection efforts and require us to incur additional associated costs to collect expected revenues. If the economic conditions of the general economy or industries in which we operate worsen from present levels, our results of operation could be adversely affected.
Our sales and operations in international markets expose us to operational, financial and regulatory risks.
We currently offer our solutions in several countries and intend to continue to expand our international operations. While we have committed resources to expanding our international operations and sales channels, these efforts may not be successful. International operations are subject to a number of other risks, including:
| ● | Exchange rate fluctuations; |
| ● | Political and economic instability, particularly in emerging markets; |
| ● | Global or regional health crises, such as the COVID-19 pandemic or any resurgence thereof; |
| ● | Potential for violations of anti-corruption laws and regulations, such as those related to bribery and fraud; |
| ● | Less effective protection of intellectual property; |
| ● | Difficulties and costs of staffing and managing foreign operations, including recruiting and retaining talented and capable employees; |
| ● | Import and export laws, including technology import and export license requirements, and the impact of tariffs; |
| ● | Trade restrictions, including as a result of boycotts, trade disputes or other disputes between countries or regions in which we sell and operate; |
| ● | Difficulties in complying with a variety of foreign laws and legal standards and changes in regulatory requirements; |
| ● | Difficulties in collecting receivables from foreign entities or delayed revenue recognition; |
| ● | The introduction of exchange controls and other restrictions by foreign governments; and |
| ● | Changes in local tax and customs duty laws or changes in the enforcement, application or interpretation of such laws. |
There is no assurance that the foregoing factors will not have a material adverse effect on our future revenues and, as a result, on our business, operating results and financial condition.
Changes in tax laws or exposure to additional income tax liabilities could affect our future profitability.
Factors that could materially affect our future, effective tax rates, include but are not limited to:
| ● | Changes in tax laws or the regulatory environment; |
| ● | Changes in accounting and tax standards or practices; |
| ● | Changes in the composition of operating income by tax jurisdiction; and |
| ● | our operating results before taxes. |
Because we do not have a long operating history and have significant expansion plans, our effective tax rate may fluctuate in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded, changes in the composition of earnings in countries with differing tax rates, changes in deferred tax assets and liabilities, or changes in tax laws.
Forecasting our estimated annual effective tax rate is complex and subject to uncertainty, and there may be material differences between forecasted and actual tax rates.
We conduct business in several countries and is subject to taxation in many of such jurisdictions. The taxation of HUB’s business is subject to the application of multiple and sometimes conflicting tax laws and regulations, as well as multinational tax conventions. HUB’s effective tax rate will depend upon the geographic distribution of its worldwide earnings or losses, the tax regulations and tax holidays in each geographic region, the availability of tax credits and the effectiveness of its tax planning strategies. The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws themselves are subject to change as a result of changes in fiscal policy, changes in legislation and the evolution of regulations and court rulings. Consequently, tax authorities may impose tax assessments or judgments against HUB that could materially impact its tax liability and effective income tax rate.
The Organization for Economic Co-operation and Development (“OECD”), an international association comprised of 37 countries, including the United States, has issued and continues to issue guidelines and proposals that change various aspects of the existing framework under which HUB’s tax obligations are determined in many of the countries in which it does business. Due to HUB’s international business activities, any changes in the taxation of such activities could increase its tax obligations in many countries and may increase its worldwide effective tax rate.
Fluctuations in currency exchange rates could harm our operating results and financial condition.
We offer our solutions to customers globally and have sales in several countries. Although a portion of our cash generated from revenue is denominated in U.S. dollars, most of our revenues and operating expenses are incurred in Israel and denominated in Israeli New Shekels. As a result, our consolidated U.S. dollar financial statements are subject to fluctuations due to changes in exchange rates as our revenues and operating expenses are translated from NIS into U.S. dollars. If the significant fluctuation in the value of the U.S. dollar relative to the NIS will continue, it will have an impact on the U.S. dollar amount of our future operating expenses. Our financial results are also subject to changes in exchange rates that impact the settlement of transactions in non-local currencies. Because we conduct business in currencies other than U.S. dollars but report our results of operations in U.S. dollars, it also faces re-measurement exposure to fluctuations in currency exchange rates, which could hinder our ability to predict future results and earnings and could materially and adversely impact our financial condition and results of operations. We evaluate periodically the various currencies to which we are exposed and take selective hedging measures to reduce the potential adverse impact from the appreciation or the devaluation of our non-U.S. dollar-denominated expenses, as appropriate and as reasonably available to us. There can be no assurances that our hedging activities will be successful in protecting us from adverse impacts from currency exchange rate fluctuations.
Risks Related to Our Systems and Technology
As a company that seeks to become a comprehensive secured data fabric provider and confidential computing provider, if any of our systems, our customers’ cloud or on-premises environments, or our internal systems are breached or if unauthorized access to customer or third-party data is otherwise obtained, public perception of our business may be harmed, and we may lose business and incur losses or liabilities.
The success of our security solution capturing significant market share depends in part on the market’s perception of the integrity of the HUB solution in securely storing, transmitting and processing data. Because our solutions and services are used by our customers to protect and manage large data sets that often contain proprietary, confidential, and sensitive information (it may include in some instances personal or identifying information and personal health information), components protected by our products will be perceived by computer hackers as an attractive target for attacks, and our software could face threats of unintended exposure, exfiltration, alteration, deletion or loss of data. Additionally, because some of our customers use our solutions to store, transmit and otherwise process proprietary, confidential, or sensitive information and complete mission-critical tasks, they have a lower risk tolerance for security vulnerabilities in our solutions and services than for vulnerabilities in other, less critical, software products and services.
We, and the third-party vendors upon which we rely, have experienced, and may in the future experience, cybersecurity threats, including threats or attempts to disrupt our information technology infrastructure and unauthorized attempts to gain access to sensitive or confidential information. We and our third-party vendors’ technology systems may be damaged or compromised by malicious events, such as cyber-attacks (including computer viruses, malicious and destructive code, phishing attacks, and denial of service attacks), physical or electronic security breaches, natural disasters, fire, power loss, telecommunications failures, personnel misconduct, and human error. Such attacks or security breaches may be perpetrated by internal bad actors, such as employees or contractors, or by third parties (including traditional computer hackers, persons involved with organized crime, or foreign state or foreign state-supported actors). Cybersecurity threats can employ a wide variety of methods and techniques, which may include the use of social engineering techniques, are constantly evolving, and have become increasingly complex and sophisticated; all of which increase the difficulty of detecting and successfully defending against them.
Furthermore, because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until after they are launched against a target, we and our third-party vendors may be unable to anticipate these techniques or implement adequate preventative measures. Although prior cyber-attacks directed at us have not had a material impact on our financial results, and we are continuing to bolster our threat detection and mitigation processes and procedures, we cannot guarantee that future cyber-attacks against our own computer components or components owned by third parties that are protected by our solutions, will not have a material impact on our business or financial results.
Many governments have enacted laws requiring companies to provide notice of data security incidents involving certain types of data, including personal data. In addition, most of our customers contractually require us to notify them of data security breaches. If an actual or perceived breach of security measures, unauthorized access to our system or the systems of the third-party customers that are protected by our solutions, we may face direct or indirect liability, costs, or damages, contract termination, our reputation in the industry and with current and potential customers may be compromised, our ability to attract new customers could be negatively affected and our business, financial condition, and results of operations could be materially and adversely affected.
Further, a successful hacking of systems that are protected by our solutions could result in the loss of information; significant remediation costs; litigation, disputes, regulatory action, or investigations that could result in damages, material fines, and penalties; indemnity obligations; interruptions in the operation of our business, including our ability to provide new product features, new solutions, or services to our customers; and other liabilities. Moreover, our remediation efforts may not be successful. Any or all of these issues, or the perception that any of them have occurred, could negatively affect our ability to attract new customers, cause existing customers to terminate or not renew their agreements, hinder our ability to obtain and maintain required or desirable cybersecurity certifications and result in reputational damage, any of which could materially adversely affect our results of operations, financial condition and prospects. As our focus and business continue to shift towards cybersecurity and managing sensitive and large amounts of data, the risk will intensify as more of a premium is placed on our cybersecurity efforts. There can be no assurance that any limitations of liability provisions in our license arrangements with customers or in our agreements with vendors, partners, or others would be enforceable, applicable, or adequate or would otherwise protect us from any such liabilities or damages concerning any particular claim.
We maintain different types of insurance, subject to applicable deductibles and policy limits, but our insurance may not be sufficient to cover the financial, legal, business, or reputational losses that may result from an interruption or breach of our systems. We also cannot be sure that our existing general liability insurance coverage and coverage for cyber liability or errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could result in our business, financial condition and results of operations being materially adversely affected. In addition, our cybersecurity risk could be increased because of the ongoing military conflicts between Israel and Hamas and other terrorist organizations and Russia and Ukraine and the related sanctions imposed against Russia. We implement continuous multi-layered cybersecurity protection for our operations and resources and have an internal professional group of cybersecurity services to ensure protection against attacks by state actors, including any new cybersecurity threats that may be presented by the unfolding conflicts between Israel and Hamas and other terrorist organizations and Russia and Ukraine.
We incorporate artificial intelligence (AI) and machine learning (ML) into some of our products. This technology is new and developing and may present both compliance and reputational risks.
We rely on AI and machine learning in the operation of some of our products or solutions. The AI models that we use are trained using various data sets. If our AI models are incorrectly designed or implemented, they may produce inaccurate or unreliable results, negatively impacting the performance and reliability of our products or solutions. The effectiveness of our AI models depends on the quality and completeness of the data used for training. Any malfunction or unexpected behavior in our AI-driven systems could disrupt our operations and potential loss of revenue. Additionally, failures in the performance of our AI models could damage our reputation, erode customer trust, and result in loss of business and negative publicity.
Undetected defects and errors may increase our costs and impair the market acceptance of our products and solutions.
Our products and solutions have occasionally contained, and may in the future contain, undetected defects or errors, especially when first introduced or when new versions are released, due to defects or errors that we fail to detect, including in components supplied to us by third parties. In addition, because our customers integrate our products into their networks with products from other vendors, it may be difficult to identify the product that has caused the problem in the network. Regardless of the source of these defects or errors, we will then need to divert the attention of our engineering personnel from our product development efforts to detect and correct these errors and defects. In the past, we have not incurred significant warranty or repair costs, nor have we been subject to liability claims for material damages related to product errors or defects, nor have we experienced any material lags or delays as a result thereof. However, there can be no assurance that these costs, liabilities and delays will continue to be immaterial in the future. Any insurance coverage that we maintain may also not provide sufficient protection should a claim be asserted. Moreover, the occurrence of errors and defects, whether caused by our products or the components supplied by another vendor, may result in significant customer relations problems, and injure our reputation, thereby impairing the market acceptance of our products.
Interruption or failure of our information technology and communications systems could impact our ability to effectively provide our products and services.
The availability and effectiveness of our services depend on the continued operation of information technology and communications systems. Our systems will be vulnerable to damage or interruption from, among others, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, viruses, denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to harm our systems. We utilize reputable third-party service providers or vendors for all of our IT and communications systems, and these providers could also be vulnerable to harms similar to those that could damage our systems, including sabotage and intentional acts of vandalism causing potential disruptions. Some of our systems will not be fully redundant, and our disaster recovery planning cannot account for all eventualities. Any problems with our third-party cloud hosting providers could result in lengthy interruptions in our business. In addition, our services and functionality consist of highly technical and complex technology which may contain errors or vulnerabilities that could result in interruptions in our business or the failure of our systems.
We incorporate third-party technologies in our products, which makes us dependent on the providers of these technologies and exposes us to potential intellectual property claims.
Our products and services contain certain technologies that are purchased and/or licensed from other companies. Third-party developers or owners of such technologies may be unwilling to sell to us or enter into, or renew, license agreements with us for the technologies that we need on acceptable terms, or at all. If we cannot purchase these products or obtain licenses for these technologies, we could lose a competitive advantage compared to our competitors who are able to license these technologies. In addition, when we obtain licenses for third-party technologies, we may have little or no ability to determine in advance whether the technology infringes the intellectual property rights of others. Our suppliers and licensors may not be required or may not be able to indemnify us if claims of infringement are asserted against us, or they may be required to indemnify us only up to a maximum amount, and we would be responsible for any costs or damages above such maximum amount. Any failure to obtain licenses for intellectual property or any exposure to liability as a result of incorporating third-party technologies into our products could materially and adversely affect our business, results of operations, and financial condition.
If our products do not effectively interoperate with our customers’ existing or future IT infrastructures, implementations of our products could be delayed or canceled, which could harm our business.
Our products must effectively interoperate with our customers’ existing or future IT infrastructures, which often have different specifications, utilize multiple protocol standards, deploy products from multiple vendors and contain multiple generations of products that have been added over time. If we find errors in the existing software or defects in the hardware used by our customers’ infrastructure or problematic network configurations or settings, we may need to modify our software or hardware so that our products will interoperate with our customers’ infrastructure and business processes.
We may not deliver or maintain interoperability quickly or cost-effectively, or at all. These efforts require capital investment and engineering resources. If we fail to maintain compatibility of our products with our customers’ internal networks and infrastructures, our customers may not be able to fully utilize our services and products, and we may, among other consequences, lose or fail to increase our market share and number of customers and experience reduced demand for our products, and our business, financial condition and results of operations could be materially adversely affected.
Risks Related to Our Intellectual Property
Our proprietary rights may be difficult to enforce, which could enable others to copy or use aspects of our products without compensating us.
We rely primarily on patent, trademark, copyright and trade secrets laws and confidentiality procedures and contractual provisions to protect our technology. As of the date of this Annual Report, we own six patents registered in the U.S. We have a further patent application pending in the United States which was recently allowed. Patents may not issue from our pending applications, and the claims eventually allowed on any patents may not be sufficiently broad to protect our technology or products. Any issued patents may be challenged, invalidated or circumvented, and any rights granted under these patents may not actually provide adequate defensive protection or competitive advantages to us. Patent applications in the United States are typically not published until at least 18 months after filing or an earlier priority date, or, in some cases, not at all, and publications of discoveries in industry-related literature lag behind actual discoveries. We cannot be certain that we were the first to make the inventions claimed in our pending patent applications or that we were the first to file for patent protection. Additionally, the process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, recent changes to the patent rules in the United States may bring into question the validity of certain software patents and may make it more difficult and costly to prosecute patent applications. As a result, we may not be able to obtain adequate patent protection or effectively enforce our issued patents.
Despite our efforts to protect our intellectual proprietary rights, unauthorized parties may attempt to copy aspects of our products or obtain and use information that we regard as proprietary. We generally enter into confidentiality or license agreements with our employees, consultants, vendors and customers and generally limit access to and distribution of our proprietary information. However, we cannot guarantee that the steps taken by us will prevent misappropriation of our technology. Policing unauthorized use of our technology or products is difficult. In addition, the laws of some foreign countries do not protect proprietary rights to as great an extent as the laws of the United States or Israel, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United States or Israel. From time to time, legal action by us may be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results and financial condition. If we are unable to protect our proprietary rights (including aspects of our software and products protected other than by patent rights), we may find ourselves at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create the innovative products that we seek to create.
We may not be able to adequately protect or enforce our intellectual property rights or prevent unauthorized parties from copying or reverse engineering our products or technology. Our efforts to protect and enforce our intellectual property rights and prevent third parties from violating our rights may be costly.
The success of our products and business depends in part on our ability to obtain patents and other intellectual property rights and maintain adequate legal protection for our products. We rely on a combination of patent, service mark, and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights, all of which provide only limited protection.
We cannot be sure that any patents will be issued with respect to our currently pending patent applications or that any trademarks will be registered with respect to our currently pending applications in a manner that provides adequate defensive protection or competitive advantages, if at all, or that any patents issued to us will not be challenged, invalidated or circumvented. We may file for patents and trademarks in the United States and other international jurisdictions, but such protections may not be available in all countries in which we operate or in which we seek to enforce our intellectual property rights, or may be difficult to enforce in practice. For example, the legal environment relating to intellectual property protection in certain emerging market countries where we may operate in the future is relatively weaker, often making it difficult to create and enforce such rights. Our currently-registered intellectual property and any intellectual property that may be issued or registered, as applicable, in the future with respect to pending or future applications may not provide sufficiently broad protection or may not prove to be enforceable in actions against alleged infringers. We cannot be certain that the steps we have taken will prevent unauthorized use of our technology or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive to or infringe our intellectual property.
Protecting against the unauthorized use of our intellectual property, products and other proprietary rights is expensive and difficult, particularly internationally. We believe that our intellectual property is foundational in the area of confidential computing and we intend to enforce the intellectual property portfolio that we have built. Unauthorized parties may attempt to copy or reverse engineer our technology or certain aspects of our products that we consider proprietary. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to prevent unauthorized parties from copying or reverse engineering our products or technology to determine the validity and scope of the proprietary rights of others or to block the importation of infringing products into the U.S., Israel or other jurisdictions in which we seek to protect our intellectual property rights.
Any such litigation, whether initiated by us or a third party, could result in substantial costs and diversion of management resources, either of which could adversely affect our business, operating results and financial condition. Even if we obtain favorable outcomes in litigation, we may not be able to obtain adequate remedies, especially in the context of unauthorized parties copying or reverse engineering our products or technology.
Effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our products are available and competitors based in other countries may sell infringing products in one or more markets. Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage, and our business, financial condition and results of operations could be materially adversely affected.
Our intellectual property applications, including patent applications, may not be approved or granted or may take longer than expected to be approved, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
We cannot be certain that we are the first inventor of the subject matter to which we have filed a particular patent application or if we are the first party to file such a patent application. The process of securing definitive patent protection can take five or more years. If another party has filed a patent application to the same subject matter as we have, we may not be entitled to some or all of the protection sought by the patent application. We also cannot be certain whether the claims included in a patent application will ultimately be allowed in the applicable issued patent or the timing of any approval or grant of a patent application. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. In addition, if our competitors may design around our registered or issued intellectual property, our business, financial condition and results of operations could be materially adversely affected.
Third-party claims that we are infringing intellectual property, whether successful or not, could subject us to costly and time-consuming litigation or expensive licenses, and our business could be adversely affected.
Participants in our industry typically protect their technology, especially embedded software, through copyrights and trade secrets in addition to patents. As a result, there is frequent litigation based on allegations of infringement, misappropriation or other violations of intellectual property rights. We may in the future receive inquiries from other intellectual property holders and may become subject to claims that we infringe their intellectual property rights, particularly as we expand our presence in the market, expand to new use cases and face increasing competition. In addition, parties may claim that the names and branding of our products infringe their trademark rights in certain countries or territories. If such a claim were to prevail, we may have to change the names and branding of our products in the affected territories and could incur other costs.
We may in the future need to initiate infringement claims or litigation in order to try to protect our intellectual property rights. In addition to litigation where we are a plaintiff, our defense of intellectual property rights claims brought against us or our customers or suppliers, with or without merit, could be time-consuming, expensive to litigate or settle, could divert management resources and attention and could force us to acquire intellectual property rights and licenses, which may involve substantial royalty or other payments and may not be available on acceptable terms or at all. Further, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages or obtain an injunction and we may also lose the opportunity to license our technology to others or to collect royalty payments. An adverse determination could also invalidate or narrow our intellectual property rights and adversely affect our ability to offer our products to our customers and may require that we procure or develop substitute products that do not infringe, which could require significant effort and expense. If any of these events were to materialize, our business, financial condition and results of operations could be materially adversely affected.
Certain of our products contain third-party open-source software components, and failure to comply with the terms of the underlying open-source software licenses could restrict our ability to sell our products or expose us to other risks.
Our products contain software modules licensed to us by third-party authors under “open source” licenses. From time to time, there have been claims against companies that distribute or use open-source software in their products and services, asserting that open-source software infringes the claimants’ intellectual property rights. We could be subject to suits by parties claiming infringement of intellectual property rights in what we believe to be licensed open-source software. Use and distribution of open-source software may entail greater risks than the use of third-party commercial software, as, for example, open-source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some open-source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open-source software we use. If we combine our proprietary software with open-source software in a certain manner, HUB could, under certain open-source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar products with lower development effort and time and ultimately could result in a loss of product sales for HUB.
Although we monitor our use of open-source software to avoid subjecting our products to conditions we do not intend, the terms of many open-source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that, for example, could impose unanticipated conditions or restrictions on our ability to commercialize our products. In this event, we could be required to seek licenses from third parties to continue offering our products, to make our proprietary code generally available in source code form, to re-engineer our products, or to discontinue the sale of our products if re-engineering could not be accomplished on a timely basis, and our business, financial condition and results of operations could be materially adversely affected.
In addition to patented technology, we rely on unpatented proprietary technology, trade secrets, designs, experiences, workflows, data, processes, software, and know-how.
We rely on proprietary information (such as trade secrets, designs, experiences, workflows, data, know-how, and confidential information) to protect intellectual property that may not be patentable or subject to copyright, trademark, trade dress, trade secrets or service mark protection, or that we believe is best protected by means that do not require public disclosure. We generally seek to protect this proprietary information by entering into confidentiality agreements, or consulting, services or employment agreements that contain non-disclosure and non-use provisions with our employees, consultants, customers, contractors, and third parties. However, we may fail to enter into the necessary agreements, and even if entered into, such agreements may be breached or may otherwise fail to prevent disclosure, third-party infringement, or misappropriation of our proprietary information, may be limited as to their term and may not provide adequate remedies in the event of unauthorized disclosure or use of proprietary information. We have limited control over the protection of trade secrets used by our current or future manufacturing counterparties and suppliers and could lose future trade secret protection if any unauthorized disclosure of such information occurs. In addition, our proprietary information may otherwise become known or be independently developed by our competitors or other third parties. To the extent that our employees, consultants, customers, contractors, advisors, and other third parties use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection for our proprietary information could adversely affect our competitive business position. Furthermore, laws regarding trade secret rights in certain markets where we operate may afford little or no protection to our trade secrets.
We also rely on physical and electronic security measures to protect our proprietary information but cannot provide assurance that these security measures will not be breached or provide adequate protection for our property. There is a risk that third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage. We may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely steps to enforce our intellectual property rights, and our business, financial condition and results of operations could be materially adversely affected.
Risks Related to Our Legal and Regulatory Environment
The dynamic regulatory environment around privacy and data protection may limit our offering or require modification of our products and services, which could limit our ability to attract new customers and support our existing customers and increase our operational expenses. We could also be subject to investigations, litigation, or enforcement actions alleging that we fail to comply with the regulatory requirements, which could harm our operating results and adversely affect our business.
Federal, state and international bodies continue to adopt, enact, and enforce new laws and regulations, as well as industry standards and guidelines, addressing cybersecurity, privacy, data protection and the collection, processing, storage, cross-border transfer and use of personal information.
We are subject to diverse laws and regulations relating to data privacy, including but not limited to the EU General Data Protection Regulation 2016/679 (“GDPR”), the California Consumer Privacy Act (“CCPA”), the Health Insurance Portability and Accountability Act as amended by the Health Information Technology for Economic and Clinical Health Act (“HIPAA”), the UK Data Protection Act 2018, national privacy laws of EU Member States, the Israeli Privacy Protection Law, 1981 (“PPL”) and other laws relating to privacy, data protection, and cloud computing. These laws are evolving rapidly, as exemplified by the recent adoption by the European Commission of a new set of Standard Contractual Clauses; the prospect of a new European “ePrivacy Regulation” (to replace the existing “ePrivacy Directive,” Directive 2002/58 on Privacy and Electronic Communications); the California Privacy Rights Act, which took effect on January 1, 2023 and created obligations with respect to certain data relating to consumers, significantly expanded the CCPA, including by introducing additional obligations such as data minimization and storage limitations, granting additional rights to consumers, such as correction of personal information and additional opt-out rights, and created a new entity, the California Privacy Protection Agency, to implement and enforce the law; and the adoption of a significant amendment to the PPL, known as Amendment 13, that will take effect in August 2025 and is expected to notably enhance the investigative powers of the Privacy Protection Authority and increase the potential monetary sanctions for violations. Similar laws coming into effect in U.S. states, adoption of a comprehensive U.S. federal data privacy law, and new legislation in international jurisdictions may continue to change the data protection landscape globally and could result in us expending considerable resources to meet these requirements. Compliance with these laws, as well as efforts required to understand and interpret new legal requirements, require HUB to expend significant capital and other resources. We could be found to not be in compliance with obligations or suffer from adverse interpretations of such legal requirements either as directly relating to our business or in the context of legal developments impacting our customers or other businesses, which could impact our ability to offer our products or services, impact operating results, or reduce demand for our products or services.
Compliance with privacy and data protection laws and contractual obligations may require changes in services, business practices, or internal systems resulting in increased costs, lower revenue, reduced efficiency, or greater difficulty in competing with companies that are not subject to these laws and regulations. For example, GDPR and the UK compliance regime impose several stringent requirements for controllers and processors of personal data and increase our obligations such as, requiring robust disclosures to individuals, establishing an individual data rights regime, setting timelines for data breach notifications, imposing conditions for international data transfers, requiring detailed internal policies and procedures and limiting retention periods. Ongoing compliance with these and other legal and contractual requirements may necessitate changes in services and business practices, which may lead to the diversion of engineering resources from other projects. Additionally, given our overall cash position, liquidity concerns and lack of resources, we do not have sufficient capability to adequately maintain ongoing compliance with all relevant legal and contractual requirements or timely and properly implement new policies and procedures to comply with new and changing laws and regulations.
As a company that focuses on cybersecurity, our customers may rely on our products and services as part of their own efforts to comply with security control obligations under GDPR and other laws and contractual commitments. If our products or services are found insufficient to meet these standards in the context of an investigation into us or our customers, or we are unable to engineer products that meet these standards, we could experience reduced demand for our products or services. There is also increased international scrutiny of cross-border transfers of data, including by the EU for personal data transfers to countries such as the U.S., following recent case law and regulatory guidance. This increased scrutiny, as well as evolving legal and other regulatory requirements around the privacy or cross-border transfer of personal data could increase our costs, restrict our ability to store and process data as part of our solutions, or, in some cases, impact our ability to offer our solutions or services in certain jurisdictions.
Enactment of further privacy laws in the U.S., at the state or federal level, or introduction of new services or products that are subject to additional regulations, as well as ensuring compliance of solutions that we obtained through acquisitions, may require us to expend considerable resources to fulfill regulatory obligations, and could carry the potential for significant financial or reputational exposure to our business, delay introduction to the market and affect adoption rates.
Claims that we have breached our contractual obligations or failed to comply with applicable privacy and data protection laws, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business. In addition to litigation, we could face regulatory investigations, negative market perception, potential loss of business, enforcement notices and/or fines (which, for example, under GDPR / UK regime can be up to 4% of global turnover for the preceding financial year or €20 / £17.5 million, whichever is higher).
Failure to comply with applicable economic sanctions laws and regulations could harm our business.
Failure to comply with trade compliance and economic sanctions laws and regulations of the U.S., the EU (including Germany), Israel and the UK and other applicable international jurisdictions could materially adversely affect our reputation and operations.
Our business must be conducted in compliance with applicable economic and trade sanctions laws and regulations, such as those administered and enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council, the EU, His Majesty’s Treasury of the United Kingdom and other relevant sanctions authorities. Our global operations expose us to the risk of violating, or being accused of violating, economic and trade sanctions laws and regulations.
While we have taken certain precautions to prevent our solutions from being provided in violation of applicable trade controls laws and regulations, our products may have been in the past, and could in the future be, provided inadvertently, and without our knowledge, in violation of such laws. Violations of U.S. trade controls laws and regulations can result in significant fines or penalties and possible criminal liability for responsible employees and managers, in addition to potential reputational harm.
Any change in export or import regulations, economic sanctions or related laws or regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our solutions by, or in our decreased ability to export or sell our solutions to, existing or potential end-customers with international operations. Any decreased use of our solutions or limitation on our ability to export or sell our solutions could adversely affect our business, financial condition, results of operations, and growth prospects.
Our business may be affected by sanctions, export controls and similar measures targeting Russia and other countries and territories as well as other responses to Russia’s military conflict in Ukraine, including indefinite suspension of operations in Russia and dealings with Russian entities by many multi-national businesses across a variety of industries.
As a result of Russia’s military conflict in Ukraine, governmental authorities in the United States, the EU and the UK, among others, launched an expansion of coordinated sanctions and export control measures, including:
| ● | blocking sanctions on some of the largest state-owned and private Russian financial institutions (and their subsequent removal from SWIFT); |
| ● | blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians and those with government connections or involved in Russian military activities; |
| ● | blocking sanctions against certain Russian businessmen and their businesses, some of which have significant financial and trade ties to the EU; |
| ● | blocking of Russia’s foreign currency reserves and prohibition on secondary trading in Russian sovereign debt and certain transactions with the Russian Central Bank, National Wealth Fund and the Ministry of Finance of the Russian Federation; |
| ● | expansion of sectoral sanctions in various sectors of the Russian and Belarusian economies and the defense sector; |
| ● | United Kingdom sanctions introducing restrictions on providing loans to, and dealing in securities issued by, persons connected with Russia; |
| ● | restrictions on access to the financial and capital markets in the EU, as well as prohibitions on aircraft leasing operations; |
| ● | sanctions prohibiting most commercial activities of U.S. and EU persons in Crimea and Sevastopol; |
| ● | enhanced export controls and trade sanctions targeting Russia’s imports of technological goods as a whole, including tighter controls on exports and reexports of dual-use items, stricter licensing policy with respect to issuing export licenses, and/or increased use of “end-use” controls to block or impose licensing requirements on exports, as well as higher import tariffs and a prohibition on exporting luxury goods to Russia and Belarus; |
| ● | closure of airspace to Russian aircrafts; and |
| ● | ban on imports of Russian oil, liquefied natural gas and coal to the U.S. |
As the conflict in Ukraine continues, there can be no certainty regarding whether the governmental authorities in the United States, the EU, the UK or other counties will impose additional sanctions, export controls or other measures targeting Russia, Belarus or other territories. Furthermore, in retaliation against new international sanctions and as part of measures to stabilize and support the volatile Russian financial and currency markets, the Russian authorities also imposed significant currency control measures aimed at restricting the outflow of foreign currency and capital from Russia, imposed various restrictions on transacting with non-Russian parties, banned exports of various products and other economic and financial restrictions.
We must be ready to comply with the existing and any other potential additional measures imposed in connection with the conflict in Ukraine. The imposition of such measures could adversely impact our business, including preventing us from performing existing contracts, recognizing revenue, pursuing new business opportunities or receiving payment for products already supplied or services already performed with customers.
Furthermore, even if an entity is not formally subject to sanctions, customers and business partners of such entity may decide to reevaluate or cancel projects with such entity for reputational or other reasons. As a result of the ongoing conflict in Ukraine, many U.S. and other multi-national businesses across a variety of industries, including consumer goods and retail, food, energy, finance, media and entertainment, tech, travel and logistics, manufacturing and others, have indefinitely suspended their operations and paused all commercial activities in Russia and Belarus. As a result of the outbreak of the war in Ukraine, we have ceased to conduct any business operations in the region. We may seek to resume operations in the area, dependent on the outcome of the hostilities. While we do not currently have any material operations or business in Russia or Ukraine, depending on the extent and breadth of sanctions, export controls and other measures that may be imposed in connection with the conflict in Ukraine, it is possible that our business, financial condition and results of operations could be materially and adversely affected.
We are subject to complex, evolving regulatory requirements that may be difficult and expensive to comply with and that could negatively impact our business.
Our business and operations are subject to a variety of often changing regulatory requirements in the countries in which we operate or offer our solutions, including, among other things, with respect to trade compliance, anti-corruption, sanction regimes, information security, data privacy and protection, tax, labor and government contracts. Compliance with these regulatory requirements may be onerous, time-consuming, and expensive, especially where these requirements are inconsistent from jurisdiction to jurisdiction, or where the jurisdictional reach of certain requirements is not clearly defined or seeks to reach across national borders. Regulatory requirements in one jurisdiction may make it difficult or impossible to do business in another jurisdiction. We may also be unsuccessful in obtaining permits, licenses, or other authorizations required to operate our business, such as for the marketing or sale or import or export of our products and services.
While we endeavor to implement policies, procedures and systems designed to achieve compliance with these regulatory requirements, there is no assurance that these policies, procedures, or systems will be adequate, that we or our personnel will not violate these policies and procedures or applicable laws and regulations or that we will have sufficient resources to meet these regulatory requirements or any changes to these regulatory requirements. Violations of these laws or regulations may harm our reputation and deter government agencies and other existing or potential customers or partners from purchasing our solutions. Furthermore, non-compliance with applicable laws or regulations could result in fines, damages, criminal sanctions against us, our officers, or our employees, restrictions on the conduct of our business and damage to our reputation.
Moreover, regulatory requirements are subject to constant updates, modifications and revisions by the authorities adopting and implementing such requirements which result in uncertainty as well as difficulties in planning ahead of time. Adapting our practices, policies and procedures to this ever-changing regulatory environment involves resources and time and requires our regulatory compliance teams to be on the watch for any actual or potential changes and may have an impact on our ability to pursue business opportunities and anticipate the future results.
We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.
We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 5737-1977, the Israeli Prohibition on Money Laundering Law, 5760-2000, and other anti-corruption, anti-bribery laws and anti-money laundering laws in countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and generally prohibit companies and their employees and agents from directly or indirectly promising, authorizing, making, offering, soliciting, or receiving improper payments of anything of value to or from government officials or others in the private sector. As we increase our international sales and business, our risks under these laws may increase. Although we have internal policies and procedures, including a code of ethics and proper business conduct, reasonably designed to promote compliance with anti-bribery laws, HUB cannot be sure that our employees or other agents will not engage in prohibited conduct and render HUB responsible under the FCPA, the U.K. Bribery Act or any similar anti-bribery laws in other jurisdictions. Noncompliance with these laws could subject HUB to investigations, sanctions, settlements, prosecutions, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, collateral litigation, adverse media coverage and other consequences. Any investigations, actions or sanctions could harm our business, results of operations and financial condition.
If we fail to comply with environmental requirements, our business, financial condition, operating results and reputation could be adversely affected.
We are subject to various environmental laws and regulations, including laws governing the hazardous material content of our products, laws relating to real property and future expansion plans and laws concerning the recycling of Electrical and Electronic Equipment (“EEE”). The laws and regulations to which HUB may be subject to include the EU RoHS Directive, EU Regulation 1907/2006 — Registration, Evaluation, Authorization and Restriction of Chemicals (the “REACH Regulation”) and the EU Waste Electrical and Electronic Equipment Directive (the “WEEE Directive”), as well as the implementing legislation of the EU member states. Similar laws and regulations have been passed or are pending in China, South Korea, Norway and Japan and may be enacted in other regions, including in the United States, and we may in the future be subject to these laws and regulations.
The EU RoHS Directive and the similar laws of other jurisdictions ban or restrict the presence of certain hazardous substances such as lead, mercury, cadmium, hexavalent chromium and certain fire-retardant plastic additives in electrical equipment, including our products. HUB attempts to comply with these laws, including research and development costs, costs associated with assuring the supply of compliant components and costs associated with writing off scrapped noncompliant inventory. HUB expects to continue to incur costs related to environmental laws and regulations in the future.
As part of the Circular Economy Action Plan, the European Commission amended the EU Waste Framework Directive (“WFD”) to include a number of measures related to waste prevention and recycling, whereby HUB may be responsible for submitting product data to a database of hazardous substances established under the WFD and managed by the European Chemicals Agency. HUB may incur costs to comply with this new requirement.
The EU has also adopted the WEEE Directive, which requires electronic goods producers to be responsible for the collection, recycling and treatment of such products. Although currently our EU international channel partners may be responsible for the requirements of this directive as the importer of record in most of the European countries in which we sell our products, changes in interpretation of the regulations may cause us to incur costs or have additional regulatory requirements in the future to meet in order to comply with this directive, or with any similar laws adopted in other jurisdictions.
Our failure to comply with these and future environmental rules and regulations could result in reduced sales of our products, increased costs, substantial product inventory write-offs, reputational damage, penalties and other sanctions.
Scrutiny of sustainability and environmental, social, and governance, or ESG, initiatives could increase our costs or otherwise adversely impact our business.
Public companies have recently faced scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder advocacy groups, other market participants and other stakeholder groups. Such scrutiny may result in increased costs, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition or results of operations. If our ESG practices and reporting do not meet investor or other stakeholder expectations, we may be subject to investor or regulator engagement regarding such matters. Our failure to comply with any applicable ESG rules or regulations could lead to penalties and adversely impact our reputation, access to capital and employee retention. Such ESG matters may also impact our third-party contract manufacturers and other third parties on which we rely, which may augment or cause additional impacts on our business, financial condition, or results of operations.
Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, financial condition and prospects.
The global data protection landscape is rapidly evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure, retention, and security of personal data, such as information that we may collect in connection with clinical trials in the U.S. and abroad. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations, fines and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our business, financial condition and prospects.
As our operations and business grow, we may become subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. For example, the State of Israel has implemented data protection laws and regulations, including the Israeli Protection of Privacy Law of 1981. In addition, the California Consumer Privacy Act of 2018, or CCPA, went into effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches has increased the likelihood, and risks associated with data breach litigation. The CCPA increases our compliance costs and potential liability, and many similar laws have been proposed at the federal level and in other states, including in Utah, Connecticut, Virginia, and Colorado. Further, the California Privacy Rights Act, or CPRA, generally went into effect on January 1, 2023 and significantly amends the CCPA. The CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. Additional compliance investment and potential business process changes may also be required. In the event that we are subject to or affected by Israeli data protection laws, the CCPA, the CPRA or other domestic or foreign privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
In Europe, the GDPR went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the European Economic Area, or EEA. Companies that must comply with the GDPR face increased compliance obligations and risk, robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States In July 2020, the Court of Justice of the EU, or CJEU limited how organizations could lawfully transfer personal data from the EU/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses, or SCCs. In March 2022, the United States and EU announced a new regulatory regime intended to replace the invalidated regulations; however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities. European court and regulatory decisions subsequent to the CJEU decision of July 16, 2020 have taken a restrictive approach to international data transfers. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
Further, from January 1, 2021, companies have had to comply with the GDPR and also the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law. The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.
Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply. Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators, or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could result in additional cost and liability to us, damage our reputation, and adversely affect our business, financial condition and prospects.
Our business could be negatively affected as a result of the actions of activist shareholders, and such activism could impact the trading value of our securities.
In recent years, U.S. and non-U.S. companies listed on securities exchanges in the U.S. have been faced with governance-related demands from activist shareholders, unsolicited tender offers and proxy contests. Although as a foreign private issuer we are not subject to U.S. proxy rules, responding to any action of this type by activist shareholders could be costly and time-consuming, disrupting our operations and diverting the attention of management and our employees. Such activities could interfere with our ability to execute our strategic plans. In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our board of directors. The perceived uncertainties due to such actions of activist shareholders also could affect the market price of our securities.
We may be required to indemnify our directors and officers in certain circumstances.
Our Articles of Association (the “Articles”) allow us to indemnify, exculpate and insure our directors and senior officers to the fullest extent permitted under the Israeli Companies Law, 5759-1999 (the “Companies Law”). As such, we have entered into agreements with each of our directors and senior officers to indemnify, exculpate and insure them against some types of claims, subject to dollar limits and other limitations. Subject to Israeli law, these agreements generally provide that HUB will indemnify each of these directors and senior officers for any of the following liabilities or expenses that they may incur due to an act performed or failure to act in their capacity as directors or senior officers:
| ● | Monetary liability imposed on the director or senior officer in favor of a third party in a judgment, including a settlement or an arbitral award confirmed by a court. |
| ● | Reasonable legal costs, including attorneys’ fees, expended by a director or senior officer as a result of an investigation or proceeding instituted against the director or senior officer by a competent authority; provided, however, that such investigation or proceeding concludes without the filing of an indictment against the director or senior officer and either: |
| ● | No financial liability was imposed on the director or senior officer in lieu of criminal proceedings, or |
| ● | Financial liability was imposed on the director or senior officer in lieu of criminal proceedings, but the alleged criminal offense does not require proof of criminal intent. |
| ● | Reasonable legal costs, including attorneys’ fees, expended by the director or senior officer or for which the director or senior officer is charged by a court: |
| ● | In an action brought against the director or senior officer by us, on our behalf or on behalf of a third party, |
| ● | In a criminal action in which the director or senior officer is found innocent, or |
| ● | In a criminal action in which the director or senior officer is convicted, but in which proof of criminal intent is not required. |
We are subject to a number of securities class actions and other litigations and could be subject to additional litigation in the United States, Israel or elsewhere that could negatively impact our business, including resulting in substantial costs and liabilities.
From time to time, we are subject to litigation or claims that could negatively affect our business operations and financial position. We and certain of our directors and officers have been named as defendants in a number of lawsuits that could cause us to incur unforeseen expenses, service disruptions, and otherwise occupy a significant amount of our management’s time and attention, any of which, if determined adversely to us, could have a material adverse impact on our business, financial condition, results of operations, cash flows, growth prospects and reputation.
For additional information on these class action and other lawsuits and for information concerning additional litigation proceedings, please refer to Item 8. “Financial Information—Consolidated Statements and Other Financial Information—Legal and Arbitration Proceedings.”.
We also from time to time receive inquiries and subpoenas and other types of information requests from government regulators and authorities and we may become subject to related claims and other actions related to our business activities. While the ultimate outcome of investigations, inquiries, information requests and related legal proceedings is difficult to predict, such matters can be expensive, time-consuming and distracting, and adverse resolutions or settlements of those matters may result in, among other things, modification of our business practices, reputational harm or costs and significant payments, any of which could negatively affect our business operations and financial position.
Our current and future cash balances and investment portfolio may be adversely affected by market conditions and interest rates.
We currently have limited cash resources and liquidity. As our business expected to grow, we anticipate having larger reserves of cash in the future. As such we expect to maintain balances of cash and cash equivalents for purposes of acquisitions and general corporate purposes. While we do not currently hold any marketable securities, there is no guarantee that we will not maintain marketable securities in the future. The performance of the capital markets affects the values of funds that are held in marketable securities. These assets are subject to market fluctuations, changes in interest rates and credit spreads, market liquidity and various other factors, including, without limitation, rating agency downgrades that may impair their value, or unexpected changes in the financial markets’ healthiness worldwide. In addition, in case we hold liquid investments in the future and would like to liquidate some of our investments and turn them into cash, we will be dependent on market conditions and liquidity opportunities, which may be impacted by global economic trends.
Risks Related to Being a U.S. Listed Public Company
We continue to incur increased costs as a result of operating as a U.S. listed public company, and our management needs to devote substantial time to compliance initiatives.
As a public company subject to reporting requirements in the United States, we incur significant legal, accounting and other expenses, and these expenses may increase even more after we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act. As a public company in the United States, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and Nasdaq. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have caused us to incur significant legal and financial compliance costs and have made some activities to be more time-consuming and costly. As a result, the preparation and filing of this Annual Report was exceedingly time consuming and costly for us and we cannot be certain that similar situations would not occur in the future. Additionally continued delinquency in the timely submission of future filings could lead to the SEC instituting administrative proceedings pursuant to Section 12(j) of the Exchange Act to suspend or revoke the registration of our ordinary shares. These costs will likely increase our net loss in the short term. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
A market for our securities may not be sustained, which would adversely affect the liquidity and price of our securities.
The price of our securities has and may continue to fluctuate significantly due to general market and economic conditions. An active trading market for our securities may never develop or, if developed, it may not be sustained. In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business conditions and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq and are quoted on OTC Markets (an inter-dealer automated quotation system for equity securities that is not a national securities exchange), the liquidity and price of our securities may be more limited than if we were quoted or listed on the NYSE, Nasdaq or another national securities exchange. You may be unable to sell your securities unless an active market can be sustained.
If we fail to remediate our material weaknesses or if we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As discussed above, in connection with the review of our consolidated financial statements for the years ended December 31, 2024, 2023, and 2022 included in this Annual Report, our management identified material weaknesses in our internal control over financial reporting. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act, is accumulated and communicated to our principal executive and financial officers. We believe that any disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
We are also continuing to try to improve our internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses in our controls. In addition to our results determined in accordance with IFRS, we believe certain non-IFRS measures and key metrics may be useful in evaluating our operating performance. We present certain non-IFRS financial measures and key metrics in this Annual Report and intend to continue to present certain non-IFRS financial measures and key metrics in future filings with the SEC and other public statements. Any failure to accurately report and present our non-IFRS financial measures and key metrics could cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our ordinary shares.
While we are in the process of implementing remediation measures to address the material weaknesses identified by our management, our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, additional material weaknesses or other weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations that we will be required to include in our second annual report that we file with the SEC and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will be required to include in our annual reports after we lose our status as an “emerging growth company.” Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our ordinary shares. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.
We are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting pursuant to Section 404(a) of the Sarbanes-Oxley Act. See “Item 15. Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting”. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business. Additionally, while we remain an emerging growth company, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.
We continue to be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. The company is working to improve its control system through the implementation of an internal audit. The process of procuring insurance includes conducting a risk survey to identify where there is an increased level of risk. This process allows for an intelligent lowering of the risk levels that the Company is exposed to by improving the control system.
Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed time frame or at all, that our internal control over financial reporting is effective as required by Section 404 of the Sarbanes-Oxley Act. If we cannot properly remediate our material weaknesses and develop our internal controls, or identify additional material weaknesses it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. As a result, the market price of our ordinary shares could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
Any failure to maintain effective disclosure controls and internal control over financial reporting could adversely affect our business, financial condition, and results of operations and could cause a decline in the price of our ordinary shares.
As a result of our business combination with a special purpose acquisition company, regulatory obligations may impact us differently than other publicly traded companies.
On February 28, 2023, we completed the Business Combination with RNER, a special purpose acquisition company, or SPAC, pursuant to which, on March 1, 2023, we became a publicly traded company in the United States. As a result of this transaction, regulatory obligations have, and may continue, to impact us differently than other publicly traded companies. For instance, the SEC and other regulatory agencies may issue additional guidance or apply further regulatory scrutiny to companies like us that have completed a business combination with a SPAC. Managing this regulatory environment, which has and may continue to evolve, could divert management’s attention from the operation of our business, negatively impact our ability to raise additional capital when needed or have an adverse effect on the price of our ordinary shares and warrants.
We are a former “shell company” and as such are subject to certain limitations not applicable to other public companies generally.
Following the Business Combination, we are a successor to a public reporting “shell company,” as defined in Rule 12b-2 under the Exchange Act. Although we are no longer a “shell company,” we are subject to certain restrictions under the Securities Act for the resale of securities issued by issuers that have been at any time previously a shell company. Specifically, the Rule 144 safe harbor available for the resale of our restricted securities is only available to our shareholders if, at the time of the proposed sale, we have filed the annual report required to be filed during the preceding twelve months, regardless of whether the restricted securities were initially issued at the time we were a shell company or subsequent to termination of such status. Other reporting companies that are not former shell companies and have been reporting for more than twelve months are not subject to this same reporting threshold for non-affiliate reliance on Rule 144. Accordingly, any restricted securities we have sold or sell in the future or issue to consultants or employees, in consideration for services rendered or for any other purpose, may not be resold unless such securities are registered with the SEC or the requirements of Rule 144 have been satisfied. As a result, it may be harder for us to fund our operations and pay our employees and consultants with our securities instead of cash. Furthermore, it may be harder for us to raise funding through the sale of debt or equity securities unless we agree to register such securities with the SEC, which could cause us to expend additional resources in the future. Our prior status as a “shell company” could prevent us in the future from raising additional funds, engaging employees and consultants, and using our securities to pay for any acquisitions, which could cause the value of our securities to decline in value.
Risks Related to Ownership of Our Ordinary Shares and Warrants
The market price and trading volume of our ordinary shares and warrants on Nasdaq may be volatile and could decline significantly.
The stock markets, including Nasdaq on which we have listed our ordinary shares and warrants under the symbols “HUBC,” “HUBCW” and “HUBCZ,” respectively, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market develops and is sustained for our ordinary shares and warrants, the market price of our ordinary shares and warrants may be volatile and could decline significantly. In addition, the trading volume in our ordinary shares and warrants has already and may continue to fluctuate and cause significant price variations to occur. The market price of our ordinary shares has already declined significantly in the limited period in which our securities have been trading on Nasdaq and if it declines further, you may be unable to resell your ordinary shares or warrants at or above the market price of the ordinary shares and warrants as of the date of this Annual Report. We cannot assure you that the market price of our ordinary shares and warrants will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:
| ● | the realization of any of the risk factors presented in this Annual Report or any additional filing that we make with the SEC; |
| ● | actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues, gross margin, Adjusted EBITDA, results of operations, liquidity or financial condition; |
| ● | additions and departures of key personnel; |
| ● | failure to comply with the requirements of Nasdaq; |
| ● | failure to comply with the Sarbanes-Oxley Act or other laws or regulations; |
| ● | regulatory inquiries or investigations resulting from our previously disclosed Internal Investigation; |
| ● | future issuances, sales, resales or repurchases or anticipated issuances, sales, resales or repurchases, of our securities including due to the expiration of contractual lock-up agreements; |
| ● | publication of research reports about us; |
| ● | the performance and market valuations of other similar companies; |
| ● | failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow us or our failure to meet these estimates or the expectations of investors; |
| ● | new laws, regulations, subsidies, or credits or new interpretations of existing laws applicable to is; |
| ● | commencement of, or involvement in, litigation involving HUB; |
| ● | broad disruptions in the financial markets, including sudden disruptions in the credit markets; |
| ● | speculation in the press or investment community; |
| ● | actual, potential or perceived control, accounting or reporting problems; |
| ● | changes in accounting principles, policies and guidelines; and |
| ● | other events or factors, including those resulting from infectious diseases, health epidemics and pandemics (including the COVID-19 public health emergency or any resurgence thereof), natural disasters, war, acts of terrorism or responses to these events. |
In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on us.
If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our share price.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. HUB’s management bases its estimates on various assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions. These could cause HUB’s operating results to fall below the expectations of securities analysts and investors, resulting in a decline in HUB’s stock price. Significant assumptions and estimates used in preparing HUB’s consolidated financial statements include those related to revenue recognition, valuation of inventory, accounting for business combination, contingent liabilities and accounting for income taxes.
We do not intend to pay dividends for the foreseeable future. Accordingly, you may not receive any return on investment unless you sell your HUB ordinary shares for a price greater than the price you paid for them.
We have never declared or paid any cash dividends on our shares. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on the HUB ordinary shares in the foreseeable future. Consequently, you may be unable to realize a gain on your investment except by selling such shares after price appreciation, which may never occur.
Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency, and amount will depend upon its future, operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that its directors may deem relevant. The Companies Law imposes restrictions on our ability to declare and pay dividends. See “Dividend and Liquidation Rights” in Exhibit 2.1 to this Annual Report for additional information. Payment of dividends may also be subject to Israeli withholding taxes. See “Item 10.E —Additional Information—Taxation” for additional information.
Our actual financial results may differ materially from any guidance we may publish from time to time.
We may, from time to time, provide guidance regarding our future performance that represents our management’s estimates as of the date such guidance is provided. Any such guidance would be based upon a number of assumptions with respect to future business decisions (some of which may change) and estimates, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies (many of which are beyond our control). Guidance is necessarily speculative in nature and it can be expected that some or all the assumptions that inform such guidance will not materialize or will vary significantly from actual results. Our ability to meet any forward-looking guidance is affected by a number of factors, including, but not limited to, our ability to complete our certain projects and business initiatives in a timely manner, changes in operating costs, the availability of financing on acceptable terms, changes in policies and regulations, the availability of raw materials, as well as the other risks to our business described in this “Risk Factors” section. Our revenues from individual customers may also fluctuate from time to time based on the timing and the terms under which further orders are received and the duration of the delivery and implementation of such orders. Therefore, if our projected sales do not close before the end of the relevant quarter, our actual results may be inconsistent with our published guidance. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date such guidance is provided. Actual results may vary from such guidance and the variations may be material. Investors should also recognize the reliability of any forecasted financial data diminishes the farther into the future the data is forecast. In light of the foregoing, investors should not place undue reliance on our financial guidance and should carefully consider any guidance we may publish in context.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our ordinary shares or warrants adversely, then the price and trading volume of our ordinary shares could decline.
The trading market for our ordinary shares and warrants will be influenced by the research and reports that industry or financial analysts publish about our business. We do not control these analysts, or the content and opinions included in their reports. As a relatively new public company, the analysts who publish information about our ordinary shares and warrants have had relatively little experience with us, which could affect their ability to accurately forecast our results and make it more likely that we fail to meet their estimates. In the event we obtain industry or financial analyst coverage, if any of the analysts who cover us issues an inaccurate or unfavorable opinion regarding us, our share price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn could cause our share price or trading volume to decline.
We are eligible to be treated as an emerging growth company, as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors because we may rely on these reduced disclosure requirements.
We qualify as an emerging growth company within the meaning of the Securities Act, and we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, which could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are eligible to be treated as an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies. We intend to take advantage of this extended transition period under the JOBS Act for adopting new or revised financial accounting standards.
For as long as we continue to be an emerging growth company, we may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including presenting only limited selected financial data and not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, our shareholders may not have access to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue exceeds $1.235 billion, if we issue more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time we are a “large accelerated filer” under U.S. securities laws.
We cannot predict if investors will find our ordinary shares less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile. Further, there is no guarantee that the exemptions available to us under the JOBS Act will result in significant savings. To the extent that we choose not to use exemptions from various reporting requirements under the JOBS Act, we will incur additional compliance costs, which may impact our business, financial condition, results of operations, growth prospects and reputation.
We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S. company with foreign private issuer status. We qualify as a foreign private issuer under the Exchange Act, and consequently we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, although we are subject to Israeli laws and regulations with regard to certain of these matters and intend to furnish comparable quarterly information on Form 6-K. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, our next determination will be made on June 30, 2025. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We would also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.
As we are a “foreign private issuer” and follow certain home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.
As a foreign private issuer we have the option to follow certain home country corporate governance practices rather than those of Nasdaq, provided that we disclose the requirements we are not following and describe the home country practices we are following. We intend to rely on this “foreign private issuer exemption” with respect to the Nasdaq rules for shareholder meeting quorums and Nasdaq rules requiring shareholder approval. We may in the future elect to follow home country practices with regard to other matters. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.
As a company incorporated in Israel, even though we delisted our securities from the TASE, the Israeli Securities Law, 5728-1968 (the “Israeli Securities Law”) continues to apply and we are still subject to certain reporting obligations in Israel unless otherwise exempt in accordance with Israeli law. We have petitioned the Israeli Securities Authority to cease our reporting requirements in Israel, given that we are no longer traded on the TASE, but the outcome of such petition remains uncertain and we may be forced to continue reporting pursuant to Israeli law requirements. We have not filed reports under the Israeli Securities Law after we started reporting in the United States under the Securities Act in March 2023. This could result in the imposition of penalties under the Israel Securities Law. In addition, as a company incorporated in the State of Israel, regardless of the outcome of the petition to cease our reporting requirements in Israel, we will remain subject to the jurisdiction of the Companies Law that apply to all Israeli incorporated companies.
Our Articles provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of resolution of any claims arising under the Securities Act.
Our Articles provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for any claim asserting a cause of action arising under the Securities Act (for the avoidance of any doubt, such provision does not apply to any claim asserting a cause of action arising under the Exchange Act). Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both U.S. state and federal courts have jurisdiction to entertain such claims. This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may increase the costs associated with such lawsuits, which may discourage such lawsuits against us and our directors, officers and employees. However, the enforceability of similar forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and there is uncertainty as to whether courts would enforce the exclusive forum provisions in the Articles. If a court were to find these provisions of the Articles inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, results of operations, growth prospects. Any person or entity purchasing or otherwise acquiring any interest in our share capital shall be deemed to have notice of and to have consented to the choice of forum provisions of the Articles described above. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction.
The listing of our securities on Nasdaq did not benefit from the process undertaken in connection with an underwritten initial public offering, which could result in diminished investor demand, inefficiencies in pricing and a more volatile public price for our securities.
Our ordinary shares and warrants are currently listed on Nasdaq under the symbols “HUBC,” “HUBCW” and “HUBCZ,” respectively. Unlike an underwritten initial public offering of the HUB securities, the initial listing of our securities as a result of the Business Combination did not benefit from the following:
| ● | the book-building process undertaken by underwriters that helps to inform efficient price discovery with respect to opening trades of newly listed securities; |
| ● | underwriter support to help stabilize, maintain or affect the public price of the new issue immediately after listing; and |
| ● | underwriter due diligence review of the offering and potential liability for material misstatements or omissions of fact in a prospectus used in connection with the securities being offered or for statements made by its securities analysts or other personnel. |
Underwriters have liability under the U.S. securities laws for material misstatements or omissions in a registration statement pursuant to which an issuer sells securities. Section 11 of the Securities Act (“Section 11”) imposes liability on parties, including underwriters, involved in a securities offering if the registration statement contains a materially false statement or material omission. To effectively establish a due diligence defense against a cause of action brought pursuant to Section 11, a defendant, including an underwriter, carries the burden of proof to demonstrate that he or she, after reasonable investigation, believed that the statements in the registration statement were true and free of material omissions. In order to meet this burden of proof, underwriters in a registered offering typically conduct extensive due diligence of the registrant and vet the registrant’s disclosure. Due diligence entails engaging legal, financial and/or other experts to perform an investigation as to the accuracy of an issuer’s disclosure regarding, among other things, its business, prospects and financial results. Further, in an underwritten initial public offering, the use of projections and forecasts in the offering documentation, if used at all, is heavily scrutinized as part of the underwriters’ due diligence. In making their investment decision, investors have the benefit of such diligence in underwritten public offerings. Investors must rely on the information in this Annual Report and our other public filings and will not have the benefit of an independent review and investigation of the type normally performed by an independent underwriter in a public securities offering. While sponsors, private investors and management in a business combination undertook a certain level of due diligence, it is not necessarily the same level of due diligence that would have been undertaken by an underwriter in a public securities offering and, therefore, there could be a heightened risk of an incorrect valuation of our business or material misstatements or omissions in our filings with the SEC.
In addition, because there were no underwriters engaged in connection with the Business Combination, prior to the opening of trading on the trading day immediately following the closing of the Business Combination, there was no traditional “roadshow” or book building process, and no price at which underwriters initially sold shares to the public to help inform efficient and sufficient price discovery with respect to the initial post-closing trades. Therefore, buy and sell orders submitted prior to and at the opening of initial post-closing trading of our securities did not have the benefit of being informed by a published price range or a price at which the underwriters initially sold shares to the public, as would be the case in an underwritten initial public offering. There were no underwriters assuming risk in connection with an initial resale of our securities or helping to stabilize, maintain or affect the public price of our securities following the closing of the Business Combination. Moreover, neither HUB nor RNER engaged in, nor did they, directly or indirectly, request financial advisors to engage in, any special selling efforts or stabilization or price support activities in connection with our securities that are outstanding immediately following the closing of the Business Combination. In addition, since we became public through a merger, securities analysts of major brokerage firms may not provide coverage of us since there is no incentive to brokerage firms to recommend the purchase of our ordinary shares or warrants. No assurance can be given that brokerage firms will, in the future, want to conduct any offerings on our behalf. All of these differences from an underwritten public offering of our securities has resulted and could continue to result in a more volatile price for the our securities.
Such differences from an underwritten public offering may present material risks to unaffiliated investors that would not exist if we had become a U.S. publicly listed company through an underwritten initial public offering instead of upon completion of the Business Combination. Further, the lack of such processes in connection with the listing of our securities could result in diminished investor demand, inefficiencies in pricing and a more volatile public price of our securities during the period immediately following the listing than in connection with an underwritten initial public offering.
We may issue additional ordinary shares or other equity securities without seeking approval of our shareholders, which would dilute your ownership interests and may depress the market price of our ordinary shares and warrants.
We may choose to seek third party financing to provide additional working capital for our business, in which event we may issue additional equity securities or take out loans convertible into equity securities. We may also issue additional HUB ordinary shares or other equity securities of equal or, subject to applicable law, of senior rank in the future for any reason or in connection with, among other things, future acquisitions, the redemption of outstanding warrants or repayment of outstanding indebtedness, without shareholder approval, in a number of circumstances.
The issuance of additional HUB ordinary shares or other equity securities of equal or, subject to any applicable law, senior rank would have the following effects:
| ● | our existing shareholders’ proportionate ownership interest in HUB will decrease; |
| ● | the amount of cash available per share, including for payment of any dividends in the future, may decrease; |
| ● | the relative voting strength of each previously outstanding ordinary share may be diminished; and |
| ● | the market price of our ordinary shares may decline. |
We may also seek additional capital through debt financings. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, to make capital expenditures, to create liens or to redeem shares or declare dividends, that could adversely affect our ability to conduct our business.
Future issuances of our ordinary shares may significantly dilute the holdings of existing shareholders, and future resales of our ordinary shares may cause the market price of our ordinary shares and warrants to drop significantly, even if our business is doing well.
As of April 28, 2025, there were 10,047,296 outstanding ordinary shares. We have issued a substantial number of convertible notes and warrants that may be converted or exercised into our ordinary shares, which will significantly dilute our existing shareholders and may adversely affect the market price of our ordinary shares. As of April 28, 2025, such securities are convertible or exercisable into an aggregate of 10,586,298 ordinary shares. Many of such notes and warrants are subject to anti-dilution adjustments that would result in their becoming convertible or exercisable for additional shares and the reduction of the conversion or exercise price if we were to issue securities at a purchase price (or conversion or exercise price) of less than $5.00 per share.
Pursuant to the terms of private investments made by certain equityholders, we are required to register the securities of such equityholders. Upon the effectiveness of any registration statement we file to register securities issued or issuable in connection with such private investments in a registered offering of securities pursuant to the Securities Act or otherwise in accordance with Rule 144 under the Securities Act, our shareholders may sell large amounts of ordinary shares and warrants in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of our ordinary shares or warrants or putting significant downward pressure on the price of our ordinary shares or warrants. Additionally, downward pressure on the market price of our ordinary shares or warrants likely will result from sales of our ordinary shares issued in connection with the exercise of warrants. Further, sales of our ordinary shares or warrants upon expiration of the applicable lockup period could encourage short sales by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. Short sales of our ordinary shares or warrants could have a tendency to depress the price of our ordinary shares or warrants, respectively, which could increase the potential for short sales.
In consideration for the acquisition of BST, HUB issued to BST’s equity holders 2,965,366 ordinary shares and pre-funded warrants to purchase 664,373 ordinary shares of HUB. 364,972 of the shares issued to the BST equityholders are to be held in escrow for a period of 12 months following the closing date to secure certain indemnification obligations. The exercise of the pre-funded warrants is limited to the extent that, upon exercise, the holder and its affiliates would hold more than 4.99% of HUB’s outstanding ordinary shares. The ordinary shares are subject to transfer restrictions for a period of 18 months following the closing date of January 27, 2025. Specifically, all such shares are restricted from transfer for a period of six-months. After six months, each former BST equityholder will be entitled to transfer up to 28% of its shares. Over the following 12 months, an additional 6% of the shares will be released from the lock-up each month. The actual or perceived availability of these shares for sale may further depress the trading price of our ordinary shares.
If we or any of our subsidiaries are characterized as a Passive Foreign Investment Company (“PFIC”) for U.S. federal income tax purposes, U.S. Holders may suffer adverse tax consequences.
A non-U.S. corporation generally will be treated as a PFIC for U.S. federal income tax purposes, in any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (generally based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. We believe we were not a PFIC in 2024. Based on the current and anticipated composition of our and our subsidiaries’ income, assets and operations, there is a risk that we may be treated as a PFIC for future taxable years. Moreover, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you that the Internal Revenue Service (the “IRS”) will not take a contrary position or that a court will not sustain such a challenge by the IRS.
Whether we or any of our subsidiaries are a PFIC for any taxable year is a factual determination that depends on, among other things, the composition of our and our subsidiaries’ income and assets, and the market value of our and our subsidiaries’ shares and assets. Changes in the composition of our and our subsidiaries’ income, composition or composition of assets may cause us to be or become a PFIC for the current or subsequent taxable years. Whether we are treated as a PFIC for U.S. federal income tax purposes is a factual determination that must be made annually at the close of each taxable year and, thus, is subject to significant uncertainty.
If we are a PFIC for any taxable year, a U.S. Holder (as defined in “Certain Material U.S. Federal Income Tax Considerations”) of our ordinary shares or warrants may be subject to adverse tax consequences and may incur certain information reporting obligations. Such adverse consequences of PFIC status may be alleviated if a U.S. Holder makes a “mark to market” election or an election to treat us as a “qualified electing fund”, or QEF. These elections would result in an alternative treatment (such as mark-to-market treatment) of our ordinary shares. A U.S. Holder may make a QEF election with respect to our ordinary shares only if we provide U.S. Holders on an annual basis with certain financial information specified under applicable U.S. Treasury regulations. There can be no assurance that we will have timely knowledge of our status as a PFIC in the future or that we will timely provide U.S. Holders with the required information on an annual basis to allow U.S. Holders to make a QEF election with respect to our ordinary shares in the event we are treated as a PFIC for any taxable year. U.S. Holders who hold or have held our securities during a period when we were or are a PFIC will generally be subject to the foregoing rules unless we cease to be a PFIC and such U.S. Holder makes a “deemed sale” election with respect to our ordinary shares. For a further discussion, see “Certain Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Rules.” U.S. Holders of our ordinary shares and our warrants are strongly encouraged to consult their own advisors regarding the potential application of these rules to us and the ownership of our ordinary shares and/or warrants.
If a U.S. Holder is treated as owning at least 10% of our stock, such U.S. Holder may be subject to adverse U.S. federal income tax consequences.
For U.S. federal income tax purposes, if a U.S. Holder is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our stock, such person may be treated as a “United States shareholder” with respect to us, or any of our subsidiaries, if we or such subsidiary is a “controlled foreign corporation.” If, as expected, we have one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as a controlled foreign corporation regardless of whether we are treated as a controlled foreign corporation.
Certain United States shareholders of a controlled foreign corporation may be required to report annually and include in their U.S. federal taxable income their pro rata share of the controlled foreign corporation’s “Subpart F income” and, in computing their “global intangible low-taxed income,” “tested income” and a pro rata share of the amount of certain U.S. property (including certain stock in U.S. corporations and certain tangible assets located in the United States) held by the controlled foreign corporation regardless of whether such controlled foreign corporation makes any distributions. The amount includable by a United States shareholder under these rules is based on a number of factors, including potentially, but not limited to, the controlled foreign corporation’s current earnings and profits (if any), tax basis in the controlled foreign corporation’s assets, and foreign taxes paid by the controlled foreign corporation on its underlying income. Failure to comply with these reporting obligations (or related tax payment obligations) may subject such United States shareholder to significant monetary penalties and may extend the statute of limitations with respect to such United States shareholder’s U.S. federal income tax return for the year for which reporting (or payment of tax) was due. We cannot provide any assurances that we will assist U.S. Holders in determining whether we or any of our subsidiaries are treated as a controlled foreign corporation for U.S. federal income tax purposes or whether any U.S. Holder is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations if we, or any of our subsidiaries, is treated as a controlled foreign corporation for U.S. federal income tax purposes. U.S. Holders should consult their own advisors regarding the potential application of these rules to an investment in our ordinary shares or warrants.
As a result of the Business Combination, the IRS may not agree that we should be treated as a non-U.S. corporation for U.S. federal income tax purposes.
Under current U.S. federal income tax law, a corporation generally will be considered to be a U.S. corporation for U.S. federal income tax purposes if it is created or organized in the United States or under the law of the United States or of any State. Accordingly, under generally applicable U.S. federal income tax rules, we, given our incorporation and tax residency in Israel, would generally be classified as a non-U.S. corporation for U.S. federal income tax purposes. Section 7874 of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury regulations promulgated thereunder, however, contain specific rules that may cause a non-U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes. If it were determined that we are treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury regulations promulgated thereunder, we would be liable for U.S. federal income tax on our income in the same manner as any other U.S. corporation and certain distributions made by us to holders that are not U.S. Holders (as defined in “Certain Material U.S. Federal Income Tax Considerations”) of our ordinary shares may be subject to U.S. withholding tax.
Based on the terms of the Business Combination and certain factual assumptions, we do not currently expect to be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code after the Business Combination. However, the application of Section 7874 of the Code is complex, subject to detailed regulations (the application of which is uncertain in various respects and would be impacted by changes in such U.S. Treasury regulations with possible retroactive effect) and subject to certain factual uncertainties. Accordingly, there can be no assurance that the IRS will not challenge our status as a non-U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code or that such challenge would not be sustained by a court.
If the IRS were to successfully challenge under Section 7874 of the Code our status as a non-U.S. corporation for U.S. federal income tax purposes, we and certain of our shareholders may be subject to significant adverse tax consequences, including a higher effective corporate income tax rate and future withholding taxes on certain of our shareholders, depending on the application of any applicable income tax treaty that may apply to reduce such withholding taxes.
You should consult your own advisors regarding the application of Section 7874 of the Code to the Business Combination and the tax consequences if our classification as a non-U.S. corporation is not respected.
The remainder of this discussion assumes that we will not be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code.
Risks Related to Our Incorporation and Operations in Israel
Conditions in Israel could materially and adversely affect our business.
Many of our employees, including certain management members operate from our offices that are located in Tel Aviv, Israel. In addition, a number of our officers and directors are residents of Israel. Accordingly, political, economic, and military conditions in Israel and the surrounding region may directly affect our business and operations. On the military front, in recent years, Israel has been engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large portions of southern Lebanon, and with Iranian-backed military forces in Syria. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip, Lebanon and Syria against civilian targets in various parts of Israel, including areas in which our employees are located, which negatively affected business conditions in Israel. Any hostilities involving Israel, regional political instability or the interruption or curtailment of trade between Israel and its trading partners could materially and adversely affect our operations and results of operations.
In particular, on October 7, 2023, thousands of Hamas terrorists invaded Israel’s southern border from the Gaza Strip and conducted widespread brutal attacks on civilian and military targets. Hamas concurrently launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped hundreds of civilians and soldiers from Israel. Following the invasion, Israel’s security cabinet declared war against Hamas and commenced a military campaign against Hamas, and these terrorist organizations in parallel continued rocket and terror attacks against Israeli targets.
In addition, since the commencement of these events, there have been continual hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and southern border (with the Houthi movement in Yemen) until ceasefire agreements went into effect with Hezbollah on November 27, 2024. It is possible that hostilities with Hamas in Gaza or Hezbollah in Lebanon will further escalate, and that other terrorist organizations, including Palestinian military organizations in the West Bank as well as other hostile countries, will join the hostilities.
The Israel Defense Force (the “IDF”), the national military of Israel, is a conscripted military service, subject to certain exceptions. Several of our employees and management members are subject to military service in the IDF and have been and may be called to serve. Since the war with Hamas broke out and as of the date of this Annual Report, 56 of our 322 employees served in active duty, including our CEO and CTO. Military service call ups that result in absences of personnel for an extended period of time may materially and adversely affect our business, prospects, financial condition and results of operations.
Since the war broke out on October 7, 2023, our operations have not been adversely affected by this situation in a material manner, and we have not experienced material disruptions to our business operations. As such, our product and business development activities remain on track. However, the intensity and duration of Israel’s current war against Hamas is difficult to predict at this stage, as are such war’s economic implications on our business and operations and on Israel’s economy in general. If the war extends for a long period of time or expands to other fronts, such as Lebanon, Syria, Iran and the West Bank, our operations may be adversely affected.
In addition, in April and October 2024, Iran launched direct attacks on Israel involving hundreds of drones and missiles and has threatened to continue to attack Israel. Iran is widely believed to be developing nuclear weapons and is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. Such clashes may escalate in the future into a greater regional conflict. These situations may potentially escalate in the future to more violent events which may affect Israel and us.
Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions, could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business may decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel refusing to perform their commitments under those agreements. Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations.
Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on its business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
Further, political conditions within Israel may affect our operations. Israel has held five general elections between 2019 and 2022, and in 2023 the Israeli government pursued extensive changes to Israel’s judicial system, which sparked extensive political debate and unrest. Actual or perceived political instability in Israel or any negative changes in the political environment, may individually or in the aggregate adversely affect the Israeli economy and, in turn, our business, financial condition, results of operations and growth prospects.
In addition, many Israeli citizens are obligated to perform several weeks of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial condition, and results of operations.
As a public company incorporated in Israel, we may become subject to further compliance obligations and market trends or restrictions, which may strain our resources and divert management’s attention.
Being an Israeli company publicly traded in the United States and being subject to both U.S. and Israeli rules and regulations may make it more expensive for us to obtain directors and officers liability insurance, and we may be required to continue incurring substantially higher costs for reduced coverage. In addition, as a company that had publicly offered securities in Israel via prospectus, even though we were approved by the Israeli court and delisted from the TASE, the Israeli Securities Law shall continue to apply and we shall still be subject to certain reporting obligations in Israel unless otherwise exempt in accordance with Israeli law. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on its audit committee, and qualified executive officers. In accordance with the provisions of the Companies Law, approval of our directors and officers insurance is limited to the terms of our duly approved compensation policy, unless otherwise approved by our shareholders.
Our Articles and Israeli law could prevent a takeover that shareholders consider favorable and could also reduce the market price of our ordinary shares.
Certain provisions of Israeli law and the Articles could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or for our shareholders to elect different individuals to our board of directors, even if doing so would be beneficial to our shareholders, and may limit the price that investors may be willing to pay in the future for the HUB ordinary shares. Among other things:
| ● | Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased; |
| ● | Israeli corporate law requires special approvals for certain transactions involving a company with its directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions; |
| ● | Israeli corporate law does not provide for shareholder action by written consent for public companies, thereby requiring all shareholder actions to be taken at a general meeting of shareholders; |
| ● | Our Articles divide our directors into three classes, each of which is elected once every three years; |
| ● | Our Articles require that any amendment thereto will be approved by our board of directors, in addition to by a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter at a general meeting of shareholders; |
| ● | Our Articles do not permit a director to be removed except by a vote of the holders of at least 65% of the outstanding shares entitled to vote at a general meeting of shareholders; and |
| ● | Our Articles provide that director vacancies may be filled by the board of directors. |
Further, Israeli tax considerations may make certain transactions undesirable to HUB or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires the tax becomes payable even if no disposition of the shares has occurred. See the section titled “Taxation — Taxation of Our Shareholders.”
Provisions of Israeli law and the Articles may delay, prevent or make difficult an acquisition of HUB, prevent a change of control, and negatively impact our share price.
Israeli corporate law regulates acquisitions of shares through tender offers and mergers, requires special approvals for transactions involving directors, officers or significant shareholders, and regulates other matters that may be relevant to these types of transactions. Furthermore, Israeli tax considerations may make potential acquisition transactions unappealing to us or to some of our shareholders. For example, Israeli tax law may subject a shareholder who exchanges his or her ordinary shares for shares in a foreign corporation, to taxation before disposition of the investment in the foreign corporation. These provisions of Israeli law may delay, prevent or make an acquisition of HUB, which could prevent a change of control and, therefore, depress the price of our shares.
We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
A significant portion of our intellectual property has been developed by our employees in the course of their employment by us. Under the Israeli Patents Law, 5727-1967 (the “Patents Law”), inventions conceived by an employee during and as a result of his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent an agreement between the employee and employer providing otherwise. The Patents Law also provides that if there is no agreement between an employer and an employee determining whether the employee is entitled to receive consideration for service inventions and on what terms, this will be determined by the Israeli Compensation and Royalties Committee (the “Committee”), a body constituted under the Patents Law. Case law clarifies that the right to receive consideration for “service inventions” can be waived by the employee and that in certain circumstances, such waiver does not necessarily have to be explicit. The Committee will examine, on a case-by-case basis, the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further, the Committee has not yet determined one specific formula for calculating this remuneration, but rather uses the criteria specified in the Patents Law. Although we generally enter into agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created during and as a result of their employment with us, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced to litigate such monetary claims (which will not affect our proprietary rights), which could negatively affect our business.
Certain tax benefits that may be available to us, if obtained, would require us to continue to meet various conditions and such benefits may be terminated or reduced in the future, which could increase our costs and taxes.
We may be eligible for certain tax benefits provided to “Preferred Technological Enterprises” under the Israeli Law for the Encouragement of Capital Investments, 5719-1959, referred to as the “Investment Law”. If we obtain tax benefits under the “Preferred Technological Enterprises” regime then, in order to remain eligible for such tax benefits, we will need to continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended. If these tax benefits are reduced, canceled or discontinued, our Israeli taxable income may be subject to Israeli corporate tax rates of 23% in 2018 and thereafter. Additionally, if we increase our activities outside of Israel through acquisitions, for example, our activities might not be eligible for inclusion in future Israeli tax benefit programs. See “Taxation.”
It may be difficult to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this Annual Report in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors and these experts.
Most of our directors or officers are not residents of the United States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. directors and officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.
Moreover, an Israeli court will not enforce a non-Israeli judgment if (among other things) it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, or if it was obtained by fraud or in absence of due process, or if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, at the time the foreign action was brought.
Your rights and responsibilities as a shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.
We are incorporated under Israeli law. The rights and responsibilities of holders of the ordinary shares are governed by the Articles and the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an Israeli company has to act in good faith and in a customary manner in exercising his or her rights and fulfilling his or her obligations toward the company and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at the general meeting of shareholders and class meetings, on amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers, and transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder of an Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power under the articles of association to appoint or prevent the appointment of a director or officer in the Company, or has other powers toward the Company has a duty of fairness toward the Company. However, Israeli law does not define the substance of this duty of fairness. There is limited case law available to assist in understanding the implications of these provisions that govern shareholder behavior.
The Articles provide that unless we consent otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes between us and our shareholders under the Companies Law and the Israeli Securities Law.
The competent courts of Tel Aviv, Israel shall, unless we consent otherwise in writing, be the exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of ours to us or our shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law. This exclusive forum provision is intended to apply to claims arising under Israeli law and would not apply to claims brought pursuant to the Securities Act or the Exchange Act or any other claim for which federal courts would have exclusive jurisdiction. Such exclusive forum provision in the Articles will not relieve us of our duties to comply with federal securities laws and the rules and regulations thereunder, and shareholders will not be deemed to have waived our compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors or other employees, which may discourage lawsuits against us, our directors, officers and employees.
We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the combined company’s ordinary share price, which could cause the price of our shares to fall and shareholders to lose some or all of their investment.
We may be forced to further write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in us reporting losses. Unexpected risks may arise and previously known risks may materialize. Even though these charges may be non-cash items and would not have an immediate impact on our liquidity, the fact that we may report charges of this nature could contribute to negative market perceptions of us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by our business or by virtue of the us obtaining additional debt financing. Accordingly, any of our shareholders could suffer a reduction in the value of their shares. Such shareholders are unlikely to have a remedy for such reduction in value.
Item 4. Information on the Company.
A. History and Development of the Company
HUB began operations in 1984 as A.L.D. Advanced Logistics Development Ltd. (“ALD”) and is engaged in developing and marketing quality management software tools and solutions. HUB Cyber Security TLV Ltd. (“HUB TLV”) was founded in 2017 by veterans of the elite Unit 8200 and Unit 81 of the Israeli Defense Forces, with vast experience and proven track records in setting up and commercializing start-ups in a multi-disciplinary environment. On February 28, 2021, HUB TLV and ALD signed a share swap merger agreement, pursuant to which HUB TLV became a wholly owned subsidiary of ALD and the shareholders of HUB TLV owned 51% of ALD’s issued and outstanding share capital (the “ALD Merger”). The ALD Merger was completed on June 21, 2021 and ALD later changed its name to Hub Cyber Security (Israel) Ltd. and later to Hub Cyber Security Ltd. Following the ALD Merger, we have developed unique technology and products in the field of confidential computing, with the intention to be a significant player in the cyber security industry.
As of March 1, 2023, HUB began trading on Nasdaq following its Business Combination Agreement with Mount Rainier Acquisition Corp.
In November 2023, HUB began to collaborate with BST with the goal of becoming a significant player in the secured data fabric industry, and in January 2025, HUB subsequently acquired BST. These technologies and solutions are mostly needed by government entities, banks and financial institutions, and large regulated enterprises. We currently operate in several countries and provide secured data fabric SaaS solutions, as well as a wide range of cybersecurity professional services.
Corporate Information
Our website address is www.hubsecurity.com. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report and is not incorporated by reference herein. We have included our website address in this Annual Report solely for informational purposes. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers, such as we, that file electronically, with the SEC at www.sec.gov.
The main address of our principal executive offices is 2 Kaplan Street, Tel Aviv, Israel and our telephone number is +972-3-791-3200. Our agent for service of process in the U.S. is Puglisi & Associates, 850 Library Avenue, Newark, Delaware 19711. We are registered with the Israeli Registrar of Companies (registration number 511029373).
For a description of our principal capital expenditures and divestitures for the two years ended December 31, 2024 and for those currently in progress, see Item 5. “Operating and Financial Review and Prospects.”
Recent Developments
Internal Investigation
On August 15, 2023, the Special Committee (the “Special Committee”) of the board of directors (the “Board”) of HUB, comprised of independent directors Ilan Flato and Nuriel Kasbian Chirich, announced that it had substantially completed its independent internal investigation (the “Internal Investigation”) into, among other matters, the issues disclosed in the Company’s previously announced Report on Form 6-K dated April 20, 2023.
The Board authorized the Special Committee to review documents, records and information of the Company, and to conduct interviews as the Special Committee deemed appropriate in order to conduct the Internal Investigation. In addition to investigating potential misconduct involving Eyal Moshe (our former Chief Executive Officer and President of U.S. Operations and former member of our board of directors) and Ayelet Bitan (former Chief of Staff), the Special Committee also conducted a review of the Company’s financial department and relevant policies, procedures and internal controls.
In conducting the Internal Investigation, the Special Committee and its advisors reviewed documents collected from various custodians, interviewed witnesses and performed forensic accounting and data analytics testing, including an examination of the Company’s financial records.
The Special Committee believed that it found sufficient evidence to support the following findings as a result of the Internal Investigation:
| A. | Misappropriation by Eyal Moshe and Ayelet Bitan. Mr. Moshe and Ms. Bitan misappropriated (from a Company bank account over which Mr. Moshe had sole signatory rights) a total of approximately NIS 2 million (approximately $582,000) for use in renovations of their private residence and other personal expenses. |
| B. | Payments to one of the Controllers. One of the controllers, with the permission of Mr. Moshe, used Company credit cards for personal use in the amount of approximately NIS 400,000 (approximately $110,000). These personal expenses were neither factored into the controller’s payroll nor properly documented in the Company’s financial books and records. Additionally, Mr. Moshe approved a bonus of NIS 250,000 to the controller. However, this bonus was not paid to the controller but instead was paid to a third-party at the controller’s direction. |
| C. | Payments to Contractors. In certain instances, Mr. Moshe authorized payments to contractors without either (i) proper documentation and signatory approval; or (ii) approved budget and expense reports. |
Since the completion of the Internal Investigation, the Company performed a rehaul of its top management and executive officers, in addition to enacting and enforcing tougher anti-fraud and anti-corruption policies, oversight, reviews and checks. All of the management and executive officers that served in the Company during the time when the misappropriation occurred have since left the Company and been replaced. To the best of the Company’s knowledge, the past misappropriation of funds has no current or further impact on the Company, its finances and its business, and is not expected to affect the Company or its expected growth in the future.
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.
On April 22, 2025, investigators from the Israeli Tax Authority visited the offices of the company. To the Company best knowledge, said visit related to developments in the investigation related to the actions of a former Financial Controller of the Company, which were also addressed in the aforementioned special committee investigation.
Board Actions in Response to the Special Committee’s Findings
In light of the Special Committee’s findings, the Board has taken and has directed us to take action to implement significant remedial measures. Mr. Moshe was formally terminated as an employee of the Company as of July 24, 2023 and resigned from the Board on August 15, 2023.
Two actions were undertaken against Ms. Bitan. In the initial action, the court granted an injunction preventing her from accessing her accumulated severance package. In the second action, it was requested that the court order that these sums be returned to us. In the action against Mr. Moshe, the court was requested to grant an injunction against accessing his accumulated severance package and to order the return of the sums to us. These actions are time limited, so the initial action against Ms. Bitan was initiated prior to the completion of the Special Committee Report and as such was based upon the limited information known at that time. The preliminary hearing in both of these cases is set for the coming months and both will be heard in front of the same judge who granted the injunction against Ms. Bitan.
We terminated the employment of the controller in 2023 in accordance with Israeli law. Prior to the commencement of legal proceedings, the Company reached a settlement with the controller whereby the amount of the bonus in the amount of NIS 250,000 plus VAT was repaid to the Company and all his options and RSUs were cancelled.
The Company is also in the process of developing and implementing a number of additional remedial measures to enhance internal controls over financial reporting and disclosure controls. The Company and its independent auditors have determined that no restatement of the Company’s previously issued financial statements is necessary or appropriate.
The Company is reporting in this Annual Report material weaknesses in internal controls over financial reporting related to these matters and also is reporting that its disclosure controls and procedures were not effective.
The Special Committee may continue to perform certain additional investigative steps if necessary or additional relevant information is discovered.
The events described above regarding the Special Committee and Internal Investigation are the subject of possible regulatory review and expose the Company and its directors and officers to possible investigations and possible enforcement actions by regulators both in Israel and the United States, including the ISA, SEC, Nasdaq and/or DOJ. The Company has provided certain information and documentation to certain regulatory authorities and is prepared to respond to any regulatory inquiry it may receive. If the Company were to be subject to an investigation or enforcement action from a regulatory agency it could have a material adverse effect on the Company’s business, financial position and results of operations.
BST Collaboration and Merger
In November 2023, the Company began to collaborate with BlackSwan Technology (“BST”) with the goal of becoming a significant player in the secured data fabric industry. Subsequently, in August 2024, we entered into a collaboration agreement with BST formalizing the terms of the collaboration between the parties (the “BST Collaboration Agreement”). The BST Collaboration Agreement was effective as of November 1, 2023 and pursuant to the terms thereof, BST agreed to conduct activities directed by us to integrate BST technology with HUB technology. In addition, we agreed to provide advisory services to BST in connection with BST’s performance under specified commercial agreements. Pursuant to the BST Collaboration Agreement, we receive 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 granted HUB 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. We subsequently exercised this right and acquired BST on January 27, 2025. We believe that the acquisition of BST will solidify our position as a leading provider of secured data fabric solutions, offering a critical safeguard for banks, financial institutions and other industries navigating an increasingly complex regulatory and cybersecurity environment.
March 2025 Notes
On March 27, 2025, the Company completed the issuance of a series of notes (the “March 2025 Notes”) to certain investors, including Keystone Capital Partners, LLC as the lead investor (“Keystone” and collectively with the other investors, the “March 2025 Note Investors”), in an aggregate principal amount of $1,625,000 and original issue discount of $325,000, for an aggregate purchase price of $1,300,000. The March 2025 Notes mature on December 11, 2025, do not bear interest, and include a prepayment option at a premium of 125%. In addition, the Company is required to use the cash proceeds deriving from a financing in which it receives proceeds of at least $10 million to repay the March 2025 Notes.
The March 2025 Note Investors have the right to convert the principal amount into ordinary shares of the Company upon the occurrence of a subsequent equity financing pursuant to which the Company receives at least $5 million, subject to certain conditions.
The conversion of the March 2025 Notes will be limited to the extent that, upon their conversion, a March 2025 Note Investor and its affiliates would in aggregate beneficially own more than 4.99% of the Company’s outstanding share capital at any time.
ELOC Transaction
Concurrently with the investment by the March 2025 Note Investors described above, the Company entered into an Ordinary Shares Purchase Agreement (the “ELOC Purchase Agreement”) with Keystone, pursuant to which the Company has the right to sell to Keystone up to an aggregate of $50 million of newly issued ordinary shares (the “ELOC Shares”).
As consideration for Keystone’s commitment to purchase ELOC Shares upon the terms of and subject to satisfaction of the conditions set forth in the ELOC Purchase Agreement, the Company agreed to issue to Keystone a note in a principal amount of $1,000,000, does not bear interest, and has a maturity date of December 11, 2025 (the “Commitment Note”). The Commitment Note is due by way of conversion into the Company’s shares based on the closing share price of the Company’s shares on the date immediately prior to the maturity date, provided that in each case the applicable conversion price shall not be lower than twenty percent (20%) of the closing sale price of the Company’s shares on the issuance date of the Commitment Note. The Commitment Note can be converted prior to the maturity date by either the Company or Keystone at any time following the earlier of (i) the date on which the shares issuable upon conversion are registered under a registration statement filed with the Securities and Exchange Commission (the “SEC”) or (ii) September 11, 2025. In the event of a conversion prior to the maturity date, the number of Company shares to be issued upon the conversion of the Commitment Note will be based on the closing share price on the day prior to the issuance of the conversion notice provided that the closing sale price on the day prior to the issuance of the conversion notice is not lower than 10% as compared to the closing sale price on the date immediately prior thereto. The conversion of the Commitment Note will be limited to the extent that, upon its conversion, Keystone and its affiliates would in aggregate beneficially own more than 4.99% of the Company’s outstanding share capital at any time.
In addition, in connection with the ELOC Purchase Agreement, the Company and Keystone entered into a Registration Rights Agreement pursuant to which the Company undertook to register with the SEC the shares issuable upon conversion of the Conversion Note and the ELOC Shares that the Company has the right to sell to Keystone.
The Company does not have a right to commence any sales of ELOC Shares to Keystone under the ELOC Purchase Agreement before a registration statement of such shares is declared effective by the SEC and the final form of prospectus is filed with the SEC (the “Commencement Date”). Following such date, the Company will control the timing and amount of any sales of ELOC Shares to Keystone. Actual sales of shares of ELOC Shares to Keystone under the ELOC Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the ELOC Shares and determinations by the Company as to the appropriate sources of funding for the Company and its operations. The Company is obligated to use 33% proceeds from the sale of ELOC Shares to repay the principal amount under the March 2025 Notes.
Under the ELOC Purchase Agreement, on any business day on which the closing sale price of the Company’s shares is equal to or greater than $0.05 (the “Fixed Purchase Date”), the Company may direct Keystone to purchase shares (a “Fixed Purchase”) at a purchase price equal to 95% of the lesser of (i) the daily volume-weighted average price (the “VWAP”) of the Company’s shares for the five (5) trading days immediately preceding the applicable fixed purchase date and (ii) the lowest sale price on the applicable Fixed Purchase Date, provided, that Keystone’s committed obligation under any single Fixed Purchase shall not exceed $50,000.
In addition to Fixed Purchases, on any business day on which the Company has directed Keystone to purchase the maximum allowable Fixed Purchase amount, the Company may also direct Keystone to purchase additional shares on the trading day immediately following the purchase date for such Fixed Purchase (the “VWAP Purchase Date” and such purchase, a “VWAP Purchase”) at a purchase price equal to 90% of the lesser of (i) the closing sale price of the Company’s shares on the applicable VWAP Purchase Date and (ii) the VWAP during the period on the applicable VWAP Purchase Date beginning at the opening of trading and ending on the earlier of (1) close of trading, (2) the time at which the trading volume of the Company’s shares on Nasdaq has reached the number of shares to be sold in the VWAP Purchase divided by 30%, and (3) the time at which the sale price of the Company’s shares on Nasdaq is 75% of the closing sale price on the date on which the Company directs Keystone to make a VWAP Purchase (such period, the “VWAP Purchase Period”), provided, that Keystone’s committed obligation under any single VWAP Purchase shall not exceed the lesser of (a) 300% of the number of shares sold in the corresponding Fixed Purchase and (b) 30% of the trading volume of the VWAP Purchase Period.
In addition, on a VWAP Purchase Date, the Company may also direct Keystone to purchase on such day, an additional number of shares (an “Additional VWAP Purchase”) at a purchase price equal to 90% of the lesser of (i) the VWAP beginning at the completion of any prior VWAP Purchases and the last Additional VWAP Purchase, as applicable, and ending on the earlier of (1) close of trading, (2) the time at which the trading volume of the Company’s shares on Nasdaq has reached the number of shares to be sold in the Additional VWAP Purchase divided by 30%, and (3) the time at which the sale price of the Company’s shares on Nasdaq is 75% of the closing sale price on the date on which the Company directs Keystone to make an Additional VWAP Purchase (such period, the “Additional VWAP Purchase Period”), and (ii) the lowest sale price on such day, provided, that Keystone’s committed obligation under any single Additional VWAP Purchase shall not exceed the lesser of (a) 300% of the number of shares sold in the Fixed Purchase that corresponded to the VWAP Purchase corresponding to the Additional VWAP Purchase and (b) 30% of the trading volume of the Additional VWAP Purchase Period.
The Lead Investor’s aggregate committed obligation under a VWAP Purchase and all Additional VWAP Purchases for a particular VWAP Purchase Date shall not exceed $1,000,000 in the aggregate.
The ELOC Purchase Agreement provides that the Company may not issue or sell any shares under the ELOC Purchase Agreement if the issuance or sale of such shares would result in Keystone and its affiliates beneficially owning more than 4.99% of the Company’s outstanding share capital at any time.
Julestar Financing Transaction
In February 2025, the Company entered into a Loan Agreement with Julestar LLC, a New York limited liability company (“Julestar”), pursuant to which Julestar agreed to loan us $2,650,000 in consideration for a promissory note in the principal amount of $3,117,647 (the “Julestar Note”). The principal amount, and interest thereon, is required to be repaid in 40 weekly installments over the 10-month term of the loan. The Julestar Note accrues interest at a rate of 10% per annum. To secure the repayment of the Julestar Note, the Company undertook to grant a subordinated pledge over the shares of certain of its subsidiaries, subject to the consent of a senior lender within 60 days. As of the date hereof, the Company did not make any payments.
The Loan Agreement also provides for the issuance of five-year warrants to purchase 530,000 Ordinary Shares (the “Julestar Warrants”), subject to downward adjustment in the number of underlying shares in the event of early repayment of the Julestar Note in full or upward adjustment in the event the Julestar Note is not repaid in full within 90 days of the issuance date, as detailed below. The exercise price of the Julestar Warrants is $5.00 per share, subject to adjustment in certain circumstances, including dilutive issuances. The Julestar Warrants are subject to a limitation that prohibits ownership of more than 4.99% of Company’s outstanding share capital at any time.
The Company undertook to register with the Securities and Exchange Commission on a Form F-1 or Form F-3 the shares issuable upon the exercise of the Julestar Warrants.
The net proceeds of the amount we raise in any single subsequent financing or asset sale outside the ordinary course of business of more than $5.0 million, or multiple subsequent financings or asset sales outside the ordinary course of business of more than $7.0 million in the aggregate, will be required to be used to prepay the Julestar Note in full. We are entitled to prepay a minimum of $100,000 of the Julestar Note at any time, with no prepayment penalties, with declining incentives for early prepayment consisting of a decrease in the principal amount and a decrease in the number of shares issuable under the Julestar Warrants. If the Julestar Note is not repaid in full within 90 days, the number of shares issuable under the Julestar Warrants will increase and the exercise price of the additional shares could be set lower, to half the lowest 10-day average market price during the period, subject to a floor price.
While we are currently in default of certain terms under the Loan Agreement with Julestar, we are in discussions with Julestar to restructure our obligations thereunder.
J.J. Astor Financing
In December 2024, the Company entered into a Loan Agreement with J.J. Astor & Co. (“Astor”) pursuant to which Astor agreed to loan us $2,200,000 in consideration for a promissory note in the principal amount of $2,750,000 (the “December 2024 Convertible Note”). After fees and expenses, the net proceeds of the loan are expected to be $2,087,000. The December 2024 Convertible Note is payable in 40 weekly installments of $68,750 each in cash or registered ordinary shares, at our election. The December 2024 Convertible Note will not accrue interest (unless there is an event of default). As of the date hereof, the Company has paid an aggregated amount of $840,000.
The Company is entitled to prepay the December 2024 Convertible Note at any time, with declining discounts for prepayment within 30, 60 or 90 days. Upon an event of default, the outstanding principal amount will increase to 110% of the outstanding principal amount, plus interest thereon at the rate of 16% per annum. The December 2024 Convertible Note will be convertible by Astor following an event of default.
The conversion price of the December 2024 Convertible Note is 80% of the average of the four lowest VWAP prices for the 20 trading days prior to conversion but not lower than the 20% of the average of the four lowest VWAP prices for the 20 trading days prior to the closing date. To the extent that the conversion price is lower than such minimum price, the Company will be required to pay a make-whole payment.
One-half of the net proceeds of the amount the Company raises in any subsequent equity financing of less than $5 million will be required to be used to prepay the December 2024 Convertible Note, and all of larger equity financings will be required to be used to prepay the December 2024 Convertible Note.
The Company agreed to issue to Astor a five-year warrant to purchase 129,411 ordinary shares at an exercise price of $8.50 per share (the “December 2024 Warrant”), subject to adjustment in certain circumstances, including dilutive issuances. The exercise price of the December 2024 Warrant was subsequently lowered to $5.00 per share in accordance with the adjustment mechanism therein. The Company undertook to register the shares issuable upon conversion of the December 2024 Convertible Note and upon exercise of December 2024 Warrant on our registration statement on Form F-1. If there is no such registration statement in effect, the holder of the December 2024 Warrant will be entitled to exercise on a cashless basis. On January 13, 2025, Astor assigned the December 2024 Warrant to Wolverine Flagship Fund Trading Limited, which now holds the rights under the December 2024 Warrant.
The Company could be required to pay liquidated damages of up to 10% of the principal amount of the Note if the Company does not satisfy our obligations under the registration rights agreement on a timely basis. The December 2024 Convertible Note and December 2024 Warrant are subject to a limitation that prohibits ownership of more than 4.99% our outstanding share capital at any time.
Each of the Company’s subsidiaries agreed to guarantee the December 2024 Convertible Note and the Company and each of its subsidiaries agreed to grant a subordinated pledge over its assets to secure the December 2024 Convertible Note, each to become effective following an event of default and receipt of consent from our senior lenders. Failure to obtain such consents will be deemed an event of default under the December 2024 Convertible Note.
While we are currently in default of certain terms under the Loan Agreement with Astor, we are in discussions with Astor to restructure our obligations thereunder.
Bank Mizrahi Debt Settlement Agreement
In December 2024, Comsec Ltd. and Bank Mizrahi entered into a debt settlement agreement concerning the restructuring of the overall outstanding debt of Comsec Distribution Ltd, or the Mizrahi Debt Settlement Agreement. Pursuant to the Mizrahi Debt Settlement Agreement, the parties agreed that the outstanding debt amount of NIS 23 million will be repaid over 24 months with quarterly installments, commencing on June 30, 2025. Interest will accrue at a rate of Prime (Bank of Israel intrabank plus 1.5%) plus 3.25%. In addition, Bank Mizrahi agreed to waive any claims or objections regarding the debts, interest rates, or associated banking charges. Bank Mizrahi reserves the right to demand immediate repayment if the debtors breach the Mizrahi Debt Settlement Agreement or if significant events occur that cast doubt on the debtors' ability to meet obligations.
Claymore Capital Financings
In August 2024, we entered into Securities Purchase Agreements with multiple private investors to raise gross proceeds of approximately $3.3 million in exchange for the issuance of convertible notes (the “August 2024 Notes”) with an aggregate principal amount of approximately $4.0 million and warrants to acquire an aggregate of approximately 470,000 ordinary shares of the Company. The August 2024 Notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price equal to $5.00. The August 2024 Warrants are exercisable for a period of three years at an exercise price of $7.143 per share. Claymore Capital PTY Ltd. (“Claymore”) served as the placement agent for this transaction and received a fee of approximately $233,000 in cash and a warrant to purchase approximately 110,000 ordinary shares of the Company on terms substantially similar to the terms of the August 2024 Warrants. The Company entered into a consulting agreement with the placement agent for an initial period of three months, during which the placement agent will be paid a fee of $15,000 per month.
In August 2024, Claymore agreed to extend a loan to the Company in the amount of $500,000 with interest at the rate of 10% of the principal amount until it was subsequently repaid in August 2024. In November 2024, Claymore agreed to extend a loan of an additional $200,000 with interest at the cumulative rate of 20% of the principal amount until it was subsequently repaid in December 2024. In November 2024, Claymore agreed to extend a loan of an additional $500,000 at the cumulative rate of 45% of the principal amount until it was subsequently repaid in February 2025.
In November and December 2024, Claymore and investors introduced by Claymore made follow-on investments on the terms of the August 2024 financing in the aggregate amount of $1,150,000 in exchange for convertible notes with an aggregate principal amount of $1,391,500 and warrants to purchase an aggregate of 164,285 ordinary shares. The convertible notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price of $5.00. The warrants to purchase an aggregate of 164,285 ordinary shares are exercisable for a period of three years at an exercise price of $7.143 per share. Claymore’s placement fees for the foregoing follow-on investments amounted to $80,500 in cash, 115,000 ordinary shares and a warrant to purchase 38,333 ordinary shares on the same terms of the investors’ warrants. The Company extended the consulting agreement with the placement agent for a period of 12 months, during which the placement agent will be paid a fee of $15,000 per month.
In December 2024, Claymore and investors introduced by Claymore loaned us an aggregate of $1,262,500 in exchange for notes with an aggregate principal amount of $1,402,778 and warrants to purchase an aggregate of 126,250 ordinary shares. The notes are unsecured, and do not accrue interest. However, in the event that the note has not been repaid by the maturity date, interest will accrue at a rate of 5% per month. The notes are repayable at the earlier of (i) the six-month anniversary of the issuance of the note or (ii) five business days following the closing of a financing of at least $10,000,000 or the sale of our Qpoint subsidiary. If the notes are not repaid by the maturity date, they will be convertible at a conversion price of $5.00. The notes provide that if the notes are not repaid by March 31, 2025, the holders thereof will be entitled to receive collateral to secure the notes. The warrants to purchase an aggregate of 126,250 ordinary shares are exercisable for a period of three years at an exercise price of $5.00 per share. Claymore’s placement fees for the foregoing loan amounted to $88,375 in cash, and a warrant to purchase 126,250 ordinary shares on the same terms of the investors’ warrants.
In January and February 2025, Claymore and investors introduced by Claymore made follow-on investments on the terms of the August 2024 financing in the aggregate amount of $1,467,000 in exchange for convertible notes with an aggregate principal amount of $1,775,070 and warrants to purchase an aggregate of 209,571 ordinary shares. The convertible notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price of $5.00. The warrants to purchase an aggregate of 209,571 ordinary shares are exercisable for a period of three years at an exercise price of $7.143 per share. Claymore’s placement fees for the foregoing follow-on investments amounted to $102,690 in cash, 146,700 ordinary shares and a warrant to purchase 48,900 ordinary shares on the same terms of the investors’ warrants.
In February 2025, Claymore agreed to extend a loan to the Company in the amount of $255,000 with interest at the rate of 19% of the principal amount and a maturity date of April 18, 2025. Claymore received pre-funded warrants to purchase 12,500 ordinary shares as fees for the foregoing loan. Claymore agreed to extend the repayment of the loan until May 18, 2025, in exchange for an additional pre-funded warrant to purchase 25,000 ordinary shares.
In March 2025, Claymore investors agreed to extend a loan to the Company with a principal amount of $200,000 and a face value of $300,000 until it was subsequently repaid in March 2025. Claymore received pre-funded warrant to purchase 15,000 ordinary shares as fees for the foregoing loan.
In April 2025, Claymore made follow-on investments on the terms of the August 2024 financing in the aggregate amount of $928,000 in exchange for convertible notes with an aggregate principal amount of $1,122,880 and warrants to purchase an aggregate of 132,572 ordinary shares. The convertible notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price of $7.00, subject to adjustment in certain circumstances, including dilutive issuances, but no lower than $5.00. The warrants to purchase an aggregate of 132,572 ordinary shares are exercisable for a period of three years at an exercise price of $10.00 per share. In the event that the conversion price of the note is reduced, the exercise price of the warrant will be reduced proportionately. Claymore’s placement fees for the foregoing follow-on investments amounted to $64,960 in cash, pre-funded warrant to purchase 335,600 ordinary shares and a warrant to purchase 92,800 ordinary shares on the same terms of the investors’ warrants. The Company extended the consulting agreement with the placement agent for an additional period of 12 months, until October 31, 2026, during which the placement agent will be paid a fee of $20,000 per month.
The conversion of the notes and warrants issued in the foregoing financings are limited to the extent that, upon conversion or exercise, the holder and its affiliates would in the aggregate beneficially own more than 4.99% of the Company’s outstanding ordinary shares. The Company has undertaken to register the resale of the ordinary shares underlying such notes and warrants on a registration statement with the Securities and Exchange Commission.
Qpoint Purchase
On April 3, 2024, we acquired for NIS 25,000,000 in cash the shares of Qpoint that it did not yet own at that time, constituting 53.5% of Qpoint’s outstanding shares. As of the date hereof, we have paid the purchase price in full.
This acquisition is strategically aligned with the Company’s mission to establish a leading global professional services and secure data fabric ecosystem. Qpoint has a diverse customer base of over 100 renowned brand clients, including partnerships with Rafael Advanced Defense Systems, the developer of the “Iron Dome”, the Israel Airport Authority and the Ministry of Defense of Israel.
Qpoint, which was established in 2009, comprises five subsidiaries and provides solutions and consulting across various verticals, including innovative data management and security solutions. The strategic integration enhances HUB’s capabilities in safeguarding sensitive information across various sectors.
Qpoint has expertise in software engineering, testing, cybersecurity, ICT, web, mobile, project management and complex integration processes, which bring invaluable additions to HUB’s portfolio and expands HUB’s market reach, revenue stability and customer support. There is a significant cross-selling opportunity between Qpoint and HUB’s expanded offerings, with customers spanning various industries, including the healthcare, government, energy, defense, and financial sectors. The acquisition of Qpoint not only significantly broadens HUB’s customer base and service offerings as a result of Qpoint’s market presence and compelling service solutions, but also integrates a financially sound partner poised to make a significant contribution to HUB’s overall financial well-being.
March-November 2024 Financing and Restructure
In March-November 2024, we sold to an accredited investor (the “March-November 2024 Investor”), in a series of unregistered private transaction, notes (the “March-November 2024 Notes”) with an aggregate principal amount of $11,000,000, and warrants (the “March-November 2024 Warrants”) pursuant to a Securities Purchase Agreement entered into with the March-November 2024 Investor (the “March-November 2024 Purchase Agreement”). Our acquisition of QPoint’s shares that were not held by us to complete ownership of 100% of QPoint shares was partially funded by proceeds we received pursuant to the March-November 2024 Purchase Agreement.
The loan amount under the March-November 2024 Notes was repayable by the Company on (a) November 29, 2024 with respect to $1,000,000 of the principal amount and (b) with respect to the remaining $10,000,000, the earlier of (i) August 10, 2024 with respect to $4,000,000 of the principal amount and September 24, 2024 with respect to $6,000,000 of the principal amount, or (ii) five (5) business days following the closing of a financing in the Company of at least $25,000,000. The principal amount under the March-November 2024 Notes carries a variable interest rate based on the date of repayment as follows: (a) with respect to $8,000,000 of the principal amount, (i) for the principal amount repaid on or prior to May 12, 2024, 7%, (ii) for the principal amount repaid following May 12, 2024 and on or prior to June 12, 2024, a rate between 7% and 8.5% of such principal amount computed by adding to 7% the result obtained by multiplying 1.5 by the quotient of the number of days elapsed in such period until (and including) the repayment date divided by the number of days in such period, and (iii) for the principal amount repaid following June 12, 2024, 8.5% of such principal amount plus 15% per annum, on the basis of the actual number of days elapsed commencing from the date following June 12, 2024 and ending on the repayment date; (b) with respect to $2,000,000 of the principal amount, (i) for the principal amount repaid on or prior to September 24, 2024, 10%, and (ii) for the principal amount repaid following September 24, 2024, 10% of such principal amount plus 15% per annum, on the basis of the actual number of days elapsed commencing from the date following September 24, 2024 and ending on the repayment date; and (c) with respect to $2,000,000 of the principal amount, (i) for the principal amount repaid on or prior to November 29, 2024, 8.5% of such principal amount, and (ii) for the principal amount repaid following November 29, 2024, 8.5% of such principal amount plus 15% per annum, on the basis of the actual number of days elapsed commencing from the date following November 29, 2024 and ending on the repayment date.
If the March-November 2024 Notes are not repaid prior to the applicable maturity date, the March- November 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 (5) trading days prior to the date of conversion, provided that such conversion rate shall not be lower than $5.00. 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- November 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-November 2024 Warrants issued under the March-November 2024 Purchase Agreement were exercisable as follows: (i) March-November 2024 Warrants exercisable into 444,444 ordinary shares were exercisable at an exercise price equal to $7.00 per share until March 12, 2027, (ii) March-November 2024 Warrants exercisable into 400,000 ordinary shares were exercisable at an exercise price equal to $7.00 per share until April 3, 2027, (iii) March-November 2024 Warrants were exercisable into 100,000 ordinary shares are exercisable at an exercise price equal to $5.00 per share until June 26, 2027, (iv) March-November 2024 Warrants were exercisable into 200,000 ordinary shares are exercisable at an exercise price equal to $7.00 per share until June 26, 2027, and (v) March-November 2024 Warrants were exercisable into 150,000 ordinary shares are exercisable at an exercise price equal to $5.50 per share until June 26, 2027.
The conversion of the March-November 2024 Notes and the exercise of the March-November 2024 Warrants will be limited to the extent that, upon the conversion or exercise, the March-November 2024 Investor and its affiliates would in aggregate beneficially own more than 4.99% of the ordinary shares.
On February 17, 2025, HUB and the March-November 2024 Investor agreed to amend the terms of the March-November 2024 Notes and the March-November 2024 Warrants. Pursuant to the amended terms, the maturity date of each of the March-November 2024 Notes, having an aggregate principal amount of $11 million (plus accrued interest), was extended to August 16, 2025. Additionally, per the amendment terms, in the event the notes are not paid or converted in full by April 1, 2025, from and after April 1, 2025, the current interest rate of the notes will increase from 15% per annum to 20% per annum.
Pursuant to the amendment, the exercise price of each of the March-November 2024 Warrants was changed to a unified exercise price of NIS 17.77 (being the NIS equivalent of $5.00 per share based on the last published exchange rate published by the Bank of Israel on the date of the amendment) and the term of the March-November 2024 Warrants was extended to a unified end date of February 17, 2030. The Company also issued to the March-November 2024 Investor an additional warrant exercisable into 205,555 ordinary shares at an exercise price of $5.00 per share and a pre-funded warrant exercisable into 1,000,000 ordinary shares, in each case until February 17, 2030, and in each, the exercise of the new warrants will be limited to the extent that, upon the exercise of the new warrants, the March-November 2024 Investor would not beneficially own more than 4.99% of our outstanding ordinary shares.
Additionally, pursuant to the amended terms, the March-November 2024 Investor agreed to sell all or a signification portion of the notes to a third party who will convert the notes and attempt to sell the resulting conversion shares. The March-November 2024 Investor agreed by no later than April 2, 2025, to inform the Company in writing of the amount of proceeds the March-November 2024 Investor irrevocably received from the sale of such conversion shares by the third party, in which case the Company shall be deemed to have repaid the principal and accrued interest under the converted notes in the amount equal to the sale proceeds. In the event that the sale proceeds are lower than the aggregate principal and accrued interest under the converted notes thereon, the Company agreed to issue to the March-November 2024 Investor a convertible note in the principal amount equal to such shortfall amount (and if the sale proceeds (and any repayments from the Company) are less than $6.5 million, also the interest that would have accrued on the converted notes in accordance with their terms had they not been converted). The new note would have an interest rate of 20% per annum, commencing retroactively from the date of conversion of the converted notes, and a maturity date of August 16, 2025, and otherwise the same terms and conditions as the converted notes. In the event that, at April 2, 2025, the March-November 2024 Investor holds unsold conversion shares, then warrants held by the March-November 2024 Investor will be exercised for an equivalent number of ordinary shares pursuant to the terms thereof and such conversion shares will be deemed to be issued pursuant to such exercise in lieu of the issuance of new ordinary shares.
2023-2024 Investment by Accredited Investors
Between November 2023 and January 2024, the Company entered into Securities Purchase Agreements (the “First 2023-2024 Accredited Investor SPAs”) providing for the sale by the Company to certain accredited investors (the “First 2023-2024 Accredited Investors”), in unregistered private transactions, of convertible notes with an aggregate principal amount of $3,100,000 (the “First 2023-2024 Accredited Investor Notes”), and warrants exercisable into one ordinary share for each ordinary share issuable to the Investors upon the conversion of the principal amount of the First 2023-2024 Accredited Investor Notes, assuming conversion on the respective issuance dates of the Notes (the “First 2023-2024 Accredited Investor Warrants”).
The aggregate principal amount of the First 2023-2024 Accredited Investor Notes was convertible into our ordinary shares at a rate of the lower of (i) $25.00 and (ii) the product of 75% multiplied by the arithmetic average of the volume-weighted average price of the ordinary shares in the five (5) trading days prior to the date of conversion, provided that such conversion rate would not be lower than $15.00. The First 2023-2024 Accredited Investor Notes did not bear interest and were repayable on the three-month anniversary of their issuance, subject to earlier conversion by the First 2023-2024 Accredited Investors. The First 2023-2024 Accredited Investors had the right to convert the First 2023-2024 Accredited Investors Convertible Notes, in whole or in part, at any time following their issuance.
The First 2023-2024 Accredited Investor Notes were subsequently fully converted by the First 2023-2024 Accredited Investors.
In February 2025, the Company and the First 2023-2024 Accreditor Investors agreed to amend the terms of the First 2023-2024 Accredited Investor SPAs and the First 2023-2024 Accredited Investor Warrants. Pursuant to the amended terms, the exercise price of each of the First 2023-2024 Accredited Investor Warrants was changed to a unified exercise price of $10.00 per share and the Company issued to the First 2023-2024 Accreditor Investors additional warrants exercisable into 173,881 ordinary shares at an exercise price of $10.00 per share and 142,020 ordinary shares.
Second 2023-2024 Accredited Investor Financing Transaction
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” and together with the First 2023-2024 Accreditor Investors, the “2023-2024 Accreditor Investors”), in unregistered private transactions, of convertible notes with an aggregate principal amount of $550,000 (the “Second 2023-2024 Accredited Investor Notes”), and warrants exercisable into between 0.50 and one ordinary shares for each ordinary share issuable to the Investors upon the conversion of the principal amount of the Second 2023-2024 Accredited Investor Notes, assuming conversion on the respective issuance dates of the Notes (the “Second 2023-2024 Accredited Investor Warrants”).
The aggregate principal amount of the Second 2023-2024 Accredited Investor Notes is convertible into our ordinary shares at a rate equal to the arithmetic average of the volume-weighted average price of the ordinary shares in the five (5) trading days prior to the date of conversion, provided that such conversion rate would not be lower than $15.00. The Second 2023-2024 Accredited Investor Notes do not bear interest and are repayable on March 14, 2027, subject to earlier conversion by the Second 2023-2024 Accredited Investors. The Second 2023-2024 Accredited Investors have the right to convert the Second 2023-2024 Accredited Investors Convertible Notes, in whole or in part, at any time following their issuance.
Pursuant to the First 2023-2024 Accredited Investor SPAs, we have issued First 2023-2024 Accredited Investor Warrants which are exercisable into 167,959 ordinary shares. The First 2023-2024 Accredited Investor Warrants are exercisable until January 1, 2027 for an exercise price equal to the closing price of the ordinary shares as of the respective issuance dates of the First 2023-2024 Accredited Investor Warrants and have a weighted average exercise price of $23.30. Pursuant to the Second 2023-2024 Accredited Investor SPAs, we have issued Second 2023-2024 Accredited Investor Warrants which are exercisable into 20,000 ordinary shares. The Second 2023-2024 Accredited Investor Warrants are exercisable until September 14, 2025 for an exercise price of $15.00. The exercise of the 2023-2024 Accredited Investor Warrants will be limited to the extent that, upon their exercise, a 2023-2024 Accredited Investor and its affiliates would in the aggregate beneficially own more than 4.99% of our ordinary shares.
In addition, in February 2025, HUB and the Second 2023-2024 Accredited Investors agreed to amend the terms of the Second 2023-2024 Accredited Investor SPAs, the Second 2023-2024 Accredited Investor Notes and the Second 2023-2024 Accredited Investor Warrants. Pursuant to the amended terms, the exercise price of each of the First 2023-2024 Accredited Investor Warrants was changed to a unified exercise price of $11.50 per share, the Company issued to the Second 2023-2024 Accreditor Investors additional warrants exercisable into 173,881 ordinary shares at an exercise price of $10.00 per share, and the Company conversion price of each of the Second 2023-2024 Accredited Investor Notes was changed to a unified conversion price of $11.42 per share.
The Second 2023-2024 Accredited Investors were subsequently fully converted by the Second 2023-2024 Accredited Investors.
Liquidity
As a result of liquidity and cash flow concerns that have arisen due to factors related to our business operations, we face significant uncertainty regarding the adequacy of our liquidity and capital resources and our ability to repay our obligations as they become due. We are generating negative cash flow, requiring constant and immediate cash injections to continue to operate, and are failing to meet obligations as they become due, including financial, suppliers debts and other ordinary course of operations costs. In addition, and as a result of our ongoing operating losses, we had outstanding liabilities that could not be met by our revenues, including payments due to our debt holders, vendors and service providers, and since May 2024, we have been unable to make required deposits in employee pension and severance funds or to pay required withholding taxes on employee compensation payments. Certain of our subsidiaries also did not make timely tax filings with the ITA for several years. Our independent registered public accounting firm has included in its report an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
In November 2024, we reached a settlement agreement with the unsecured creditors of Comsec, subject to which we will pay NIS 1,800,000 spread over 36 months.
In February 2025, we reached a settlement agreement with Oppenheimer & Co., Inc. (“Oppenheimer”) for $3 million, with $1.1 million being paid on the effective date and the remaining balance payable in ten monthly payments of $200,000 from March to December 2025 (with the first payment being $100,000). As part of the settlement arrangement, Claymore agreed to make on the Company’s behalf, all the payments that the Company is required to make under the settlement agreement with Oppenheimer. In consideration, the Company issued Claymore a convertible note in the principal amount of $6 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 18, 2030, subject to earlier conversion by Claymore.
In February 2025, we also reached a settlement agreement with Dominion Capital LLC and its affiliates (together, “Dominion”) for $4.5 million, with $400,000 being payable by February 21, 2025, $200,000 payable by March 3, 2025 and the remaining balance payable in ten monthly payments of $390,000 from March to December 2025. As part of the settlement arrangement, Claymore agreed to make on the Company’s behalf all the payments that the Company is required to make under the settlement agreement with Dominion. In consideration, the Company issued Claymore a convertible note in the principal amount of $7.5 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 20, 2030, subject to earlier conversion by Claymore.
The significant uncertainty regarding our liquidity and capital resources, our ability to repay our obligations as they become due, provides substantial doubt about our ability to continue as a going concern for the next twelve months from the date of issuance of this Annual Report. Our management is closely monitoring the situation and has been attempting to alleviate the liquidity and capital resources concerns through workforce reductions, interim financing facilities and other capital raising efforts.
Following the filing of this Annual Report, we expect to be able to obtain additional sources of debt and equity financing, together with additional revenues from new business opportunities and has engaged with potential investors with regards to such financing alternatives. However, such opportunities remain uncertain and are predicated upon events and circumstances which are outside the Company’s control. The inability to borrow or raise sufficient funds on commercially reasonable terms, would have serious consequences to the Company’s business, financial condition, results of operations and growth prospects.
Our ability to continue as a going concern is contingent upon, among other factors, the sale of ordinary shares to obtain additional funding to support our operations and/or obtaining alternate financing. Management currently believes that it will be necessary for us to secure additional funds to continue our existing business operations and to fund our obligations. We have raised and will continue to seek to raise additional funds during 2025 through a variety of equity and/or debt financing arrangements; however, there can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. If we cannot generate sufficient revenues, reduce cost and/or secure additional financing on acceptable terms, we may be required to, among other things, alter our business strategy, significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.
Additionally, we signed subscription agreements for the purchase of $50 million of our ordinary shares to be offered in a private placement in connection with the closing of the Business Combination Agreement (the “PIPE Investors”). However, upon the closing of the Business Combination Agreement, we did not receive the funds related to the private placement. Negotiation with the PIPE investors resulted in closing on $4 million to date. The investors never explained their breach of the subscription agreements. While we are considering possible alternatives in order to pursue the majority of the remaining funds committed as a part of the PIPE investment from the investors, it is uncertain that we will be able to receive the remaining PIPE funds.
Additionally, we will receive the proceeds from any exercise of any warrants in cash. We expect to use any such proceeds for general corporate and working capital purposes, which would increase our liquidity, but our ability to fund our operations is not dependent upon receipt of cash proceeds from the exercise of the warrants. We believe the likelihood that warrant holders will exercise their warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the market price of our ordinary shares. If the market price for our ordinary shares is less than the respective prices of the warrants, we believe warrant holders will be unlikely to exercise their warrants.
B. Business Overview
In this section “we,” “us”, “our” and “HUB” refer to HUB Cyber Security Ltd.
Overview
HUB currently focuses on two symbiotic lines of business: the Products and Technology Division - Secured Data Fabric and Confidential Computing; and the Professional Services Division (Consulting) – cyber security and other technology services. The symbiotic connection between the two offerings is deeply rooted in the company’s strategy.
Data Fabric
Data Fabric is a design concept that supports data sharing in a distributed environment without friction through the use of a unified data management framework. The framework combines data integration, data visualization, and data management technologies. A Data Fabric enables organizations to bypass data silos, share data across applications, minimize data discrepancies between the data creators and the data consumers, and reduce the cost of reusing data fetched from prepaid sources by other business units. “According to Gartner, organizations that utilize a Data Fabric to continuously analyze data assets and to support the design, deployment and utilization of diverse data reduce the time required for integration by 30%, deployment by 30%, and maintenance by 70%.”
Data Fabric architecture enables a set of enterprise solutions that rely on massive data processing and enrichment for large applications such as Compliance, Risk, Know Your Customer, ESG and more. With a regular traditional solution, all the organization’s data is moved continuously from tens of locations and data sources such as on-prem data, cloud, and also subscription data sources to a single location. The continuous transfer is costly, slow, and risky These “ETL” (“Extract, Transform and Load”) solutions to move the data are expensive. Once the data is collected to a large data lake, which also entails a significant expenditure, the organization can start developing the algorithms needed depending on the required application. This way of resolving development and handling of data is required by regulators and is expensive and risky. It involves moving continuously large amounts of data.
The data fabric solution leaves most of the data as is in its prime original location. The system simply indexes the data using AI to understand what is there and what applications may need this data. It only fetches the required data (a very small percentage of the total data, which is mostly not needed) when it is needed. It then uses the data to perform the required operation and releases it back to its original location. This approach eliminates a major cost by not having to perform continuous ETL procedures and not needing a new data lake to collect all the organization’s data.
We are seeking to become a leading provider of secured data fabric solutions with a focus on the financial services market segment. BlackSwan flagship data fabric platform, combined with HUB’s security modules and know-how, enables secured, digital transformation from the top down by harnessing the power of data while limiting costs, errors, and inefficiencies.
Traditional Approaches to Cybersecurity
Traditional cybersecurity technologies operate as a collection of unique purpose-built systems and components that mitigate different threats and risks within a network. All of these systems are being operated by expanding costly IT and cyber teams within organizations. Most organizations today have sophisticated methods for protecting data at rest (encrypted in storage), and data in transit (encrypted in transit). However, traditional approaches to cybersecurity do not address vulnerabilities to data in use, (when applications and data are processed). As a result, most companies are exposed to hacks by commercially available tools and techniques, even after investing heavily in perimeter defenses.
This common vulnerability of systems to exploit by hackers has been exacerbated by the recent shift to remote work and the increase in cell phone access to networks. This shift allows even simple devices such as phones, tablets and laptops to access networks and receive sensitive data. The connection of these simple devices to a network has created a network perimeter that is almost indefensible by traditional cybersecurity systems.
Confidential Computing
Confidential computing is a strong solution for cyber protection as it assumes that hackers have already infiltrated a computer and that an administrator’s credentials have been compromised. HUB’s zero trust confidential computing systems protect data and applications by running them within secure enclaves that are governed by policies and managed with strict, rules-based filters to prevent unauthorized access to the processor as well as by and between microservices. This approach ensures data security, unrelated of the vulnerability of the computing infrastructure.
Confidential computing places the network system into a “bunker” or trusted execution environment, and maintains strict control over how the system is accessed, and does not require any changes in the network operations which traditional cybersecurity solutions would otherwise require. According to the Everest Group, the Confidential Computing market is expected to grow by up to 90-95% each year through 2026 and will help to mitigate the threat of data breaches.
The potential benefits of confidential computing are immense, including data protection, ensuring security on data in use in the cloud, protecting intellectual property, allowing safe collaboration with external organizations on cloud, eliminating concerns over selecting cloud providers and protecting data processes for edge computing environments, such as IoT. HUB’s zero trust confidential computing has a key strength in that it can minimize the vulnerability of data for all of these use cases by protecting data in use, that is, during processing or runtime.
Business Overview
We currently operate in several countries and provide innovative cybersecurity computing appliances, secured data fabric services as well as a wide range of cybersecurity and reliability, availability, maintainability and safety (RAMS) professional services. Our zero trust confidential computing product has received positive initial market feedback, with detailed discussions held with interested parties in Israel, EMEA, APAC and the United States, including well established companies in the telecommunications, insurance, banking and technology sectors.
HUB’s management team and board of directors includes, amongst others, Noah Hershcoviz (CEO, 15 years of experience), Lior Davidsohn (Interim CFO, nearly 15 years of experience), Nachman Geva (Chief Technology Officer, 25 years of experience), Shai Shiller (Head of Strategy, with over 35 years of experience), Tuvia Grossman (General Counsel and Chief Legal Officer with over 21 years of experience), Shlomo Bibas (32 years of experience), Major-General (Ret.) Uzi Moskovich (Director, former head of the Cyber Communications and Defense Division of the Israel Defense Forces), Ilan Flato (Director, 40 years of experience) and Renah Persofsky (Director, over 40 years of experience).
For the years ended December 31, 2024 and 2023, HUB generated $29.6 million and $42.7 million of revenue, respectively. For the year ended December 31, 2024, the revenue HUB generated from each of the geographic markets in which it operates, Israel, Americas, Europe amounted to $27,808,000, $698,876,000, $1,055,000, respectively. For the year ended December 31, 2023, the revenue HUB generated from each of the geographic markets in which it operates, Israel, Americas, Europe and Asia Pacific, amounted to $40,300,000, $334,000, $1,670,000 and $290,00, respectively.
HUB is a trusted advisor and professional services provider facilitating cyber risk assessment, cyber risk mitigation, cyber incident response, quality reliability, and safety of critical systems and also selling technology products. HUB’s management believes that HUB has great potential for growth and the ability to handle large and complex projects for governments and organizations by providing reliable secured data fabric and cybersecurity solutions for the sensitive data and critical infrastructure of these entities.
HUB is seeking to become a category leader and capture a leading position in the secured data fabric market, based on two major strategies:
| ● | Focus on continuing the development of data fabric and confidential computing solutions to ensure HUB is able to meet the demands of an evolving and growing market; and |
| ● | Achieve rapid growth and market penetration through industry collaborations and mergers and acquisitions that can give HUB access to large clients and integration capabilities, to capture both market share and relevant additional technologies needed. |
Since the start of 2021, HUB has completed four acquisitions of cybersecurity consulting services and distribution companies – ALD, Comsec, QPoint and BST. This has provided HUB with an established and trusted customer base, including governmental agencies and enterprises that are prime targets for its data fabric and confidential computing solutions.
HUB intends to leverage the acquired companies’ professional services, expert knowledge and understanding of customers’ need to upsell its secured data fabric and confidential computing solutions. In addition, HUB intends to use its technological abilities to transform the acquired companies’ services into products that can be sold widely, thereby accelerating HUB’s revenue growth and increasing shareholder value.
Market Opportunity
The Data Fabric Market
The data fabric market is experiencing robust growth, driven by the escalating demand for unified data management solutions across hybrid and multi-cloud environments. As organizations grapple with increasing data complexity, the need for real-time analytics and seamless data integration has become paramount. According to Precedence Research, the global data fabric market size was valued at $2.1 billion in 2022 and was projected to reach $8.9 billion by 2032, poised to grow at a CAGR of 15.54% during the forecast period of 2023 to 2032, with North America having the largest market share in 2022 (47%). Furthermore, according to Precedence Research, in 2022, the banking, financial services and insurance sector accounted for 23% of the market share.
This surge in demand is primarily attributed to the rapid digital transformation across various industries, including banking, financial services, insurance (BFSI), retail, healthcare, and telecommunications. Organizations are increasingly adopting data fabric solutions to manage and integrate vast amounts of data from diverse sources, enabling real-time analytics and improved decision-making. The integration of (AI) and machine learning (ML) technologies into data fabric architectures further enhances data processing capabilities, driving market expansion.
North America currently holds the largest market share, owing to the presence of major technology providers and a high rate of adoption among enterprises. However, the Asia-Pacific region is expected to witness fast growth, fueled by government-led digital initiatives, increasing investments in AI and big data analytics, and the rapid expansion of data centers.
We believe the data fabric market is poised for substantial growth as organizations seek to streamline data management processes and leverage advanced analytics capabilities. The ongoing digital transformation across industries and the integration of AI and ML technologies are key factors contributing to the expanding demand for data fabric solutions.
The Increasing Data Proliferation Adds Complexity to Data Management
Data proliferation across enterprises has become one of the defining challenges and opportunities of the digital age. Every interaction, transaction, and operational process generates massive volumes of structured and unstructured data from sources like IoT devices, mobile apps, CRM systems, supply chains, and customer service platforms. As enterprises expand globally and adopt hybrid and multi-cloud infrastructures, their data is increasingly distributed across various locations, platforms, and formats. Managing this growth effectively is critical: organizations must not only store and access their data efficiently, but also integrate, govern, and analyze it in real time to drive business insights and maintain competitive advantage. Without a cohesive strategy to handle this data proliferation, enterprises risk fragmentation, inefficiencies, compliance breaches, and missed opportunities for innovation.
Regulations Create a Shift in Data Management Architecture
The rise of regulatory and data privacy requirements has profoundly reshaped enterprise data management strategies. Regulations such as GDPR, CCPA, DORA, and others mandate that organizations maintain strict control over how personal and sensitive data is collected, stored, processed, and shared. Enterprises are now required to ensure data transparency, user consent management, auditable data trails, and secure cross-border data flows, often under threat of heavy fines and reputational damage for non-compliance. This has led to a shift from traditional, siloed data practices toward centralized governance models and metadata-driven architectures that provide real-time visibility, classification, and control over data assets. Enterprises must embed privacy by design into their data management processes, implement robust encryption and access controls, and ensure that every data interaction across hybrid and multi-cloud environments meets evolving global compliance standards.
Digital Transformation for Core Banking Systems
Using data fabric to streamline digital transformation for core banking systems is a strategic approach that enables banks to efficiently manage, integrate, and analyze vast amounts of data from diverse sources, accelerating their transition into the digital era. Data fabric technology provides a unified and intelligent data architecture that seamlessly connects data across on-premise, hybrid, and multi-cloud environments, breaking down traditional silos. For core banking systems, this means enabling real-time access to critical financial data, improving operational efficiency, and enhancing decision-making capabilities.
As core banking systems evolve to support new digital services and products, data fabric can play a crucial role by simplifying data integration across various banking applications, legacy systems, and emerging technologies. It allows for the continuous flow of data between different platforms, ensuring consistency, security, and accuracy. With AI and machine learning embedded in data fabric solutions, banks can unlock deeper insights from their data, improving customer experiences, optimizing loan underwriting processes, detecting fraud more effectively, and personalizing banking services. Moreover, the ability to access and process data in real time helps banks respond faster to market changes and regulatory requirements, ensuring they stay competitive in a rapidly evolving financial landscape.
By implementing data fabric, banks can modernize their core banking systems without the need for complete overhauls. The integration of disparate data sources and the automation of data management processes significantly reduces the complexity of digital transformation. This approach not only supports enhanced operational efficiency but also accelerates innovation, enabling banks to launch new products and services that meet the demands of digitally-savvy customers while ensuring compliance with evolving regulations. Ultimately, data fabric enables core banking systems to become more agile, scalable, and capable of meeting the future demands of the financial services industry.
The global core banking software market is experiencing significant growth, driven by the increasing demand for digital transformation and modernization in the banking sector. According to Fortune Business Insisghts, in 2024, the global core banking software market was valued at approximately $16.79 billion and is projected to expand to $64.96 billion by 2032, reflecting a compound annual growth rate (CAGR) of 18.6%. Precedence Research estimates the global core banking market size at $12.51 billion in 2024, with expectations to reach approximately $33.10 billion by 2034, growing at a CAGR of 10.22%.
This surge in demand is primarily attributed to the rapid digital transformation across various banking institutions, including retail banks, credit unions, and digital-first fintech companies. Core banking solutions are increasingly being adopted to streamline operations, enhance customer experiences, and support the integration of emerging technologies such as artificial intelligence, machine learning, and blockchain. Additionally, the shift towards cloud-based platforms is enabling banks to achieve greater scalability, flexibility, and cost efficiency in their operations.
We believe our secured data fabric (“SDF”) technology, together with our project and security savvy professional services teams, and our strategic partnerships with complimentary products, can enable digital transformation for medium to large banks and other financial services companies who seek to boost their digital offering and outreach to stay compliant and competitive in the market.
Ever Growing Demand for Cybersecurity Consulting Services
The cybersecurity market continues to grow due to increased risks of breach and regulatory pressure. New or enhanced regulations like the NIS2 directive, privacy regulations like the GDPR and the newly enacted SEC disclosure rules that will require companies to disclose cyber incidents are expected to drive growth to bigger heights. According to Fortune Business Insights, the global cybersecurity market was valued at $193 billion in 2024 and is projected to reach $562 billion in 2032.
As a result, the demand for cybersecurity consulting services increased as well and with a shortage of people entering the cybersecurity market, we believe our Professional Services department is positioned well for growth having served the market for over 30 years in this space and having updated our services and offerings to meet the new increased demands.
Demand for Effective Cybersecurity Solutions
According to the Official Cybercrime Report published by Cybersecurity Ventures, global cybercrime costs are expected to reach $10.5 trillion USD annually by 2025, up from $3 trillion in 2015. Based on a 2023 Sophos report, the average total cost of recovery from a ransomware attack increased from $1.4 million in 2022 to $1.82 million in 2023. In addition, Gartner has reported that the world-wide spending on cyber-defense grew at an annual rate of 14.3% in 2023 to $215 billion. According to CSO Online and IBM, in 2020, large enterprises spent on average 11% of their IT budgets on cybersecurity at an average cost of $2,000 per employee.
Despite increased spending on cybersecurity, the number and frequency of malicious attacks continues to grow. This means a new approach is needed to offer effective cybersecurity protection. Organizations are facing massive challenges as they attempt to manage and secure the explosion of data created within their organizations, which are in part created by remote environments. This, coupled with the lack of visibility across dispersed networks and growing migration to the cloud, has increased the risk of cyber-attacks.
According to Thoughtlab, the average number of attacks and breaches rose sharply in 2021 — the number of incidents rose 15.1%, while the number of material breaches increased 24.5%. According to IBM Security’s Cost of a Data Breach Report 2021, the average cost of a healthcare data breach reached $9.42 million in 2021, a significant increase from $7.13 million in 2020. These figures may be underestimated because some organizations may fail to detect and under-report attacks. According to Gartner, enterprises trying to defend against those cyber threats have as many as 46 cybersecurity tools.
Healthcare breach costs have been the most expensive industry for 12 years. Material breaches — those generating a large financial loss, compromising many records or having a significant impact on business operations — increased even more, by 24.5% from 2020 to 2021.
This means that the traditional approach and tools for cybersecurity are not effective. In addition, under the current macroeconomic environment, enterprises are facing increasing pressure to control their spending and thereby rethink the strategy to cybersecurity protection. Top executives in enterprises are consistently looking for more cost-effective options to secure their companies, and chief information security officers are playing an increasingly important role in business operations.
According to Gartner’s top eight cybersecurity predictions for 2022-23, 80% of enterprises will adopt a strategy to unify web, cloud services and private application access from a single vendor’s security service edge platform by 2025. Similarly, enterprises are most likely to look for a consolidated and stronger cybersecurity solution, a solution offering a more holistic protection instead of accumulating more tools and related costs.
In the meantime, global cybersecurity regulators are strengthening their standards for data security and encryption. In a recently published report, Gartner indicates that through 2023, government regulations requiring organizations to provide consumer privacy rights will cover 5 billion citizens and more than 70% of global GDP. However, more needs to be done to mitigate cybersecurity threats, especially in the post-pandemic work environment.
According to Forbes, this growing issue of cybersecurity protection is affecting a wide range of industries, from healthcare and financial services to decentralized finance (“DeFi”). Emerging technologies such as AI and machine learning are also expected to become increasingly important to prevent widespread attacks in vulnerable industries and to secure business operations.
In particular, HUB believes that there are two mega markets — edge computing and 5G, with a combined value of over $517 billion as of 2023 according to KPMG, that urgently require more effective cybersecurity protections. According to IDC, worldwide spending on edge computing is expected to reach $261 billion in 2025, an increase of 13.8% over 2024. Enterprise and service provider spending on hardware, software and services for edge solutions is forecasted to sustain this pace of growth through 2027, by when the spending is expected to reach nearly $350 billion. In addition, according to Gartner, 50% of data will be generated outside a traditional centralized data center or cloud through 2027. According to Markets and Markets, the global edge computing market is expected to grow from $53.6 billion in 2023 to $111.3 billion by 2028, growing at a CAGR of 15.7% from 2023 to 2028. On the other hand, according to Statista, the AI market reached $305.9 billion in 2024 and is expected to show a CAGR of 15.83% between 2025 and 2030, resulting in a market volume of $738.8 billion by 2030. Gartner believes that in 2025, approximately half of the large organizations will implement privacy enhancing computation to process data in untrusted environments as well as implement multiparty data analytics solutions.
The Confidential Computing Market
Leading technology companies are coming to recognize that confidential computing is a powerful trend and are investing heavily to provide their networks with this enhanced protection. They are also educating the market on the advantages of confidential computing.
With a projected market size of $59.4 billion by 2028 according to MarektsandMarkets, the long-term growth prospects for confidential computing are robust. In addition, it is estimated the average data breach costs to enterprises have escalated to $4.88 million in 2024.
According to the MarketsandMarkets, although adoption of confidential computing is nascent, its potential is tremendous for both the enterprises that are adopting it and the technology and service providers that are enabling it.
Technology Background
How Data Works in a Network
In a network setting, code and data are moved and stored in structured formats called packets. Within a network, packets exist in three states:
| ● | At rest (stored in a memory) — packets at rest may include data that is stored in a mass storage system such as on the ‘cloud’ or in the network’s own random access memory (“RAM”) or storage drives. |
| ● | In transit (moving from component to component within a network) — data has been loaded into packets for sending into or out of a network or for moving between components inside a network. Code or data in packets are typically encrypted when in transit or at rest so that even if the packet is captured and sent out of the network, its data remains unreadable. |
| ● | In use (being worked on by a processor) — data is being processed by a CPU, GPU or other processor that run programs, algorithms, application programming interface (“APIs”) or applications. Data in use is generally decrypted, and this decrypted data is a primary target of cyber-attackers. |
Protecting Data in Use
Significant progress has been made in recent years to protect sensitive data in transit and in storage. However, sensitive data is still vulnerable when it is in use. For example, while Transparent Database Encryption (“TDE”) ensures that sensitive data is protected in storage, that data must be stored in cleartext (i.e. in an unencrypted form) in the database buffer pool so that Structured Query Language (“SQL”) queries can be processed. This renders the sensitive data vulnerable because its confidentiality may be compromised in several ways, including memory-scraping malware and privileged user abuse.
This concern around protecting data in use has been the primary reason that is holding back many organizations from saving on IT infrastructure costs by delegating certain computations to the cloud and from sharing private data with their peers for collaborative analytics.
HUB’s Confidential Computing Solution
HUB’s confidential computing solution is a hardware-based confidential computing platform that secures the entire compute and network stack, leveraging the digital twin technology and a new zero-trust paradigm to provide enhanced security and privacy for customers’ most sensitive organizational applications and data, whether it’s data at rest, in transit or in use. It enables security for any computing environment, including AI, edge computing, 5G, Metaverse, ransomware protection, e-Government and quantum. Since HUB’s confidential computing solution completely isolates servers, it is applicable to data centers, private clouds and edge networks.
HUB’s confidential computing solution is built on a “zero-trust” principle which assumes that all data and network components have been hacked and cannot be trusted. Each component must therefore check and authorize all code and data packets before they reach the component’s CPU. This check must be done in a separate hardware space that is proximate to the CPU but not run by it.
The solution includes a dedicated hardware environment—root of trust, providing a higher level of security than a perimeter, a software or agent-based security solution. It automatically implements micro segmentation, web application firewall capabilities, Hardware Security Modules (“HSMs”), key management functionality, identity and access management services, interface gateway as well as stealth logging and monitoring.
HUB’s combined hardware and software check all streams of code and data packets and prevent unauthorized packets from reaching the CPU, its related memory and its software. The software that checks the stream of packets must be located in the hardware and be run by a processor other than the CPU.
HUB’s devices create a single path for data packets to enter and exit a networked component, so that no flow of unauthorized packets can reach or leave the component without being checked by the HUB device. The solution guards each layer of the software stack that is executed by a CPU or Graphics Processing Unit (“GPU”), from the data and application layer to the physical layer, and it monitors each flow of packets that reach the CPU or GPU of a component. HUB’s solution provides a significant improvement over traditional “firewall” defenses that are designed to block the penetration of a network’s perimeter but are largely ineffective at stopping hackers once they have breached into a network.
HUB began selling its confidential computing solution in 2018. HUB’s solution is currently available as a stand-alone component to protect one or more servers, and as a peripheral component interconnect, or computer circuit board, card (“PCIe Card”) that is inserted into a server or other network component.
HUB’s confidential computing solution comprises four main components — 1) cyber digital twins, 2) permission and governance policy engine, 3) cryptographic engine, and 4) physical security of an appliance. Taken together, HUB’s Confidential Computing solution offers world-class security. It provides seamless integration with existing systems and applications, which ensures no interference with work processes and can be customized to customer’s precise requirements. In addition, the solution runs on a separate execution platform, making it even more secure since the security solution will not be hacked even if the network environment is hacked. At the same time, it is not a perimeter security solution that can be bypassed. More importantly, the solution works in stealth mode and is invisible to the attacker and the applications, so there is no need to change a network’s current applications and architecture.
Permission and Governance Policy Engine
A policy engine is a software component that allows an organization to create, monitor and enforce rules about how network resources and the organization’s data can be accessed. The policy engine authorizes users’ and entities’ access to protected resources. Its purpose is to only allow for a specific request or action, based on analysis of normal traffic and irregularities of timing and volume. HUB’s aim is to have the right level of permissions setup for each asset inside the secure zone and have the right checks and balances for the approvals.
HUB’s policy engine adopts the stealth logging feature, which offers an extra layer of support for log data integrity by further restricting attack vectors on the data itself. With stealth logging, HUB has created a highly secure authorization system for the entire network and computer stack, from hardware to layer-7 applications. Moreover, organizations can use the permission and governance policy engine to prevent privileged abuse of advanced hacking techniques with governance rules such as approval workflows and velocity checks. The approval workflows are configurable and allow for the segregation of duties.
Cryptographic Engine
A cryptographic engine operates as an internal high-security key manager for each application and service by operating as a self-contained, redundant cryptographic module. It replaces appliance and board-level cryptographic devices and creates and manages key encryption and decryption services.
The cryptographic engine serves as a hardware based root of trust for isolation and protection of incoming data and other services. It also generates and distributes keys to external servers and to the internal applications. In addition, it adopts a bi-directional physical and logical filtering to perform automated signature verification on each incoming and outgoing data packet.
Advantages of HUB’s Confidential Computing Solution
HUB believes that it has a strong advantage by already having its zero trust confidential computing solution developed and in the market. HUB believes it has a significant lead compared to its closest competitors and that it can offer customers greater protection against cyber threats at significantly lower costs.
HUB’s solution enables secure computation and protects data across the entire compute and network stack, with an integrated hardware and software platform that is compatible across computing architectures with any CPU, GPU or field programmable gate arrays. This solution has a few unique features, including the facts that (i) it secures data in use, at rest and in transit, (ii) it ensures true isolation of the entire network stack and eliminates security hassles for customers, and (iii) it is able to integrate with existing network environment and does not need any modification to the network environment. These features will enable HUB to secure business opportunities with significant external or edge requirements such as AI collaboration, private 5G and Internet of Things (“IoT”).
With the hardware isolation set-up, HUB’s solution isolates the execution environment from network threats, thereby preventing any malicious access to stored data and applications. The cyber digital twin technique establishes a digital replica for any API to provide physical protection and threat detection and to prevent vulnerability exploitation, ensuring that the actual API is never exposed. Moreover, the governance and controls system within HUB’s solution provides highly secure authentication and authorization for the entire network and compute stack, in order to prevent privileges abuse from advanced hacking techniques. The zero-trust security method also establishes a trust-zone boundary to completely protect the network from privileged access abuse. HUB’s management believes that this solution is ready for quantum computing threats by integrating quantum key distribution and post-quantum algorithms. The solution can also be deployed quickly and at any place, from data centers to the edge, using automation and remotely secure update features.
HUB’s solution is able to protect the digital assets of external data, as the twin (i.e. the digital replica) performs a number of security checks for every request before it is forwarded to the destination. An access check is done to verify identity, filter data and evaluate rules. A simulation check is carried out to validate the incoming request’s impact on the original copy in real time. In addition, a manipulation check is conducted to proactively change the incoming requests and outgoing responses as needed, in order to keep the original application and data safe.
HUB’s management believes that its solution also has the following additional advantages over traditional firewall solutions:
| ● | Protects each networked component separately, so the component’s cybersecurity is independent of the security of the rest of the network and mitigates targeted risks and threats. |
| ● | Checks packets both as they enter and as they leave the device so sensitive data is stopped before it can be hijacked out of the network. |
| ● | Checks packets and then restores them to their original state so legacy programs need not be adjusted to accommodate changed packet structures. |
| ● | Evaluates packets proximate to the component’s processor and in-line with the stream of packets into the device so there is no slowing of throughput speed. |
| ● | Detects physical tampering with a component’s works and erases data if tampering is detected before the data can be hijacked out of the component. |
| ● | Stores administration interfaces, access controls and user management policies in a separate and secure area that is not accessed by the CPU. |
| ● | Uses software that can be updated remotely and on the fly without risk of unauthorized alteration to the software. |
HUB’s Offerings
HUB’s Products Division:
Secured Data Fabric:
A secured data fabric is a foundational capability for any organization operating with large volumes of sensitive or regulated data. As enterprises grow, so does the complexity of their data landscape and distributed sources, growing regulatory requirements, and increased attack surfaces all contribute to rising costs and risks.
Traditional data architectures typically rely on centralizing all information into heavy, monolithic data lakes. This approach often incurs significant capital expenditures (CapEx) and high ongoing operational costs (OpEx), particularly in highly regulated environments. Furthermore, these centralized systems introduce multiple points of vulnerability, increasing the likelihood of data breaches and the accompanying financial and reputational damages.
The HUB approach, combined with the Blackswan solution, offers a radically more efficient and secure alternative. This architecture minimizes the need for a heavyweight data lake and almost entirely eliminates the cost and complexity of traditional ETL (Extract, Transform, Load) processes. By allowing data to remain closer to its source and enabling just-in-time access through a mesh of connected nodes, the system reduces infrastructure load and avoids unnecessary data duplication.
Beyond efficiency, security is core to this fabric. Traditional security methods often struggle with scale and context, treating all data equally without understanding its value, structure, or sensitivity. In contrast, our approach builds security into the fabric itself.
Blackswan’s technology integrates with our secured data fabric via lightweight, standards-based connectors deployed at each data node. Upon every data access or transfer, Blackswan automatically encrypts information in transit and at rest, enforces the centralized access and anonymization policies defined in the fabric’s control plane, and records a tamper-evident audit trail. This seamless integration supports continuous, real-time compliance monitoring and threat detection without the need for additional security appliances or manual intervention, ensuring uniform governance and regulatory adherence across our entire distributed data environment.
The combined technologies create a strong and attractive offering and we are currently focused on deployment of our data fabric solution for the financial services sector providing the following key features:
Financial Services Compliance
Know Your Customer (KYC) including Customer Due Diligence (CDD) and Enhance Due Diligence (EDD). Customer Due Diligence (CDD) is the standard process that financial institutions, FinTechs, and regulated businesses follow to verify the identity of their customers and assess the risk they pose. It is a core requirement under global Anti-Money Laundering (AML) regulations (like the FATF Recommendations, EU AML Directives, BSA/AML laws in the U.S.). Enhanced Due Diligence (EDD) is a deeper, more rigorous version of CDD, applied only to high-risk customers or transactions.
HUB SDF brings added value and capabilities to its customers, extending the process to a worldwide collection and fusion of data from hundreds of web sources, in real time, curating and enriching the data, with a fully automated process that follows the customer policies and workflows for each jurisdiction and market it is operating in. The result is a comprehensive KYC report with real time compliance data, with full audit trail and collection evidence presented to the end user in a rich visual dashboard, simplifying complex data structures, highlighting any critical information and insights that is easy to act on if needed.
Perpetual KYC is an advanced add-on to our existing KYC framework, designed to achieve full automation of regular customer reviews. Instead of relying on periodic, manual re-assessments, the system continuously monitors customer profiles against dynamic data sources in real time. User intervention is only triggered when there is a material change in the customer's risk profile, such as updated sanctions status, adverse media, or significant behavioral deviations. This proactive, event-driven approach not only enhances regulatory compliance and risk management but also significantly reduces operational burden and improves the customer experience by minimizing unnecessary touchpoints. Real time name screening against a large set of sanction lists, PEP, adverse media and internal lists. This can also integrate with external screening engines and provide additional benefits on top, with AI detection of false-positive alerts and automation of EDR handling
Financial Risk Scoring: Customizable Risk Rule Policies Along with AI Engine
Financial risk scoring is a critical aspect of risk management in the financial sector, particularly for banks and financial institutions that need to assess the risk level of transactions, customers, and investments. The process involves evaluating various factors to determine the potential risk exposure and predict the likelihood of adverse financial outcomes, including (a) Pre-Defined Risk Rule Policies - standardized rules and criteria established by regulatory bodies, risk management frameworks, or internal organizational guidelines that define what constitutes a "risky" behavior or transaction, (b) Customizable Risk Rule Policies – flexible rules that allow institutions to modify the risk parameters based on the unique characteristics of their customers, products, or market conditions. The customization of these policies ensures that the risk scoring system aligns with the institution's risk tolerance and the regulatory environment, and (c) AI Engine – the integration AI enhances the efficiency and accuracy of risk scoring by processing large volumes of data and identifying patterns that might not be immediately apparent. Continuous Learning also improve the risk model over time by learning from new data, meaning they adapt and become more precise in detecting emerging risks.
HUB’s risk scoring engine combines Pre-defined Rules and AI. The combination of pre-defined yet customizable risk rule policies with AI engines allows for a hybrid approach that balances the structure of established risk management guidelines with the adaptability and predictive power of AI. This approach enables financial institutions to (a) Improve Accuracy: AI adds a layer of intelligence that helps validate or refine risk assessments made by rule-based systems, (b) Streamline Operations: Automation of risk scoring processes reduces the time and effort required for manual review, especially when it comes to high volumes of transactions, (c) Enhance Regulatory Compliance: The system can be fine-tuned to comply with specific regulatory frameworks while incorporating AI’s ability to adapt to changing legal and financial landscapes, and (d) Reduce False Positives: By learning from historical data, AI can help reduce the number of false alerts, making the risk scoring process more efficient and actionable.
Transaction Monitoring: Track and Analyze Financial Transactions in Near Real-Time
Transaction monitoring is a vital component of risk management within financial institutions, focusing on tracking and analyzing financial transactions to detect suspicious, unusual, or high-risk activities. This process can occur either in real-time or after the transaction has been processed, allowing institutions to continuously assess the legitimacy of financial movements. Through sophisticated monitoring systems, these institutions can identify patterns that deviate from normal transaction behavior, such as large, rapid withdrawals, transactions to high-risk countries, or frequent transfers that don't align with a customer's profile. These anomalies are often indicative of potential financial crimes or regulatory violations, requiring immediate investigation.
Particularly in the context of AML and Counter-Terrorism Financing (CTF), transaction monitoring plays an essential role in identifying and preventing illicit activities. Money laundering schemes often involve complex layers of transactions designed to obscure the origin of illegal funds, while terrorist organizations may attempt to move funds covertly to finance their operations. By applying advanced algorithms and AI-driven techniques, financial institutions can detect these covert activities, even when attempts are made to disguise them. Real-time monitoring systems, coupled with historical transaction analysis, help ensure that institutions remain compliant with legal obligations, preventing the misuse of their financial services for illegal purposes.
HUB offers a comprehensive transaction monitoring solution through its SDF platform, designed to address the complexities of AML and CTF compliance. This solution integrates traditional rule-based monitoring with advanced AI techniques, including machine learning, knowledge graphs, and natural language processing. By leveraging these technologies, we enhance the detection of suspicious activities, reduces false positives, and improves the efficiency of compliance processes.
A key feature of HUB’s transaction monitoring is its relationship-based and behavior-based monitoring capabilities. The relationship-based monitoring utilizes knowledge graph link analysis to uncover complex networks of entities, such as shell companies, that may facilitate money laundering activities. This approach allows for the detection of intricate financial networks that traditional systems might overlook. The behavior-based monitoring, on the other hand, identifies patterns of activity that deviate from established norms, enabling the system to flag potentially illicit transactions even when they do not match predefined rules.
Additionally, HUB integrates with external, third party providers of financial crime data, to enhance its compliance solution. This collaboration integrates comprehensive financial crime data into HUB SDF platform, further strengthening its ability to assess customer risk and detect financial crimes. The platform's modular design allows for seamless integration with existing systems, providing financial institutions with a scalable and adaptable solution
From Real Time Transaction Monitoring to Fraud Detection
Fraud detection involves analyzing and evaluating financial transactions in real-time to identify and prevent fraudulent activities before they are completed. This process relies on advanced algorithms and machine learning techniques that assess various factors such as transaction patterns, user behavior, and external data sources to spot anomalies or suspicious actions. By monitoring transactions as they occur, financial institutions can immediately flag potentially fraudulent activities, such as unauthorized account access, unusual spending patterns, or identity theft. Early detection is crucial in minimizing the impact of fraud, enabling quick intervention to halt transactions before they are finalized, thereby protecting both customers and the institution from financial losses and reputational damage.
Driven by market demand, HUB SDF is extending its transaction monitoring solution into a robust fraud detection system, by enhancing the monitoring capabilities to not only identify suspicious or high-risk transactions but also to detect fraud in real time as transactions occur. By integrating Hub SDF Knowledge Graph module and its advanced machine learning and AI technologies, the system can be adapted to analyze transaction data more dynamically, enabling it to assess risk factors such as user behavior patterns, transaction velocity, location anomalies, and device fingerprints. This allows for a deeper understanding of transactional activities and the detection of irregularities that may indicate fraudulent behavior, even before the transaction is completed. Additionally, incorporating real-time monitoring and decision-making processes enables the system to immediately flag and halt potentially fraudulent transactions, preventing financial losses. By refining the system to focus on immediate intervention while leveraging customizable fraud detection models, financial institutions can create a more proactive approach, evolving from traditional risk-based monitoring into a real-time fraud prevention solution that continuously adapts to emerging threats.
Horizon scanning: Staying Ahead of Regulatory Changes and Trends
Horizon scanning is a systematic process used by financial institutions to identify, monitor, and analyze upcoming or evolving regulatory changes that could have an impact on their operations. It involves the proactive identification of trends, shifts in the regulatory landscape, and emerging regulatory challenges that may affect business operations, compliance frameworks, and risk management strategies. This process is essential for staying ahead of regulatory developments and ensuring that organizations are not only compliant with current regulations but also prepared for any future legal or regulatory requirements. Financial institutions, such as banks, fintechs, insurers, and even regulators themselves, use horizon scanning to gain insights into upcoming regulations or amendments that could influence their strategies, risk appetite, or business models.
As part of a proactive compliance strategy, Hub’s horizon scanning allows organizations to anticipate and prepare for changes in regulatory obligations before they come into effect. By monitoring developments in regulatory bodies, industry trends, and geopolitical shifts, institutions can make informed decisions about necessary adjustments to their operations. This might include altering internal policies, implementing new technology solutions, or enhancing employee training to ensure continued compliance. Moreover, horizon scanning can help financial institutions identify potential risks early on, reducing the likelihood of non-compliance penalties and fostering a culture of proactive risk management. By embracing horizon scanning, financial institutions can not only stay ahead of evolving regulations but also maintain a competitive edge by adapting to regulatory changes with agility and foresight.
Digital Transformation of Banking Systems Compounding Operational and Compliance Needs
The need for core banking systems to be fully integrated with compliance solutions has become increasingly critical for banks in today’s regulatory landscape. As financial institutions face complex and evolving regulatory requirements, integrating compliance features directly into core banking platforms ensures that all transactions, customer data, and financial activities are automatically monitored and aligned with compliance standards. This integration enables real-time detection of suspicious activities, such as money laundering or fraud, and ensures that banks can generate accurate reports for regulatory bodies without manual intervention. Additionally, by embedding compliance workflows into the core banking system, banks can reduce operational inefficiencies, minimize the risk of non-compliance penalties, and ensure a more streamlined, proactive approach to risk management. This unified framework not only helps banks stay compliant with local and global regulations but also enhances overall operational agility, security, and customer trust.
HUB is offering small and medium banks, as well as other financial services companies such as digital payment services, a holistic approach for digital transformation of core banking and financial systems encompassing HUB’s data fabric technology fully integrated with the HUB’s financial compliance solution and partners’ core banking and digital banking applications. The solution can be delivered on-cloud, on-premise, or as a hybrid solution.
Confidential Computing:
HUB’s confidential computing solution has three configurations (HUB Vault, HUB PCIe Card and Hub Guard) that are available for commercial sale. In addition to technology, HUB also provides advanced professional services that enable clients to assess their vulnerability to a cybersecurity attack as well as to quickly respond should one occur.
HUB Vault
HUB Vault is a managed file transfer application (“MFT”) that protects critical data, enabling secure data storage and sharing through an application leveraging our secure compute core. Customers can use our technology for data sharing within the enterprise or supply chain, or white label the application for end users, suppliers or partners. HUB Vault is currently live with one commercial customer who intends to attempt to resell the capability to tens of thousands of end users. In September 2023, we announced that HUB Vault underwent a significant transformation to make it significantly more robust to match large enterprises’ and governments’ needs, making it easier than ever for organizations to secure and manage their sensitive data with the highest level of hardware-backed security.
HUB PCIe Card
HUB PCIe Card provides the same confidential computing functionality for a single compute component as HUB Appliance. HUB PCIe Card is configured onto a single computer board that is inserted into a compute component. It can be installed on an original equipment manufacturer (“OEM”) basis by hardware or server manufacturers such as Hewlett-Packard and Dell. It can also be ordered separately and fitted into board slots of existing equipment. HUB PCIe Card was first offered for commercial sale in 2021 and is currently in full service in 2 installations.
HUB Guard
HUB is positioned as a leading and trusted advisor. Customers continue to utilize more services offered by HUB. By leveraging market-wide demand, HUB’s technological capabilities, HUB’s domain expertise and HUB’s growing clientele, HUB is offering a cyber resilience bundle known as HUB Guard.
HUB Guard continuously evaluates the security posture of the customer while outlining any weaknesses or threats and suggesting solutions to mitigate and remediate them. HUB Guard introduces methodology for an ongoing alignment and evolvement of the cybersecurity posture.
First, enterprises require a continual and comprehensive understanding of their regulatory adherence and risk posture. HUB Guard assessments serve as systematic evaluations of processes, controls and systems to identify compliance gaps and vulnerabilities, enabling clients to proactively identify areas of non-compliance, security weaknesses and operational inefficiencies, allowing for timely remediation.
Second, enterprises have a need to proactively discover, analyze and address potential gaps in their security defenses and controls. HUB Guard allows clients to systematically identify and evaluate vulnerabilities, threats, and potential compliance gaps within their operations. By quantifying and scoring risks, organizations gain valuable insights into their risk landscape, enabling informed decision-making and resource allocation to mitigate those identified risks.
Third, enterprises require a means to monitor, respond to, and mitigate security incidents promptly while demonstrating their commitment to risk management, data protection and business continuity. The HUB Guard incident response enables rapid and transparent remediation to security events, minimizing the financial impact of incidents, protecting sensitive information, and preserving customer trust.
As part of HUB Guard, HUB intends to automate existing service offerings based on its technological capabilities. The conversion relates to various professional services that are offered by HUB, where the systems can be automated and merged with other products and utilized by the services teams and be operated on an ongoing basis. Moreover, we continually explore how to broaden the offerings of HUB Guard with new technologies and capabilities and thus expand coverage of customer needs. Both new offerings and existing ones are bundled into the dashboard and reflected in real time to the end customer, providing value and offering more and more service bundles to the customer. HUB Guard is offered in a one-to-three year subscription model and is marketed via partners and directly to both existing and new end customers.
Paid Proof of Concept, Pilots & Pipelines
Following the acquisition of Comsec, HUB has added a number of products and services to its portfolio and established a solid customer base of hundreds of leading enterprises and organizations in Israel, the Netherlands and the UK, including several government departments, banks and military branches.
HUB currently has a number of proof of concept activities, including having recently run trials with (i) a defense contractor in an Asian country regarding secure computing for military systems, which is currently offering HUB’s products and solutions for resale and (ii) a secure file storage system bundled with cyber insurance offered in the Middle East and Europe to SMBs, which remains on going. HUB is also in discussions regarding potential proof of concept trials.
HUB’s current pipeline includes signed agreements with enterprises and organizations in the defense and government sectors.
At the time of the Legacy acquisition, HUB’s management believed that the acquisition could have the potential to bring in a considerable number of new enterprises and government customers within the EU and the Middle East. To date, we have yet to recognize any revenues or acquire new customers from the Legacy assets and it remains extremely uncertain as to when, if at all, we may be able to do so.
As of December 31, 2022, we determined that the assets acquired should be fully impaired. As such, for the year ended December 31, 2022, we recorded an impairment loss of $8,738 for the assets acquired from Legacy.
HUB’s Professional Services Division:
The HUB Professional Services division is built upon three groups of subsidiaries: ALD, Comsec and QPoint.
Comsec
Comsec is a global leader in innovative cybersecurity services for more than 30 years to customers in Israel and across the world. The professional services portfolio provides consulting services to identify and mitigate risks in their cybersecurity environment.
Comsec specializes in governance risk compliance (“GRC”) and strategic consulting services. The company helps clients assess their gaps to their relevant regulatory requirements and propose solutions to mitigate the gaps and become compliant. As part of the GRC offerings, there is focus on the credit card industry which has stringent requirements in place for implementation of cybersecurity controls. The team has a large number of qualified security assessors to work on these projects. HUB provides a chief information security officer as a service to clients that do not have sufficient internal resources to manage cybersecurity in their organization. Within compliance and GRC offering services there are GDPR and other regulatory compliance assessments and remediation work.
The application security offerings help organizations assess their risk and vulnerabilities in their application landscape. The services provided are aligned with the Secure Development Lifecycle (“SDLC”) methodology and helps clients and their development departments with assessing risk (testing and threat modeling), training their developers, scanning code for vulnerabilities, recommending mitigation activities and implementation of security controls.
Offensive security offerings mimic what criminal organizations and or hackers are attempting to do to compromise organizations. The teams rely on their expertise and tooling to try and find vulnerabilities in the organization’s environment and exploit them to access critical assets and systems. This enables clients to mitigate the found exploitations and plug gaps in their cybersecurity posture before being exploited by hackers and/or criminal organizations.
Infrastructure security services provide testing services on infrastructure-related equipment and environments. The team utilizes penetration testing equipment to validate the security posture and identify potential vulnerabilities with a focus on cloud computing.
Reacting to cyber incidents in a fast and decisive manner is key to mitigating harm. HUB has incident response teams available at all times to receive calls from clients that may be experiencing a breach or ransomware attack. The experienced teams investigate the incident and assist the client with activities to minimize the impact and get their operations back to normal.
HUB professional services also provides training to organizations employees in the field of cybersecurity. A catalog of over 50 training courses is available to the client base and market.
HUB professional services division provides services to more than 100 active clients and has served over 1,000 customers across industries and geographies. Customers include some of the largest banks, insurance companies, telecommunications organizations, industrial organizations and high tech companies around the globe. HUB also partners with organizations across the globe to provide their customers with the same high quality services that the HUB professional services division provides directly to customers. Partners include large outsourcing organizations as well as specialized niche companies that value the add-on services HUB can provide. HUB has more than 10 active partners operating in Italy, Turkey, India, Sri Lanka, Spain, UK, Poland and across South America.
HUB is exploring opportunities with the large outsourcing companies in Europe and around the world which lack a number of critical security services that HUB is able to provide. These organizations struggle with the demand and to provide high-quality profiles. This is where we believe HUB can provide a lot of value.
Comsec Competition and Competitive market
Although there are a large number of cybersecurity organizations, the market need fast outpaces the growth in our competitors. HUB stands out to the competition because its core services are developed and implemented in the Israeli market first. The Israeli market is demanding and innovative, and HUB has the opportunity to bring these innovative services to an international clientele.
Major competitors include global consulting firms. While these organizations are large, HUB stands out through innovative and cutting-edge services catered to the latest trends and threats. Other competitors are more country-specific cybersecurity services companies. Against these companies, HUB believes it can show its experience in the global market, the breadth and depth of the service portfolio and the quality of service.
ALD
RAMS - Reliability Products and Services
The reliability products and services division is built upon the acquisition of ALD, a global leader in innovative Reliability, Availability, Maintainability and Safety Assessment (“RAMS”) products and services for more than 30 years to customers in Israel and across the globe.
The ALD consulting team consists of experts in the fields of RAMS, LCC and ILS. The team provides solutions in the fields of aviation, transportation, construction, infrastructure and renewable energy. Proposed solutions include preparation of RAMS and quality control plans, allocation of professional personnel to projects and establishment of quality systems and certification of standards.
As RAMS collects and analyses large amounts of data, it would be natural for HUB to include a Data Fabric solution to manage these data assets.
ALD Software
ALD Software Suite is a result of 40 years of expertise in development of safety and reliability analysis software for world-class civil and military aviation, communication, space and electronics organizations.
The software suite consists of a set of integrated tools covering reliability prediction, availability, maintainability analysis, safety assessment, quality management, safety management, industrial process control and more:
RAM Commander:
RAM Commander is the reliability and safety software that covers engineering tasks related to reliability of electronic, electro-mechanical and mechanical systems. RAM Commander modules include reliability prediction, RBD, fault tree analysis, event tree analysis, FMECA and testability analysis, FMEA process and design and more.
Safety Commander:
Safety Commander is an off-the-shelf software that provides fail-safe design for any System of System Safety Assessment (“SoSSA”) across multiple industries, including aerospace, rail, communication and energy. With the ability to perform safety analysis integration on the level of an aircraft or system-of-systems, Safety Commander sets itself apart as a unique solution in the market.
FavoWeb:
FavoWeb FRACAS is ALD web-based and user-configurable Failure Reporting, Analysis and Corrective Action System (“FRACAS”) that captures information about equipment or a process throughout its life cycle, from design, production testing, and customer support.
ALD College
ALD College offers various courses in the areas of quality and reliability. Our courses are designed for different levels of students and objectives. They range from short courses on quality control to full 250-hour academic courses on quality engineering. Courses correspond to the American Society for Quality’s programming for the CQM/CQE/CRE/CSQE. Our courses are designed for both private participants and institutions. Courses for large customers can be tailored to meet specific needs and delivered at either ALD College or at the customer’s site.
Outsourcing
In the framework of its outsourcing activity, ALD offers its customers a variety of services and solutions of positioning professional and qualified manpower in accordance to customers’ needs and demands.
ALD specializes in locating, qualifying and placement of qualified manpower in the following areas: Quality Engineering, Quality Assurance, Failure Analysis, Reliability Engineering, Quality Control, FMEA/ FMECA Analyses, Standardization (ISO, AS) Thermal Design and Audits QPoint provides a variety of tech solutions and services, including software development and testing, cybersecurity, information systems, consulting, and training.
QPoint
Their team of over 145 engineers brings advanced technological expertise to the table, offering readily available and professional solutions to leading Israeli companies and organizations.
HUB’s Strategies
During the next five years, HUB is aiming to become a category leader in secured data fabric and confidential computing. This is a further application of our experience in capturing and managing of data gleaned from our cyber security business. Data management requires security and becomes one of the largest expenditures for any government and enterprise. HUB believes that it is ideally positioned to take advantage of the increased demand in confidential computing technology for effective protection of data.
The essential elements of HUB’s strategies include:
Strengthening HUB’s technological advantage by delivering innovative solutions. HUB believes that its technology is readily ahead of potential competitors as HUB’s solution has a proven working technology, while others are at earlier stages of development. HUB intends to extend its significant technological advantage over its competitors by focusing on the development of its secured data fabric solutions with a focus on the financial services sector, enhancing its existing products and services, introducing new functionality and developing new solutions to address new use cases. HUB’s strategy includes both internal development and an active mergers and acquisition program where HUB acquires or invests in complementary businesses or technologies. In particular, HUB’s collaboration and eventual acquisition of BST allowed us to rapidly advance other technological advantages and increase market reach. We continue to explore potential partner and acquisition targets, particularly in the United States. There is no certainty that the parties will enter into a collaboration agreement or any other transaction between them. HUB intends to leverage the acquired companies’ professional services, expert knowledge and understanding of customers’ need to upsell its secured data fabric and confidential computing solutions. In addition, HUB intends to use its technological abilities to transform the acquired companies’ services into products that can be sold widely, thereby accelerating HUB’s revenue growth and increasing shareholder value.
Growing HUB’s customer base. HUB aims to acquire operating companies with established customer bases in the targeted segments, intending to upsell HUB’s products to those customers and to convert existing services into products, to significantly increase revenue, market coverage, and shareholder value. In addition, the global threat landscape, digitalization of the enterprise, and the broad security skills shortage are contributing to the need for data fabric, compliance and cyber solutions. HUB believes that every organization, regardless of size or vertical, needs better data management and cyber protection, yet HUB’s primary focus is to pursue business with new customers in the enterprise, governments, and mid-market segments of the commercial market. HUB executes its strategy by leveraging a combination of internal marketing professionals and a network of channel partners to communicate the value proposition and differentiation for its products, generating qualified leads for its sales force and channel partners. HUB’s marketing efforts also include public relations in multiple regions and extensive content development available through its website.
| ● | Extending HUB’s global go-to-market reach. HUB sells its solutions through a high-touch hybrid model that includes direct and indirect sales. HUB plans to expand its sales reach by adding new direct sales capacity, expanding its indirect channels by deepening its relationships with existing partners and by adding new value-added resellers, system integrators, managed security service providers and partners. HUB is also expanding its routes to market. |
| ● | Expanding HUB’s relationships with existing customers. As of December 31, 2024, HUB had hundreds of customers, primarily through its professional services division. HUB has worked hard to develop strong relationships with its customers, and its strategy includes its sales and distribution division expanding these relationships by growing the number of users who access HUB’s solutions and cross-selling HUB’s product solutions. HUB’s marketing strategy is focused on building awareness and consideration of its broad range of cybersecurity solutions and developing new qualified leads; while increasing sales to existing customers. |
| ● | Driving strong adoption of HUB’s solution and retaining HUB’s customer base. HUB plans to deliver high levels of customer service and support and continue to invest in its professional services division to help ensure that its customers are up and running quickly and derive benefit from HUB’s products which HUB believe will result in higher customer retention rates. |
| ● | Attracting, developing and retaining a diverse and inclusive employee base. A key pillar of HUB’s growth strategy is attracting, developing and retaining its employees. HUB’s people are one of HUB’s most valuable assets, and its culture is a key business differentiator for HUB. HUB values diversity and inclusion which allows for the exchange of ideas, creates a strong community and helps ensure its employees are valued and respected. |
HUB’s Operations
Strategic Acquisitions
HUB has so far completed four acquisitions, as set forth below, which match its criteria for acquisition targets. HUB intends to continue identifying acquisition targets and acquiring companies and business assets that match its criteria, especially companies with well established relationships and long term contracts with the U.S. government, and apply lessons learned from these acquisitions when approaching new ones.
HUB’s acquisition targets include companies with the following characteristics:
| ● | Established customer base, preferably with long term relationships and preferably with a significant US presence. |
| ● | Supplying products and/or providing services to government agencies and enterprises that can benefit from confidential computing and data fabric and that have revenues and are growing. |
| ● | In-house teams with experiences and know how of working with customers with a good understanding of customers’ needs and operations as customers’ trusted advisor. |
| ● | A set of professional services with the potential to be transformed into products, so that revenues can be increased dramatically through upselling HUB’s products and expanding the product offering generally. |
| ● | Having intellectual property rights in the area of AI, Gen AI, Knowledge graph and Data. |
ALD
HUB merged with ALD in 2021. ALD was founded in 1984 and became publicly traded on TASE in 2000. ALD was an engineering services provider specializing in quality, reliability and safety control for complex engineering projects and dependability of mission critical processes. ALD’s culture of exacting quality standards and superior reliability and safety is highly complementary with the cybersecurity industry’s emphasis on impenetrability and safety from external or internal threats. It also renders services, through one of its subsidiaries, Qpoint Technologies Ltd. (“Qpoint”), in the field of information systems, software testing and outsourcing of professionals and in the field of development, testing and information systems. ALD’s experience and reputation enable it to provide high-quality cybersecurity integration services to large-enterprise customers of HUB.
In 2024 and 2023, ALD had sales of $4,625,000 and $15,512,000 (respectively). ALD’s customers include those in the aerospace, defense, government and transportation industries.
ALD consulting team consists of highly professional experts in the fields of RAMS, LCC, ILS. It also provides solutions in the fields of construction, infrastructure, and renewable energy. Among the proposed solutions: preparation of RAMS and quality control plans, allocation of professional personnel to projects and establishment of quality systems and certification of standards as needed.
Some of ALD customers are world leading commercial companies as well as major defense, transportation and government organizations.
ALD Products
ALD Software Suite is a result of 40 years of expertise in development of safety and reliability analysis software for many world leading civil & military aviation, communication, space and electronics organizations.
The software suite consists of a set of integrated tools covering Reliability prediction, Availability, Maintainability Analysis, Safety Assessment, Quality Management, Safety Management, Industrial Process Control and more:
RAM Commander
RAM Commander is the reliability and safety software that covers engineering tasks related to reliability of electronic, electro-mechanical and mechanical systems. RAM Commander modules: Reliability Prediction, RBD, Fault Tree Analysis, Event Tree Analysis, FMECA and Testability Analysis, Process & Design FMEA and more.
Safety Commander
Is an off-the-shelf software that provides fail-safe design for any SoSSA across multiple industries, including aerospace, railway, communication, and energy. With the ability to perform safety analysis integration on the level of aircraft or system-of-systems, Safety Commander sets itself apart as a unique solution in the market.
FavoWeb
FavoWeb FRACAS is ALD Software web based and user configurable Failure Reporting, Analysis and Corrective Action System (“FRACAS”) that captures information about equipment or a process throughout its life cycle, from design, production testing, and customer support.
Comsec
In November 2021, the Company completed the acquisition of Comsec Ltd. and its Subsidiaries, Comsec Distribution Ltd. (“Distribution”). However, during 2023, Distribution, had financial, operational and commercial difficulties, cessation of sales starting July 2023, layoffs and departures of employees so that as of December 31, 2023 there were no business activities in Distribution. In addition, in 2024 Distribution had no commercial activities.
In 2024 and 2023, Comsec had sales of $5,189,000 and $6,800,000 (respectively). Most of Comsec’s customers are large enterprises, militaries and government agencies, and Comsec has deep and long-term connections with the IT procurement departments in those organizations and is recognized by them as an approved provider.
This customer profile matches the target market of HUB’s confidential computing solution, so the process of integrating HUB’s proprietary products with Comsec’s existing offering has been smooth and efficient. Since the acquisition in 2021, Comsec’s experienced sales and distribution staff have emerged as the primary driver of the market’s acceptance of HUB’s cybersecurity solutions.
Qpoint
In April 2024, we completed the acquisition of all shares of Qpoint that we did not yet own at that time, constituting 53.5% of Qpoint’s outstanding shares.
QPoint Technologies provides a variety of tech solutions and services, including software development and testing, cybersecurity, information systems, consulting, and training. Their team of over 145 engineers brings advanced technological expertise to the table, offering readily available and professional solutions to leading Israeli companies and organizations.
In 2024 and 2023, QPoint Group had sales of $20,191,000 and $26,900,000 (respectively). Most of QPoints’s customers are large enterprises, militaries and government agencies, and QPoint has deep and long-term connections with the IT procurement departments in those organizations and is recognized by them as an approved provider.
BST
In November 2023, HUB began to collaborate with BST with the goal to become a significant player in the secured data fabric industry. On January 15, 2025, HUB entered into an Agreement and Plan of Merger with BST, pursuant to which, on January 27, 2025, BST merged with and into a wholly-owned subsidiary of HUB. As a result of the merger, BST and its subsidiaries became subsidiaries of HUB and certain of the equity holders of BST became shareholders of HUB. We believe that the acquisition of BST will solidify our position as a leading provider of secured data fabric solutions, offering a critical safeguard for banks, financial institutions and other industries navigating an increasingly complex regulatory and cybersecurity environment.
Operating Structure
HUB believes that in addition to developing superior technology, a successful technology company must also maintain a disciplined sales and distribution force, alongside an experienced, customer-oriented professional services group. In particular, the sales force must bring established relationships with customers’ IT procurement departments, while professional services consultants must possess extensive experience in tailoring systems to meet the individual needs of clients and provide outstanding long-term support to stay ahead of evolving security threats.
Through a combination of organic growth and strategic acquisitions, including the recent acquisition of BlackSwan Technologies, HUB has further strengthened its operational capabilities. This strategic move has enhanced our AI and data analytics expertise, expanded our customer base, and deepened our domain-specific offerings in security and intelligence. Together, these three synergetic operating structures—Technology, Sales & Distribution, and Professional Services—form the backbone of our ability to solve complex client needs and bring our products and solutions to market efficiently and at scale.
| 1. | Technology and Product Division |
| ● | HUB’s technology development team is in charge of research and development of HUB’s Products solutions. The current focus on HUB’s technology development organization is to continuously advance HUB’s technology products solutions. |
| ● | HUB’s product solutions are marketed and licensed on a direct basis to banks, financial services, government agencies, defense organizations, research institutions and large enterprises. |
As of December 31, 2024, HUB’s Technology and Product Division team had 21 employees.
| 2. | Management, Sales, and Distribution |
| ● | HUB’s Management, Sales, and Distribution oversees the company marketing, sales, and related commercial activities to advance and support the distribution of Hub’s product solutions and services. |
| ● | Oversee strategic planning, resource allocation, and operational execution to align the company's goals with market demands and ensure sustainable growth. |
| ● | Drive revenue by identifying customer needs, closing deals, and ensuring effective delivery and support of software products through various channels. |
As of December 31, 2024, HUB’s Management, Sales, and Distribution teams had 20 employees.
| 3. | Professional Services Division |
The professional services department is comprised of services performed by ALD, Comsec and QPoint.
| a) | ALD is in charge of providing quality control in complex engineering projects and ensuring smooth and reliable execution in mission critical processes. |
| b) | Comsec provides cyber risk assessment, risk mitigation and cyber incident response services to customers worldwide. Comsec customers are large enterprises, militaries and government agencies, and Comsec has deep and long-term connections with the IT procurement departments in those organizations and is recognized by them as an approved provider. |
| c) | QPoint Technologies provides a variety of tech solutions and services, including software development and testing, cybersecurity, information systems, consulting, and training. Their team of over 145 engineers brings advanced technological expertise to the table, offering readily available and professional solutions to leading Israeli companies and organizations. |
As of December 31, 2024, HUB’s professional services division had 274 employees.
HUB’s management believes that in addition to serving customers with professional services, these employees are also essential for customization and integration of HUB’s technology products into customers’ networks.
| 2. | Management and Product Division |
Target Markets
HUB’s primary target markets are medium to large entities that need to manage and handle diverse or sensitive data, or in a highly regulated industry. These include, but are not limited to:
| ● | Financial institutions — these include banks, payment providers, brokerage houses and insurance companies that need to manage and take advantage of data explosion, or require high speed processing, remote access and very high levels of compliance and security. |
| ● | Governmental institutions — both government agencies and militaries are expected to have significant demand for HUB’s solution in order to process, store and encrypt/decrypt highly sensitive data. |
| ● | Healthcare institutions — HUB anticipates that early adopters of its technology in this industry will be hospital chains, life science research institutions and pharmaceutical companies that process enormous data sets and face strict regulatory requirements for data security and data management. |
| ● | Large, regulated enterprises and industries that are required by regulators to handle data in a responsible manner, such as ESG requirements. |
Telecommunication and cellular operators who are ramping up to 5G service also present enormous market potential for HUB devices. The speed and data-handling capabilities of 5G services will take advantage of HUB’s high throughput speed and protection. A HUB device installed in a cellular tower can provide cybersecurity for all data flowing in and out of the tower’s 5G equipment.
Competition
The markets in which HUB operates are characterized by intense competition, constant innovation, rapid adoption of different technological solutions and services, and evolving security threats. HUB competes with a multitude of companies that offer a broad array of products and services that employ different approaches and delivery models to address these evolving threats.
Secured Data Fabric Competitive Landscape
The data fabric market is rapidly evolving, with major players including Informatica, IBM, Oracle, Microsoft, Talend, Snowflake, and others offering a variety of solutions across integrated data platforms, cloud-native architectures, and data virtualization technologies. Established technology giants like IBM and Oracle leverage their deep expertise, broad tool portfolios, and strong industry presence, while newer entrants like Snowflake and Denodo emphasize cloud-native flexibility and real-time analytics. Companies like SAP and Palantir focus on niche strengths such as security and entity-based data organization. Open-source alternatives, such as Apache Atlas and Airflow, also pose a competitive threat by offering cost-effective and customizable solutions. However, the crowded field and overlapping capabilities create a highly competitive environment where innovation, integration, and scalability are key differentiators.
Cybersecurity Competitive Landscape
HUB may face competition due to changes in the manner that organizations utilize IT assets and the security solutions applied to them. Cybersecurity spending is spread across a wide variety of solutions and strategies, including, for example, endpoint, network and cloud security, vulnerability management and identity and access management. Organizations continually evaluate their security priorities and investments and may allocate their cybersecurity budgets to other solutions and strategies and may not adopt or expand use of HUB’s solution. Accordingly, HUB may also compete for budgetary reasons, to a certain extent, with additional vendors that offer threat protection solutions in adjacent or complementary markets to HUB’s.
Our primary competitors in the network security industry consist of Cisco Systems, Inc., Juniper Networks, Inc., Fortinet Inc., Check Point Software Technologies Ltd. and Palo Alto Networks, Inc., as well as companies that have network security capabilities as part of broader IT solutions offerings, such as Microsoft Corporation, McAfee, Inc., International Business Machines Corporation, Hewlett-Packard Enterprise Company and FireEye, Inc. Competitors in the data fabric market include Atlan, IBM, Oracle, Talend, SAP, Informatica, Cloudera, TIBCO, Amazon Web Services and data.world.
Professional Services Competitive Landscape
The cybersecurity professional services markets are experiencing heightened competition driven by rapid technological advancements, evolving regulatory landscapes, and increasing client demands. Major players like IBM, Microsoft, SAP, Oracle, and SAS Institute are expanding their offerings through strategic acquisitions and the integration of AI and machine learning to provide comprehensive, cloud-based GRC solutions. This technological innovation enables more efficient risk management and compliance processes, allowing organizations to automate regulatory adherence reports and detect threats more effectively. Simultaneously, the cybersecurity consulting sector is witnessing a shift as clients may favor technology firms over traditional consultancies. This trend underscores the importance for traditional firms to demonstrate their unique value propositions.
Nonetheless, the demand for professionals with cybersecurity expertise is surging, as organizations seek to navigate complex regulatory environments and bolster their cybersecurity frameworks. The convergence of regulation and cybersecurity services, coupled with the integration of advanced technologies, is reshaping the competitive landscape, compelling firms to innovate and adapt to maintain a competitive edge.
Intellectual Property
HUB considers its trademarks, trade dress, copyrights, trade secrets, patent and other intellectual property rights, including those in its know-how and the software code of its proprietary solution, to be, in the aggregate, material to its business. HUB protects its intellectual property rights by relying on federal and state statutory and common law rights, foreign laws where applicable, as well as contractual restrictions.
As of December 31, 2024, we owned six registered patents in the United States, as well as one U.S. patent application, which was recently allowed. In addition, HUB owns and uses trademarks and service marks on or in connection with its proprietary solution, including both unregistered common law marks and issued trademark registrations. Finally, HUB has registered domain names for websites that it uses in its business, such as https://hubsecurity.com/.
HUB designs, tests and updates its products, services and websites regularly, and it has developed its proprietary solutions in-house. HUB’s know-how is an important element of its intellectual property. The development and management of its solution requires sophisticated coordination among many specialized employees. HUB takes steps to protect its know-how, trade secrets and other confidential information, in part, by entering into confidentiality agreements with its employees, consultants, developers and vendors who have access to confidential information, and generally limiting access to and distribution of HUB’s confidential information.
While most of the intellectual property HUB uses is developed and owned by HUB, it has obtained rights to use intellectual property of third parties through licenses and services agreements. Although HUB believes these licenses are sufficient for the operation of its business, these licenses typically limit HUB’s use of the third parties’ intellectual property to specific uses and for specific time periods.
HUB intends to pursue additional intellectual property protection to the extent it believes would advance its business objectives and maintain its competitive position. Notwithstanding these efforts, there can be no assurance that HUB will adequately protect its intellectual property or that it will provide any competitive advantage. From time to time, HUB expects to face in the future allegations by third parties, including its competitors, that HUB has infringed their trademarks, copyrights, patents and other intellectual property rights or challenging the validity or enforceability of HUB’s intellectual property rights. HUB is not presently a party to any such legal proceedings that, in the opinion of HUB’s management, would individually or taken together have a material adverse effect on HUB’s business, financial condition, results of operations or cash flows.
Government Regulation and Compliance
Data Protection Laws and Regulations
HUB is subject to various federal, state, and international laws and regulations that affect companies conducting business on digital platforms, including those relating to privacy, data protection, the Internet, mobile applications, content, advertising and marketing activities. New and evolving laws and regulations, and changes in their enforcement and interpretation, may require changes to HUB’s technology, solutions, or business practices, which may significantly limit the ways in which HUB collects and processes data of individuals, communicate with users, serve advertisements and generally operate HUB’s business. This may increase HUB’s compliance costs and otherwise adversely affect HUB’s business and results of operations. As HUB’s business expands to include additional solutions and industries, including the financial services sector, and HUB’s operations continue to expand internationally, HUB’s compliance requirements and costs may increase and HUB may be subject to increased regulatory scrutiny.
The data HUB collects and otherwise processes is integral to HUB’s business, technology, solutions and services, providing HUB with insights to improve its solution and customization and integration of its solution to customers’ network. HUB’s collection, use, receipt, storage and other processing of data in its business subjects it to numerous U.S. state and federal laws and regulations, and foreign laws and regulations, addressing privacy, data protection and the collection, storing, sharing, use, transfer, disclosure, protection and processing of certain types of data. Such regulations include, for example, the European Union General Data Protection Regulation 2016/679 (the “GDPR”) as implemented by EU member states, the Privacy and Electronic Communications Directive 2002/58/EC, the UK Data Protection Act 2018 (which retains the GDPR under UK law), the Israeli Privacy Protection Regulations (Data Security) 2017, the Children’s Online Privacy Protection Act, Section 5(a) of the Federal Trade Commission Act, and other applicable laws globally.
Our activities in the cybersecurity market require that we comply with laws and regulations in the area of data privacy and data protection governing the collection, use, retention, sharing and security of personal data. For example, the GDPR and UK DP Laws (each as referenced above), include operational requirements for companies that receive or process personal data of residents of the EU and the UK, and non-compliance may result in significant penalties. Many other countries in which we operate have their own data protection and data security laws that we need to comply with in collecting, utilizing, or otherwise processing personal data from our customers and/or visitors to their websites and others.
HUB also may be subject to the California Consumer Privacy Act, or the CCPA, which imposes heightened transparency obligations, creates new data privacy rights for California residents, and carries the potential for significant enforcement penalties for non-compliance as well as a private right of action for certain data breaches. We also may be subject to the California Privacy Act, or CPRA, which took effect on January 1, 2023 and created obligations with respect to certain data relating to consumers, significantly expanded the CCPA, including by introducing additional obligations such as data minimization and storage limitations, granting additional rights to consumers, such as correction of personal information and additional opt-out rights, and created a new entity, the California Privacy Protection Agency, to implement and enforce the law. Similar laws coming into effect in U.S. states, adoption of a comprehensive U.S. federal data privacy law, and new legislation in international jurisdictions may continue to change the data protection landscape globally and could result in us expending considerable resources to meet these requirements.
Non-compliance with these laws could result in fines, regulatory investigations, reputational damage, orders to cease or change HUB’s processing of data, enforcement notices or assessment notices for a compulsory audit, civil claims for damages, as well as associated costs, diversion of internal resources and reputational harm. Although HUB takes extensive efforts to comply with all applicable laws and regulations, HUB can provide no assurance that it will not be subject to regulatory and/or private action, including fines for non-compliance with data protection and privacy laws, including in the event of a security incident.
HUB works to comply with, and to support customers and partners in their efforts to comply with, applicable laws and regulations relating to privacy, data protection and information security. HUB maintains privacy information notices for individuals whose personal data is processed, enters into data processing agreements, conducts data protection impact assessments, product and feature reviews, maintains a reasonably exhaustive list of data collected and processed, and responds to privacy-related queries and requests. HUB takes a variety of technical and organizational security measures and other procedures and protocols to protect data, including data pertaining to users and employees. Despite measures HUB puts in place, HUB may be unable to anticipate or prevent unauthorized access to or disclosure of such data.
To read more about HUB’s approach to laws and regulations relating to privacy, data protection, and information security, please see the section titled “Risk Factors — Risks Related to Our Legal and Regulatory Environment.”
Anti-Bribery, Anti-Corruption and Sanctions Laws and Regulations
Our operations are subject to anti-bribery and anti-corruption laws and regulations, including the Foreign Corrupt Practices Act (“FCPA”), and economic and trade sanctions, including those administered by the Office of Foreign Assets Control of the U.S. Treasury, the U.S. Department of State and the EU. These statutes generally prohibit providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. HUB may deal with both governments and state-owned business enterprises, the employees of which are considered foreign officials for purposes of these laws.
Cybersecurity
In July 2023, the U.S. Securities and Exchange Commission adopted the Risk Management, Strategy, Governance, and Incident Disclosure Final Rule (the “Cybersecurity Final Rule”) enhancing disclosure requirements for registered companies covering cybersecurity risk and management. The Cybersecurity Final Rule requires registrants to disclose material cybersecurity incidents on Form 8-K within four business days of a determination that a cybersecurity incident is material, and such materiality determination must be made without unreasonable delay. The rule also requires periodic disclosures of, among other things, details on the company’s processes to assess, identify, and manage cybersecurity risks, cybersecurity governance, and management’s role in overseeing such a compliance program, including the board of directors’ oversight of cybersecurity risks. Certain reporting requirements under the Cybersecurity Final Rule become effective as early as December 2023.
We are in the process of designing and implementing a security program consisting of policies, procedures, and technology intended to maintain the privacy, security and integrity of our information, systems, and networks. Among other things, the program includes controls designed to limit and monitor access to authorized systems, networks, and data, prevent inappropriate access or modification, and monitor for threats or vulnerability. See “Risk Factors—Risks Related to Our Systems and Technology—As a cybersecurity provider, if any of our systems, our customers’ cloud or on-premises environments, or our internal systems are breached or if unauthorized access to customer or third-party data is otherwise obtained, public perception of our business may be harmed, and we may lose business and incur losses or liabilities.”
Financial Services
We are not currently subject to laws and regulations applicable to the financial services sector. However, some of our products are subject to regulation and supervision by our customers’ regulators and we, as a service provider to the financial services sector undertake certain compliance obligations. If we were to become directly subject to financial service regulations or if the third-party risk management requirements applicable to us were to change, our business model may need to be substantially altered and we may not be able to continue to operate our business as it is currently operated. Failure by us, or any of our customers, to comply with applicable laws and regulations could have a material adverse effect on our business, financial position and results of operations.
Other Regulations
In addition, HUB is subject or might be subject to laws and regulations relating to antitrust, competition, intellectual property, AI and other matters. HUB has implemented internal policies designed to minimize and detect potential violations of laws and regulations in a timely manner, but can provide no assurance that such policies and procedures will be followed at all times or will effectively detect and prevent violations of the applicable laws by one or more of its employees, consultants, agents, or partners.
Human Capital Resources
HUB has always strived to foster a culture that emphasizes the importance of its team and that values creativity, professionalism, transparency, obligation to dissent and responsibility. HUB believes that its hiring decisions reflect this culture.
Through multiple growth phases, HUB has drawn talent and leadership from the technology and cybersecurity industries to achieve its vision. As of December 31, 2024, HUB, had approximately 322 employees worldwide, which includes the employees of all of HUB’s wholly-owned subsidiaries. As of December 31, 2024, HUB had 41 employees. None of our employees are represented by a labor union, and HUB considers its employee relations to be in good standing. To date, HUB has not experienced any work stoppages.
Legal Proceedings
HUB is subject to claims and legal proceedings that have arisen both as a result of the Business Combination and the Company’s commencement of trading in the United States and in the ordinary course of its business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the HUB’s business, financial condition, results of operation, cash flows and reputation. HUB does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its results of operations. HUB records a liability in its consolidated financial statements for such matters when a loss is known or considered probable and the amount can be reasonably estimated. HUB reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, HUB estimates, provides the appropriate accrual and discloses the possible loss or range of loss to the extent necessary for its consolidated financial statements not to be misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.
For a description of the Company’s current legal proceedings, see Item 8. “Financial Information—Consolidated Statements and Other Financial Information—Legal and Arbitration Proceedings.” Inclusion of such proceedings by HUB is not an admission that these proceedings, if determined adversely to HUB, would have a material adverse effect on HUB’s results of operations.
C. Organizational Structure
The following table sets forth our material subsidiaries as of April 28, 2025, all of which are wholly owned, directly or indirectly, with the exception of ALD Software Ltd, of which we own 98.63%.
| Name of Subsidiary | Jurisdiction of Organization | |
| HUB Cyber Security TLV Ltd. | Israel | |
| ALD Manpower Solutions Ltd. | Israel | |
| ALD College Ltd. | Israel | |
| Qpoint Solutions Ltd. | Israel | |
| Sensecom Consulting & Project Management Ltd. | Israel | |
| Comsec Ltd. | Israel | |
| Comsec International Information Security B.V | The Netherlands | |
| Blackswan Technologies, Inc. | Delaware, United States | |
| BlackSwan Technologies GmbH | Germany |
D. Property, Plants and Equipment
Our principal facilities are located in Tel Aviv, Israel which consist of approximately 643 square meters (approximately 6,921 square feet) of leased office space, and additional facilities in Or Yehuda (near Tel Aviv) which consist of approximately 1,600 square meters (approximately 17,222 square feet) of leased office space. These facilities currently accommodate our principal executive offices, research and development, account management, legal, marketing, business development, sales, finance, information technology, customer support and other administrative activities. HUB’s employees are located in these two facilities. The lease for these facilities expires in August 2026 and March 2028 (respectively), and HUB has the option to extend the lease which expires in March 2028 for an additional five years beyond the current term. HUB also currently leases offices in the Netherlands and expects to lease office space in the United States in the near term. HUB believes that its facilities are adequate to meet its needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of its operations.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
A. Operating Results
You should read the following discussion together with the consolidated financial statements and related notes included elsewhere in this Annual Report. The statements in this discussion regarding industry outlook, our expectations regarding our future performance, planned investments in our expansion into additional geographies, research and development, sales and marketing and general and administrative functions as well as other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Item 3.D entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” included elsewhere in this Annual Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Certain information called for by this Item 5, including a discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022 has been reported previously in our Annual Report on Form 20-F for the fiscal year ended December 31, 2023, filed with the SEC on August 16, 2024 as amended on October 22, 2024 under the section entitled “Item 5—Operating and Financial Review and Prospects.”
Overview
HUB focuses on two symbiotic lines of business: – the Products Division - Confidential Computing and Secured Data Fabric; and the Professional Services Division (Consulting) – cyber security and other technology services. The symbiotic connection between the two offerings is deeply rooted in the Company’s strategy.
Data Fabric
Data Fabric is an architectural solution to process data for large applications such as Compliance, Risk, Know Your Customer, and ESG. With a regular traditional solution, all the organization’s data is moved continuously from tens of locations and data sources such as on-prem data, cloud, and also subscription data sources to a single location. The continuous transfer is costly, slow, and risky. These “ETL” solutions to move the data are expensive.
Once the data is collected to a large data lake, which also entails a significant expenditure, the organization can start developing the algorithms needed depending on the required application. This way of resolving development and handling of data is required by regulators and is expensive and risky. It involved moving continuously large amounts of data.
Our Data Fabric solution leaves most of the data as is in its prime original location. The system simply indexes the data using AI to understand what is there and what applications may need this data. It only fetches the required data (a very small percentage of the total data, which is mostly not needed) when it’s needed. It then uses the data to perform the required operation and release it back to its original location. This approach eliminates a major cost by not having to perform continuous ETL procedures and not needing a new data lake to collect all the organization’s data.
Traditional Approaches to Cybersecurity
Traditional cybersecurity technologies operate as a collection of unique purpose-built systems and components that mitigate different threats and risks within a network. All of these systems operate by expanding costly IT and cyber teams within organizations. Most organizations today have sophisticated methods for protecting data at rest (encrypted in storage), and data in transit (encrypted in transit). However, traditional approaches to cybersecurity do not address vulnerabilities to data in use (when applications and data are processed). As a result, most companies are exposed to hacks by commercially available tools and techniques, even after investing heavily in perimeter defenses.
This common vulnerability of systems to exploit by hackers has been exacerbated by the recent shift to remote work and the increase in cell phone access to networks. This shift allows even simple devices such as phones, tablets and laptops to access networks and receive sensitive data. The connection of these simple devices to a network has created a network perimeter that is almost indefensible by traditional cybersecurity systems.
Confidential Computing
Confidential computing is a strong solution for cyber protection as it assumes that hackers have already infiltrated a computer and that an administrator’s credentials have been compromised. HUB’s zero trust Confidential Computing systems protect data and applications by running them within secure enclaves that are governed by policies and managed with strict, rules-based filters to prevent unauthorized access to the processor as well as by and between microservices. This approach ensures data security, unrelated to the vulnerability of the computing infrastructure.
Confidential computing places the network system into a “bunker” or trusted execution environment maintains strict control over how the system is accessed, and does not require any changes in the network operations which traditional cybersecurity solutions would otherwise require. According to the Everest Group, the Confidential computing market is expected to grow by up to 90-95% each year through 2026 and will help to mitigate the threat of data breaches.
The potential benefits of confidential computing are immense, including data protection, ensuring security on data in use in the cloud, protecting intellectual property, allowing safe collaboration with external organizations on cloud, eliminating concerns over selecting cloud providers and protecting data processes for edge computing environments, such as IoT. HUB’s zero trust confidential computing has a key strength in that it can minimize the vulnerability of data for all of these use cases by protecting data in use, that is, during processing or runtime.
Basis of presentation
On June 21, 2021, a share swap agreement was consummated, whereby the Company acquired Hub Cyber Security TLV Ltd. (“HUB TLV”) in exchange for 51% of the issued and outstanding share capital of the Company. Pursuant to the share swap agreement, HUB TLV became a wholly owned subsidiary of the Company. From an accounting and economic perspective, because the share swap consisted of a reverse acquisition whereby HUB TLV’s shareholders acquired the controlling interests in the Company, HUB TLV is treated as the acquirer for accounting purposes and the Company as the acquiree. The financial statements included herein therefore reflect the financial results of HUB TLV prior to the consummation of the share swap. All references to “HUB” prior to June 21, 2021 refer to HUB TLV and subsequent to June 21, 2021 refer to HUB Cyber Security Ltd.
The Company’s financial statements are prepared in accordance with International Financial Reporting Standards, or IFRS as issued by the International Accounting Standards Board (“IASB”).
Business Combination
On March 23, 2022, HUB entered into the Business Combination Agreement with RNER and RNER Merger Sub. Pursuant to the Business Combination Agreement, Merger Sub merged with and into RNER, with RNER surviving the merger. Upon the consummation of the Business Combination on February 28, 2023, RNER became a wholly owned subsidiary of HUB.
BST Merger
On January 15, 2025, HUB entered into the Agreement and Plan of Merger with BST and BST Merger Sub. Pursuant to the BST Merger Agreement, BST Merger Sub merged with and into BST, with BST surviving the merger. Upon the consummation of the BST Merger on January 27, 2025, BST became a wholly owned subsidiary of HUB.
Our Segments
We organize our business into two reporting segments:
(i) Product and Technology Segment - we develop and market integrated cybersecurity hardware/software solutions that allow organizations to protect their RAM or confidential computing data to create a reliable work environment we offer 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.
(ii) Professional Services Segment – we offer 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 unified product development, operations, and administrative resources. The chief operating decision maker (the “CODM”), which is our chief executive officer, evaluates segment operating performance and makes resource allocation decisions based on revenue, cost of revenue and operating profit (loss) from reportable segments.
Key Factors Affecting Our Results of Operations
Retention and Expansion of Customer Base
HUB’s results of operations are driven by its ability to retain customers, increase revenue generated from existing customers and expand its customer base. The retention of customers is a measure of the long-term value of customer agreements and HUB’s ability to establish and maintain deep, long-term relationships with customers. A number of factors drive HUB’s ability to attract and retain customers, particularly large enterprise customers (which HUB defines as customers that represent 10% or more of total revenue), including customers’ satisfaction with HUB’s solutions provided by its technical staff, services and pricing, customers’ technology budgets, and the effectiveness of HUB’s efforts to help its customers realize the benefits of its solutions.
For the year ended December 31, 2024, HUB, annual revenue decreased by 31% from $42.7 million for the year ended December 31, 2023 to $29.6 million for the year ended December 31, 2024.
HUB achieved a gross retention rate of 89% and 90% as of December 31, 2023 and 2024, respectively, for customers who generated over $26.6 million revenues over the trailing 12 months.
HUB’s customer base also represents a potential significant opportunity for further growth and adoption of a larger range of HUB’s solutions and services. HUB also plans to continue investing in growing its large enterprise customers and providing new solutions to increase its market share.
Following the acquisition of Comsec, HUB has established a solid customer base comprised of hundreds of leading enterprises and organizations in Israel and the Netherlands, including several government departments, banks and military branches. HUB is also adopting a two-prong strategy to further build and enhance market acceptance for HUB’s solution. As a first step, HUB’s solutions are marketed to government entities, militaries, research institutions and large enterprises, with the goal of expanding HUB’s penetration into these industries. The second prong of the strategy involves marketing effort that targets OEMs and manufacturers of network components to encourage them to integrate the HUB PCIe card into their hardware, either as an optional add-on or as a standard equipment.
Technologically Advanced Solutions
We developed a unique hardware and software combined solution that provides end-to-end data protection across all phases of data storage and processing. HUB’s solution seeks to enable secure computation and protects data across the entire compute and network stack, with an integrated hardware and software platform that is compatible across computing architectures with any CPU, GPU or field programmable gate arrays. HUB’s confidential computing solution currently exists in three configurations, two of which (HUB Vault and HUB PCIe Card) are available for commercial sale. In addition to technology, HUB also provides advanced professional services that enable clients to assess their vulnerability to a cybersecurity attack as well as to quickly respond should one occur.
Market Trends
HUB believes there will be a transformation in the IT industry over the next decade. HUB anticipates that there will be robust demand for its products as consumers, businesses and governments across all geographies and industries will need to replace the existing traditional data management and network security solutions and that, as a result, there is significant market opportunity for HUB’s more secure data fabric and confidential computing systems.
Impact of Acquisitions
HUB has historically grown through selected acquisitions and, in addition to efforts to grow its confidential computing business organically and through parallel technology like data fabric, expects to continue to pursue potential new acquisitions on a targeted basis in order to expand its technical competencies and to expand its presence in strategic geographies. HUB’s results of operations have been, and are expected to continue to be, affected by such acquisitions.
On September 27, 2021, HUB signed an agreement for the purchase of the entire issued and outstanding share capital of Comsec Ltd. Comsec is a private company that provides cybersecurity consulting, design, testing and control services and sells data security and cybersecurity software and hardware solutions (the “Comsec Acquisition”). The purchase price of this acquisition was NIS 70 million and the transaction was completed on November 17, 2021.
In addition, on February 28, 2021, HUB TLV and ALD signed a merger agreement, pursuant to which HUB TLV became a wholly owned subsidiary of HUB and the shareholders of HUBTLV owned 51% of HUB’s issued and outstanding share capital (the “ALD Merger”). The ALD Merger was completed on June 21, 2021.
In May 2022, the Company entered into an Asset Purchase Agreement with Legacy Technologies Gmbh, or Legacy, a European cyber firm that has an extensive EMEA distribution network of cyber solutions for major government and enterprise data centers. The acquired assets were mainly comprised of customer relationships of Legacy. The asset acquisition was completed on July 5, 2022. As of December 31, 2022, we identified indicators of impairment since no binding purchase orders had been signed nor significant progress had been made on the purchased customer relationships as was expected upon the purchase date. As a result, we determined that the assets acquired should be fully impaired. As such, for the year ended December 31, 2022, the Company recorded an impairment loss of $8,738 for the assets acquired from Legacy.
During the period from the respective date of acquisition to December 31, 2024, 2023 and 2022, ALD and Comsec contributed together $29,562,000, $42,657,000 in revenue and $50,002,000 (neutralizing of $29,741,000 from discontinued operation revenues) (respectively), and $42,652,000, $50,767,000 in net loss and $37,229,000 (neutralizing of $569,000 from discontinued operation net loss) (respectively) to the Company’s results of operations.
The Comsec Acquisition and ALD Merger have been significant drivers of HUB’s growth in revenue and expenses during the years ended December 31, 2022, December 31, 2023 and December 31, 2024. The impact of future acquisitions on HUB’s financial condition and results of operations will depend on HUB’s success in identifying and acquiring target businesses and assets that fulfil these criteria, integrating them into HUB’s business, and realizing the targeted synergies and other expected benefits of the transactions.
On April 3, 2024, HUB acquired for NIS 25,000,000 in cash the shares of Qpoint that it did not yet own at that time, constituting 53.5% of Qpoint’s outstanding shares. Payments were agreed to be carried out in three installments as follows: (i) NIS 4,000,000 on the signing date; (ii) NIS 16,000,000 on the closing date (which was April 8, 2024); and (iii) NIS 5,000,000 no later than February 10, 2025 (of which NIS 2,500,000 was already paid as of June 5, 2024).
This acquisition is strategically aligned with the Company’s mission to establish a leading global secure data fabric ecosystem. QPoint has a diverse customer base of over 100 renowned brand clients, including partnerships with Rafael Advanced Defense Systems, the developer of the “Iron Dome”, the Israel Airport Authority and the Ministry of Defense of Israel.
In November 2023, HUB began to collaborate with BST with the goal to become a significant player in the secured data fabric industry. On January 15, 2025, HUB entered into an Agreement and Plan of Merger with BST, pursuant to which, on January 27, 2025, BST merged with and into a wholly-owned subsidiary of HUB. As a result of the acquisition, HUB issued to BST equityholders 2,965,366 ordinary shares and pre-funded warrants to purchase 664,373 ordinary shares of HUB. 364,972 of the shares issued to the BST equity holders are being held in escrow for a period of 12 months following the closing date to secure certain indemnification obligations. The exercise of the pre-funded warrants is limited to the extent that, upon exercise, the holder and its affiliates would hold more than 4.99% of HUB's outstanding ordinary shares. The ordinary shares issued in the transaction are also subject to transfer restrictions.
With respect to the Comsec acquisition, Comsec is composed of two business activities – distribution and services – both which are in the field of cybersecurity. During 2023, financial difficulties arose in Comsec’s distribution activity, which included, among other things, difficulty in paying off obligations to suppliers in the amount of approximately NIS 26 million ($7 million), and as a result the termination of exclusive distribution licenses, cessation of sales started in July 2023, which resulted in layoffs and departures of employees, so that as of December 31, 2023 there are no employees under this activity.
All of the noted circumstances, among others, led HUB to conduct an assessment for “discontinued operation” per IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, where the conclusion was that Comsec Distribution LTD (part of Comsec) needed to be defined as “discontinued operation”. Therefore, the presentation for the period ended December 31, 2023 as well as the comparable numbers from prior periods, were adjusted to properly reflect that.
Since the distribution activity has been classified and presented as “discontinued operation” per IFRS5, the performance presentation is separate from the ongoing business, which does not have a direct impact on the operating results and cash flow.
With respect to the acquisition of Legacy, HUB recorded an impairment in 2022, which was driven by the fact that revenue was not recognized or that HUB had not acquired new customers from Legacy’s assets. As a result, all of those circumstances led to conclusion where such asset was no longer viable and would not generate economical benefits in future.
With respect to the acquisition of ALD, according to IAS36, regarding impairment, once a year following an acquisition, HUB must perform an impairment test in order to ensure that the net book value of the assets are recoverable. In such assessment, which is based on several paraments, if there is a situation where the enterprise value is lower compared to the carrying amount of the CGU, then the impairment entry must be recorded to reflect such impairment. HUB has used third party evaluation services to thoroughly assess the outcome as of December 31, 2023, where the profit and loss approach has been selected and is based on five parameters, which are depreciation and amortization, capital expenditures, investment in working capital, weighted average cost of capital and sensitivity analysis. The outcome of the analysis has been reflected in HUB’s books. The fact that ALD will not generate the expected cash flow as planned will negatively affect the cash flow of the Company and its subsidiaries (“the Group”). In order to mitigate and address the risk, the Company focuses on two main areas: (1) seek new business opportunities in the overall services arena and (2) explore and evaluate additional capital investments which results in positive cash flow impact.
Continued Innovation
HUB’s success and continued growth are dependent on sustaining innovation in order to deliver a superior product and customer experience, allowing it to maintain a competitive advantage. HUB intends to continue to invest in research and development to maintain solution differentiation and grow the community of large enterprise customers. In the short-term, HUB anticipates making continual investments in upgrading technology to continue providing customers a reliable and effective solution.
As a result, HUB expects research and development expenses to increase on an absolute basis in future periods. HUB foresees that such investment in research and development will contribute to long-term growth but will also negatively impact short-term profitability. For the year ended December 31, 2024, HUB’s research and development expenses as a percentage of revenue were approximately 6.8%.
Continued Investment in Growth
HUB believes the market opportunity is substantial, and, although HUB currently has limited cash resources, it expects to continue to make significant investments across all aspects of the business in the future in order to continue to attract new customers, expand relationships with existing customers, and develop technology to address customers’ evolving needs, thereby prioritizing long-term growth over short-term profitability.
HUB intends to invest in growth in Europe and North America. HUB’s management believes that when combined with risk management, its secured data fabric and confidential computing solution has significant opportunities for growth in Europe and North America, as it provides a cost-effective security solution for enterprises and small and medium-sized businesses.
As a result, HUB expects sales and marketing expenses to increase on an absolute basis in future periods. HUB expects that such investment in sales and marketing will contribute to long-term growth but may negatively impact short-term profitability, as they drive an increase in operating expenses in advance of revenues attributable to such investments, as well as a decrease in free cash flow.
For the year ended December 31, 2024, sales and marketing expenses as a percentage of revenue were approximately 18.5%.
HUB’s Impacts of being a U.S. listed public company
We expect our general and administrative expenses will decrease, as it did in the last two consecutive years, significant amount was recorded due to litigations services provided to the group subjected to the merge transactions and other litigations matters.
Components of our Results of Operations
Revenue
Revenue is primarily generated from rendering professional services, including consulting, planning, training, integrating and servicing our cybersecurity, risk management, system quality, reliability and security projects. Revenue is recognized in the period in which the services are provided.
Cost of Revenue
Cost of revenue primarily consists of salaries and related expenses associated with teams integral in providing HUB’s service, subcontractors and consultant expenses, share-based compensation, as well as depreciation and material costs and amortization of intangible assets.
Research and Development Expenses, net
Research and development expenses include costs incurred in developing, maintaining, and enhancing our products and technology. Additional expenses include costs related to development, consulting, including share-based compensation, travel and other related costs. Part of these expenses are partially offset by government grants received from the Israel Innovation Authority. HUB believes that continuing to invest in research and development efforts is essential to maintaining its competitive position. HUB expects research and development expenses, net from government grants, to increase in the future as it continues to broaden its product portfolio.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of salaries and other related costs including share-based compensation, sales and sales support functions, as well as advertising and promotional personnel. Sales and marketing expenses also include depreciation and amortization and impairment of intangible assets.
General and Administrative Expenses
General and administrative expenses include costs incurred to support and operate our business. These costs primarily include personnel-related salary costs including share-based compensation, professional services related to finance, legal, IT consulting, outsourcing, expenses related to the SPAC Merger and other general overheads.
Additionally, we expect to continue to incur increased expenses associated with being a public company, including costs of additional personnel, accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs, and investor and public relations costs.
Finance Income and Finance Expenses
Finance income and finance expenses primarily consists of revaluation of financial instruments which are measured on fair market value as well as income and expenses associated with fluctuations in foreign exchange rates, interest payable or received and bank fees.
Taxes on Income
Taxes on income consists primarily of income taxes related to the jurisdictions in which HUB conducts business. HUB’s effective tax rate is affected by non-deductible expenses, utilization of tax losses from prior years for which deferred taxes was not recognized, effect on deferred taxes at a rate different from the primary tax rate and differences in previous tax assessments.
Results of Operations
The following table sets forth HUB’s operating results for the years ended December 31, 2024 and 2023. We have derived this data from our consolidated financial statements included elsewhere in this Annual Report. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. The results of historical periods are not necessarily indicative of the results of operations for any future period. The numbers take into consideration the discontinuation of Distribution, a Comsec subsidiary.
| Year ended December 31, |
||||||||||||||||
| 2024 | 2023 | Change | % Change | |||||||||||||
| (In thousands) | (In thousands) | (In thousands) | ||||||||||||||
| Revenue | 29,562 | 42,657 | (13,095 | ) | (30.7 | )% | ||||||||||
| Cost of Revenue | 24,515 | 41,907 | (17,392 | ) | 41.50 | % | ||||||||||
| Gross Profit | 5,047 | 750 | 4,297 | (572.93 | )% | |||||||||||
| Research and development expenses, net | 2,002 | 5,886 | (3,884 | ) | (65.99 | )% | ||||||||||
| Selling and marketing expenses | 5,457 | 10,694 | (5,237 | ) | (48.97 | )% | ||||||||||
| General and administrative expenses | 23,630 | 49,172 | (25,542 | ) | (51.94 | )% | ||||||||||
| Other expenses, net | 181 | 12,723 | (12,542 | ) | (98.58 | )% | ||||||||||
| Operating loss | (26,223 | ) | (77,725 | ) | 51,502 | (66.26 | )% | |||||||||
| Finance income | (2,220 | ) | (484 | ) | (1,736 | ) | 358.6 | % | ||||||||
| Financial expenses | 12,586 | 7,194 | 5,392 | 74.95 | % | |||||||||||
| Loss before taxes on income | (36,589 | ) | (84,435 | ) | 47,461 | (56.10 | )% | |||||||||
| Taxes on income | 557 | 171 | 386 | 225.81 | % | |||||||||||
| Net loss from continuing operation | (37,146 | ) | (84,606 | ) | 47,460 | (56.10 | )% | |||||||||
| Net income (loss) from discontinued operation | (1,885 | ) | (2,030 | ) | 145 | (7.14 | )% | |||||||||
| Total net loss | (39,031 | ) | (86,636 | ) | 47,605 | (54.95 | )% | |||||||||
Comparison of the Years Ended December 31, 2024 and 2023
Revenue
Revenue was $29,562,000 and $42,657,000 for the years ended December 31, 2024 and 2023, respectively, resulting in a decrease of $13,095,000 or 30.7%, for the year ended December 31, 2024 compared to 2023.
The reduction in revenues in aggregate amount of $12,900,000 is attributed to the professional services segment, due to termination of less profitable long term governmental projects with several customers.
The table below sets forth a breakdown of HUB’s revenue by customer location for the years ended December 31, 2024 and 2023.
| Year ended December 31, |
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| 2024 | 2023 | Change | Change % | |||||||||||||
| (In thousands) | (In thousands) | |||||||||||||||
| Israel | 27,808 | 40,364 | (12,556 | ) | (31.11 | )% | ||||||||||
| America | 699 | 334 | 365 | 109.28 | % | |||||||||||
| Europe | 1,055 | 1,669 | (614 | ) | (36.79 | )% | ||||||||||
| Asia Pacific | - | 290 | (290 | ) | (100 | )% | ||||||||||
| Total | $ | 29,562 | $ | 42,657 | (13,095 | ) | (30.7 | )% | ||||||||
Cost of Revenue
Cost of revenue was $24,515,000 and $41,907,000 for the years ended December 31, 2024 and 2023 respectively, resulting in a decrease of $17,285,000 or 41.50% for the year ended December 31, 2024.
The decrease consisted of $17,285,000 in the Professional Services Segment and decrease of $107,000 in the Products and Technology Segment. The decrease is mainly attributed to headcount reduction as well as subcontractors support associated with the governmental projects in aggregate amount of $11,000,000 as well as one off recorded in 2023 for impairment of supplier backlog of $3,800,000.
Gross Profit
Gross profit was $5,047,000 and $750,000 for the years ended December 31, 2024 and 2023, respectively, resulting in an increase of $4,297,000 or 572.93%, for the year ended December 31, 2024, compared to 2023. The increase was mainly attributable to one off recorded in 2023 for impairment of “supplier backlog” intangible asset in an amount of $3,800,000.
Research and Development Expenses, net
Research and development expenses, mainly attributed to the Products and Technology Segment, were $2,002,000 and $5,886,000 for the years ended December 31, 2024 and 2023, respectively, resulting in a decrease of $3,884,000 for the year ended December 31, 2024 compared to the year ended December 31, 2023. The decrease is mainly headcount reduction in an aggregate amount of $4,800,000, which is partially offset by a one off recorded in 2023 due to the government grants in an amount of $1,300,000.
Selling and Marketing Expenses
Selling and marketing expenses were $5,457,000 and $10,694,000 for the years ended December 31, 2024 and 2023, respectively, resulting in a decrease of $5,237,000 or 48.97%. The decrease is attributed to a reduction of $1,490,000 in salaries and related expenses due to a decrease in headcount in HUB’s marketing department and a decrease in an amount of $4,996,000 related mainly to impairment of customer relationships intangible asset from 2023, which is partially offset by an increase in advertising and public relations in an amount of $1,093,000.
General and Administrative Expenses
General and administrative expenses were $23,630,000 and $49,172,000 for the years ended December 31, 2024 and 2023, respectively, resulting in a decrease of $25,542,000 or 51.94%. The decrease is mainly attributed to the following: Payroll G&A decrease by $1,900,000 mainly due to a headcount decrease, consulting expenses decreased by $12,250,000, impairment expenses decreased by $10,071,000.
Other Expenses
Other expenses were $181,000 and $12,723,000 for the years ended December 31, 2024 and 2023, respectively, resulting in a decrease of $12,542,000, or 98.58%, which was mainly attributed to SPAC’s associated merger expenses recorded in 2023 in aggregate amount approximately $12,311,000.
Finance Income and Finance Expenses
Financial expenses were $12,586,000 and $7,194,000 for the years ended December 31, 2024 and 2023, respectively, and finance income was $2,220,000 and $484,000 for the years ended December 31, 2024 and 2023, respectively, resulting in a net increase of $3,656,000 of finance expenses. The increase is primarily attributed to convertible components measurement, warrants measurement and interest expenses recorded in 2024 compared to 2023.
Taxes on Income
Taxes on income were $557,000 and $171,000 for the years ended December 31, 2024 and 2023, respectively.
Key Performance Indicators and Non-IFRS Financial Metrics
HUB monitors the key business metrics set forth below to help it evaluate its business and growth trends, establish budgets, measure the effectiveness of its sales and marketing efforts, and assess operational efficiencies. The calculation of the key metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts or investors.
Key Performance Indicators
The following table summarizes the key performance indicators that HUB uses to evaluate its business for the periods presented.
| Year ended December 31 |
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| 2024 | 2023 | Change | % Change | |||||||||||||
| (in thousands) | ||||||||||||||||
| Revenue | ||||||||||||||||
| Products and Technology Segment (1) | 1,039 | 1,068 | (29 | ) | (2.72 | )% | ||||||||||
| Professional Services Segment (2) | 28,523 | 41,589 | (13,066 | ) | (31.42 | )% | ||||||||||
| Total | $ | 29,562 | $ | 42,657 | (13,095 | ) | (30.7 | )% | ||||||||
| (1) | The Products and Technology Segment 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. |
| (2) | The Professional Services Segment 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 full managed corporate cybersecurity services. In addition, this segment also includes distribution and marketing of security products procured from the manufacturers of information security products to sub-distributors (integrators) who market them to end users. |
| Year ended December 31 |
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| 2024 | 2023 | Change | % Change | |||||||||||||
| (in thousands) | ||||||||||||||||
| Segment results (operating loss) | ||||||||||||||||
| Products and Technology Segment | (9,137 | ) | (30,690 | ) | 21,553 | (70.23 | )% | |||||||||
| Professional Services Segment | (17,086 | ) | (33,153 | ) | 16,067 | (48.46 | )% | |||||||||
| Unallocated* | - | (13,882 | ) | 13,882 | 100 | % | ||||||||||
| Total | $ | (26,223 | ) | $ | (77,725 | ) | 51,502 | (66.26 | )% | |||||||
| * | In 2023, the expenses related to the SPAC merger and ELOC. |
Non-IFRS Financial Metrics
In addition to HUB’s results determined in accordance with IFRS, HUB’s management believes that the following non-IFRS financial measures are useful in evaluating HUB’s operating performance.
Adjusted EBITDA
HUB defines Adjusted EBITDA as net loss as adjusted for income taxes, finance income, finance expenses, depreciation and amortization, impairments, share-based compensation expense, SPAC transaction cost and other one-time costs. Adjusted EBITDA is included in this Annual Report because it is a key metric used by management and HUB’s board of directors to assess its financial performance. Adjusted EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in HUB’s industry. Management believes that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate directly to the performance of the underlying business.
Adjusted EBITDA is not an IFRS measure of HUB’s financial performance or liquidity and should not be considered as alternatives to net income or loss as a measure of financial performance, as alternatives to cash flows from operations as a measure of liquidity, or as alternatives to any other performance measure derived in accordance with IFRS. Adjusted EBITDA should not be construed as an inference that HUB’s future results will be unaffected by unusual or other items. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect HUB’s tax payments and certain other cash costs that may recur in the future, including, among other things, cash requirements for costs to replace assets being depreciated and amortized.
Management compensates for these limitations by relying on HUB’s IFRS results in addition to using Adjusted EBITDA as a supplemental measure. HUB’s measure of Adjusted EBITDA is not necessarily comparable to similarly titled captions of other companies due to different methods of calculation.
| Year ended December 31, |
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| 2024 | 2023 | Change | % Change | |||||||||||||
| (In thousands) | ||||||||||||||||
| Net loss from continuing operation | $ | (37,146 | ) | $ | (84,606 | ) | 47,460 | (56.1 | )% | |||||||
| Adjusted EBITDA | $ | (18,912 | ) | $ | (12,165 | ) | (6,747 | ) | (55.46 | )% | ||||||
Adjusted EBITDA decreased in the year ended December 31, 2024 primarily as a result of the significant growth in the Company’s operations cost across all of our business (see below analysis).
| Year ended December 31, |
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| 2024 | 2023 | Change | % Change | |||||||||||||
| (In thousands) | ||||||||||||||||
| Net loss | $ | (37,146 | ) | $ | (84,606 | ) | 47,460 | (56.1 | )% | |||||||
| Finance income(1) | (2,220 | ) | (484 | ) | (1, 736 | ) | 358.6 | % | ||||||||
| Finance expenses(1) | 12,586 | 7,194 | 5,392 | 74.95 | % | |||||||||||
| Taxes on income | 557 | 171 | 386 | 226 | % | |||||||||||
| Depreciation and amortization(2) | 2,379 | 7,637 | (5,258 | ) | (68.85 | )% | ||||||||||
| Share-based compensation expense(3) | 2,070 | 7,115 | (5,045 | ) | (71 | )% | ||||||||||
| Transaction costs | - | 4,943 | (4,943 | ) | (100 | )% | ||||||||||
| One time cost(4) | 2,209 | 30,607 | (26,774 | ) | (87 | )% | ||||||||||
| Impairment of Goodwill and intangibles(5) | 653 | 15,258 | (14,605 | ) | (95.72 | )% | ||||||||||
| Adjusted EBITDA | $ | (18,912 | ) | $ | (12,165 | ) | (6,747 | ) | $ | (55.46 | )% | |||||
| 1. | Represents mainly finance expenses, net, which were recorded on to convertible loans & warrants issued during 2023 and 2024 |
| 2. | Represents the amortization of the intangible assets as well as recurring depreciation of company’s fixed assets |
| 3. | Represents non-cash share-based compensation expenses |
| 4. | In 2023 we have recorded $7.6 million on convertible loans, $12.3 million of merger expenses, OPCO commission of $7.6 million, ELOC facility costs $1.58 million, special audit fees of $1.6 million while in 2024 we have recorded non-recurring consultancy fees. |
| 5. | Represents technology goodwill and impairment of intangibles |
B. Liquidity and Capital Resources
Since inception, HUB has incurred losses and generated negative cash flows from operations and has funded its operations, research and development, capital expenditure and working capital requirements through revenue received from customers, bank loans and other debt facilities and government grants, as well as equity contributions from shareholders.
HUB expects its capital expenditures and working capital requirements to increase in the near future, as it seeks to produce confidential computing products and continue its research and development efforts. As of December 31, 2024, HUB’s cash and cash equivalents were about $3,085,000. The Company intends to finance operating costs over the next twelve months through a combination of future issuances of equity and/or debt securities, reducing operating spend, and potentially divesting assets.
Our future capital requirements will depend on many factors, including, but not limited to our growth, market acceptance of our offerings, the timing and extent of spending to support our efforts to develop our platform, and the expansion of sales and marketing activities. We are required to seek additional equity or debt financing. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we issue additional equity securities to raise additional funds, further dilution to existing shareholders may occur. However, we cannot predict with certainty the outcome of our actions to generate liquidity, including the availability of additional financing. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.
As a result of liquidity and cash flow concerns that have arisen resulting from our business operations, together with the Internal Investigation, we face significant uncertainty regarding the adequacy of our liquidity and capital resources and our ability to repay our obligations as they become due. We are generating negative cash flow, requiring constant and immediate cash injections to continue to operate, and are failing to meet obligations as they become due, including financial, suppliers debts and other ordinary course of operations costs. In addition, and as a result of our ongoing operating losses, we had outstanding liabilities that could not be met by our revenues, including payments due to our debt holders, vendors and service providers, and since May 2024, we have been unable to make required deposits in employee pension and severance funds or to pay required withholding taxes on employee compensation payments. Certain of our subsidiaries also did not make timely tax filings with the ITA for several years.
In November 2024, we reached a settlement agreement with the unsecured creditors of Comsec, subject to which we will pay NIS 1,800,000 spread over 36 months.
In February 2025, we reached a settlement agreement with Oppenheimer & Co., Inc. (“Oppenheimer”) for $3 million, with $1.1 million being paid on the effective date and the remaining balance payable in ten monthly payments of $200,000 from March to December 2025 (with the first payment being $100,000). As part of the settlement arrangement, Claymore Capital Pty Ltd. (“Claymore”) agreed to make on the Company’s behalf, all the payments that the Company is required to make under the settlement agreement with Oppenheimer. In consideration, the Company issued Claymore a convertible note in the principal amount of $6 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 18, 2030, subject to earlier conversion by Claymore.
In February 2025, we also reached a settlement agreement with Dominion Capital LLC and its affiliates (together, “Dominion”) for $4.5 million, with $400,000 being payable by February 21, 2025, $200,000 payable by March 3, 2025 and the remaining balance payable in ten monthly payments of $390,000 from March to December 2025. As part of the settlement arrangement, Claymore agreed to make on the Company’s behalf all the payments that the Company is required to make under the settlement agreement with Dominion. In consideration, the Company issued Claymore a convertible note in the principal amount of $7.5 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 20, 2030, subject to earlier conversion by Claymore.
The significant uncertainty regarding our liquidity and capital resources and our ability to repay our obligations as they become due, provides substantial doubt about our ability to continue as a going concern for the next twelve months from the date of issuance of this Annual Report. The Company’s management is closely monitoring the situation and has been attempting to alleviate the liquidity and capital resources concerns through workforce reductions, interim financing facilities and other capital raising efforts.
Following the filing of this Annual Report, we expect to be able to obtain additional sources of debt and equity financing, together with additional revenues from new business opportunities and has engaged with potential investors with regards to such financing alternatives. However, such opportunities remain uncertain and are predicated upon events and circumstances which are outside our control. The inability to borrow or raise sufficient funds on commercially reasonable terms, would have serious consequences to our financial condition and results of operations.
Our ability to continue as a going concern is contingent upon, among other factors, the sale of ordinary shares to obtain additional funding to support our operations and/or obtaining alternate financing. Management currently believes that it will be necessary for us to secure additional funds to continue our existing business operations and to fund our obligations. We have raised and will continue to seek to raise additional funds during 2025 through a variety of equity and/or debt financing arrangements; however, there can be no assurance that we will be able to obtain funds on commercially acceptable terms, if at all. If we cannot generate sufficient revenues, reduce cost and/or secure additional financing on acceptable terms, we may be required to, among other things, alter our business strategy, significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.
Additionally, we signed subscription agreements for the purchase of $50 million of our ordinary shares to be offered in a private placement in connection with the closing of the Business Combination Agreement (the “PIPE Investors”). However, upon the closing of the Business Combination Agreement, we did not receive the funds related to the private placement. Negotiation with the PIPE investors resulted in closing on $4 million to date. The investors never explained their breach of the subscription agreements. While we are considering possible alternatives in order to pursue the majority of the remaining funds committed as a part of the PIPE investment from the investors, it is uncertain that we will be able to receive the remaining PIPE funds.
Please see the Financings section below for more details on our recent efforts to fund operating activities.
Material Cash Requirements
The table below summarizes certain material cash requirements as of the year ended December 31, 2024 that will affect the HUB’s future liquidity. HUB plans to utilize its liquidity and its cash flows from business operations including investments to fund its material cash requirements.
| 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | ||||||||||||||||||||||
| Total (in thousands) | ||||||||||||||||||||||||||||
| Loans from bank | 7,177 | - | - | - | - | - | 7,177 | |||||||||||||||||||||
| Loans from others | 6,357 | - | - | - | - | 6,357 | ||||||||||||||||||||||
| Lease liabilities | 956 | 741 | 408 | 82 | - | - | 2,187 | |||||||||||||||||||||
| Liabilities for government grants | 270 | 33 | 30 | 27 | 25 | 102 | 487 | |||||||||||||||||||||
| Total | $ | 14,760 | $ | 774 | $ | 438 | $ | 109 | $ | 25 | $ | 102 | $ | 16,208 | ||||||||||||||
Cash Flows Summary
The following table shows a summary of HUB’s cash flows for the years ended December 31, 2024 and 2023.
| Year ended December 31, | ||||||||||||||||
| 2024 | 2023 | Change | % Change | |||||||||||||
| (In thousands) | ||||||||||||||||
| Net cash provided by / (used in): | ||||||||||||||||
| Net cash used in operating activities | $ | (17,110 | ) | $ | (16,202 | ) | (908 | ) | (5.6 | )% | ||||||
| Net cash provided by / (used in) investing activities | (452 | ) | 2,136 | (2,588 | ) | (121.16 | )% | |||||||||
| Net cash provided by financing activities | 17,176 | 12,927 | 4,249 | 32.88 | % | |||||||||||
| Exchange rate differences on cash and cash equivalents | (51 | ) | 667 | (718 | ) | (107.80 | )% | |||||||||
| Net (decrease) in cash and cash equivalents | $ | (437 | ) | $ | (472 | ) | $ | 35 | (7.41 | )% | ||||||
Cash Flows Used in Operating Activities
Net cash used in operating activities was $17,110,000 for the year ended December 31, 2024, reflecting a net loss of $39,031,000 and a non-cash adjustments of $16,615,000 which primarily consists of Finance expenses related to convertible loans and warrants in an aggregate amount of $7,227,000 Issuance of shares in an amount of $2,420,000, share-based compensation expenses in total amount of $2,070,000, intangible assets and goodwill impairment in an amount of $653,000 and depreciation and amortization in an amount of $2,379,000. In addition, changes in asset and liability items in 2024 were $8,810,000 which was primarily affected by an increase in other accounts payable in the amount of $7,776,000.
Net cash used in operating activities was $16,202,000 for the year ended December 31, 2023, reflecting a net loss of $86,636,000 and a non-cash adjustments of $57,489,000, which primarily consists of share-based payment in an amount of $7,115,000, intangible assets impairment in an amount of $15,258,000 transaction costs related to the SPAC merger in an amount of $12,312,000 and depreciation and amortization in an amount of $7,637,000. In addition, changes in asset and liability items in 2023 were $14,044,000, which was primarily affected by a decrease in trade receivables in the amount of $13,242,000.
Cash Flows Used in Investing Activities
Net cash used in investing activities was ($452,000) for the year ended December 31, 2024, compared with $2,136,000 for the year ended December 31, 2023, resulting in a decrease of $2,588,000. The decrease was primarily attributed to the amounts transferred to BlackSwan subjected to the “collaboration agreement” between the companies, in an amount of $1,615,000 and a decrease due to a withdrawal from restricted bank deposit in an amount of $1,363,000.
Cash Flows Provided by Financing Activities
Cash flows provided by financing activities primarily relate to proceeds from issuance of shares, short-term credits from banks and government grants, which have been used to fund working capital and for general corporate purposes.
Net cash provided by financing activities was $17,176,000 for the year ended December 31, 2024, compared with $12,927,000 for the year ended December 31, 2023, resulting in an increase of $4,249,000. The increase was primarily due to an increase in Receipt of short-term loans in an amount of $4,588,000.
HUB Mizrahi Loans
On July 6, 2020, Comsec Distribution Ltd. entered into a credit agreement (the “Comsec Distribution Term Loan”) with Bank Mizrahi. The Comsec Distribution Term Loan provided for an NIS 5 million (approximately $1.4 million) term loan maturing on June 20, 2026. The principal amount of the Comsec Distribution Term Loan is repaid in monthly installments with the final payment aligning with the maturity date. As of December 31, 2024 the remaining principal amount on the Comsec Distribution Term Loan was $627,000.
On September 1, 2021, Comsec Ltd. entered into a credit agreement (the “Comsec Ltd. Term Loan”) with Bank Mizrahi. The Comsec Ltd. Term Loan provides for an NIS 6 million (approximately $1.7 million) term loan maturing on September 10, 2024. The principal amount of the Comsec Ltd. Term Loan is repaid in quarterly installments with the final payment aligning with the maturity date. The Comsec Ltd. Term Loan bears annual interest of Prime (Bank of Israel intrabank) + 1.95%. As of December 31, 2024 the remaining principal amount is $877,000.
Additionally, in September 2021, Comsec Ltd. received a loan from Bank Mizrahi with an original principal amount of NIS 980,000 (approximately $278,000). The loan bears interest annually at Prime (Bank of Israel intrabank) + 1.5%. As of December 31, 2024 the remaining principal amount on the Comsec Ltd. Term Loan was $153,000.
On November 16, 2021, HUB entered into a settlement agreement with Bank Mizrahi (“Mizrahi Settlement”) after HUB failed to comply with a pre-existing financial covenant which required positive EBITDA. The Mizrahi Settlement governs the Mizrahi Loans and requires that (i) the combined principal of the Mizrahi Loans divided by HUB’s EBITDA will not exceed 3.5, (ii) HUB accounts receivable divided by the Mizrahi Revolver will exceed 1.20, (iii) HUB will deposit with Bank Mizrahi HUB Shares with a gross value of NIS 9.35 million as of November 16, 2021 to serve as collateral for the Mizrahi Loans and (iv) HUB will deposit NIS 10 million with Bank Mizrahi to serve as collateral for the Mizrahi Loans.
In July 2023, Bank Mizrahi agreed to waive existing defaults and suspend enforcement of the annual EBITDA financial covenant for 2022. In September 2023, Bank Mizrahi collected an amount of NIS 2.3 million from the NIS 10 million deposit which served as collateral for the Mizrahi Loans and in November 2023, Bank Mizrahi collected the remaining NIS 7.7 million balance of the NIS 10 million collateral deposit.
On December 19, 2024, HUB signed a settlement agreement with Bank Mizrahi to restructure $6.1 million of HUB’s secured debt with Bank Mizrahi. The settlement agreement represents over 60% of HUB’s secured debt, through its wholly-owned subsidiary Comsec Ltd., and reflects the Company’s commitment to address key financial obligations in its ongoing efforts to settle or extend most of its outstanding debt to achieve financial stability and confidence in its growth trajectory.
Under the settlement agreement, payments are deferred until June 2025, aligning with HUB’s expected free cash flow generation. This milestone enhances liquidity and enables the Company to focus on scaling operations and delivering shareholder value.
Qpoint Loans
On May 1, 2023, Qpoint Technologies Ltd., an Israeli company (“Qpoint”) received a loan from the First International Bank of Israel Ltd. (“FIBI”), with an original principal amount of NIS 1,700,000 ($469,000) and repayable in 12 installments beginning in June 2023. The loan was bearing interest of Prime + 1.1%. As of December 31, 2024, the loan has been fully repaid.
On September 28, 2023, we completed a non-recourse loan transaction pursuant to a loan agreement (the “Qpoint Loan Agreement”) with Qpoint, of which we held 46.52% of the outstanding shares and the effective control until our acquisition of all of the outstanding shares of Qpoint not otherwise held by us in March, 2024 (the “Qpoint Acquisition”). Pursuant to the Qpoint Loan Agreement, (i) Qpoint agreed to lend us an amount equal to NIS 3.5 million (approximately $900,000) and to extend the date by which we are required to pay Qpoint an amount equal to NIS 6.5 million (approximately $1.7 million) in outstanding obligations, from August 15, 2023 to February 28, 2024 (the “Repayment Date”) and (ii) the Company agreed to pay Qpoint a loan installation fee of NIS 300,000 (approximately $80,000) (the “Qpoint Loan”).
The Qpoint Loan bears interest at an annual rate of 11% until paid in full, provided that in the event the payments under the Qpoint Loan as set forth in the Loan Agreement are not timely made, the Loan will bear interest at an annual rate of 15% until paid in full.
Pursuant to the Qpoint Loan Agreement, the parties also agreed that for a period of nine months following the date of repayment of the Qpoint Loan, the parties will not take any action in furtherance of the (i) appointment of a new chief executive officer in Qpoint, (ii) distribution of dividends by Qpoint, (iii) receipt of credit or investments by Qpoint, or (iv) issuance or pledge of shares by Qpoint or its subsidiaries. The Qpoint Loan was secured by the shares held by HUB in various Qpoint entities.
In April 2024, in connection with HUB’s acquisition of the outstanding shares of the Qpoint entities that it did not own at that time, HUB repaid the Qpoint Loan in full.
On May 1, 2024, Qpoint received a loan from FIBI, with an original principal amount of NIS 1,200,000 ($321,000) and repayable in 12 installments beginning in June 2024. The loan is bearing interest of 7.10%. As of December 31, 2024, the remaining principal amount is $240,000.
During 2024, Qpoint received On-call loans from FIBI, in an aggregate principal amount of NIS 6,300,000 ($1,703,000). The loan is bearing interest of Prime + 1.1%. As of December 31, 2024, the remaining principal amount is $521,000.
Aginix Loans
On May 1, 2023, Aginix Engineering and Project Management Ltd., a wholly owned subsidiary of Qpoint, received a loan from Bank Hapoalim Ltd. (“Bank Hapoalim”), with an original principal amount of NIS 1,000,000 ($267,000) and repayable in 12 installments from June 2023. The loan bearing interest of 7.25%. As of December 31, 2024, the loan has been fully repaid.
On July 19, 2024, Aginix received a loan from Bank Hapoalim, with an original principal amount of NIS 1,200 thousand ($334 thousand) and repayable in 12 installments beginning in August 2024. The loan is bearing interest of 7%. As of December 31, 2024, the remaining principal amount is $195,000.
On December 31, 2024, Aginix received a loan from Bank Hapoalim, with an original principal amount of NIS 500,000 ($137,000) and repayable in 12 installments beginning in January 2025. The loan is bearing interest of 6.5%. As of December 31, 2024, the remaining principal amount is $137,000.
Financings
March 2025 Notes
On March 27, 2025, the Company completed the issuance of a series of notes (the “March 2025 Notes”) to certain investors, including Keystone Capital Partners, LLC as the lead investor (“Keystone” and collectively with the other investors, the “March 2025 Note Investors”), in an aggregate principal amount of $1,625,000 and original issue discount of $325,000, for an aggregate purchase price of $1,300,000. The March 2025 Notes mature on December 11, 2025, do not bear interest, and include a prepayment option at a premium of 125%. In addition, the Company is required to use the cash proceeds deriving from a financing in which it receives proceeds of at least $10 million to repay the March 2025 Notes.
The March 2025 Note Investors have the right to convert the principal amount into ordinary shares of the Company upon the occurrence of a subsequent equity financing pursuant to which the Company receives at least $5 million, subject to certain conditions.
The conversion of the March 2025 Notes will be limited to the extent that, upon their conversion, a March 2025 Note Investor and its affiliates would in aggregate beneficially own more than 4.99% of the Company’s outstanding share capital at any time.
ELOC Transaction
Concurrently with the investment by the March 2025 Note Investors described above, the Company entered into an Ordinary Shares Purchase Agreement (the “ELOC Purchase Agreement”) with Keystone, pursuant to which the Company has the right to sell to Keystone up to an aggregate of $50 million of newly issued ordinary shares (the “ELOC Shares”).
As consideration for Keystone’s commitment to purchase ELOC Shares upon the terms of and subject to satisfaction of the conditions set forth in the ELOC Purchase Agreement, the Company agreed to issue to Keystone a note in a principal amount of $1,000,000, does not bear interest, and has a maturity date of December 11, 2025 (the “Commitment Note”). The Commitment Note is due by way of conversion into the Company’s shares based on the closing share price of the Company’s shares on the date immediately prior to the maturity date, provided that in each case the applicable conversion price shall not be lower than twenty percent (20%) of the closing sale price of the Company’s shares on the issuance date of the Commitment Note. The Commitment Note can be converted prior to the maturity date by either the Company or Keystone at any time following the earlier of (i) the date on which the shares issuable upon conversion are registered under a registration statement filed with the Securities and Exchange Commission (the “SEC”) or (ii) September 11, 2025. In the event of a conversion prior to the maturity date, the number of Company shares to be issued upon the conversion of the Commitment Note will be based on the closing share price on the day prior to the issuance of the conversion notice provided that the closing sale price on the day prior to the issuance of the conversion notice is not lower than 10% as compared to the closing sale price on the date immediately prior thereto. The conversion of the Commitment Note will be limited to the extent that, upon its conversion, Keystone and its affiliates would in aggregate beneficially own more than 4.99% of the Company’s outstanding share capital at any time.
In addition, in connection with the ELOC Purchase Agreement, the Company and Keystone entered into a Registration Rights Agreement pursuant to which the Company undertook to register with the SEC the shares issuable upon conversion of the Conversion Note and the ELOC Shares that the Company has the right to sell to Keystone.
The Company does not have a right to commence any sales of ELOC Shares to Keystone under the ELOC Purchase Agreement before a registration statement of such shares is declared effective by the SEC and the final form of prospectus is filed with the SEC (the “Commencement Date”). Following such date, the Company will control the timing and amount of any sales of ELOC Shares to Keystone. Actual sales of shares of ELOC Shares to Keystone under the ELOC Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the ELOC Shares and determinations by the Company as to the appropriate sources of funding for the Company and its operations. The Company is obligated to use 33% proceeds from the sale of ELOC Shares to repay the principal amount under the March 2025 Notes.
Under the ELOC Purchase Agreement, on any business day on which the closing sale price of the Company’s shares is equal to or greater than $0.05 (the “Fixed Purchase Date”), the Company may direct Keystone to purchase shares (a “Fixed Purchase”) at a purchase price equal to 95% of the lesser of (i) the daily volume-weighted average price (the “VWAP”) of the Company’s shares for the five (5) trading days immediately preceding the applicable fixed purchase date and (ii) the lowest sale price on the applicable Fixed Purchase Date, provided, that Keystone’s committed obligation under any single Fixed Purchase shall not exceed $50,000.
In addition to Fixed Purchases, on any business day on which the Company has directed Keystone to purchase the maximum allowable Fixed Purchase amount, the Company may also direct Keystone to purchase additional shares on the trading day immediately following the purchase date for such Fixed Purchase (the “VWAP Purchase Date” and such purchase, a “VWAP Purchase”) at a purchase price equal to 90% of the lesser of (i) the closing sale price of the Company’s shares on the applicable VWAP Purchase Date and (ii) the VWAP during the period on the applicable VWAP Purchase Date beginning at the opening of trading and ending on the earlier of (1) close of trading, (2) the time at which the trading volume of the Company’s shares on Nasdaq has reached the number of shares to be sold in the VWAP Purchase divided by 30%, and (3) the time at which the sale price of the Company’s shares on Nasdaq is 75% of the closing sale price on the date on which the Company directs Keystone to make a VWAP Purchase (such period, the “VWAP Purchase Period”), provided, that Keystone’s committed obligation under any single VWAP Purchase shall not exceed the lesser of (a) 300% of the number of shares sold in the corresponding Fixed Purchase and (b) 30% of the trading volume of the VWAP Purchase Period.
In addition, on a VWAP Purchase Date, the Company may also direct Keystone to purchase on such day, an additional number of shares (an “Additional VWAP Purchase”) at a purchase price equal to 90% of the lesser of (i) the VWAP beginning at the completion of any prior VWAP Purchases and the last Additional VWAP Purchase, as applicable, and ending on the earlier of (1) close of trading, (2) the time at which the trading volume of the Company’s shares on Nasdaq has reached the number of shares to be sold in the Additional VWAP Purchase divided by 30%, and (3) the time at which the sale price of the Company’s shares on Nasdaq is 75% of the closing sale price on the date on which the Company directs Keystone to make an Additional VWAP Purchase (such period, the “Additional VWAP Purchase Period”), and (ii) the lowest sale price on such day, provided, that Keystone’s committed obligation under any single Additional VWAP Purchase shall not exceed the lesser of (a) 300% of the number of shares sold in the Fixed Purchase that corresponded to the VWAP Purchase corresponding to the Additional VWAP Purchase and (b) 30% of the trading volume of the Additional VWAP Purchase Period.
Keystone’s aggregate committed obligation under a VWAP Purchase and all Additional VWAP Purchases for a particular VWAP Purchase Date shall not exceed $1,000,000 in the aggregate.
The ELOC Purchase Agreement provides that the Company may not issue or sell any shares under the ELOC Purchase Agreement if the issuance or sale of such shares would result in Keystone and its affiliates beneficially owning more than 4.99% of the Company’s outstanding share capital at any time.
Julestar Financing Transaction
In February 2025, the Company entered into a Loan Agreement with Julestar LLC, a New York limited liability company (“Julestar”), pursuant to which Julestar agreed to loan us $2,650,000 in consideration for a promissory note in the principal amount of $3,117,647 (the “Julestar Note”). The principal amount, and interest thereon, is required to be repaid in 40 weekly installments over the 10-month term of the loan. The Julestar Note will accrue interest at a rate of 10% per annum. To secure the repayment of the Julestar Note, the Company undertook to grant a subordinated pledge over the shares of certain of its subsidiaries, subject to the consent of a senior lender within 60 days. As of the date hereof, the Company did not make any payments.
The Loan Agreement also provides for the issuance of five-year warrants to purchase 530,000 Ordinary Shares (the “Julestar Warrants”), subject to downward adjustment in the number of underlying shares in the event of early repayment of the Julestar Note in full or upward adjustment in the event the Julestar Note is not repaid in full within 90 days of the issuance date, as detailed below. The exercise price of the Julestar Warrants is $5.00 per share, subject to adjustment in certain circumstances, including dilutive issuances. The Julestar Warrants are subject to a limitation that prohibits ownership of more than 4.99% of Company’s outstanding share capital at any time.
The Company undertook to register with the Securities and Exchange Commission on a Form F-1 or Form F-3 the shares issuable upon the exercise of the Julestar Warrants.
The net proceeds of the amount we raise in any single subsequent financing or asset sale outside the ordinary course of business of more than $5.0 million, or multiple subsequent financings or asset sales outside the ordinary course of business of more than $7.0 million in the aggregate, will be required to be used to prepay the Julestar Note in full. We are entitled to prepay a minimum of $100,000 of the Julestar Note at any time, with no prepayment penalties, with declining incentives for early prepayment consisting of a decrease in the principal amount and a decrease in the number of shares issuable under the Julestar Warrants. If the Julestar Note is not repaid in full within 90 days, the number of shares issuable under the Julestar Warrants will increase and the exercise price of the additional shares could be set lower, to half the lowest 10-day average market price during the period, subject to a floor price.
As a result of the issuance of the Julestar Warrants, the exercise price of the warrant to purchase 129,411 ordinary shares issued in an earlier financing transaction on December 30, 2024 automatically decreased from $8.50 to $5.00 per share.
While we are currently in default of certain terms under the Loan Agreement with Julestar, we are in discussions with Julestar to restructure our obligations thereunder.
J.J. Astor Financing
In December 2024, the Company entered into a Loan Agreement with J.J. Astor & Co. (“Astor”) pursuant to which Astor agreed to loan us $2,200,000 in consideration for a promissory note in the principal amount of $2,750,000 (the “December 2024 Convertible Note”). After fees and expenses, the net proceeds of the loan are expected to be $2,087,000. The December 2024 Convertible Note is payable in 40 weekly installments of $68,750 each in cash or registered ordinary shares, at our election. The December 2024 Convertible Note will not accrue interest (unless there is an event of default). As of the date hereof, the Company has paid an aggregated amount of $840,000.
The Company is entitled to prepay the December 2024 Convertible Note at any time, with declining discounts for prepayment within 30, 60 or 90 days. Upon an event of default, the outstanding principal amount will increase to 110% of the outstanding principal amount, plus interest thereon at the rate of 16% per annum. The December 2024 Convertible Note will be convertible by Astor following an event of default.
The conversion price of the December 2024 Convertible Note is 80% of the average of the four lowest VWAP prices for the 20 trading days prior to conversion but not lower than the 20% of the average of the four lowest VWAP prices for the 20 trading days prior to the closing date. To the extent that the conversion price is lower than such minimum price, the Company will be required to pay a make-whole payment.
One-half of the net proceeds of the amount the Company raises in any subsequent equity financing of less than $5 million will be required to be used to prepay the December 2024 Convertible Note, and all of larger equity financings will be required to be used to prepay the December 2024 Convertible Note.
The Company agreed to issue to Astor a five-year warrant to purchase 129,411 ordinary shares at an exercise price of $8.50 per share (the “December 2024 Warrant”), subject to adjust in certain circumstances, including dilutive issuances. The Company undertook to register the shares issuable upon conversion of the December 2024 Convertible Note and upon exercise of December 2024 Warrant on our registration statement on Form F-1. If there is no such registration statement in effect, the holder of the December 2024 Warrant will be entitled to exercise on a cashless basis. On January 13, 2025, Astor assigned the December 2024 Warrant to Wolverine Flagship Fund Trading Limited, which now holds the rights under the December 2024 Warrant.
The Company could be required to pay liquidated damages of up to 10% of the principal amount of the Note if the Company does not satisfy our obligations under the registration rights agreement on a timely basis. The December 2024 Convertible Note and December 2024 Warrant are subject to a limitation that prohibits ownership of more than 4.99% our outstanding share capital at any time.
Each of the Company’s subsidiaries agreed to guarantee the December 2024 Convertible Note and the Company and each of its subsidiaries agreed to grant a subordinated pledge over its assets to secure the December 2024 Convertible Note, each to become effective following an event of default and receipt of consent from our senior lenders. Failure to obtain such consents will be deemed an event of default under the December 2024 Convertible Note.
While we are currently in default of certain terms under the Loan Agreement with Astor, we are in discussions with Astor to restructure our obligations thereunder.
Claymore Capital Financings
In August 2024, we entered into Securities Purchase Agreements with multiple private investors to raise gross proceeds of approximately $3.3 million in exchange for the issuance of convertible notes (the “August 2024 Notes”) with an aggregate principal amount of approximately $4.0 million and warrants to acquire an aggregate of approximately 470,000 ordinary shares of the Company. The August 2024 Notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price equal to $5.00. The August 2024 Warrants are exercisable for a period of three years at an exercise price of $7.143 per share. Claymore Capital PTY Ltd. (“Claymore”) served as the placement agent for this transaction and received a fee of approximately $233,000 in cash and a warrant to purchase approximately 110,000 ordinary shares of the Company on terms substantially similar to the terms of the August 2024 Warrants. The Company entered into a consulting agreement with the placement agent for an initial period of three months, during which the placement agent will be paid a fee of $15,000 per month.
In August 2024, Claymore agreed to extend a loan to the Company in the amount of $500,000 with interest at the rate of 10% of the principal amount until it was subsequently repaid in August 2024. In November 2024, Claymore agreed to extend a loan of an additional $200,000 with interest at the cumulative rate of 20% of the principal amount until it was subsequently repaid in December 2024. In November 2024, Claymore agreed to extend a loan of an additional $500,000 at the cumulative rate of 45% of the principal amount until it was subsequently repaid in February 2025.
In November and December 2024, Claymore and investors introduced by Claymore made follow-on investments on the terms of the August 2024 financing in the aggregate amount of $1,150,000 in exchange for convertible notes with an aggregate principal amount of $1,391,500 and warrants to purchase an aggregate of 164,285 ordinary shares. The convertible notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price of $5.00. The warrants to purchase an aggregate of 164,285 ordinary shares are exercisable for a period of three years at an exercise price of $7.143 per share. Claymore’s placement fees for the foregoing follow-on investments amounted to $80,500 in cash, 115,000 ordinary shares and a warrant to purchase 38,333 ordinary shares on the same terms of the investors’ warrants. The Company extended the consulting agreement with the placement agent for a period of 12 months, during which the placement agent will be paid a fee of $15,000 per month.
In December 2024, Claymore and investors introduced by Claymore loaned us an aggregate of $1,262,500 in exchange for notes with an aggregate principal amount of $1,402,778 and warrants to purchase an aggregate of 126,250 ordinary shares. The notes are unsecured, and do not accrue interest. However, in the event that the note has not been repaid by the maturity date, interest will accrue at a rate of 5% per month. The notes are repayable at the earlier of (i) the six-month anniversary of the issuance of the note or (ii) five business days following the closing of a financing of at least $10,000,000 or the sale of our Qpoint subsidiary. If the notes are not repaid by the maturity date, they will be convertible at a conversion price of $5.00. The notes provide that if the notes are not repaid by March 31, 2025, the holders thereof will be entitled to receive collateral to secure the notes. The warrants to purchase an aggregate of 126,250 ordinary shares are exercisable for a period of three years at an exercise price of $5.00 per share. Claymore’s placement fees for the foregoing loan amounted to $88,375 in cash, and a warrant to purchase 126,250 ordinary shares on the same terms of the investors’ warrants.
In January and February 2025, Claymore and investors introduced by Claymore made follow-on investments on the terms of the August 2024 financing in the aggregate amount of $1,467,000 in exchange for convertible notes with an aggregate principal amount of $1,775,070 and warrants to purchase an aggregate of 209,571 ordinary shares. The convertible notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price of $5.00. The warrants to purchase an aggregate of 209,571 ordinary shares are exercisable for a period of three years at an exercise price of $7.143 per share. Claymore’s placement fees for the foregoing follow-on investments amounted to $102,690 in cash, 146,700 ordinary shares and a warrant to purchase 48,900 ordinary shares on the same terms of the investors’ warrants.
In February 2025, Claymore agreed to extend a loan to the Company in the amount of $255,000 with interest at the rate of 19% of the principal amount and a maturity date of April 18, 2025. Claymore received pre-funded warrants to purchase 12,500 ordinary shares as fees for the foregoing loan. Claymore agreed to extend the repayment of the loan until May 18, 2025, in exchange for an additional pre-funded warrant to purchase 25,000 ordinary shares.
In March 2025, Claymore investors agreed to extend a loan to the Company with a principal amount of $200,000 and a face value of $300,000 until it was subsequently repaid in March 2025. Claymore received pre-funded warrant to purchase 15,000 ordinary shares as fees for the foregoing loan.
In April 2025, Claymore made follow-on investments on the terms of the August 2024 financing in the aggregate amount of $928,000 in exchange for convertible notes with an aggregate principal amount of $1,122,880 and warrants to purchase an aggregate of 132,572 ordinary shares. The convertible notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price of $7.00, subject to adjustment in certain circumstances, including dilutive issuances, but no lower than $5.00. The warrants to purchase an aggregate of 132,572 ordinary shares are exercisable for a period of three years at an exercise price of $10.00 per share. In the event that the conversion price of the note is reduced, the exercise price of the warrant will be reduced proportionately. Claymore’s placement fees for the foregoing follow-on investments amounted to $64,960 in cash, pre-funded warrant to purchase 335,600 ordinary shares and a warrant to purchase 92,800 ordinary shares on the same terms of the investors’ warrants. The Company extended the consulting agreement with the placement agent for an additional period of 12 months, until October 31, 2026, during which the placement agent will be paid a fee of $20,000 per month.
The conversion of the notes and warrants issued in the foregoing financings are limited to the extent that, upon conversion or exercise, the holder and its affiliates would in the aggregate beneficially own more than 4.99% of the Company’s outstanding ordinary shares. The Company has undertaken to register the resale of the ordinary shares underlying such notes and warrants on a registration statement with the Securities and Exchange Commission.
March-November 2024 Financing and Restructure
In March-November 2024, we sold to an accredited investor (the “March-November 2024 Investor”), in a series of unregistered private transaction, notes (the “March-November 2024 Notes”) with an aggregate principal amount of $11,000,000, and warrants (the “March-November 2024 Warrants”) pursuant to a Securities Purchase Agreement entered into with the March-November 2024 Investor (the “March-November 2024 Purchase Agreement”). Our acquisition of QPoint’s shares that were not held by us to complete ownership of 100% of QPoint shares was partially funded by proceeds we received pursuant to the March-November 2024 Purchase Agreement.
The loan amount under the March-November 2024 Notes was repayable by the Company on (a) November 29, 2024 with respect to $1,000,000 of the principal amount and (b) with respect to the remaining $10,000,000, the earlier of (i) August 10, 2024 with respect to $4,000,000 of the principal amount and September 24, 2024 with respect to $6,000,000 of the principal amount, or (ii) five (5) business days following the closing of a financing in the Company of at least $25,000,000. The principal amount under the March-November 2024 Notes carries a variable interest rate based on the date of repayment as follows: (a) with respect to $8,000,000 of the principal amount, (i) for the principal amount repaid on or prior to May 12, 2024, 7%, (ii) for the principal amount repaid following May 12, 2024 and on or prior to June 12, 2024, a rate between 7% and 8.5% of such principal amount computed by adding to 7% the result obtained by multiplying 1.5 by the quotient of the number of days elapsed in such period until (and including) the repayment date divided by the number of days in such period, and (iii) for the principal amount repaid following June 12, 2024, 8.5% of such principal amount plus 15% per annum, on the basis of the actual number of days elapsed commencing from the date following June 12, 2024 and ending on the repayment date; (b) with respect to $2,000,000 of the principal amount, (i) for the principal amount repaid on or prior to September 24, 2024, 10%, and (ii) for the principal amount repaid following September 24, 2024, 10% of such principal amount plus 15% per annum, on the basis of the actual number of days elapsed commencing from the date following September 24, 2024 and ending on the repayment date; and (c) with respect to $2,000,000 of the principal amount, (i) for the principal amount repaid on or prior to November 29, 2024, 8.5% of such principal amount, and (ii) for the principal amount repaid following November 29, 2024, 8.5% of such principal amount plus 15% per annum, on the basis of the actual number of days elapsed commencing from the date following November 29, 2024 and ending on the repayment date.
If the March-November 2024 Notes are not repaid prior to the applicable maturity date, the March- November 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 (5) trading days prior to the date of conversion, provided that such conversion rate shall not be lower than $5.00. 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- November 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-November 2024 Warrants issued under the March-November 2024 Purchase Agreement were exercisable as follows: (i) March-November 2024 Warrants exercisable into 444,444 ordinary shares were exercisable at an exercise price equal to $7.00 per share until March 12, 2027, (ii) March-November 2024 Warrants exercisable into 400,000 ordinary shares were exercisable at an exercise price equal to $7.00 per share until April 3, 2027, (iii) March-November 2024 Warrants were exercisable into 100,000 ordinary shares are exercisable at an exercise price equal to $5.00 per share until June 26, 2027, (iv) March-November 2024 Warrants were exercisable into 200,000 ordinary shares are exercisable at an exercise price equal to $7.00 per share until June 26, 2027, and (v) March-November 2024 Warrants were exercisable into 150,000 ordinary shares are exercisable at an exercise price equal to $5.50 per share until June 26, 2027.
The conversion of the March-November 2024 Notes and the exercise of the March-November 2024 Warrants will be limited to the extent that, upon the conversion or exercise, the March-November 2024 Investor and its affiliates would in aggregate beneficially own more than 4.99% of the ordinary shares.
On February 17, 2025, HUB and the March-November 2024 Investor agreed to amend the terms of the March-November 2024 Notes and the March-November 2024 Warrants. Pursuant to the amended terms, the maturity date of each of the March-November 2024 Notes, having an aggregate principal amount of $11 million (plus accrued interest), was extended to August 16, 2025. Additionally, per the amendment terms, in the event the notes are not paid or converted in full by April 1, 2025, from and after April 1, 2025, the current interest rate of the notes will increase from 15% per annum to 20% per annum.
Pursuant to the amendment, the exercise price of each of the March-November 2024 Warrants was changed to a unified exercise price of NIS 17.77 (being the NIS equivalent of $5.00 per share based on the last published exchange rate published by the Bank of Israel on the date of the amendment) and the term of the March-November 2024 Warrants was extended to a unified end date of February 17, 2030. The Company also issued to the March-November 2024 Investor an additional warrant exercisable into 205,555 ordinary shares at an exercise price of $5.00 per share and a pre-funded warrant exercisable into 1,000,000 ordinary shares, in each case until February 17, 2030, and in each, the exercise of the new warrants will be limited to the extent that, upon the exercise of the new warrants, the March-November 2024 Investor would not beneficially own more than 4.99% of our outstanding ordinary shares.
Additionally, pursuant to the amended terms, the March-November 2024 Investor agreed to sell all or a signification portion of the notes to a third party who will convert the notes and attempt to sell the resulting conversion shares. The March-November 2024 Investor agreed by no later than April 2, 2025, to inform the Company in writing of the amount of proceeds the March-November 2024 Investor irrevocably received from the sale of such conversion shares by the third party, in which case the Company shall be deemed to have repaid the principal and accrued interest under the converted notes in the amount equal to the sale proceeds. In the event that the sale proceeds are lower than the aggregate principal and accrued interest under the converted notes thereon, the Company agreed to issue to the March-November 2024 Investor a convertible note in the principal amount equal to such shortfall amount (and if the sale proceeds (and any repayments from the Company) are less than $6.5 million, also the interest that would have accrued on the converted notes in accordance with their terms had they not been converted). The new note would have an interest rate of 20% per annum, commencing retroactively from the date of conversion of the converted notes, and a maturity date of August 16, 2025, and otherwise the same terms and conditions as the converted notes. In the event that, at April 2, 2025, the March-November 2024 Investor holds unsold conversion shares, then warrants held by the March-November 2024 Investor will be exercised for an equivalent number of ordinary shares pursuant to the terms thereof and such conversion shares will be deemed to be issued pursuant to such exercise in lieu of the issuance of new ordinary shares.
2023-2024 Investment by Accredited Investors
Between November 2023 and January 2024, the Company entered into Securities Purchase Agreements (the “First 2023-2024 Accredited Investor SPAs”) providing for the sale by the Company to certain accredited investors (the “First 2023-2024 Accredited Investors”), in unregistered private transactions, of convertible notes with an aggregate principal amount of $3,100,000 (the “First 2023-2024 Accredited Investor Notes”), and warrants exercisable into one ordinary share for each ordinary share issuable to the Investors upon the conversion of the principal amount of the First 2023-2024 Accredited Investor Notes, assuming conversion on the respective issuance dates of the Notes (the “First 2023-2024 Accredited Investor Warrants”).
The aggregate principal amount of the First 2023-2024 Accredited Investor Notes was convertible into our ordinary shares at a rate of the lower of (i) $25.00 and (ii) the product of 75% multiplied by the arithmetic average of the volume-weighted average price of the ordinary shares in the five (5) trading days prior to the date of conversion, provided that such conversion rate would not be lower than $15.00. The First 2023-2024 Accredited Investor Notes did not bear interest and were repayable on the three-month anniversary of their issuance, subject to earlier conversion by the First 2023-2024 Accredited Investors. The First 2023-2024 Accredited Investors had the right to convert the First 2023-2024 Accredited Investors Convertible Notes, in whole or in part, at any time following their issuance.
The First 2023-2024 Accredited Investor Notes were subsequently fully converted by the First 2023-2024 Accredited Investors.
In February 2025, the Company and the First 2023-2024 Accreditor Investors agreed to amend the terms of the First 2023-2024 Accredited Investor SPAs and the First 2023-2024 Accredited Investor Warrants. Pursuant to the amended terms, the exercise price of each of the First 2023-2024 Accredited Investor Warrants was changed to a unified exercise price of $10.00 per share and the Company issued to the First 2023-2024 Accreditor Investors additional warrants exercisable into 173,881 ordinary shares at an exercise price of $10.00 per share and 142,020 ordinary shares.
Second 2023-2024 Accredited Investor Financing Transaction
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” and together with the First 2023-2024 Accreditor Investors, the “2023-2024 Accreditor Investors”), in unregistered private transactions, of convertible notes with an aggregate principal amount of $550,000 (the “Second 2023-2024 Accredited Investor Notes”), and warrants exercisable into between 0.50 and one ordinary share for each ordinary share issuable to the Investors upon the conversion of the principal amount of the Second 2023-2024 Accredited Investor Notes, assuming conversion on the respective issuance dates of the Notes (the “Second 2023-2024 Accredited Investor Warrants”).
The aggregate principal amount of the Second 2023-2024 Accredited Investor Notes is convertible into our ordinary shares at a rate equal to the arithmetic average of the volume-weighted average price of the ordinary shares in the five (5) trading days prior to the date of conversion, provided that such conversion rate would not be lower than $15.00. The Second 2023-2024 Accredited Investor Notes do not bear interest and are repayable on March 14, 2027, subject to earlier conversion by the Second 2023-2024 Accredited Investors. The Second 2023-2024 Accredited Investors have the right to convert the Second 2023-2024 Accredited Investors Convertible Notes, in whole or in part, at any time following their issuance.
Pursuant to the First 2023-2024 Accredited Investor SPAs, we have issued First 2023-2024 Accredited Investor Warrants which are exercisable into 167,959 ordinary shares. The First 2023-2024 Accredited Investor Warrants are exercisable until January 1, 2027 for an exercise price equal to the closing price of the ordinary shares as of the respective issuance dates of the First 2023-2024 Accredited Investor Warrants and have a weighted average exercise price of $23.30. Pursuant to the Second 2023-2024 Accredited Investor SPAs, we have issued Second 2023-2024 Accredited Investor Warrants which are exercisable into 20,000 ordinary shares. The Second 2023-2024 Accredited Investor Warrants are exercisable until September 14, 2025 for an exercise price of $15.00. The exercise of the 2023-2024 Accredited Investor Warrants will be limited to the extent that, upon their exercise, a 2023-2024 Accredited Investor and its affiliates would in the aggregate beneficially own more than 4.99% of our ordinary shares.
In February 2025, HUB and the First 2023-2024 Accreditor Investors agreed to amend the terms of the First 2023-2024 Accredited Investor SPAs and the First 2023-2024 Accredited Investor Warrants. Pursuant to the amended terms, the exercise price of each of the First 2023-2024 Accredited Investor Warrants was changed to a unified exercise price of $10.00 per share and the Company also issued an additional warrant exercisable into 173,881 ordinary shares at an exercise price of $10.00 per share. In addition, the Company issued 142,020 ordinary shares to the First 2023-2024 Accreditor Investors.
In addition, in February 2025, HUB and the Second 2023-2024 Accredited Investors agreed to amend the terms of the Second 2023-2024 Accredited Investor SPAs, the Second 2023-2024 Accredited Investor Notes and the Second 2023-2024 Accredited Investor Warrants. Pursuant to the amended terms, the exercise price of each of the First 2023-2024 Accredited Investor Warrants was changed to a unified exercise price of $11.50 per share the Company issued to the Second 2023-2024 Accreditor Investors additional warrants exercisable into 173,881 ordinary shares at an exercise price of $10.00 per share,, and the conversion price of each of the Second 2023-2024 Accredited Investor Notes was changed to a unified conversion price of $11.42 per share.
The Second 2023-2024 Accredited Investors were subsequently fully converted by the Second 2023-2024 Accredited Investors.
Shayna Loans
On each of February 23, 2023, June 11, 2023 and July 7, 2023, we entered into Convertible Loan Agreements (together the “Shayna Loan Agreements”) with Shayna LP, a Cayman Islands company (“Shayna”), in the amounts of NIS 10 million (approximately $2.8 million), NIS 5 million (approximately $1.4 million) and NIS 1.85 million (approximately $500,000) respectively (each a “Shayna Loan and, together, the “Shayna Loans”). The Shayna Loans were subsequently amended in 2024 pursuant to a series of agreements with Shayna and Akina Holding Limited (“Akina”), which assigned most of Shayna’s rights to Akina and established new conversion and warrant terms. All original interest, conversion, and warrant provisions under the Shayna Loan Agreements were superseded by the 2024 amendments.
The Shayna Loans were amended in March–May 2024 through a series of agreements with Shayna and Akina. On March 31, 2024, the Company entered into the first amendment with Shayna and Akina, pursuant to which Shayna and Akina are entitled to convert the Shayna Loans into a total of 512,937 ordinary shares, based on an agreed USD/NIS exchange rate of NIS 3.65 and a conversion price of $9.00 per share. Under this amendment, Akina will receive 389,745 ordinary shares, while Shayna will receive 123,192 ordinary shares. Additionally, warrants have been issued for the purchase of the same number of ordinary shares at an exercise price of $9.00 per share, with Akina entitled to 389,745 ordinary shares and Shayna entitled to 123,192 ordinary shares. Furthermore, a customary clause limits the beneficial ownership of both Shayna and Akina to 4.99% of the Company’s outstanding ordinary shares.
On April 18, 2024, the Company entered into the second amendment with Shayna and Akina, pursuant to which if Akina defaults on its payment installments to Shayna, Shayna will have the right to assume all of Akina’s conversion rights under the Shayna Loan Agreements. Upon receiving written notice of such default from Shayna, the Company is required to allocate the outstanding Shayna Loan amounts to Shayna, provided that no judicial injunction is issued within seven days. This allocation will take place upon receipt of a written conversion notice from Shayna.
On May 9, 2024, the Company entered into the third amendment with Shayna and Akina, pursuant to which a cash payment of $1,150,800 for Shayna’s consulting services under the Convertible Loan Agreements was converted into 127,866 ordinary shares of the Company, calculated at a price of $9.00 per share. Additionally, Shayna was issued a warrant to purchase 127,866 ordinary shares of the Company at an exercise price of $8.00 per share, with an exercise period of six months.
As of the date of this Annual Report, Akina has converted the loan under the Convertible Loan Agreements into our ordinary shares, pursuant to which conversions we have issued 512,937 ordinary shares and exercised the warrant and purchased 448,230 ordinary shares of the Company at an exercise price of $9.00. In addition, Shayna exercised the warrant and purchased 127,866 ordinary shares of the Company at an exercise price of $8.00.
In addition, on January 26, 2025, BST, Shayna and Akina entered into a settlement agreement and general release, pursuant to which all outstanding obligations and claims under the Shayna Loan Agreements, as amended, were fully released and discharged. As a result of the settlement agreement, no further claims, demands, or obligations remain outstanding among the parties with respect to these agreements.
Lind Financing
On May 4, 2023, we entered into a Securities Purchase Agreement (the “Lind SPA”) with Lind Global Asset Management VI LLC, an investment fund managed by The Lind Partners, a New York based institutional fund manager (together, “Lind”). Pursuant to the Lind SPA, the Company agreed to issue to Lind up to two (2) secured convertible promissory notes in three tranches (the “Lind Notes” and each a “Lind Note”) for gross proceeds of up to $16,000,000 and warrants (the “Lind Warrants” and each a “Lind Warrant”) to purchase the Company’s ordinary shares (the “Transaction”).
The closings of the Transaction (the “Closings and each a “Closing”) occurred in tranches (each a “Tranche”): the Closing of the first Tranche (the “First Closing”) occurred on May 8, 2023 and consisted of the issuance and sale to Lind of a Lind Note with a purchase price of $6,000,000 a principal amount of $7,200,000 and the issuance to Lind of Lind Warrants to acquire 245,821 ordinary shares. The purchase price for the initial Lind Note consisted of two separate funding amounts. At the closing the initial funding amount of $4,500,000 was received by the Company and the funding of the remaining $1,500,000 (the “Second Funding Amount”) was expected to occur within two (2) Business Days following the filing by the Company of its Annual Report on Form 20-F for the year ended December 31, 2022, under the original conditions of the Lind SPA (see details regarding amendments to the Lind SPA below). The terms of the Lind SPA and related instruments were amended on multiple occasions to reflect changes to funding amounts, warrant coverage, and pricing.
On August 24, 2023, we and Lind entered into an amendment (the “August 2023 Lind Amendment”) to the Lind SPA, the Lind Note and the Lind Warrants pursuant to which we agreed to amend the definition of “First Funding Amount” in the Lind SPA such that Lind would fund us with $1 million, less the Commitment Fee, immediately upon execution of the August 2023 Lind Amendment. In addition, Lind agreed to provide us with an additional $500,000, less the Commitment Fee, within five (5) business days following our providing written confirmation to Lind that we have filed the Registration Statement to register the ordinary shares issuable upon conversion of the Lind Note and the ordinary shares issuable upon the exercise of the Lind Warrants and that there is no ongoing Event of Default or that no event of default will occur as a result of such additional funding.
As consideration for the amendments to the First Funding Amount in the August 2023 Lind Amendment, we agreed to amend the Lind Note and increase the principal amount of the Lind Note from $7.2 million to $9 million. Additionally, we agreed to amend the conversion price of the Lind Note to $4.50. Further, as consideration for the August 2023 Lind Amendment, we agreed to amend the Lind Warrants and issue to Lind additional warrants to purchase 254,179 of our ordinary shares bringing the total amount of shares that can be purchased under the Lind Warrant to 500,000 ordinary shares. We also agreed to amend the exercise price of the Lind Warrant to $4.50 per ordinary share.
In connection with the additional $1 million funding pursuant to the August 2023 Lind Amendment, we agreed issue to Lind a new warrant to purchase 250,000 ordinary shares with an exercise price of $4.50 per ordinary share and under the same terms and conditions as the Lind Warrant. Finally, in the event that the Registration Statement is filed and we receive the additional $500,000 funding amount, we agreed to issue to Lind a new warrant to purchase a number of ordinary shares equal to $500,000 divided by the closing price of our ordinary shares on the date prior to the filing of the Registration Statement, at an exercise price equal to 1.25 multiplied by the average of the daily volume weighted average prices during the five (5) trading days prior to the filing of the Registration Statement, and under the same terms and conditions as the Lind Warrant.
On November 28, 2023, we and Lind entered into an additional amendment (the “November 2023 Lind Amendment”) to the Lind SPA, the Lind Note and the Lind Warrants pursuant to which we agreed to further amend the definition of “First Funding Amount” in the Lind SPA such that Lind would fund us with an additional $500,000 in cash immediately upon execution of the November 2023 Lind Amendment. Pursuant to the November 2023 Lind Amendment. We also agreed to amend the definitions of “Second Funding Amount” and “Second Principal Amount” in the Lind SPA to decrease such amount from $10.0 million to $9.5 million and from $12.0 million to $11.4 million, respectively.
As consideration for the amendment to the First Funding Amount in the November 2023 Lind Amendment, we agreed to amend the Lind Note and increase the principal amount of the Lind Note from $9.0 million to $9.6 million. Additionally, we agreed to amend the conversion price of the Lind Note from $4.50 to $3.50. Further, as consideration for the November 2023 Lind Amendment, we agreed to amend the Lind Warrants and issue to Lind additional warrants to purchase 142,857 of our ordinary shares, bringing the total amount of shares that can be purchased under the Lind Warrants to 892,857 ordinary shares. We also agreed to amend the exercise price of the Lind Warrant from $4.50 per ordinary share to $3.50 per ordinary share. Following a price adjustment provisions and anti-dilution protections in the Lind Warrants, the number of shares that can be purchased under the Lind Warrants have been adjusted to 624,999 ordinary shares at $5.00.
As of the date of this Annual Report, Lind has converted the principal amount of $9.6 million of the Lind Note into our ordinary shares, pursuant to which conversions we have issued 927,119 ordinary shares. Lind has also exercised Lind Warrants using the cashless exercise formula to purchase 360,268 ordinary shares at an exercise price of $4.00. Only a small number of Lind Warrants remain outstanding.
Dominion Equity Line of Credit
On March 28, 2023 (the “Effective Date”), we and Dominion Capital LLC and its affiliates (together, “Dominion”) entered into an Equity Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company, may, but is not required to, issue up to $100,000,000 of the Company’s ordinary shares to Dominion over the course of 36 months from the Effective Date.
As consideration for Dominion’s purchase commitment, the Company issued to Dominion 100,000 (10,000 post the reverse splits) of its ordinary shares on the Effective Date (the “Commitment Shares”). The Commitment Shares were issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof and Dominion has agreed not to sell or transfer the Commitment Shares for a period of six (6) months following the Effective Date. Dominion had previously claimed that it has advanced to the Company $2.5 million as an upfront commitment under the Purchase Agreement (the “ELOC Upfront Commitment”) upon closing of the Business Combination. Upon a draw-down of the equity line by the Company, 50% of such draw down must be used to first repay the ELOC Upfront Commitment. The Company never filed an F-1 to register this ELOC.
The Purchase Agreement contains certain registration rights, pursuant to which the Company agreed to file a registration statement within 45 days of the Effective Date to register the Commitment Shares and other ordinary shares to be issued to Dominion pursuant to the Purchase Agreement (the “Dominion Registration Statement”).
Following the Effective Date, subject to certain conditions (including the effectiveness of the Dominion Registration Statement), the Company has the right, but not the obligation, on any business day selected by the Company (the “Purchase Date”), to notify Dominion (an “Advance Notice”) and require Dominion to purchase an amount of ordinary shares equal to the lesser of: (i) an amount equal to fifteen percent (15)% of the aggregate Daily Traded Volume of Ordinary Shares on the Nasdaq Global Market for the ten (10) Trading Days immediately preceding such notice date and (ii) $5,000,000. The purchase price for regular purchases (the “Purchase Price”) shall be equal to 96% of the average daily volume weighted average price of the Company’s ordinary shares during the five days prior to submission of an Advance Notice. Advance Notices must be received by the Dominion by 8:30 a.m. EST on a Trading Day. Advance Notices can be submitted no more than once per any given calendar week. However, subject to the satisfaction of the conditions under the Purchase Agreement, the Company may deliver Advance Notices from time to time, provided that it delivered all shares relating to all prior Advance Notices. The Parties may mutually agree to increase the number of ordinary shares sold to Dominion pursuant to an Advance Notice.
The Purchase Price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse share split or other similar transaction occurring during the business days used to compute the Purchase Price.
The Purchase Agreement contains customary representations, warranties, covenants, closing conditions, indemnification and termination provisions. Sales under the Purchase Agreement may commence only after certain conditions have been satisfied, which conditions include the effectiveness of the Dominion Registration Statement covering the ordinary shares issued or to be sold by the Company to Dominion under the Purchase Agreement, the filing with the Nasdaq Stock Market of a Listing of Additional Shares notification with respect to the shares and Nasdaq having raised no objection to the consummation of transactions contemplated under the Purchase Agreement, and the receipt by Dominion of a customary opinion of counsel and other certificates and closing documents.
The Purchase Agreement may be terminated by the Company at any time, at its sole discretion, without any cost or penalty, by giving five trading days’ notice to Dominion to terminate the Purchase Agreement provided that (i) there are no outstanding Advance Notices, the Ordinary Shares under which have yet to be issued, and (ii) the Company has paid all amounts owed to Dominion pursuant to the Agreement, including the Up-Front Advance. Dominion has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the ordinary shares of the Company.
Except as set forth herein, there are no limitations on the use of proceeds, financial or business covenants, restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Company may deliver Advance Notices under the Purchase Agreement, subject to market conditions, and in light of its capital needs, from time to time and under the limitations contained in the Purchase Agreement. Any proceeds that the Company receives under the Purchase Agreement are expected to be used for working capital and general corporate purposes.
Secured Promissory Note
In connection with the ELOC, the Company and Dominion entered into a senior secured demand promissory note (the “Secured Promissory Note”) to evidence the Company’s obligation to repay the ELOC Upfront Commitment. The Secured Promissory Note will bear interest at a rate of 10% per annum and is due on demand.
Dominion alleged that the Company was in default under the Secured Promissory Note due to its alleged failure to provide security to Dominion under the Secured Promissory Note. Dominion has demanded payment in full of the ELOC Upfront Commitment.
In February 2025, we reached a settlement agreement with Dominion for $4.5 million, with $400,000 being payable by February 21, 2025, $200,000 payable by March 3, 2025 and the remaining balance payable in ten monthly payments of $390,000 from March to December 2025. As part of the settlement arrangement, Claymore agreed to make on the Company’s behalf all the payments that the Company is required to make under the settlement agreement with Dominion. In consideration, the Company issued Claymore a convertible note in the principal amount of $7.5 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 20, 2030, subject to earlier conversion by Claymore.
Convertible Notes
Upon the closing of the Business Combination, agreement the Company entered into two convertible notes agreements (collectively, the “Convertible Notes Agreements”) with A.G.P./Alliance Global Partners (“AGP”), the representative of the underwriters in RNER’s IPO and a stockholder of RNER, and another vendor involved in the Business Combination (the “Vendor”). Pursuant to the Convertible Notes Agreements, AGP purchased convertible notes of and from the Company in an aggregate principal amount of $5,219,319 and the Vendor purchased convertible notes of and from the Company in an aggregate principal amount of $349,319 (each, a “Convertible Notes”). Each Convertible Notes will bear interest at a rate of 6% per annum, has a maturity date of March 1, 2024 and will be convertible for Company Ordinary Shares at AGP’s or the Vendor’s option, as applicable, at any time prior to the respective Convertible Notes being paid in full. The proceeds from the Convertible Notes Agreements were used to pay expenses in connection with the closing of the Business Combination agreement. The loan from AGP was neither paid nor converted.
AGP alleged that the Company was in default under the Convertible Notes Agreements, having failed to make the required payments thereunder, and the parties are in a commercial dispute. 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 approximately $5.2 million and provides for interest at the rate of 6% per year and default interest at the rate of $18% per year. 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 approximately $5.7 million.
The Company and AGP entered into an amended and restated note dated as of November 22, 2024 (the “Amended Note”), which contemplates the AGP will convert $250,000 of the principal amount in each of seven 30-day periods, up to an aggregate amount of $1.8 million (but the first conversion can be in the amount of $320,000 and final conversion $230,000). Upon each conversion, one-seventh of the excess debt above $1.8 million will be cancelled. Upon conversion of the full $1.8 million, the Amended Note will be extinguished. If an aggregate amount of $1.8 million is not converted by May 30, 2025, the terms of the Original Note will again apply, unless otherwise agreed by the parties. The Amended Note contains a conversion price equal to 93% of the prevailing market price, subject to a $4.00 floor. The floor price may be adjusted downward after three months if the market price falls below the floor price and does not subsequently increase above the floor price.
A-Labs Loan
On January 16, 2023, we entered into a loan agreement with A-Labs Finance and Advisory Ltd. (“A-Labs”), pursuant to which A-Labs agreed to issue us a $1,000,000 principal amount note for gross proceeds of $900,000 (the “A-Labs Loan”). The principal amount A-Labs Loan is due to be repaid in one repayment on January 16, 2026 (the Maturity Date”) (36 months from the execution of the A-Labs Loan). The A-Labs Loan bears interest at 12% per annum and interest became payable quarterly commencing on April 1, 2023 until the Maturity Date. Overdue payments will accrue interest in arrears at the rate of 18% per annum from the relevant payment date until such payment is made.
In order to secure the repayment under the A-Labs Loan, we committed to apply to the within two (2) business days from receipt of the A-Labs Loan, to register a floating lien in favor of A-Labs on certain of our assets.
A-Labs currently claims that we are in default under the A-Labs Loan, having failed to make the required quarterly interest payments thereunder or timely provide a lien on our assets in favor of A-Labs with the Registrar of Companies. We are currently in discussions with A-Labs as to solutions to cure the claimed defaults and anticipate curing the defaults following the filing of this Annual Report.
BST Loan
We entered into a Loan and Security Agreement with Blackswan Technologies, Inc., a Delaware corporation (“BST”), with an effective date of December 4, 2023 (the “BST Loan Agreement”). Under the BST Loan Agreement, we may make, at our sole discretion, cash advances to BST, from time to time, until June 30, 2024, in an aggregate principal amount of up to $6,000,000.
The principal amounts we lend to BST under the BST Loan Agreement accrue interest at a fixed rate per annum equal to fifteen percent (15%) and are repayable on January 1, 2025, provided that BST has the right to prepay the any outstanding loan amounts upon at least two days prior notice. Upon the occurrence of certain customary events of default, any outstanding loan amounts are immediately repayable and overdue obligation will carry interest at a fixed rate per annum equal to eighteen percent (18%).
As a continuing security for the full and punctual payment and performance when due (whether at stated maturity, acceleration or otherwise) of BST’s obligations under the BST Loan Agreement, each of BST and its subsidiary, Blackswan Technologies Gmbh, a German company (“BST Germany”), granted us a first ranking fixed charge and pledge in all of the rights and interests of BST, BST Germany and their subsidiaries (i) under any agreements entered into by any of them following the effective date of the BST Loan Agreement and any rights to receive proceeds thereunder and (ii) in any Intellectual Property.
As of the date of this Annual Report, we made cash advances in an aggregate amount of $2.662 million to BST under the BST Loan Agreement.
On January 27, 2025, BST became our wholly owned subsidiary. As a result, the loan is now an intercompany balance. While the original repayment terms remain in place, the arrangement no longer affects our consolidated liquidity position in the same way as an external loan would.
Debt Arrangement with Comsec Creditors
On March 24, 2024, we entered into a debt settlement agreement (the “Debt Settlement Agreement”) with certain creditors of Comsec. Comsec’s total liabilities are equal to approximately NIS 55.0 million (approximately $14.8 million) divided between different groups of creditors with different priorities, which is covered by a guarantee by us of up to NIS 50.0 million (approximately $13.4 million). Pursuant to the Debt Settlement Agreement, we agreed with one of Comsec’s creditors to pay NIS 13.656 million (approximately $3.7 million) in accordance with the following payment schedule:
| (i) | NIS 5.0 million (approximately $1.3 million) to be paid no later than April 7, 2024 | |
| (ii) | NIS 4.328 million (approximately $1.2 million) to be paid no later than paid May 15, 2024 | |
| (iii) | NIS 4,328 million (approximately $1.2 million) to be paid no later than July 15, 2024 |
As of the date of this Annual Report, all of the outstanding debt was paid in full.
Debt Arrangement with BST Creditors
As part of our ongoing efforts to strengthen our financial position and maintain operational stability, we have begun addressing BST’s outstanding financial obligations. We have initiated payments to financial creditors, including those associated with the BST debt, and are committed to settling these liabilities in a timely and responsible manner.
In parallel, we are actively engaging with our operational vendors to renegotiate payment terms. With several key vendors, we have already reached mutually agreed arrangements, including installment-based payment plans that allow us to manage cash flows more effectively while maintaining strong supplier relationships.
These actions reflect our proactive approach to liability management and working capital optimization. We believe that resolving these obligations and improving our payment terms will support the Company’s long-term sustainability, protect strategic partnerships, and enhance our overall liquidity position.
Quantitative and Qualitative Disclosures of Market Risk
HUB is highly exposed to market risk in the ordinary course of business given its dependency on share issuances for financing transactions. Market risk represents the risk of loss that may impact HUB’s financial position due to adverse changes in financial market prices and rates. HUB’s market risk exposure is primarily a result of foreign currency exchange rates and interest rates, which are discussed in detail below.
Foreign Currency Exchange Rate Risk
Though HUB operates internationally, its operations are primarily located in Israel and the majority of its expenses are denominated in New Israeli Shekels, or NIS. HUB is subject to fluctuations in foreign currency rates in connection with these arrangements.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
HUB’s exposure to the risk of changes in market interest rates relates primarily to HUB’s long-term liabilities with floating interest. This risk is of primary focus to HUB given its current dependency on debt financing and the ability to obtain future debt financing. HUB manages its interest rate risk by seeking to have a balanced portfolio of fixed and variable rate loans.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. HUB qualifies as an “emerging growth company” under the JOBS Act.
HUB is in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” HUB chooses to rely on such exemptions it may not be required to, among other things, (i) provide an auditor’s attestation report on its system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the Business Combination or until HUB is no longer an “emerging growth company,” whichever is earlier.
C. Research and Development, Patents and Licenses, Etc.
For a discussion of our research and development policies, see “Item 4.B” above and the “Key Information —Risk Factors —Risks Related To Our Incorporation and Operations In Israel” in Item 3.D above.
For a description of our intellectual property, please see “Item 4.B” above under “—Intellectual Property.
D. Trend Information
Other than as described in Item 3.D. “Key Information —Risk Factors” and in Item 5.A. “Operating and Financial Review” of this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our results of operations or financial condition, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial condition.
E. Critical Accounting Estimates
We describe our significant accounting policies and estimates in Note 3 to our annual financial statements for the year ended December 31, 2024. We believe that these accounting policies and estimates are critical in order to fully understand and evaluate our financial condition and results of operations.
We prepare our financial statements in accordance with IFRS as issued by the IASB.
The preparation of financial statements in conformity with IFRS requires management to make accounting estimates and assessments that involve use of judgment and that affect the amounts of assets and liabilities presented in the financial statements, the disclosure of contingent assets and liabilities at the dates of the financial statements, the amounts of revenues and expenses during the reporting periods and the accounting policies adopted by the Company. Actual results could differ from those estimates.
Recent Accounting Pronouncements
See Note 4 within HUB’s audited consolidated financial statements for the years ended December 31, 2024 and 2023 included in this Annual Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report.
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
Management and Board of Directors
The following table sets forth the name, age and position of each of our executive officers and directors as of April 28, 2025:
| Name | Age | Position | ||
| Executive Officers | ||||
| Noah Hershcoviz | 42 | Chief Executive Officer and Director | ||
| Lior Davidsohn | 45 | Interim Chief Financial Officer | ||
| Nachman Geva | 54 | Chief Technology Officer | ||
| Tuvia Grossman | 44 | General Counsel and Chief Legal Officer | ||
| Shai Schiller | 63 | Head of Strategy | ||
| John Rogers | 64 | President of the Americas Region | ||
| Directors | ||||
| Renah Persofsky (1)(2)(3)(4) | 66 | Chairperson of the Board | ||
| Ilan Flato (1)(2)(3)(4) | 68 | Director | ||
| Shlomo Bibas (1)(2)(4) | 55 | Director | ||
| Uzi Moskovich | 61 | Director |
| (1) | Member of our audit committee |
| (2) | Member of our compensation committee |
| (3) | Member of our nominating and governance committee |
| (4) | Independent director under the rules of Nasdaq |
Executive Officers
Noah Hershcoviz has served as HUB’s Chief Executive Officer since December 2023 and as a member of HUB’s board of directors since October 2023. Mr. Hershcoviz previously served as HUB’s Chief Strategy Officer from October 2023 to December 2023. Mr. Hershcoviz has served as a member of the board of BlackSwan Technologies since 2021 . Additionally, Mr. Hershcoviz has served as Managing General Partner of The 12.64 Fund since 2021 and as Managing Partner, Head of Investing Banking of A-Labs Finance and Advisory since 2017. Prior to such roles, between 2016 and 2017, Mr. Hershcoviz served as VP Strategy of MCE Systems Ltd. Mr. Hershcoviz holds an LL.B in law and a B.A. in accounting from Reichman University, Herzliya, Israel and is a certified public accountant in Israel and a member of the Israeli Bar Association.
Shai Schiller has served as our Head of Strategy since October 2023. From 2021 until 2023, Mr. Schiller served as a General Partner at Jerusalem Venture Partners. In 2021, Mr. Schiller served as Vice President of Corporate Development and Worldwide Sales at Vdoo, a cybersecurity company later acquired by JFrog for $300 million. From 2018 until 2021, Mr. Schiller was a Partner at GMOS. Prior to that, from 2012 until 2018, Mr. Schiller served as CEO & Founder of WebIntPro (sold to Cognyte in 2018), a world leader in delivering knowledge management systems to government agencies, security and law enforcement organizations and financial institutions. From 2007 until 2012, Mr. Schiller was Active Chairman of the Board of Capital Nature VC, an investment group made up of a consortium of Israel's largest corporations, such as Ormat, Elbit, Rafael and Yashir Insurance. Mr. Schiller holds a B.Sc. degree in Computer Science and an M.B.A. degree from the University of Maryland.
John Rogers has served as President of the Americas Region of HUB since April 2025. Prior to joining HUB, in 2024 Mr. Rogers co-founded Goodland Advisors. Since 2015, Mr. Rogers has served on the Board of Directors of MV Transportation, where he currently serves as Vice Chair, and from 2017 to 2018, he served as interim Chief Executive Officer of MV Transportation. From 2006 to 2022, Mr. Rogers served as Founder and Chief Executive Officer of RL Leaders, a national security consulting enterprise. Mr. Rogers previously served as Chair of the Advisory Board of HUB Security from 2023 to 2024 and served on the Board of Directors of Vendini from 2016 to 2019. He currently serves as an advisor to Neuro Animation Inc. Mr. Rogers attended Illinois State University and the University of Iowa and was named an Adjunct Fellow by the Center for Strategic and International Studies.
Lior Davidsohn has served as our Interim Chief Financial Officer since February 2024, as well as during September and October 2023. From 2019 to 2023 Mr. Davidsohn was a finance manager and business controller at Philips Electronics IL in Israel. Prior to that, from 2018 to 2019, Mr. Davidsohn was the chief financial officer of Compedia Ltd., a finance director at Leadcome from 2017 to 2018, and the chief accounting officer at Alcatel-Lucent Ltd. From 2014-2017. Mr. Davidsohn is a certified CPA and holds a B.A. in Social Sciences from Bar-Ilan University in Israel and a CPA Accreditation from the College of Management in Israel.
Nachman Geva has served as our Chief Technology Officer since January 2024. Since 2014, Mr. Geva has served as the chief technology officer for A.I.S. Active Intelligence Solutions Ltd., a company that he also co-founded. From 2019 to 2021, Mr. Geva served as the vice president of research and development and the chief product officer of Verint’s CES Ltd.’s Data Intelligence group, and from 2018 to 2019, he served as the vice president of research and development and the chief product officer of WebIntPro Ltd. Mr. Geva holds a B.A. in Computer Science from the Technion – Israel Institute of Technology, Haifa, Israel and an MBA from the University of Massachusetts Amherst.
Tuvia Grossman has served as our General Counsel and Chief Legal Officer since January 2025. Prior to joining HUB, Mr. Grossman served as the General Counsel and Chief Legal Officer of Pangea IT Ltd., a hi-tech company providing biometrically secured technology and big data solutions for the governmental sector, from 2014 to 2024. Prior to that, Mr. Grossman served as the Director of Legal & Business Affairs of Tahal Water Energy Ltd., from 2012 to 2014. Prior to that, Mr. Grossman served as a lawyer at ERM Law from 2010 to 2012, at Gornitzky & Co. from 2005 to 2010 and at the Supreme Court of Israel from 2004 to 2005. Mr. Grossman holds a J.D. degree in Law from Chicago - Kent University of Law in the US.
Directors
Renah Persofsky has served as a member of HUB’s Board of Directors since November 2024 and as Active Chairperson of HUB’s Board of Directors since March 2025. Ms. Persofsky has over 40 years of wide-ranging business experience. She served as the Chief Executive Officer of Strajectory Corp. from 2010 to November 2024 and served as an executive consultant of Canadian Imperial Bank of Commerce (NYSE: CM) from 2011 to 2021. Ms. Persofsky served as the Chairwoman of BookJane Inc. from October 2016 to December 2021; a director of Tilray Brands, Inc. (Nasdaq: TLRY) (f/k/a Aphria Inc.) since October 2017 and the Vice Chairwoman and Lead Director since October 2019; the Chairwoman of Green Gruff Inc. since July 2019; a director of Greenlane Holdings (Nasdaq: GNLN) since April 2022; and a director at Oceansix Future Paths Ltd. (TSXV: OSIX) (f/k/a K.B. Recycling Industries Ltd.) since April 2021. Ms. Persofsky has also previously served as an executive consultant to many iconic brands including Tim Hortons, Canadian Tire (OTCMKTS: CDNAF), Canada Post and Interac, and was an executive officer of the Bank of Montreal (NYSE: BMO). Ms. Persofsky previously co-chaired the Canadian Minister’s Advisory Committee on Electronic Commerce, and she also served as a special advisor to Canada’s Minister of Foreign Affairs and Trade. Ms. Persofsky received her degree from the Rotman School of Management at the University of Toronto.
Ilan Flato has served as a member of HUB’s Board of Directors since April 2023. Mr. Flato has served as President of The Association of Publicly Traded Companies on the Tel-Aviv Stock Exchange since January 2012. Since 2011, Mr. Flato has been a member of the Israel Bar Association. From 2009 until 2018, Mr. Flato served as a director in two Provident Funds. From 2009 until April 2018, Mr. Flato served as Chairman of the Business Executive of Kibbutz Kfar Blum. From January 2018 until April 2020, Mr. Flato served as Chairman of the Business Executive Kibbutz “NAAN”. Since 2004, Mr. Flato has functioned as an independent financial adviser. Until 2004, Mr. Flato served as the VP for planning, economics and online banking in United Mizrahi Bank and as the Chief Economist of the bank. From 1992 until 1996, Mr. Flato served as the Economic Advisor to the Prime Minister of Israel. Prior to that position, Mr. Flato served in the Israeli Treasury Office as the deputy director of the budget department. Additionally, Mr. Flato has served as a director of Tower Semiconductor Ltd. since February 2009 and in Leumit Health Services since March 2025. Mr. Flato also served as a member of the board of directors of many government-owned companies. Mr. Flato holds a B.A. degree in economics from Tel-Aviv University, an LL.B. degree from Netanya College, an M.A. degree in law from Bar-Ilan University and an MSIT from Clark University.
Shlomo Bibas has served as a member of HUB’s Board of Directors since April 2025. Mr. Bibas has served as Senior Vice President Operations and Chief Technology Officer at the Woodbridge Group since August 2022. From 2018 to 2022, Mr. Bibas served as Senior Vice President and Global Chief Information Officer at Celestica Inc. From 2012 to 2018, he served as Senior Vice President Global Operations and Chief Information Officer at Apotex Inc. Prior to that, Mr. Bibas was a Partner at Accenture, where he led the Canadian High-Tech practice and held several international assignments. Mr. Bibas served as Independent Director of the Board of Aphria Inc. (now Tilray Brands, Inc.) from November 2018 to November 2020. Since 2007, Mr. Bibas has served on the boards of various private, public, for-profit and not-for-profit organizations, and currently serves as Vice Chairman of the Board of Cayuse Technologies LLP. Mr. Bibas holds a B.A.Sc. in Mechanical Engineering from the University of Toronto and an ICD.D designation from the Rotman School of Management and the Institute of Corporate Directors.
Uzi Moskovich has served as a member of our board of directors since June 2021 and as our Chief Executive Officer from February 2023 to December 2023. Prior to becoming our Chief Executive Officer in February 2023, Mr. Moskovich served as Chairman from April 2022 to February 2023. Mr. Moskowitz has served as the Chief Executive Officer of Interionet since March 2024. Mr. Moskovich served as Chief Executive Officer of Wave Guard Technologies Ltd. since February 2019 to January 2023. Mr. Moskovich served as the Vice President at Israel Aerospace Industries (IAI) from January 2017 to November 2018. Mr. Moskowitz has also served on the boards of BrandShield Systems Plc (LSE: BRSD.L) and Migdal Insurance and Financial Holdings Ltd (TASE: MGDL.TA) from 2020 to 2023 and 2017 to 2021, respectively. Mr. Moskowitz received his B.Sc. in Aeronautical Engineering from the Technion Israel Institute of Technology, his MBA from New York University and his M.Sc. in Strategic Studies from the US Army War College.
B. Compensation
Directors
Under the Companies Law, the compensation of a public company’s directors requires the approval of (i) its compensation committee, (ii) its board of directors and, unless exempted under regulations promulgated under the Companies Law, (iii) the approval of its shareholders at a general meeting. In addition, if the compensation of a public company’s directors is inconsistent with the company’s compensation policy, then those inconsistent provisions must be separately considered by the compensation committee and board of directors, and approved by the shareholders by a special vote in one of the following two ways:
| ● | at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such matter, present and voting at such meeting, vote in favor of the inconsistent provisions of the compensation package, excluding abstentions; or |
| ● | the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting against the inconsistent provisions of the compensation package does not exceed two percent (2%) of the aggregate voting rights in the Company. |
Executive officers other than the chief executive officer
The Companies Law requires the compensation of a public company’s executive officers (other than the chief executive officer and who do not also serve as a director) be approved in the following order: (i) the compensation committee, (ii) the company’s board of directors, and (iii) if such compensation arrangement is inconsistent with the company’s stated compensation policy, the company’s shareholders (by a special vote as discussed above with respect to the approval of director compensation that is inconsistent with the compensation policy).
However, there are exceptions to the foregoing approval requirements with respect to such non-director executive officers. If the shareholders of the company do not approve the compensation of such a non-director executive officer, the compensation committee and board of directors may override the shareholders’ disapproval for such non-director executive officer provided that the compensation committee and the board of directors each document the basis for their decision to override the disapproval of the shareholders and approve the compensation.
An amendment to an existing compensation arrangement with a non-director executive officer requires only the approval of the compensation committee, if the compensation committee determines that the amendment is immaterial. However, if such non-director executive officer is subordinate to the chief executive officer, an immaterial amendment to an existing compensation arrangement shall not require the approval of the compensation committee if (i) such amendment is approved by the chief executive officer, (ii) the company’s compensation policy allows for such immaterial amendments to be approved by the chief executive officer and (iii) the engagement terms are consistent with the company’s compensation policy.
Chief executive officer
Under the Companies Law, the compensation of a public company’s chief executive officer is required to be approved by: (i) the company’s compensation committee, (ii) the company’s board of directors and (iii) the company’s shareholders (by a special vote as discussed above with respect to the approval of director compensation that is inconsistent with the compensation policy). However, if the shareholders of the company do not approve the compensation arrangement with a chief executive officer who does not serve as a director, the compensation committee and board of directors may override the shareholders’ decision provided that they each document the basis for their decision. The approval of each of the compensation committee and board of directors should be in accordance with the company’s compensation policy; however, in special circumstances, they may approve compensation terms of a chief executive officer that are inconsistent with such policy provided that they have considered those provisions that must be included in the compensation policy according to the Companies Law and that shareholder approval was obtained (by a special majority vote as discussed above with respect to the approval of director compensation that is inconsistent with the compensation policy).
In the case of a new chief executive officer, the compensation committee may waive the shareholder approval requirement with regard to the compensation of a candidate for the chief executive officer position if the compensation committee determines that: (i) the compensation arrangement is consistent with the company’s compensation policy, (ii) the chief executive officer candidate did not have, on the date of his appointment or during the two-year period preceding his appointment, an “affiliation” (including an employment relationship, a business or professional relationship or control) with the company or a controlling shareholder of the company or a relative thereof and (iii) subjecting the approval of the engagement to a shareholder vote would impede the company’s ability to employ the chief executive officer candidate. However, if the chief executive officer candidate will serve as a member of the board of directors, such candidate’s compensation terms as chief executive officer must be approved in accordance with the rules applicable to approval of compensation of directors.
Compensation of Executive Officers and Directors
The aggregate cash compensation and benefits in kind, paid by us and our subsidiaries to our executive officers and directors as a group for the year ended December 31, 2024 was approximately $1,932,000.
For 2025, we expect that the aggregate base compensation payable by us and our subsidiaries to our executive officers and directors as a group will be in the aggregate amount of approximately $1,997,000. This amount excludes potential salary raises, bonuses and share-based compensation, which have not yet been determined for 2025.
The following is a summary of the salary expenses and social benefit costs of our five most highly compensated executive officers in 2024, or the “Covered Executives.” All amounts reported reflect the cost to the Company as recognized in our financial statements for the year ended December 31, 2024. U.S. dollar amounts indicated for compensation of our Covered Executives are in thousands of dollars.
| Name and Principal Position(2) | Base Salary ($)(3) |
Variable compensation ($) |
Equity-Based Compensation ($)(4) |
Total ($) |
||||||||||||
| Shai Schiller | ||||||||||||||||
| Head of Strategy | 217,534 | 70,000 | 335,203 | 622,737 | ||||||||||||
| Noah Hershcoviz | ||||||||||||||||
| Chief Executive Officer and Director(6) | 256,884 | - | 335,203 | 592,087 | ||||||||||||
| Osher Partok Rheinisch, | ||||||||||||||||
| Former Chief Legal Officer(5) | 359,693 | - | 517,717 | 877,410 | ||||||||||||
| Nachman Geva | ||||||||||||||||
| Chief Technology Officer | 273,362 | - | - | 273,362 | ||||||||||||
| Lior Davidsohn | ||||||||||||||||
| Interim CFO | 299,241 | 299,241 | ||||||||||||||
| (1) | All amounts reported in the table are in terms of cost to us, as recorded in our financial statements. |
| (2) | All Covered Executives listed in the table are our full-time employees. Cash compensation amounts denominated in currencies other than the U.S. dollar were converted into U.S. dollars at the average conversion rate for 2024. |
| (3) | Amounts reported in this column include the base salary and the social benefits paid by us on behalf of the Covered Executives, convalescence pay, contributions made by the company to an insurance policy or a pension fund, work disability insurance, severance, educational fund and payments for social security. |
| (4) | Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, 2024 with respect to equity-based compensation grants. The relevant amounts underlying the equity awards granted to our officers during 2024, will continue to be expensed in our financial statements over a four-year period during the years 2024 – 2027 on account of the 2024 grants in similar annualized amounts. All equity-based compensation grants to our Covered Executives were made in accordance with the parameters of our Company’s compensation policy and were approved by our compensation committee and board of directors. |
| (5) | Osher Partok Rheinisch resigned from her position as Chief Legal Officer on December 31, 2024. Tuvia Grossman was appointed as General Counsel and Chief Legal Officer on January 1, 2025. |
At our annual general meeting of shareholders in 2023, our shareholder approved to modify the compensation payable to our directors and pay each of our directors the following compensation in respect of 2023 and onward, with the cash portion of the compensation to be paid promptly following the end of each calendar quarter (or at the termination of the director’s service in the event of the director’s termination prior thereto):
| ● | An annual fee of $50,000 for each member of the board of director or $130,000 for the chairman of the board of directors (or, in each case, a pro-rata portion thereof in the event of service for less than a full calendar year); |
| ● | An annual fee of $10,000 for each member of the audit committee (or $15,000 for the chair), $8,000 for each member of the compensation committee (or $12,000 for the chair), $6,000 for each member of the nominating, governance, compliance and sustainability committee (or $9,000 for the chair) (or, in each case, a pro-rata portion thereof in the event of service for less than a full calendar year) and, if applicable, $15,000 for each member (including the chair) of a special committee that may be established by the board of directors from time to time (even if less than a full calendar year); |
| ● | In addition, a non-employee director will be entitled to an additional annual fee if such non-employee director participated in more than 25 meetings of the board of directors and its committees in a calendar year, equal to a pro rata amount of the annual board of director membership fee, based on the applicable number of meetings attended; |
| ● | A grant of 2,000 RSUs to each director on the date of each annual general meeting of the Company, provided that we may defer the grant date if there are insufficient ordinary shares registered with the SEC on a Form S-8, until the date immediately following the filing of the applicable Form S-8. Each such grant of RSUs will vest in eight equal quarterly installments, subject to the continuing service of the grantee as a one of our directors. The vesting period of a director’s first grant of RSUs will commence from the date of such director’s initial appointment or election to the board of directors, and the vesting period of each future grant will commence on the date of the applicable annual general meeting; and |
| ● | RSUs issued to U.S.-resident directors shall be classified as non-qualified, while options issued to Israel-resident directors shall be issued under the Capital Gains tax track pursuant to Section 102 of the Israeli Income Tax Ordinance (New Version), 1961 (the “Ordinance”). |
Notwithstanding the foregoing, in light of the extraordinary efforts that our current directors expended in 2023 in dealing with our multiple challenges, at our annual general meeting of shareholders in 2023, our shareholder approved the grant of 5,000 RSUs to each of the current directors following the 2023 annual meeting, on a one-time basis. In addition, in light of the decline in the value of an RSU in the year prior to the 2024 annual meeting, the multiple challenges still facing the Company and the amount of time and effort expected to be required from its directors, our shareholders approved to change the equity-based compensation payable to the Company’s non-employee directors in 2025, as set forth below.
| ● | A grant of 15,000 RSUs to each member of the Board or 80,000 RSUs to the Chairman of the Board (or, in each case, a pro-rata portion thereof in the event of service for less than a full calendar year); and |
| ● | A grant of 10,000 RSUs to each member of a Board committee or 25,000 RSUs to the chair of the Audit Committee, the Compensation Committee and the N&G Committee (or, in each case, a pro-rata portion thereof in the event of service for less than a full calendar year) and any Special Committee that may be established by the Board from time to time (even if less than a full calendar year). |
Each such grant of RSUs will vest in eight equal quarterly instalments, subject to the continuing service of the grantee as a director of the Company. Vesting will commence on the date of the 2024 annual meeting with respect to directors appointed or already serving at such meeting and on the date of appointment for any directors appointed between annual meetings.
In addition, for 2025 and on, each non-employee director is entitled to an additional annual cash fee if such non-employee director participated in more than 15 (rather than 25) meetings of the Board and/or its Committees in a calendar year, equal to a pro rata amount of the annual Board membership fee, based on the applicable number of meetings attended.
Share Option Plans
2007 Employee Stock Option Plan
In 2007, HUB (ALD prior to its merger with HUB) adopted its 2007 Employee Stock Option Plan (the “2007 Plan”), as amended from time to time. The 2007 Plan provides for the grant of options to the employees, directors, office holders, service providers and consultants of HUB and its subsidiaries and affiliates.
Authorized Shares. As of December 31, 2024, there were no ordinary shares reserved and available for issuance under the 2007 Plan pursuant to previously granted options awards that remain outstanding. We no longer grant any awards under the 2007 Plan, though previously granted options under the 2007 Plan remain outstanding under the 2007 Plan.
Administration. HUB’s board of directors, or a duly authorized committee of the board of directors (the “Administrator”), administers the 2007 Plan. Under the 2007 Plan, the Administrator has the authority, subject to applicable law, to (among other things) interpret the terms of the 2007 Plan and any notices of grant or options granted thereunder, designate recipients of option grants, determine and amend the terms of awards, including: the number of shares underlying each award, provisions concerning the time and extent to which the options may be exercised and the nature of restrictions as to transferability, the class and the exercise price of an option or purchase price per share covered by an award, the fair market value of HUB ordinary shares, the time of grant and vesting schedule applicable to an award (including the determination to accelerate an award and/or amend the vesting schedule), the method of payment for shares purchased upon the exercise or (if applicable) vesting of an award or for satisfaction of any tax withholding obligation arising in connection with the award or such shares, the time of the expiration of the awards, the effect of the grantee’s termination of employment, the cancellation or the suspension of awards, prescribe the forms of agreement under which each award is granted, and take all other actions and make all other determinations necessary or desirable for, or incidental to, the administration of the 2007 Plan and any award under the 2007 Plan.
Eligibility. The 2007 Plan provides for granting awards under various tax regimes, including, without limitation, in compliance with Section 102 (“Section 102”) of the Israeli Income Tax Ordinance (New Version) (the “Ordinance”) and Section 3(i) of the Ordinance.
Section 102 of the Ordinance allows employees, directors and officers who are not controlling shareholders and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares or options under certain terms and conditions. HUB’s non-employee service providers and controlling shareholders who are considered Israeli residents may only be granted options under Section 3(i) of the Ordinance, which does not provide for similar tax benefits. Section 102 includes two alternatives for tax treatment involving the issuance of options or shares to a trustee for the benefit of the grantees and also includes an additional alternative for the issuance of options or shares directly to the grantee. Section 102(b)(2) of the Ordinance, the most favorable tax treatment for the grantee, permits the issuance to a trustee under the “capital gain track”.
Grant. All awards granted pursuant to the 2007 Plan are evidenced by a written agreement between HUB and the grantee or a written notice delivered by HUB (the “Award Agreement”). The Award Agreement sets forth the terms and conditions of the award, including the type of award, number of shares subject to such award, manner of exercise, term and vesting schedule (including performance goals or measures) and the exercise price, if applicable.
Exercise. An award under the 2007 Plan may be exercised by providing HUB (or to any third party designated by HUB) with a written notice of exercise and full payment of the exercise price for such shares underlying the award, if applicable, in such form and method as may be determined by the Administrator and permitted by applicable law. An award may not be exercised for a fraction of a share. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the 2007 Plan, the Administrator may, in its discretion, among others, accept cash or otherwise provide for net withholding of shares in a cashless or net exercise mechanism.
Transferability. Other than by will, the laws of descent and distribution or as otherwise provided under the 2007 Plan, and unless otherwise determined by the Administrator, neither the awards nor any right in connection with such awards are assignable or transferable.
Termination of Employment. In the event of termination of a grantee’s employment or service with HUB or any of its affiliates, all vested and exercisable awards held by such grantee as of the date of termination may be exercised within three months after such date of termination, unless otherwise determined by the Administrator. Any awards which are unvested as of the date of such termination, or which are vested but not exercised within the three-month period following such termination, will terminate.
In the event of termination of a grantee’s employment or service with HUB or any of its affiliates due to such grantee’s death or disability, all vested and exercisable awards held by such grantee as of the date of termination may be exercised, within one year after such date of termination, unless otherwise provided by the Administrator. Any awards which are unvested as of the date of such termination or which are vested but not exercised within the one-year period following such termination, will terminate.
Notwithstanding any of the foregoing, if a grantee’s employment or services with HUB or any of its affiliates is terminated for “cause” (as defined in the 2007 Plan), unless otherwise determined by the Administrator, all outstanding awards held by such grantee (whether vested or unvested) will terminate on the date of such termination.
Transactions. In the event of an exchange or change of HUB’s ordinary shares by declaration of a s stock split, consolidation or exchange of share capital of HUB recapitalization, or other similar occurrences, the number and class and kind of shares subject to the 2007 Plan any options granted thereunder shall be adjusted and, the exercise price per share covered the options shall be appropriately adjusted. No adjustment shall be made by reason of the distribution of subscription rights on outstanding shares.
In the event of a merger, acquisition, reorganization, amalgamation or consolidation of HUB, or a sale of all, or substantially all of HUB’s assets (“Transaction”), (i) all outstanding shares subject to the unexercised portions of outstanding options will be replaced or substituted by the successor corporation in such Transaction and appropriate adjustments shall be made to the exercise price and all other terms and conditions shall remain unchanged, all as determined by the Administrator or (ii) if the outstanding options are not assumed or substituted the Administrator may provide for an acceleration of vesting of unvested options as of the date that is ten days from the date of the Transaction.
In the event HUB is voluntarily liquidated or dissolved, all vested and unexercised options shall become exercisable within ten days of notice to the grantee, and following such period, all remaining outstanding options will terminate immediately.
2021 Employee Stock Option Plan
In 2021, HUB adopted the 2021 Employee Stock Option Plan (“2021 Plan”). The 2021 Plan provides for the grant of equity-based incentive awards to HUB’s and its affiliates’ employees, directors, office holders, service providers and consultants in order to incentivize them to increase their efforts on behalf of HUB or its affiliates and to promote the success of HUB’s business.
Authorized Shares. As of December 31, 2024, there were 55,324 ordinary shares reserved and available for issuance under the 2021 Plan. Following the adoption of the 2021 Plan, HUB ceased making grants under the 2007 Plan, though previously granted options under the 2007 Plan remain outstanding under the 2007 Plan.
Administration. HUB’s board of directors, or a duly authorized committee of the board of directors (the “Administrator”), will administer the 2021 Plan. Under the 2021 Plan, the Administrator has the authority, subject to applicable law, to interpret the terms of the 2021 Plan and any award agreements or awards granted thereunder, designate recipients of awards, determine and amend the terms of awards, including the exercise price of an option award, the fair market value of an ordinary share, the time and vesting schedule applicable to an award or the method of payment for an award, accelerate or amend the vesting schedule applicable to an award, prescribe the forms of agreement for use under the 2021 Plan and take all other actions and make all other determinations necessary for the administration of the 2021 Plan.
The Administrator also has the authority to approve the conversion, substitution, cancellation or suspension under and in accordance with the 2021 Plan of any or all option awards or ordinary shares, and the authority to modify option awards to eligible individuals who are foreign nationals or are individuals who are employed outside Israel or the United State of America to recognize differences in local law, tax policy or custom, in order to effectuate the purposes of the 2021 Plan but without amending the 2021 Plan.
The Administrator also has the authority to amend and rescind rules and regulations relating to the 2021 Plan or terminate the 2021 Plan at any time. No termination or amendment of the 2021 Plan shall affect any then outstanding award unless expressly provided by the Administrator.
Eligibility. The 2021 Plan provides for granting awards under various tax regimes, including, without limitation, in compliance with Section 102 of the Ordinance, and Section 3(i) of the Ordinance and for awards granted to our United States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 of the Code and Section 409A of the Code.
Grants. All awards granted pursuant to the 2021 Plan will be evidenced by an award agreement, in a form approved, from time to time, by the Administrator in its sole discretion. The award agreement will set forth the terms and conditions of the award, including the type of award, number of shares subject to such award, vesting schedule and conditions (including performance goals or measures) and the exercise price, if applicable. Certain awards under the 2021 Plan may constitute or provide for a deferral of compensation, subject to Section 409A of the Code, which may impose additional requirements on the terms and conditions of such awards.
Unless otherwise determined by the Administrator and stated in the award agreement, and subject to the conditions of the 2021 Plan, awards vest and become exercisable under the following schedule: 25% of the shares covered by the award on the first anniversary of the vesting commencement date determined by the Administrator (and in the absence of such determination, the date on which such award was granted) and 12.5% of the shares covered by the award at the end of each subsequent six-month period thereafter over the course of the following three years; provided that the grantee remains continuously as an employee or provides services to HUB throughout such vesting dates.
Each award will expire up to ten years from the date of the grant thereof, unless such shorter term of expiration is otherwise designated by the Administrator.
Awards. The 2021 Plan provides for the grant of stock options (including incentive stock options and nonqualified stock options), ordinary shares, restricted shares units (“RSUs”), restricted shares, share purchase rights and other share-based awards.
Options granted under the 2021 Plan to HUB employees who are U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code, or may be non-qualified stock options. The exercise price of an option may not be less than the par value of the shares (if the shares bear a par value) for which such option is exercisable, otherwise an exercise price of an award of less than the par value of the shares (if shares bear a par value) shall comply with section 304 of the Companies Law. The exercise price of a non-qualified stock option shall not be less than 100% of the fair market value of a share on the date of grant of such option or such other amount as may be required pursuant to the section 409A of the Code. Notwithstanding the foregoing, a non-qualified stock option may be granted with an exercise price lower than the minimum exercise price set forth above if such award is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of that complies with section 424(a) of the Code 1.409A-1(b)(5)(v)(D) of the U.S. Treasury Regulations or any successor guidance. The exercise price of an Incentive Stock Option granted under the 2021 Plan may not be less than 100% of the fair market value of the underlying share on the date of grant or such other amount as may be required pursuant to the Code. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an exercise price lower than the minimum exercise price set forth above if such Award is granted pursuant to an assumption or substitution for another option in a manner that complies with the provisions of Section 424(a) of the Code. In the case of Incentive Stock Options granted to a ten percent shareholders, (i) the exercise price shall not be less than 110% of the fair market value of the underlying share on the date of grant, and (ii) the exercise period shall not exceed five (5) years from the effective date of grant of such grant.
Exercise. An award under the 2021 Plan may be exercised by providing HUB with a written notice of exercise and full payment of the exercise price for such shares underlying the award, if applicable, in such form and method as may be determined by the Administrator and permitted by applicable law. An award may not be exercised for a fraction of a share. With regard to tax withholding, exercise price and purchase price obligations arising in connection with awards under the 2021 Plan, the Administrator may, in its discretion, accept cash, check, provide for net withholding of shares in a cashless or net exercise mechanism.
Transferability. Other than by will, the laws of descent and distribution or as otherwise provided under the 2021 Plan or by the Administrator, neither the awards nor any right in connection with such awards are assignable or transferable.
Termination of Employment. In the event of termination of a grantee’s employment or service with HUB or any of its affiliates, all vested and exercisable awards held by such grantee as of the date of termination may be exercised within ninety days after such date of termination, unless otherwise determined by the Administrator, but in no event later than the date of expiration of the award as set forth in the award agreement. After such three-month period, all such unexercised awards will terminate.
In the event of termination of a grantee’s employment or service with HUB or any of its affiliates due to such grantee’s death or permanent disability, all vested and exercisable awards held by such grantee as of the date of termination may be exercised within one year after such date of termination, unless otherwise determined in the grantee’s award agreement. Any awards which are unvested as of the date of such termination or which are vested but not then exercised within the one-year period following such date, will terminate.
The Administrator may, prior to the date of termination, extend the exercise period for the vested and exercisable options for a period not to exceed the period during which the options by their terms would otherwise have been exercisable.
Notwithstanding any of the foregoing, if a grantee’s employment or services with HUB or any of its affiliates is terminated for “cause” (as defined in the 2021 Plan), subject to the discretion of the Company, all outstanding awards held by such grantee (whether vested or unvested) will terminate on the date of such termination.
Voting Rights. Grantees will not have the rights as a shareholder of HUB with respect to any shares covered by an award until the award has vested and/or the grantee has exercised such award, paid any exercise price for such award and becomes the record holder of the shares.
Dividends. Grantees holding HUB Ordinary Shares issued upon the exercise or vesting of RSUs will be entitled to receive dividends and other distributions with respect to the quantity of their holdings, subject to HUB’s Articles of Association and applicable taxation.
Transactions. In the event of an exchange or change of HUB’s ordinary shares by declaration of a stock split, consolidation or exchange of share capital of HUB recapitalization, or other similar occurrences, the number and class and kind of shares subject to the 2021 Plan any options granted thereunder shall be adjusted and, the exercise price per share covered the options shall be appropriately adjusted. No adjustment shall be made by reason of the distribution of subscription rights on outstanding shares.
In the event of a merger, acquisition, reorganization, amalgamation or consolidation of HUB, or a sale of all, or substantially all of HUB’s assets (“Transaction”), (i) all outstanding shares subject to the unexercised portions of outstanding options will be replaced or substituted by the successor corporation in such Transaction and appropriate adjustments shall be made to the exercise price and all other terms and conditions shall remain unchanged, all as determined by the Administrator or (ii) if the outstanding options are not assumed or substituted the Administrator may provide for an acceleration of vesting of unvested options as of the date that is ten days from the date of the Transaction.
In the event HUB is voluntarily liquidated or dissolved, all vested and unexercised options shall become exercisable within ten days of notice to the grantee, and following such period, all remaining outstanding options will terminate immediately.
C. Board Practices
Corporate Governance Practices
As an Israeli company, we are subject to various corporate governance requirements under the Companies Law, relating to matters such as external directors, the audit committee, the compensation committee and an internal auditor. See below under “—External directors”.
In March 2025, the Constitution, Law and Justice Committee of the Israeli Parliament approved the version of a proposed amendment to the Companies Law relating to public companies without a controlling shareholder, such as HUB. The Parliament is expected to vote on such amendment in the near future for the purpose of final enactment. If enacted, the amendment is expected to go into effect 12 months after its official publication. The proposed amendment would apply various corporate governance requirements that are believed to be better suited to companies with decentralized ownership structures.
Generally, the proposed amendment includes, among other things, lowering the threshold for the presumption of ‘control’ from 50% to 25% of the means of control of the company; changes to the composition of the board of directors (generally, the replacement of the requirement to appoint two “external directors” with the requirement to appoint a majority of “independent directors”); the nomination of candidates for the position of director on behalf of the board of directors by an independent nomination committee; the requirement to approve extraordinary transactions with “significant holders” (holding 10% or more of the voting rights in a company) by the audit committee and board of directors; the requirement to approve extraordinary transactions with directors, their relatives or entities controlled by them (even if not compensation related) by the audit committee, board of directors and shareholders (by a simple majority); and the requirement that the term of office of a director expire no later than the third annual general meeting (without preventing re-appointment for additional terms), provided that at any given time, the terms of at least half of the directors will expire at the next two annual general meetings. As a Nasdaq-listed company, we are already subject to some of these requirements, such as a majority of independent directors and a nominating committee.
We are a “foreign private issuer”, as such term is defined in Rule 405 under the Securities Act. As a foreign private issuer we will be permitted to comply with Israeli corporate governance practices instead of the certain listing rules of Nasdaq, provided that we disclose which requirements we are not following and the equivalent Israeli requirements.
We rely on this “foreign private issuer exemption” with respect to the quorum requirement for shareholder meetings and with respect to Nasdaq shareholder approval rules. Whereas under the corporate governance rules of Nasdaq, a quorum requires the presence, in person or by proxy, of holders of at least 33 1/3% of the total issued and outstanding voting power of our shares at each general meeting of shareholders, pursuant to the Articles, and as permitted under the Companies Law, the quorum required for a general meeting of shareholders will consist of at least two shareholders present in person or by proxy in accordance with the Companies Law who hold or represent at least 33 1/3% of the total outstanding voting power of our shares, except if (i) any such general meeting of shareholders was initiated by and convened pursuant to a resolution adopted by the board of directors and (ii) at the time of such general meeting, we qualify as a “foreign private issuer,” then in such case, the requisite quorum will consist of two or more shareholders present in person or by proxy who hold or represent at least 25% of the total outstanding voting power of our shares (and if the meeting is adjourned for a lack of quorum, the quorum for such adjourned meeting will be, subject to certain exceptions, any number of shareholders). We otherwise intend to comply with the rules generally applicable to U.S. domestic companies listed on the Nasdaq. We may, however, in the future decide to rely upon the “foreign private issuer exemption” for purposes of opting out of some or all of the other Nasdaq listing rules.
Additionally, in the event that misconduct or other inappropriate behavior is found within our company, our Board has the ability to conduct internal investigations in order to determine the nature of the conduct and to form committees and hire advisors to properly address and remediate any findings. See “Item 4. Information on the Company—History and Development of the Company—Recent Developments—Internal Investigation.”
For more information regarding our corporate governance practices and foreign private issuer status, see Item 16G. “Corporate Governance.”
Board of Directors
Under the Companies Law and our Articles, our business and affairs are managed under the direction of our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to executive management. Our Chief Executive Officer (referred to as a “general manager” under the Companies Law) is responsible for our day-to-day management. Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the employment or consulting agreement that we have entered into with him. All other executive officers are appointed by the Chief Executive Officer, subject to applicable corporate approvals, and are subject to the terms of any applicable employment or consulting agreements that we may enter into with them.
We comply with the rules of Nasdaq requiring that a majority of our directors are independent. Our board of directors has determined that all of our directors, other than Noah Hershcoviz and Uzi Moskovich are independent under such rules.
Under our Articles, the number of directors on our board of directors will be no less than three and no more than eleven, divided into three classes with staggered three-year terms. Each class of directors consists, as nearly as possible, of one-third of the total number of directors constituting the entire board of directors. At each annual general meeting of our shareholders, the election or re-election of directors following the expiration of the term of office of the directors of that class of directors will be for a term of office that expires on the third annual general meeting following such election or re-election. Therefore, at each annual general meeting, the term of office of only one class of directors expires.
Our directors are divided among the three classes as follows:
| ● | the Class I directors are Ilan Flato and Noah Hershcoviz, and their terms will expire at the annual general meeting of shareholders to be held in 2026; |
| ● | the Class II directors are Uzi Moskovich and his term will expire at our annual meeting of shareholders to be held in 2027; and |
| ● | the Class III directors are Shlomo Bibas and Renah Persofsky, and their terms will expire at our annual meeting of shareholders to be held in 2025. |
Our directors will generally be appointed by a simple majority vote of holders of our ordinary shares, participating and voting (in person or by proxy) at an annual general meeting of our shareholders, provided that (i) in the event of a contested election, the method of calculation of the votes and the manner in which the resolutions will be presented to our shareholders at the general meeting shall be determined by our board of directors in its discretion, and (ii) in the event that our board of directors does not or is unable to make a determination on such matter, then the directors will be elected by a plurality of the voting power represented at the general meeting in person or by proxy and voting on the election of directors.
Each director will hold office until the annual general meeting of our shareholders in the year in which such director’s term expires, unless the tenure of such director expires earlier pursuant to the Companies Law or unless such director is removed from office as described below.
Our Articles generally require a vote of the holders of a majority of our outstanding ordinary shares entitled to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority) to adopt a shareholders resolution. In addition, vacancies on our board of directors may be filled by a vote of a simple majority of the directors then in office. A director so appointed will hold office until the next annual general meeting of our shareholders for the election of the class of directors in respect of which the vacancy was created. In the case of a vacancy due to the number of directors being less than the maximum number of directors stated in our Articles, the new director filling the vacancy will serve until the next annual general meeting of our shareholders for the election of the class of directors to which such director was assigned by our board of directors. Directors may also be dismissed or removed by a resolution adopted at a general meeting of shareholders by holders of at least 65% of our outstanding ordinary shares of the total voting power of our shareholders.
Chairperson of the Board
Our Articles provide that the board of directors shall appoint a member of the board to serve as the Chairperson. Under the Companies Law, the chief executive officer of a public company, or a relative of the chief executive officer, may not serve as the chairperson of the board of directors, and the chairperson of the board of directors, or a relative of the chairperson, may not be vested with authorities of the Chief Executive Officer unless approved by a special majority of the company’s shareholders for a period not exceeding three years from each such approval. The chairperson of the board of directors, or a relative of the chairperson, may not be vested with authorities of the Chief Executive Officer unless approved by a special majority of the company’s shareholders for a period not exceeding three years from each such approval.
In addition, a person who is subordinated, directly or indirectly, to the chief executive officer may not serve as the chairperson of the board of directors, the chairperson of the board of directors may not be vested with authorities that are granted to persons who are subordinated to the chief executive officer, and the chairperson of the board of directors may not serve in any other position in the company or in a controlled subsidiary, but may serve as a director or chairperson of a controlled subsidiary.
Our Board of Directors recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. The Board of Directors believes that, given the dynamic and competitive environment in which we operate, the optimal board leadership structure may vary as circumstances warrant.
At present, the Board of Directors has chosen to separate the two roles of Chief Executive Officer and Chairperson of the Board of Directors, as our current leadership structure promotes balance between the authority of those who oversee our business and those who manage it on a day-to-day basis. Renah Persofsky serves as non-executive Active Chairperson of the Board of Directors.
Nevertheless, the Board of Directors recognizes that it is important to retain the organizational flexibility to determine whether the roles of the Chairperson of the Board of Directors and Chief Executive Officer should be separated or combined in one individual. The Board of Directors periodically evaluates whether the board leadership structure should be changed in light of specific circumstances applicable to us.
External directors
Under the Companies Law, companies incorporated under the laws of the State of Israel that are “public companies,” including companies with shares listed on Nasdaq, are required to appoint at least two external directors. Pursuant to regulations promulgated under the Companies Law, companies with shares traded on certain U.S. stock exchanges, including Nasdaq, which do not have a “controlling shareholder,” may, subject to certain conditions, “opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors. In accordance with these regulations, we have elected to “opt out” from the Companies Law requirement to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of our board of directors.
Audit Committee
Companies Law requirements
Under the Companies Law, the board of directors of a public company must appoint an audit committee.
Listing requirements
Under the listing rules of the Nasdaq, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise.
Our audit committee consists of Ilan Flato, Renah Persofsky and Shlomo Bibas. Ilan Flato serves as the chairperson of the audit committee. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the listing rules of the Nasdaq. Our board of directors has determined that each of Ilan Flato and Renah Persofsky is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the listing rules of Nasdaq.
Our board of directors has determined that each member of our audit committee is “independent”, as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence of board and committee members.
Audit committee role
Our board of directors has adopted an audit committee charter setting forth the responsibilities of the audit committee, which are consistent with the Companies Law, the SEC rules, and the listing rules of the Nasdaq. These responsibilities include:
| ● | retaining and terminating our independent auditors, subject to ratification by the board of directors, and in the case of retention, subject to ratification by the shareholders; |
| ● | pre-approving audit and non-audit services to be provided by the independent auditors and related fees and terms; |
| ● | overseeing the accounting and financial reporting processes of our company; |
| ● | managing audits of our financial statements |
| ● | preparing all reports as may be required of an audit committee under the rules and regulations promulgated under the Exchange Act; |
| ● | reviewing with management and our independent auditor our annual and quarterly financial statements prior to publication, filing, or submission to the SEC; |
| ● | recommending to the board of directors the retention and termination of the internal auditor, and the internal auditor’s engagement fees and terms, in accordance with the Companies Law, as well as approving the yearly or periodic work plan proposed by the internal auditor; |
| ● | reviewing with our general counsel and/or external counsel, as deemed necessary, legal and regulatory matters that may have a material impact on the financial statements; |
| ● | identifying irregularities in our business administration, inter alia, by consulting with the internal auditor or with the independent auditor, and suggesting corrective measures to the board of directors; |
| ● | reviewing policies and procedures with respect to transactions (other than transactions related to compensation or terms of services) between the Company and officers and directors, affiliates of officers or directors, or transactions that are not in the ordinary course of the Company’s business and deciding whether to approve such acts and transactions if so required under the Companies Law; |
| ● | reviewing the findings of any internal investigation into matters involving suspected fraud or irregularity or a failure of internal control systems of a material nature and report the matter to the Board; and |
| ● | establishing procedures for handling employee complaints relating to the management of our business and the protection to be provided to such employees. |
Compensation Committee
Companies Law requirements
Under the Companies Law, the board of directors of a public company must appoint a compensation committee.
Listing requirements
Under the listing rules of the Nasdaq, we are required to maintain a compensation committee consisting of at least two independent directors.
Our compensation committee consists of Renah Persofsky, Shlomo Bibas and Ilan Flato. Shlomo Bibas serves as chairperson of the compensation committee. Our board of directors has determined that each member of our compensation committee is independent under the listing rules of the Nasdaq, including the additional independence requirements applicable to the members of a compensation committee.
Compensation committee role
In accordance with the Companies Law, the responsibilities of the compensation committee are, among others, as follows:
| ● | making recommendations to the board of directors with respect to the approval of the compensation policy for office holders and, once every three years, with respect to any extensions to a compensation policy that was adopted for a period of more than three years; |
| ● | reviewing the implementation of the compensation policy and periodically making recommendations to the board of directors with respect to any amendments or updates to the compensation policy; |
| ● | resolving whether to approve arrangements with respect to the terms of office and employment of office holders, which require the approval of the compensation committee pursuant to the Companies Law; and |
| ● | exempting, under certain circumstances, a transaction with our Chief Executive Officer from the approval of our shareholders. |
Our board of directors has adopted a compensation committee charter setting forth the responsibilities of the committee, which are consistent with the listing rules of the Nasdaq and include among others:
| ● | recommending to our board of directors for its approval a compensation policy, in accordance with the requirements of the Companies Law, as well as other compensation policies, incentive-based compensation plans, and equity-based compensation plans, overseeing the development and implementation of such policies, and recommending to our board of directors any amendments or modifications the committee deems appropriate, including as required under the Companies Law; |
| ● | reviewing and approving the granting of options and other incentive awards to our Chief Executive Officer and other executive officers, including reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers, including evaluating their performance in light of such goals and objectives; |
| ● | approving and exempting certain transactions regarding office holders’ compensation pursuant to the Companies Law; and |
| ● | administering our equity-based compensation plans, including without limitation, approving the adoption of such plans, amending and interpreting such plans, and the awards and agreements issued pursuant thereto, and making and determining the terms of awards to eligible persons under the plans. |
Compensation policy under the Companies Law
In general, under the Companies Law, the board of directors of a public company must approve a compensation policy after receiving and considering the recommendations of the compensation committee. In addition, our compensation policy must be approved at least once every three years, first, by our board of directors, upon recommendation of our compensation committee, and second, by a simple majority of the ordinary shares present, in person or by proxy, and voting (excluding abstentions) at a general meeting of shareholders, provided that either:
| ● | the majority of such ordinary shares is comprised of shares held by shareholders who are not controlling shareholders and shareholders who do not have a personal interest in such compensation policy; or |
| ● | the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation policy voting against the policy does not exceed two percent (2%) of the aggregate voting rights in the company. |
Under special circumstances, the board of directors may approve the compensation policy despite the objection of the shareholders on the condition that the compensation committee and then the board of directors decide, on the basis of detailed grounds, and after discussing again the compensation policy, that approval of the compensation policy, despite the objection of shareholders, is for the benefit of the company.
The compensation policy must be based on certain considerations, include certain provisions and reference certain matters as set forth in the Companies Law. The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification, or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must be determined and later reevaluated according to certain factors, including: the advancement of the company’s objectives, business plan and long-term strategy; the creation of appropriate incentives for office holders, while considering, among other things, the company’s risk management policy; the size and the nature of the company’s operations; and with respect to variable compensation, the contribution of the office holder towards the achievement of the company’s long-term goals and the maximization of its profits, all with a long-term objective and according to the position of the office holder. The compensation policy must furthermore consider the following additional factors:
| ● | The Officer’s level of education, skills, expertise, seniority (in the Company, specifically, and in his profession, in general), professional experience, and achievements. |
| ● | The Officer’s position, areas of responsibility, and terms of employment pursuant to former employment agreements signed with him; |
| ● | The Officer’s contribution to the Company’s business, the attainment of its strategic targets, and the realization of its work plans, profits, resilience, and stability. |
| ● | The extent of the Officer’s responsibilities. |
| ● | The need of the Company to hire and retain an Officer with unique skills, knowledge, or expertise. |
| ● | The existence or absence of a substantive change in the Officer’s position or function or the Company’s demands on him; |
| ● | The Company’s size and nature of its operations; |
| ● | Relation to tenure and employment terms which include retirement bonuses – the tenure or employment period of the Officer, the terms of his tenure and employment during said period, the Company’s performance during said period, the Officer’s contribution to attaining the Company’s targets and generating its profits, and the circumstances of the retirement. |
| ● | The conditions of the market in which the Company operates at any relevant time, including the Officer’s salary terms when compared to the salary terms of Officers with similar positions (or positions of a similar level) in companies with similar characteristics to the Company’s operation. |
| ● | The level of difficulty in locating, recruiting, and retaining Officers and the need to offer an attractive compensation package in a global, competitive market; and (c) changes in the Company’s operation market, operation scope, and complexity. |
Our compensation policy is designed to retain and motivate our directors and executive officers, incentivize superior individual excellence, align the interests of our directors and executive officers with our long-term performance, and provide a risk management tool. To that end, a portion of our executive officer compensation package is targeted to reflect our short and long-term goals, as well as the executive officer’s individual performance. Our compensation policy also includes measures designed to reduce the executive officer’s incentives to take excessive risks that may harm the Company in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer, and minimum vesting periods for equity-based compensation.
Our compensation policy also addresses our executive officers’ individual characteristics (such as their respective position, education, scope of responsibilities, and contribution to the attainment of our goals) as the basis for compensation variation among our executive officers and considers the internal ratios between compensation of our executive officers and directors and other employees. Pursuant to our compensation policy, the compensation that may be granted to an executive officer may include: base salary, annual bonuses, signing bonuses and other cash bonuses (such as a special bonuses with respect to any special achievements), equity-based compensation, benefits and retirement and termination of service arrangements. All cash bonuses are limited to a maximum amount linked to the executive officer’s base salary.
An annual cash bonus may be awarded to executive officers upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may be granted to our executive officers, other than our Chief Executive Officer, will be based on performance objectives and a discretionary evaluation of the executive officer’s overall performance by our Chief Executive Officer and subject to minimum thresholds. The annual cash bonus that may be granted to executive officers, other than our Chief Executive Officer, may alternatively be based entirely on a discretionary evaluation. The performance objectives for the annual cash bonus of executive officers, other than our Chief Executive Officer, is required to be approved by the board of directors after recommendation of the compensation committee and the Chief Executive Officer.
The measurable performance objectives of our Chief Executive Officer will be determined annually by our compensation committee and board of directors. A non-material portion of the Chief Executive Officer’s annual cash bonus, as provided in our compensation policy, may be based on a discretionary evaluation of the Chief Executive Officer’s overall performance by the compensation committee and the board of directors.
Under our compensation policy, our executive officers’ (including members of our board of directors) equity-based compensation is designed in a manner consistent with the underlying objectives in determining the base salary and the annual cash bonus, with its main objectives being to enhance the alignment between the executive officers’ interests with our long-term interests and those of our shareholders and to strengthen the retention and the motivation of executive officers in the long term. Our compensation policy provides for executive officer compensation in the form of share options or other equity-based awards, such as restricted shares and restricted share units, in accordance with our then-current equity incentive plan. All equity-based incentives granted to executive officers shall be subject to vesting periods in order to promote long-term retention of those executive officers. Our compensation policy sets the minimum exercise price of the options and the cap for the equity-based compensation. Equity-based compensation shall be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business experience, qualifications, role, and the personal responsibilities of the executive officer.
In addition, our compensation policy will allow us to exculpate, indemnify, and insure our executive officers and directors to the maximum extent permitted by Israeli law subject to certain limitations set forth therein.
Our compensation policy provides for compensation to the members of our board of directors either (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii) in accordance with the amounts determined in our compensation policy.
Our compensation policy includes our Policy for Recovery of Erroneously Awarded Compensation, in compliance with the requirements of the Nasdaq rules.
Our amended compensation policy, as approved by our shareholders in November 2023, is filed as an exhibit to our Annual Report filed on August 16, 2024, and amended on October 22, 2024.
Nominating and Governance Committee
Our nominating and governance committee consists of Ilan Flato and Renah Persofsky. Renah Persofsky serves as chairperson of the nominating, governance, compliance and sustainability. Our board of directors has adopted a nominating, governance, compliance and sustainability committee charter setting forth the responsibilities of the committee, which include:
| ● | overseeing and assisting our board in reviewing and recommending nominees for election of directors; |
| ● | assessing the performance of the members of our board; |
| ● | establishing and maintaining effective corporate governance policies and practices, including, but not limited to, developing and recommending to our board a set of corporate governance guidelines applicable to our business;. |
| ● | recommending to our board of directors the Company’s overall environmental, social, and governance strategies, including, but not limited to environmental, health and safety, corporate social responsibility, sustainability, philanthropy, corporate governance, reputation, diversity, equity and inclusion, community issues, political contributions and lobbying, and other public policy matters relevant to the Company (collectively, “ESG Matters”); |
| ● | overseeing the Company’s policies, practices, and performance with respect to ESG Matters; and |
| ● | reporting to the board of directors of the Company about current and emerging topics relating to ESG Matters that may affect the business, operations, performance, or public image of the Company or are otherwise pertinent to the Company and its stakeholders and, if appropriate, detailing actions taken in relation to the same |
Internal Auditor
Under the Companies Law, the board of directors of a public company must appoint an internal auditor based on the recommendation of the audit committee. The role of the internal auditor is, among other things, to review the company’s compliance with applicable law and orderly business procedure. Under the Companies Law, the internal auditor cannot be an interested party, an office holder, or a relative of an interested party or an office holder. Nor may the internal auditor be the company’s independent auditor or its representative. An “interested party” is defined in the Companies Law as (i) a holder of 5% or more of the issued share capital or voting power in a company, (ii) any person or entity who has the right to designate one or more directors or to designate the chief executive officer of the company, or (iii) any person who serves as a director or as chief executive officer of the company. Joseph Ginossar of Fahn Kanne, an affiliate of Grant Thornton International, serves as our internal auditor.
Approval of Related Party Transactions under Israeli Law
Fiduciary duties of directors and executive officers
The Companies Law codifies the fiduciary duties that office holders owe to a company. An office holder is defined in the Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of such person’s title, a director, and any other manager directly subordinate to the general manager. Each person listed in the table under “Our Management — Management and Board of Directors” is an office holder under the Companies Law.
An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would act under the same circumstances. The duty of care includes, among other things, a duty to use reasonable means, in light of the circumstances, to obtain:
| ● | information on the business advisability of a given action brought for the office holder’s approval or performed by virtue of the office holder’s position; and |
| ● | all other important information pertaining to such action. |
The duty of loyalty requires an office holder to act in good faith and in the best interests of the Company, and includes, among other things, the duty to:
| ● | refrain from any act involving a conflict of interest between the performance of the office holder’s duties in the company and the office holder’s other duties or personal affairs; |
| ● | refrain from any activity that is competitive with the business of the company; |
| ● | refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for the office holder or others; and |
| ● | disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of the office holder’s position. |
Under the Companies Law, a company may approve an act, specified above, which would otherwise constitute a breach of the office holder’s duty of loyalty, provided that the office holder is acting in good faith, neither the act nor its approval harms the company, and the personal interest of the office holder is disclosed a sufficient time before the approval of such act. Any such approval is subject to the terms of the Companies Law setting forth, among other things, the appropriate bodies of the company required to provide such approval and the methods of obtaining such approval.
Disclosure of personal interests of an office holder and approval of certain transactions
The Companies Law requires that an office holder promptly disclose to the board of directors any personal interest and all related material information known to such office holder concerning any existing or proposed transaction with the company. A personal interest includes an interest of any person in an act or transaction of a company, including a personal interest of one’s relative or of a corporate body in which such person or a relative of such person is a 5% or greater shareholder, director, or general manager or in which such person has the right to appoint at least one director or the general manager, but excluding a personal interest stemming solely from one’s ownership of shares in the company. A personal interest includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder with respect to the officer holder’s vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter.
If it is determined that an office holder has a personal interest in a non-extraordinary transaction (meaning any transaction that is in the ordinary course of business, on market terms and that is not likely to have a material impact on the company’s profitability, assets or liabilities), approval by the board of directors is required for the transaction unless the company’s articles of association provide for a different method of approval. Any such transaction that is adverse to the company’s interests may not be approved by the board of directors.
Approval first by the company’s audit committee and subsequently by the board of directors is required for an extraordinary transaction (meaning any transaction that is not in the ordinary course of business, not on market terms or that is likely to have a material impact on the company’s profitability, assets or liabilities) in which an office holder has a personal interest.
A director and any other office holder who has a personal interest in a transaction which is considered at a meeting of the board of directors or the audit committee may generally (unless it is with respect to a transaction which is not an extraordinary transaction) not be present at such a meeting or vote on that matter unless a majority of the directors or members of the audit committee, as applicable, have a personal interest in the matter. If a majority of the directors have a personal interest in the matter, then shareholder approval is also required.
Certain disclosure and approval requirements apply under Israeli law to certain transactions with controlling shareholders, certain transactions in which a controlling shareholder has a personal interest, and certain arrangements regarding the terms of service or employment of a controlling shareholder. For these purposes, a controlling shareholder is any shareholder that has the ability to direct the company’s actions, including any shareholder holding 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights in the company. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder for this purpose.
For a description of the approvals required under Israeli law for compensation arrangements of officers and directors, see “Item 6. Directors, Senior Management and Employees—B. Compensation.”
Shareholder duties
Pursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power with respect to the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following matters:
| ● | an amendment to the company’s articles of association; |
| ● | an increase of the company’s authorized share capital; |
| ● | a merger; or |
| ● | interested party transactions that require shareholder approval. |
In addition, a shareholder has a general duty to refrain from discriminating against other shareholders.
Certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it has the power to determine the outcome of a shareholder vote, and any shareholder who under the articles of association has the power to appoint or to prevent the appointment of an office holder of the company or exercise any other rights available to it under the company’s articles of association with respect to the company. The Companies Law does not define the substance of this duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty of fairness.
Exculpation, insurance and indemnification of office holders
Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care, but only if a provision authorizing such exculpation is included in its articles of association. The Articles include such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.
An Israeli company may indemnify an office holder from the following liabilities and expenses incurred for acts performed as an office holder, either in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:
| ● | a financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the above mentioned events and amount or criteria; |
| ● | reasonable litigation expenses, including legal fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2) in connection with a monetary sanction; |
| ● | reasonable litigation expenses, including legal fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third-party or in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does not require proof of criminal intent; |
| ● | expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law; and |
| ● | expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder pursuant to certain provisions of the Israeli Economic Competition Law, 5758-1988. |
An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association:
| ● | a breach of the duty of loyalty to the company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; |
| ● | a breach of the duty of care to the company or to a third-party, including a breach arising out of the negligent conduct of the office holder; |
| ● | a financial liability imposed on the office holder in favor of a third-party; |
| ● | a financial liability imposed on the office holder in favor of a third-party harmed by a breach in an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law; and |
| ● | expenses, including reasonable litigation expenses and legal fees, incurred by the office holder as a result of an administrative proceeding instituted against him or her, pursuant to certain provisions of the Israeli Securities Law. |
An Israeli company may not exempt, indemnify or insure an office holder against any of the following:
| ● | a breach of the duty of loyalty, except with respect to insurance coverage or indemnification, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; |
| ● | a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; |
| ● | an act or omission committed with intent to derive illegal personal benefit; or |
| ● | a fine, monetary sanction, or forfeit levied against the office holder. |
Under the Companies Law, exculpation, indemnification, and insurance of office holders must be approved by the compensation committee and the board of directors (and, with respect to directors and the chief executive officer, by the shareholders). However, under regulations promulgated under the Companies Law, the insurance of office holders shall not require shareholder approval and may be approved by only the compensation committee if the engagement terms are determined in accordance with the company’s compensation policy, which was approved by the shareholders by the same special majority required to approve a compensation policy, provided that the insurance policy is on market terms and the insurance policy is not likely to materially impact the company’s profitability, assets, or obligations.
The Articles allow us to exculpate, indemnify, and insure our office holders to the maximum extent permitted by law. Our office holders are currently covered by a directors and officers’ liability insurance policy.
We have entered into agreements with each of our directors and executive officers exculpating them in advance, to the fullest extent permitted by law, from liability to us for damages caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent permitted by law. This indemnification is limited to events determined as foreseeable by the board of directors based on our activities and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.
The maximum indemnification amount to be set forth in such agreements is limited to an amount equal to the higher of $100 million, 25% of our total shareholders’ equity as reflected in our most recent consolidated financial statements prior to the date on which the indemnity payment is made and 10% of our total market capitalization calculated based on the average closing price of ordinary shares over the 30 trading days prior to the actual payment, multiplied by the total number of our issued and outstanding shares as of the date of the payment (other than indemnification for an offering of securities to the public, including by a shareholder in a secondary offering, in which case the maximum indemnification amount is limited to the gross proceeds raised by us and/or any selling shareholder in such public offering). The maximum amount set forth in such agreements is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.
In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policy and therefore unenforceable.
There is no pending litigation or proceeding against any of HUB’s office holders as to which indemnification is being sought, and, except as described in the section “Item 8. Financial Information— Consolidated Statements and Other Financial Information - Legal and Arbitration Proceedings”, HUB is not aware of any pending or threatened litigation that may result in claims for indemnification by any office holder.
Approval of Private Placements under Israeli Law
Under the Companies Law, a private placement of securities requires approval by the board of directors and the shareholders of a company if it will cause a person to become a controlling shareholder or if:
| ● | the securities issued amount to 20% or more of the company’s outstanding voting rights before the issuance; |
| ● | some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and |
| ● | the transaction will increase the relative holdings of a shareholder that holds 5% or more of the company’s outstanding share capital or voting rights or that will cause any person to become, as a result of the issuance, a holder of more than 5% of the company’s outstanding share capital or voting rights. |
D. Employees
As of December 31, 2024, we had employees or full-time employee equivalents across 3 offices in 2 countries, with employees or full-time employee.
Our total number of employees and full-time employee equivalents is, 322 as of December 31, 2024, worldwide, which includes the employees of all of HUB’s wholly-owned subsidiaries. As of December 31, 2024, HUB had 41 employees. We apply the law with respect to all aspects of the employment of our employees including with respect to hiring and termination procedures, equal opportunity and anti-discrimination laws and other conditions of employment. In many cases, the terms of employment of our employees exceed the minimum required under Israeli labor laws including, but not limited to, with respect to the minimum wage, vacation days, retirement savings and sick days. As per the requirements of the law, we make payments to the National Insurance Institute.
None of our employees work under any collective bargaining agreements. Extension orders issued by the Israeli Ministry of Economy and Industry apply to us and affect matters such as length of working hours and week, recuperation pay, travel expenses and pension rights. We have never experienced labor related work stoppages or strikes and believe that our relations with our employees are satisfactory.
E. Share Ownership
For information regarding the share ownership of directors and officers, see. “Major Shareholders” in Item 7.A below. For information as to our equity incentive plans, see “Compensation of Directors and Executive Officers —Share Option Plans.”” In Item 6.B above.
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
There was no erroneously awarded compensation that was required to be recovered pursuant to the HUB Cyber Security Ltd. Policy for Recovery of Erroneously Awarded Compensation during the fiscal year ended December 31, 2024.
Item 7. Major Shareholders and Related Party Transactions
A. Major Shareholders
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of April 28, 2025 by:
| ● | each person known by us who is the beneficial owner of 5% or more of our outstanding ordinary shares; |
| ● | each of our executive officers and directors individually; and |
| ● | all of our executive officers and directors as a group. |
Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. A person is a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or “investment power,” which includes the power to dispose of or to direct the disposition of the security or has the right to acquire such powers within 60 days of April 28, 2025. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary shares (of the applicable type) beneficially owned by them.
Except as otherwise noted herein, the number and percentage of our ordinary shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any of our ordinary shares as to which the holder has sole or shared voting power or investment power and also any of our ordinary shares which the holder has the right to acquire within 60 days of through the exercise of any option, warrant or any other right. The column entitled “Percentage of Voting Power” reflects the overall voting power of a given shareholder based on the composition of his, her or its share ownership.
A description of any material relationship that our principal shareholders have had with us or any of our affiliates within the past three years is included under “Certain Relationships and Related Party Transactions.”
For a description of the voting rights attached to our ordinary shares, please see “Voting Rights.” Unless otherwise noted below, each shareholder’s address is 2 Kaplan St., Tel Aviv, Israel 6473403.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership |
% of Outstanding Shares |
||||||
| 5% or Greater Shareholders | ||||||||
| None | ||||||||
| Directors and Executive Officers of HUB: | ||||||||
| Noah Hershcoviz (1) | 299,881 | 2.98 | % | |||||
| Lior Davidsohn | – | – | ||||||
| Tuvia Grossman (2) | 5,833 | * | ||||||
| Nachman Geva (3) | 6,667 | – | ||||||
| Shlomo Bibas (4) | - | * | ||||||
| Renah Persosfky (5) | 26,250 | – | ||||||
| Ilan Flato (6) | 20,000 | * | ||||||
| Uzi Moskovich (7) | 26,193 | * | ||||||
| Shai Schiller (8) | 4,167 | |||||||
| All executive officers and directors as a group (9 individuals) | 393,158 | 3.91 | % | |||||
| * | Less than one percent (1%) of our outstanding ordinary shares. |
| (1) | Consists of (i) 10,000 ordinary shares that were issued upon the settlement of restricted share units, (ii) 119,335 ordinary shares, 12,000 of which are being held in escrow until January 27, 2026 to secure certain indemnification obligations, which were issued upon the closing of the BST Merger to Stok Kangi Ltd., a company wholly-owned by Mr. Hershcoviz, and are restricted from transfer for a period of at least six-months from January 27, 2025, and (iii) 170,546 ordinary shares, 35,932 of which are being held in escrow until January 27, 2026 to secure certain indemnification obligations, which were issued upon the closing of the BST Merger to The 12.64 Fund and are restricted from transfer for a period of at least six-months from January 27, 2025, of which Mr. Hershcoviz is Managing General Partner. Does not include (i) pre-funded warrants to purchase 186,783 ordinary shares, issued upon the closing of the BST Merger to The 12.64 Fund, of which Mr. Hershcoviz is Managing General Partner (ii) 10,000 restricted share units that vest in 14 equal three-month instalments over 3.5 years from November 21, 2024, subject to the payment in full by the Company of mandatory employee pension and severance contributions and manager’s insurance and directors’ fees (“Milestone A”) and the Control Limitation, (iii) 30,000 performance share units that vest in 14 equal three-month instalments over 3.5 years from November 21, 2024, subject to three equal instalments if and when the Company’s volume weighted average price (VWAP) per share during any period of 30 consecutive trading days multiplied by the number of ordinary shares outstanding (the “Market Value”) reaches $50 million, $75 million and $100 million, respectively, by May 21, 2027, and further subject to Milestone A and the Control Limitation and (iv) 560,000 restricted shares, the grant of which is subject to Milestone A and the Control Limitation, that vest as follows: | |
| (1) | 190,000 restricted shares vest in 14 equal three-month instalments over 3.5 years from November 21, 2024; | |
| (2) | 170,000 restricted shares vest in 14 equal three-month instalments over 3.5 years from November 21, 2024 and are subject to three equal instalments if and when the Company’s Market Value reaches $50 million, $75 million and $100 million, respectively; | |
| (3) | 100,000 restricted shares vest in 14 equal three-month instalments over 3.5 years from the closing of the BST Merger, which occurred on January 27, 2025; and | |
| (4) | 100,000 restricted shares vest in 14 equal three-month instalments over 3.5 years from the closing of one or more investments in the Company after November 21, 2024 in the aggregate amount of at least $85 million. | |
| The exercise of the pre-funded warrants is limited to the extent that such exercise would cause the beneficial ownership of holder thereof to exceed 4.99% of the Company’s outstanding shares. In addition, the ordinary shares issuable upon the issuable upon the exercise of the pre-funded warrants issued to The 12.64 Fund upon the closing of the BST Merger to The 12.64 Fund are restricted from transfer for a period of at least six-months from January 27, 2025. Mr. Hershcoviz disclaims beneficial ownership of the ordinary shares and warrants held by The 12.64 Fund except to the extent of his pecuniary interest therein. The foregoing restricted shares will be issued pursuant to the Company’s 2021 Plan, but not before a registration statement on Form S-8 covering the issuance of such shares is filed with the SEC. | ||
| No shares will be granted to the extent that Mr. Hershcoviz’s beneficial ownership, directly or indirectly, alone or together with any related party (spouse, parent, sibling, descendant, etc.), would exceed 9.9% of the Company’s control rights on an outstanding or fully diluted basis, such that he would be deemed a “controlling shareholder” as defined in Section 32(9) of the Israeli Income Tax Ordinance, including compliance with the tests established by the Israeli Tax Authority for determining “control” for the purposes of Section 102 of the Ordinance) (the “Control Limitation”), provided, however, that the vesting of any such shares will commence retroactively from the date of his eligibility therefor. | ||
| (2) | Consists of 5,833 restricted share units. Does not include 29,167 restricted share units which have been granted but have not vested and will not vest within 60 days of this annual report. | |
| (3) | Consists of 6,667 restricted share units. Does not include 33,333 restricted share units which have been granted but have not vested and will not vest within 60 days of this annual report. | |
| (4) | Does not include 50,000 restricted share units which have been granted but have not vested. | |
| (5) | Consists of 26,250 restricted share units. Does not include 123,750 restricted share units which have been granted but have not vested and will not vest within 60 days of this annual report. | |
| (6) | Consists of 20,000 restricted share units. Does not include 45,000 restricted share units, which have been granted but have not yet vested and will not vest within 60 days of this annual report. | |
| (7) | Consists of 1,318 ordinary shares and 24,875 restricted share units. Does not include 35,125 restricted share units, which have been granted but have not vested and will not vest within 60 days of this annual report. | |
| (8) | Consists of 4,167 restricted share units. Does not include 20,833 restricted share units which have been granted but have not vested and will not vest within 60 days of this annual report. |
| (9) | Consists of 4,167 restricted share units. Does not include 20,833 restricted share units which have been granted but have not vested and will not vest within 60 days of this annual report. |
Significant Changes in Ownership
To our knowledge, other than as disclosed in the table above, our other filings with the SEC and this Annual Report, there has been no significant change in the percentage ownership held by any major shareholder during the past three years.
Voting Rights
Other than the voting undertakings under the Shareholder and Sponsor Support Agreement, described below under “Related Party Transactions—Rights of Appointment,” which have been fully performed already and have therefore expired, no major shareholders listed above had or have voting rights with respect to their ordinary shares that are different from the voting rights of other holders of our ordinary shares.
Change in Control Arrangements
We are not aware of any arrangement that may at a subsequent date, result in a change of control of the Company.
Registered Holders
Based on a review of the information provided to us by our transfer agent, as of April 28, 2025, there were 32 registered holders of our ordinary shares, (one of which, Cede & Co., is a United States registered holder, holding approximately 6,213,376 shares (which represents 60.81% of our outstanding ordinary shares). The number of record holders in the United States is not representative of the number of beneficial holders nor is it representative of where such beneficial holders are resident since many of these ordinary shares were held by brokers or other nominees.
B. Related Party Transactions
The following is a description of related-party transactions we have entered into since January 1, 2024 with any of the members of the board of directors, executive officers or holders of more than 5% of any class of our voting securities at the time of such transaction.
Rights of appointment
Our board of directors currently consists of five directors. Pursuant to our articles of association as in effect immediately prior to the Business Combination, certain of our shareholders, including related parties, had rights to appoint directors and observers to its board of directors. All rights to appoint directors and observers terminated upon the closing of the Business Combination.
Agreements with officers
Employment Agreements. We have entered into employment or consulting agreements with each of our executive officers, and the terms of each individual’s employment or service, as applicable, have been approved by our board of directors. These agreements provide for notice periods of varying duration for termination of the agreement by us or by the relevant executive officer, during which time the executive officer will continue to receive base salary and benefits. These agreements also contain customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. Transactions with related parties also include employment agreements with relatives of certain directors or officers, each duly approved by the Board of Directors or its Audit Committee.
Options and restricted share units. Since our founding, we have granted options to purchase ordinary shares to our executive officers and directors. Additionally, since August 2021, we have granted restricted share units and restricted shares to our executive officers and directors.
Exculpation, indemnification, and insurance. The Articles permit us to exculpate, indemnify and insure certain of its officeholders (as such term is defined under the Companies Law) to the fullest extent permitted by the Companies Law. We have entered into agreements with certain officeholders, exculpating them from a breach of their duty of care to us to the fullest extent permitted by law and undertaking to indemnify them to the fullest extent permitted by law, subject to certain exceptions, including with respect to liabilities resulting from the closing of the Business Combination to the extent that these liabilities are not covered by insurance.
Agreements with Blackswan and A-Labs. We have entered into agreements with certain third parties with whom Noah Hershcoviz, our Chief Executive Officer and director, is an affiliate. Specifically, we entered into the BST Merger Agreement with BST, a company in which Mr. Hershcoviz serves as a director and in which a company wholly-owned by Mr. Hershcoviz held shares, with an effective date of January 15, 2025. In addition, Mr. Hershcoviz serves as Managing General Partner of The 12.64 Fund, which was a significant shareholder of BST. See Item 5B. “Liquidity and Capital Resources—Financings” and Item 4A. “History and Development of the Company—Recent Developments.”
Additionally, on January 16, 2023, we entered into a loan agreement with A-Labs Finance and Advisory Ltd. (“A-Labs”), a company in which Mr. Hershcoviz served as Managing Partner, Head of Investing Banking, as further described in Item 5B. “Liquidity and Capital Resources—Financings.” In addition, we paid A-Labs the sum of $4.2 million between July 2021 and March 2023 as consulting fees under a financial advisory services agreement entered into July 2021 (the “A-Labs Agreement”) and we issued to A-Labs warrants to purchase the 407,692 of our ordinary shares. Additionally, in March 2023, a total of $2.2 million that was owed to A-Labs pursuant to the A-Labs Agreement was converted into our ordinary shares at a conversion price of $100 per ordinary share. This conversion of amounts we owed to A-Labs under the A-Labs Agreement, was effected to partially satisfy the commitment that A-Labs made to us to purchase $20 million of our ordinary shares in the PIPE Financing. In December 2022, we amended the A-Labs Agreement to provide that for each financing transaction closed, in addition to paying a commission to A-Labs in cash, we would be required to issue warrants to purchase ordinary shares in an amount equal to the cash consideration that would otherwise be payable under the financial advisory services agreement divided by 4.81, which warrants shall be exercisable for 4 years and at an exercise price of NIS 4.81 (regardless of the price per share paid by investors in the relevant financing transaction). Additionally, we committed to provide compensation under the A-Labs Agreement for all investors with whom we would enter into a financing transaction prior to our shares being listed for trading on the Nasdaq regardless of whether such investors were introduced to the Company by A-Labs. In each of September 2022 and January 2023, we paid to A-Labs an additional commission of $50,000 in exchange for extra services provided by A-Labs over the course of certain fund raising efforts and loan issuances. Additionally, as part of the Shayna Loans, we paid to A-Labs commissions totaling $140,000 for services provided as part of the fund raising efforts. The term of the A-Labs Agreement was for 12 months following the execution in July 2021, provided that the A-Labs Agreement will automatically renew for additional 12 month terms unless either party provides written notice to the other party of its intention not to renew at least 30 days prior to the end of such initial 12 month term or any renewed terms. Additionally, the A-Labs Agreement may be terminated by either party upon a minimum of 30 days prior written notice. In August 2023, we received from A-Labs a waiver of the retainer fees for the services. Nevertheless, as of the date of this Annual Report, there remains unpaid fees of $3,298,000 under the A-Labs Agreement.
Private Placement with Chairman. In January 2023, we entered into an agreement with our former Chairman of our Board of Directors, Kasbian Nuriel Chirich, prior to when he became the Chairman of our Board of Directors in February 2023, for the purchase and sale of 5,000 ordinary shares in consideration for $100,000. As of the date of this Annual Report, we have not issued such 5,000 ordinary shares.
C. Interests of Experts and Counsel
Not applicable.
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information
Consolidated Financial Statements
See Item 18. “Financial Statements.”
Legal and Arbitration Proceedings
From time to time, we are 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 and directors, as well as governmental and other regulatory investigations and proceedings.
There is no pending litigation or proceeding against any of HUB’s office holders as to which indemnification is currently being sought, and, except as described below, HUB is not aware of any pending or threatened litigation, the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our 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 us 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 we are 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. |
| 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 800,000 (approximately $250,000) per year, and HUB’s previous announcement stated that the contract tender would have a material effect on its 2022 financial results. HUB was notified of the cancellation of the award of the tender on the afternoon of Wednesday, March 23, 2022, which was the same day that HUB announced its execution of the Business Combination Agreement. HUB reported the cancellation of the award on Sunday, March 27, 2022. The applicable rules of the Tel Aviv Stock Exchange (TASE) and the Israel Securities Authority, require announcements of this kind to be made not later than the trading day following a company’s receipt of the relevant information. Friday is not a trading day on the TASE, so HUB’s report can be said to have been made one day late. The price of HUB’s ordinary shares on the TASE fell by approximately 35% on March 27, 2022. |
| The plaintiff’s request to the court cites total damages at NIS 229 million (approximately $70 million). On October 20, 2022, the amount claimed was reduced from NIS 229.44 million to NIS 5.44 million (approximately $1.48 million). |
| On January 30, 2023, the amount requested was increased to NIS 64 million. On February 2, 2023, a partial judgment was issued in which the motion to withdraw against the directors was approved, leaving the motion pending against the Company and its former Chief Executive Officer only. The answer to the amended approval request was submitted by September 3, 2023, and the response by the plaintiffs was submitted on October 22, 2023. |
| 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 that the mediation attempt failed. The plaintiffs filed their summaries on October 1, 2024 and the defendants filed their summaries on February 19, 2025. The next hearing is set for May 18, 2025. |
| 3. |
Request for disclosure of documents according to Section 198A of the Companies Law – On February 8, 2023, Mr. Yuval Lev (the “Lev”) filed a motion for Discovery according to section 198a of the Companies Law, 1999 (as a preliminary proceeding prior to submitting a Motion to Certify a Claim as a Derivative Action) against the in the Tel Aviv-Jaffa District Court (the “Court”). On April 4, 2023, Lev filed an amended motion for discovery (the discovery motion, as amended, “Lev Discovery Motion”). The Lev Discovery Motion focused on the claim regarding the release of the Clover Fund (“Clover”) from the PIPE investment, in light of the Company’s report on this matter, dated February 2, 2023.
The Lev Discovery Motion asserted several claims: the unclarified release of Clover from the PIPE investment; claims regarding the investing entity A-Labs as “questionable”; the fact that the PIPE funds have not been disbursed to the Company; an alleged lawsuit (C.A 48585-03-23) that had been filed by Qpoint Technologies Ltd. against the Company. The Lev Discovery Motion includes Lev’s demand to disclose many documents including - all agreements between the Company and the PIPE investors; a breakdown of all the commission recipients who benefit from the investment (the amount of 50 million US dollars), including all the agreements between A-Labs and the investors or the Company; minutes of the Company’s board of directors meetings and the Company’s management; the correspondences and all draft commitments exchanged between the Company and investors; Clover ’s request to be released from its obligation to invest in the Company a total of 10 million US dollars; minutes of the Company’s board of directors meetings in which the subject of Clover’s release from its obligation was discussed; A-Labs’ commitment dated February 2, 2023, in which it assumed Clover’s obligations; details of the guarantees that A-Labs provided in relation to the original investment, as well as the guarantees provided by the other investors; A-Labs’ announcement from February 28, 2023 or shortly before that, that it or the other investing companies are not expected to meet their obligations; minutes of the Company’s board of directors meetings in which the subject of the measures to be taken to enforce the obligations was discussed; the engagement agreement between the company and A-Labs in its capacity as an investment banker and/or broker of the investment obligations in the Company, as well as a breakdown of all amounts paid by the respondent to A-Labs; and details of all the grants received by the officers and/or stakeholders of the company regarding the company’s merger with the SPAC and other relevant documents. |
|
According to the claims raised in the Lev Discovery Motion, the Company’s alleged actions demonstrate a violation of the obligations of care and trust imposed of the officers and the directors of the Company in accordance with the Companies Law, 1999, as well as an alleged basis for pursuing legal action against third parties.
On April 10, 2024, the Company filed its Response to the Lev Discovery Motion. As part as of the response, the company also requested the filing of a confidential appendix (the “motion”); It was determined by the Court that temporary confidentiality would be maintained, and that Lev would file his response to the motion and also to the Company response by September 8, 2024. On May 8, 2024, the parties submitted a joint motion to postpone the hearing date and extend the deadline for submitting responses by Lev until June 20, 2024. The Court granted the motion on the same day and postponed the scheduled hearing to November 7, 2024, at 9:00 AM. On May 20, 2024, by Lev submitted a motion to extend the deadline for submitting his responses by 30 days. The Court granted the motion. On June 24, 2024, Dominion Capital LLC (“Dominion”) (a third party not related to the proceedings) filed a motion to review the Court file. On July 8, 2024, the Company submitted it response (opposition) to the motion for review. On July 18, 2024, Dominion filed a response to the company’s response regarding the motion to review the Court file.
On July 18, 2024, the Court issued its decision on the motion for review and presented a proposal whereby the review would be allowed at the Court’s registry and not through the Court’s online system. This access would only apply to documents in the file as of the date of this decision, and not to future pleadings or decisions (for which Dominion would need to submit a separate motion). The Company was asked to inform whether they agree to the Court’s proposal. On July 21, 2024, the Company notified that it agreed to the Court’s proposal. On August 21, 2024, Lev in the proceedings submitted a response to the motion to submit a confidential appendix. On that day, the Court issued a decision proposing the Company not pursue the motion regarding the appendix. On September 22, 2024, the Company notified that it would not pursue it the motion. On the same day, the Court ruled that a copy of the appendix should be submitted to the file by September 25, 2024, and that the costs related to the motion for confidentiality would be considered when determining costs at the conclusion of the proceedings. On September 25, 2024, the respondent submitted the confidential appendix to the Court’s online file.
On July 7, 2024, Mr. Dahan Ori (“Dahan”) filed a motion for Discovery according to section 198a of the Companies Law, 1999 (as a preliminary proceeding prior to submitting a Motion to Certify a Claim as a Derivative Action) (the “Dahan Discovery Motion”) against the Company in the Court. The Dahan Discovery Motion largely overlaps with the Lev Motion to Discovery. On September 25, 2024, Lev filed a motion to dismiss the Dahan Discovery Motion filed by Dahan, arguing that it was filed too late and should therefore be dismissed outright. On November 3, 2024, Dahan, filed his objection to the motion filed by Lev, stating that he believes his Discovery motion is more comprehensive and should therefore be heard. The Court has ruled that the issue of dismissal will be discussed at the hearing scheduled for November 7, 2024.
On November 7, 2024, during the first pre-trial hearing in the Lev discovery motion, the Court recommended that Lev and Dahan engage in discussions to explore the possibility of drafting a unified discovery motion. It was agreed that Lev and Dahan would submit their position on this matter by December 5, 2024. It has been determined that instructions regarding the further conduct of the proceedings will be given only after Lev and Dahan submit their position. Following the request of Lev and Dahan, the deadline was extended until December 23, 2024.
On December 1, 2024, the petitioner in the Maj’haj case filed a motion for access the Court file (at this paragraph: “the petitioner” and “the motion”). On this date, the Court issued its decision, stating that it should be assumed that the respondent will not object to the motion, given that the respondent did not oppose another motion filed in the same matter. The Court further indicated that if the respondent has any objection, it must be filed by December 10, 2024. The same applies to the petitioner in this procedure. On December 10, 2024, the respondent filled her response to the motion. On the same day, the Court issued a decision allowing access to the Court file. On December 11, 2024, the petitioner sought a permission to fille a response to the respondent’s response to the motion. On the same day, the Court denied the request, ruling that a decision had already been made allowing the access the Court file and that there is no vested right to fille a response to the respondent’s response.
On December 26, 2024, the Applicant filed an update notice, in which he informed the Court that the Applicants were unable to reach a consent between themselves regarding the possibility to file an amendment motion. Therefore, the Court is requested to rule on the motion to dismiss the subsequent motion filed by Dahan. The Court has not yet issued its decision on the matter. |
| 4. |
A similar motion for disclosure of documents according to Section 198A of the Companies Law was filed on July 7, 2024, by Mr. Dahan Ori (“Dahan”) under Section 198A of the Companies Law (the “Dahan Discovery Motion”) against the Company in the District Court in Tel Aviv in connection with a claim concerning the Company’s release of Clover from its obligation to participate in the PIPE Financing. On July 8, 2024, the Court ruled that due to the similarities to the Lev motion detailed above, Dahan should discuss his position with Lev and report back to the Court. On July 28, 2024, the Court ruled that Dahan should provide to the Court further details regarding its attempt to receive information from Lev, and stated that it is likely that the Court would instruct both petitioners to share the details of their motions with each other. Dahan and Lev discussed the matter and Lev matter was of the opinion that the Dahan Discovery Motion should be withdrawn due to its similarities with the Lev Discovery Motion, and on August 25, 2024, the Petitioner informed the court of his disagreement with that position, and claimed that the new Discovery Motion should not be deleted. The petitioner in the Lev Discovery Petitioned on September 25, 2024 for the Discovery Motion in the Dahan matter to be dismissed. On November 3, 2024, the Dahan, filed his objection to the motion filed by Lev, stating that he believes his Discovery motion is more comprehensive and should therefore be heard. The court has ruled that the issue of dismissal will be discussed at the hearing scheduled for November 7, 2024.
On November 7, 2024, during the first pre-trial hearing in the Lev Discovery Motion, the court recommended that the Applicants engage in discussions to explore the possibility of drafting a unified discovery motion. It was agreed that Lev and Dahan would submit their position on this matter by December 5, 2024. Following the request of Lev and Dahan, the deadline was been extended until December 26, 2024.
On December 26, 2024, Dahan filed an update notice, in which he informed the court that the Lev and Dahan were unable to reach an agreement between themselves regarding the possibility to file an amended motion. Therefore, the court was requested to rule on the motion to dismiss the subsequent motion filed by Dahan. The court has not yet issued its decision on the matter. |
| 5. | PIPE Financing Litigation – On March 6, 2023, Mr. Maj’haj Avner (“Maj’haj”) 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. Maj’haj 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. Maj’haj 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 2.5 million. 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, Maj’haj 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 Maj’haj waive all cause of action that do not relate to the Securities Law which recommendations Maj’haj 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 Maj’haj does not receive a satisfactory response to the Disclosure Request by such date, Maj’haj 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 set for November 4, 2024. On December 2, 2024, Maj’haj filed a motion to summon additional witnesses. As part of this motion, Maj’haj asked the court to summon several additional witnesses, including the PIPE investors, the remaining respondents in the Motion to Certify, and other individuals associated with the Company. On the same day, the court issued its decision, instructing the respondent to file a response to the motion by January 5, 2025. |
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On December 29, 2024, Maj’haj filed a motion to remove the confidentiality protection from several documents provided to him by the company. On January 5, 2025, the court denied Maj’haj’s motion to remove confidentiality of the documents that were transferred, without requiring a response from the respondents.
On January 5, 2025, the respondents filed their response to the motion to summon additional witnesses. On January 15, 2025, Maj’haj filed his reply to the respondents’ response on this matter. The court has yet to issue its decision regarding this matter.
On March 31, 2025, the court issued a decision regarding the request to summon additional witnesses. The court approved the summoning of three witnesses. The court allowed the possibility of submitting an affidavit by one of the witnesses. On March 27, 2025, the Respondents informed the court that they wish to submit an affidavit on behalf of one of the witnesses. On the same day, the court issued a decision stating that the affidavit submitted by May 4, 2025. The date was extended to May 29, 2025.
On April 6, 2025, a decision was issued by the court stating that, due to the court's constraints, the previously scheduled evidentiary hearings in this case must be postponed to another date. Alternative evidentiary hearings were scheduled for October 20–21, 2025.
On April 7, 2025, a request to review the case was submitted by Yuval Lev (the Applicant in Lev case). On the same day, the court issued a decision requiring the parties to respond to this request by April 27, 2025 (the date was postponed to May 7, 2025. On April 10, 2025, a response was submitted on behalf of the petitioner in this case, stating that he agrees to the request for case review. |
| 6. |
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 $12 million (as well as its costs and legal fees associated with the claim) with regards to the business combination, pursuant to a financial advisory agreement entered into by and between Oppenheimer and the Company in December 2021.
Effective February 19, 2025, the Company and Oppenheimer agreed to settle the claim for $3 million, with $1.1 million being paid on the effective date and the remaining balance payable in ten monthly payments of $200,000 from March to December 2025 (with the first payment being $100,000), and the claim was dismissed on February 21, 2025.
As part of the settlement arrangement, Claymore agreed to make on the Company’s behalf, all the payments that the Company is required to make under the settlement agreement with Oppenheimer. In consideration, the Company issued Claymore a convertible note in the principal amount of $6 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 18, 2030, subject to earlier conversion by Claymore. The note is convertible into ordinary shares at a rate equal to 25% below the lower of (i) the closing price per share of the ordinary shares immediately preceding the conversion and (ii) the volume-weighted average price of the ordinary shares over the five trading days prior to the conversion, subject to a collar between $15.00 and the Nasdaq floor price.
In the event Claymore defaults on its payment obligations, the principal amount of the note will be reduced by twice the amount of such payment. The Company also undertook to grant Claymore liens to secure the Company’s repayment obligations under the note, following the repayment of note issued to J.J. Astor & Co. on December 30, 2024 and the Company’s receipt of the consent of the applicable senior lien holders. |
| 7. | Dominion Capital Suit and Insolvency Petition - 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 $2.5 million that the sponsor allegedly disbursed to the Company pursuant to a promissory note. The sponsor asserted that it was entitled to damages in the amount of the loan principal plus interest and attorneys’ fees and was awarded summary judgment. |
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On April 10, 2024, Dominion, 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 was set for October 7, 2024.
On February 20, 2025, the Company and Dominion agreed to settle the claims for $4.5 million, with $400,000 being payable by February 21, 2025, $200,000 payable by March 3, 2025 and the remaining balance payable in ten monthly payments of $390,000 from March to December 2025. Dominion agreed that, upon receipt of the first installment payment, it will file a motion to stay the Israeli insolvency proceedings, and upon receipt of the second installment payment, it will file a motion to cancel the Israeli insolvency proceedings. The Israeli insolvency proceedings were eventually dismissed on March 7, 2025.
As part of the settlement arrangement, Claymore Capital Pty Ltd. (“Claymore”) agreed to make on the Company’s behalf all the payments that the Company is required to make under the settlement agreement with Dominion. In consideration, the Company issued Claymore a convertible note in the principal amount of $7.5 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 20, 2030, subject to earlier conversion by Claymore. The note is convertible into ordinary shares at a rate equal to 25% below the lower of (i) the closing price per share of the ordinary shares immediately preceding the conversion and (ii) the volume-weighted average price of the ordinary shares over the five trading days prior to the conversion, subject to a collar between $15.00 and the Nasdaq floor price.
In the event Claymore defaults on its installment payment obligations to Dominion, the principal amount of the note will be reduced by 1.667 times the amount of such installment. The Company also undertook to grant Claymore liens on the Company’s shares in BlackSwan Technologies, Inc. and on incoming revenues of the Company in the amount of $6 million in the event that an insolvency event occurs prior to August 20, 2025 or if Nasdaq does not grant the Company the opportunity to come into compliance with its listing conditions by no earlier March 31, 2025. |
| 8. | Y.H Lahav Financial Advisors - On June 4, 2024, Y.H. Lahav Financial and Strategic Consulting Ltd.(“Lahav”) filed claims with the Tel Aviv District Court against Blackswan Technologies, Inc. and Cognitive Systems Ltd., subsidiaries of the Company, alleging breaches of a loan agreement and seeking damages totaling approximately $2 million. A statement of defense was submitted on December 15, 2024. On April 21, 2025 and April 24, 2025, Lahav requested permission from the court to update its statement of defense to add the Company as a party to the proceeding and request an order for provision of accounts. On April 24, 2025, the court ordered the defendants to respond to the request. |
| 9. | Meitar law firm – The Meitar Liquornik Geva Leshem Tal law firm (“Meitar”) filed a claim against the Company on August 29, 2024, claiming an unpaid legal retainer of NIS 562,960. Meitar was awarded by the court with the amount requested in the claim on December 18, 2024. The Company is currently negotiating a payment plan with Meitar. |
| 10. | Tufin - A claim was filed to the Tel Aviv Magistrates Court by Tufin Software Technologies Ltd. (“Tufin”), against Comsec Ltd, (a subsidiary of the Company) and against the Company claiming an unpaid debt of NIS 1,891,799. While the parties were still in discussions to try and reach a settlement, on September 4, 2024 Tufin filed a motion to receive a judgement due to the fact that the respondents did not submit their defense in the claim. As Tufin was ultimately one of the creditors included in the Comsec debt settlement, the claim is expected to eventually be dismissed. Tufin’s CFO also confirmed in writing that as long as Comsec meets the terms of the debt settlement, Tufin will not take any further actions to advance this claim. | |
| 11 | Former Service Provider Insolvency claim - On August 15, 2024, a former service provider of the Company submitted to the Tel Aviv District Court a petition to declare the Company insolvent due to an unpaid debt of NIS 70,000. On September 4, 2024, the claim was settled. |
| 12 | Bulwarx Ltd. – On September 3, 2024, Bulwarx Ltd. filed a claim against the Company claiming an unpaid debt of NIS 163,370 for services granted to the Company. On September 22, 2024 the claim was settled. | |
| 13 | The Phoenix Insurance Company Ltd Vs. Comsec 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 NIS 145,922. The amounts of the claims were paid and the claim is expected to be dismissed. A separate claim was filed by one of the employees on February 11, 2025 in the amount of 25,443 NIS. As that amount was also paid, this claim is expected to be dismissed. | |
| 14 | The Phoenix Insurance Company Ltd. vs. Hub TLV – On February 20, 2025 a claim was filed against Hub TLV for missing social benefits payment to the company’s employees insured by the Phoenix Insurance Company Ltd, in the amount of NIS 165,496. As those amounts were paid, this claim is expected to be dismissed. |
| 15. | 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. |
| 16. | Employee Claims - Two of the Company’s former US employees filed claims in the cumulative amount of approximately $350,000 in the aggregate related to lost wages, amounts due pursuant to employment agreements and unlawful termination. The claims have since been settled. |
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 846,716 alleging unlawful termination and entitlement to various employment rights, including, but not limited to, unlawful termination compensation, severance pay, advanced notice compensation, and bonuses according to the employment agreement. On December 26, 2023, Comsec submitted its statement of defense, denied, and rejected the plaintiff’s claims and demands. A preliminary hearing occurred on March 13, 2024. The plaintiff filed an affidavit with the court on May 27, 2024 and Comsec submitted an affidavit by September 15, 2024. On February 23, 2025, the case was settled for NIS 50,000. |
| (b) | An additional former Israeli employee filed a claim in the Tel Aviv Labor Court against the Company in the amount of NIS 271,593. The plaintiff alleges that this amount is owed to him due to violation of the employment agreement signed with him. The plaintiff claims a signing bonus that he claims was not paid to him, an unconditional quarterly bonus including social benefits for him, and the registration of 20,000 RSUs in his name, compensation for bad faith and misrepresentation. A preliminary hearing is set for February 2, 2025. On November 8, 2024, the case was settled for an amount of NIS 101,500. |
| (c) | An additional former employee filed a claim on July 23, 2024 with regards to alleged missing pension and social benefits payments, in the aggregated amount of NIS 17,443. The case was settled on September 9, 2024 for NIS 20,687. |
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. In 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. On November 7, 2024, the Company filed its statement of defense.
The next hearing in the claim is scheduled for September 8, 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. On February 16, 2025, the former CEO filed a discovery affidavit and the Company must file its affidavits in response on May 14, 2025. On September 8, 2025, an evidentiary hearing is scheduled to be held. |
Dividend Policy
HUB does not anticipate paying any dividends in the foreseeable future. We currently intend to retain future earnings, if any, to finance operations and expand our business. Our board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that our directors may deem relevant.
The Companies Law imposes restrictions on our ability to declare and pay dividends. See “Dividend and Liquidation Rights” in Exhibit 2.1 to this Annual Report for additional information. See also “Item 3.D. Risk Factors—Risks Related to Our Ordinary Shares— We do not intend to pay dividends for the foreseeable future. Accordingly, you may not receive any return on investment unless you sell your ordinary shares for a price greater than the price you paid for such shares.
Payment of dividends may be subject to Israeli withholding taxes. See “Israeli Tax Considerations” for additional information.
B. Significant Changes
None.
Item 9. The Offer and Listing
A. Offer and Listing Details
Our ordinary shares and warrants commenced trading on Nasdaq on March 1, 2023 under the symbol “HUBC,” “HUBCW” and “HUBCZ,” respectively. Prior to this, no public market in the United States existed for our ordinary shares or warrants.
B. Plan of Distribution
Not applicable.
C. Markets
Our ordinary shares commenced trading on Nasdaq on March 1, 2023.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. Additional Information
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
Copies of our amended and restated articles of association and memorandum of association are attached as Exhibits 1.1 and Exhibit 1.2, respectively, to this Annual Report. The information called for by this Item is set forth in Exhibit 2.1 to this Annual Report and incorporated by reference herein.
C. Material Contracts
Except as disclosed below or otherwise disclosed in this Annual Report in Item 4.A “History and Development of the Company,” Item 4.B “Business Overview,” Item 5.B “Operating and Financial Review and Prospects—Liquidity and Capital Resources,” Item 6.C “Board Practices,” Item 7.B “Related Party Transactions” and Item 19 “Exhibits,” we are not currently, nor have we been for the two years immediately preceding the date of this Annual Report, party to any material contract, other than contracts entered into in the ordinary course of business.
BST Merger Agreement
On January 27, 2025, HUB acquired BST as a wholly-owned subsidiary. As a result of the acquisition, HUB issued to BST equityholders 2,965,366 ordinary shares and pre-funded warrants to purchase 664,373 ordinary shares of HUB. 364,972 of the shares issued to the BST equityholders are to be held in escrow for a period of 12 months following the closing date to secure certain indemnification obligations. Following the issuance, HUB had 69,675,768 ordinary shares outstanding, with the ordinary shares issued as a result of the acquisition constituting approximately 42.56% of HUB’s outstanding ordinary shares and approximately 29.91% of HUB’s share capital on a fully-diluted basis (after giving effect to additional shares issuable pursuant to adjustment mechanisms under existing securities but excluding existing warrants that are significantly out-of-the-money, unvested equity grants, and convertible notes that are expected to be repaid and not converted). The exercise of the pre-funded warrants is limited to the extent that, upon exercise, the holder and its affiliates hold more than 4.99% of the Company’s outstanding ordinary shares. The ordinary shares issued in the transaction are also subject to transfer restrictions.
Qpoint Acquisition
On April 3, 2024 the Company acquired for NIS 25,000,000 in cash the shares of Qpoint that it did not yet own at that time, constituting 53.5% of Qpoint’s outstanding shares. Payments were agreed to be carried out in three installments as follows: (i) NIS 4,000,000 on the signing date; (ii) NIS 16,000,000 on the closing date (which was April 8, 2024); and (iii) additional NIS 5,000,000 no later than February 10, 2025 (of which NIS 2,500,00 was already paid as of June 5, 2024).
D. Exchange Controls
There are currently no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the ordinary shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that are, have been, or will be, in a state of war with Israel.
E. Taxation
The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares and warrants. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
Israeli tax considerations and government programs
The following is a brief summary of the material Israeli tax laws applicable to us, and certain Israeli Government programs that benefit us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition of our ordinary shares. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of such investors include residents of Israel, traders in securities, not for profit organizations, pension funds and other exempt institutional investors, partnerships and other transparent entities, individuals under the tax regime for “new immigrants” or “returning residents” and other taxpayers who are subject to special tax regimes not covered in this discussion. To the extent that the discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below.
General corporate tax structure in Israel
Israeli companies are generally subject to corporate tax. Since 2018, the corporate tax rate has been 23%. However, the effective tax rate payable by a company that derives income from a Preferred Enterprise, a Special Preferred Enterprise, a Preferred Technology Enterprise or a Special Preferred Technology Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to the prevailing regular corporate tax rate.
Law for the Encouragement of Industry (Taxes), 5729-1969
The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the “Industry Encouragement Law”, provides several tax benefits for “Industrial Companies.” We believe that we currently qualify as an Industrial Company within the meaning of the Industry Encouragement Law.
The Industry Encouragement Law defines an “Industrial Company” as an Israeli resident-company, incorporated in Israel, of which 90% or more of its income in any tax year, other than income from certain government loans, is derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area”, in accordance with the definition under section 3A of the Israeli Income Tax Ordinance (New Version) 1961 (the “Ordinance”). An “Industrial Enterprise” is defined as an enterprise which is held by an Industrial Company whose principal activity in a given tax year is industrial production.
Following are the main tax benefits available to Industrial Companies:
| ● | Amortization of the cost of purchased patent, rights to use a patent, and know-how that were purchased in good faith and are used for the development or advancement of the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised; |
| ● | Under limited conditions, an election to file consolidated tax returns with controlled Israeli Industrial Companies; |
| ● | Expenses related to a public offering are deductible in equal amounts over three years commencing on the year of the offering. |
Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority. There can be no assurance that we will continue to qualify as an Industrial Company or that the benefits described above will be available in the future.
Tax benefits and grants for research and development
Israeli tax law allows, under certain conditions, a tax deduction for expenditures, including capital expenditures, for the year in which they are incurred. Expenditures are deemed related to scientific research and development projects, if:
| ● | The expenditures are approved by the relevant Israeli government ministry, determined by the field of research; |
| ● | The research and development must be for the promotion of the company; and |
| ● | The research and development is carried out by or on behalf of the company seeking such tax deduction. |
The amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested in an asset depreciable under the general depreciation rules of the Ordinance. Expenditures that are unqualified under the conditions above are deductible in equal amounts over three years.
From time to time we may apply to the Israel Innovation Authority for approval to allow a tax deduction for all or most of research and development expenses during the year incurred. There can be no assurance that such application will be accepted. If we will not be able to deduct research and development expenses during the year of the payment, we will be able to deduct research and development expenses during a period of three years commencing in the year of the payment of such expenses.
Law for the Encouragement of Capital Investments 5719-1959
The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the “Investment Law”, provides certain incentives for capital investments in production facilities (or other eligible assets).
The Investment Law was significantly amended effective as of April 1, 2005 (the “2005 Amendment”), as of January 1, 2011 (the “2011 Amendment”) and as of January 1, 2017 (the “2017 Amendment”). Pursuant to the 2005 Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force but any benefits granted subsequently are subject to the provisions of the amended Investment Law. Similarly, the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead, irrevocably, to forego such benefits and have the benefits of the 2011 Amendment apply. The 2017 Amendment introduces new benefits for Technological Enterprises, alongside the existing tax benefits.
Tax benefits under the 2011 amendment
The 2011 Amendment canceled the availability of the benefits granted to Industrial Companies under the Investment Law prior to 2011 and, instead, introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 15% with respect to its income derived by its Preferred Enterprise in 2011 and 2012, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be 10%. Under the 2011 Amendment, such corporate tax rate was reduced from 15% and 10%, respectively, to 12.5% and 7%, respectively, in 2013, and was increased to 16% and 9% respectively. Pursuant to the 2017 Amendment, in 2017 and thereafter, the corporate tax rate for a Preferred Enterprise remained 16%, while the reduced rate for a specified development zone was decreased to 7.5%. Income derived by a Preferred Company from a “Special Preferred Enterprise” (as such term is defined in the Investment Law) would be entitled, during a benefits period of 10 years, to further reduced tax rates of 8%, or 5% if the Special Preferred Enterprise is located in a specified development zone. Since January 1, 2017, the definition for “Special Preferred Enterprise” includes less stringent conditions.
Dividends distributed from income which is attributed to a “Preferred Enterprise” will be subject to withholding tax at source at the following rates: (i) Israeli resident corporations-0%, (although, if such dividends are subsequently distributed to individuals or a non-Israeli company the below rates detailed in sub sections (ii) and (iii) shall apply) (ii) Israeli resident individuals-20% (iii) non-Israeli residents (individuals and corporations)- 25% or 30%, and subject to the receipt in advance of a valid certificate from the Israel Tax Authority (“ITA”) allowing for a reduced tax rate—20%, or a reduced tax rate under the provisions of any applicable double tax treaty.
We currently do not intend to implement the 2011 Amendment.
New tax benefits under the 2017 amendment that became effective on January 1, 2017
The 2017 Amendment provides that a technology company satisfying certain conditions will qualify as a “Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technology Income”, as defined in the Investment Law. The tax rate is further reduced to 7.5% for a Preferred Technology Enterprise located in development zone “A”. In addition, a Preferred Technology Company will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets” (as defined in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the Israel Innovation Authority. The 2017 Amendment further provides that a technology company satisfying certain conditions (group consolidated revenues of at least NIS 10 billion) will qualify as a “Special Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technology Income” regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were either developed by the Special Preferred Enterprise or acquired from a foreign company after January 1, 2017, and the sale received prior approval from the Israel Innovation Authority. A Special Preferred Technology Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500 million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law.
Dividends distributed to Israeli shareholders by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, paid out of Preferred Technology Income, are generally subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders—subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20% or such lower rate as may be provided in an applicable tax treaty). However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, the aforesaid will apply). If such dividends are distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli company and other conditions are met, the withholding tax rate will be 4%, or such lower rate as may be provided in an applicable tax treaty.
We believe that we may be eligible to the tax benefits under the 2017 Amendment. It should be noted that the proportion of income that may be considered Preferred Technology Income and enjoy the tax benefits described above, should be calculated according to the Nexus Formula, which is based on the proportion as that of qualifying research and development expenditures in the IP compared to overall research and development expenditures.
Taxation of our shareholders
Capital gains taxes applicable to non-Israeli resident shareholders
A non-Israeli resident who derives capital gains from the sale of shares in an Israeli resident company that were purchased after the company was listed for trading on a stock exchange outside of Israel, should be exempt from Israeli tax unless, among others, the shares were held through a permanent establishment that the non-resident maintains in Israel. If not exempt, a non-Israeli resident shareholder would generally be subject to tax on capital gain at the ordinary corporate tax rate (23% in 2025), if generated by a company, or at the rate of 25%, if generated by an individual, or 30%, if generated by an individual who is a “substantial shareholder” (as defined under the Ordinance), at the time of sale or at any time during the preceding 12-month period (or if the shareholder claims a deduction for interest and linkage differences expenses in connection with the purchase and holding of such shares). A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include, among others, the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. Individual and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income (a corporate tax rate for a corporation (23% in 2023) and a marginal tax rate of up to 47% for an individual in 2025, not including surtax), unless contrary provisions in a relevant tax treaty apply. Non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest more than 25% in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. In addition, such exemption is not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income.
Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under Convention Between the Government of the United States of America and the Government of the State of Israel with Respect to Taxes on Income, as amended (the “United States-Israel Tax Treaty”), the sale, exchange or other disposition of shares by a shareholder who is a United States resident (for purposes of the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident by the United States Israel Tax Treaty (a “Treaty U.S. Resident”) is generally exempt from Israeli capital gains tax unless: (i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition is attributed to a permanent establishment in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12 month period preceding the disposition, subject to certain conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year. In each case, the sale, exchange or disposition of our ordinary shares would be subject to Israeli tax, to the extent applicable; however, under the United States-Israel Tax Treaty, the taxpayer may be permitted to claim a credit for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations under U.S. law applicable to foreign tax credits. The United States-Israel Tax Treaty does not provide such credit against any U.S. state or local taxes.
In some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale (i.e., resident certificate or other documentation). Specifically, in transactions involving a sale of all of the shares of an Israeli resident company, in the form of a merger or otherwise, the ITA may require from shareholders who are not liable for Israeli tax to sign declarations in forms specified by this authority or obtain a specific exemption from the ITA to confirm their status as non-Israeli tax residents, and, in the absence of such declarations or exemptions, may require the purchaser of the shares to withhold taxes at source.
Taxation of non-Israeli shareholders on receipt of dividends
Non-Israeli residents (either individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%, which tax will be withheld at source, unless a lower tax rate is provided in an applicable treaty between Israel and the shareholder’s country of residence (subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate). With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. Such dividends are generally subject to Israeli withholding tax at a rate of 25% so long as the shares are registered with a nominee company (as such term is used in the Israeli Securities Law), whether the recipient is a substantial shareholder or not, and, subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20% if the dividend is distributed from income attributed to a Preferred Enterprise or Preferred Technology Enterprise or such lower rate as may be provided in an applicable tax treaty. For example, under the United States Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ordinary shares who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by a Preferred Enterprise or a Preferred Technology Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income for such preceding year consists of certain types of dividends and interest. If dividends are distributed from income attributed to a Preferred Enterprise or a Preferred Technological Enterprise and the foregoing conditions are met, such dividends are subject to a withholding tax rate of 15% for a shareholder that is a United States corporation. The aforementioned rates under the United States-Israel Tax Treaty would not apply if the dividend income is derived through a permanent establishment of the Treaty U.S. resident in Israel. If the dividend is attributable partly to income derived from a Preferred Enterprise, or a Preferred Technology Enterprise, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions of the two types of income. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.
A non-Israeli resident who receives dividends from which tax was withheld is generally exempt from the obligation to file tax returns in Israel with respect to such income, provided that (i) such income was not generated from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required to be filed, and (iii) the taxpayer is not obligated to pay surtax (as further explained below).
Surtax
Subject to the provisions of an applicable tax treaty, individuals who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at a rate of 3% on annual income (including, but not limited to, dividends, interest and capital gain) exceeding NIS 721,560 for 2023, which amount is linked to the annual change in the Israeli consumer price index.
Estate and gift tax
Israeli law presently does not impose estate or gift taxes.
Certain Material U.S. Federal Income Tax Considerations
The following is a description of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares and warrants. This description addresses only the U.S. federal income tax consequences to U.S. Holders (as defined below) that hold our ordinary shares or warrants as capital assets within the meaning of Section 1221 of the Code, and that have the U.S. dollar as their functional currency. This discussion is based upon the Code, applicable U.S. Treasury regulations, administrative pronouncements and judicial decisions, in each case as in effect on the date hereof, all of which are subject to change (possibly with retroactive effect). No ruling has been or will be requested from the IRS regarding the tax consequences of the acquisition, ownership or disposition of the ordinary shares and warrants, and there can be no assurance that the IRS will agree with the discussion set out below. This summary does not address any U.S. tax consequences other than U.S. federal income tax consequences (e.g., the estate and gift tax, the alternative minimum tax or the Medicare tax on net investment income) and does not address any state, local or non-U.S. tax consequences.
This description does not address tax considerations applicable to holders that may be subject to special tax rules, including, without limitation:
| ● | banks, financial institutions or insurance companies; |
| ● | real estate investment trusts or regulated investment companies; |
| ● | dealers or brokers; |
| ● | traders that elect to mark to market; |
| ● | tax exempt entities or organizations; |
| ● | “individual retirement accounts” and other tax deferred accounts; |
| ● | certain former citizens or long term residents of the United States; |
| ● | persons that are resident or ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States; |
| ● | grantor trusts; |
| ● | persons that acquired our ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation for the performance of services; |
| ● | persons holding our ordinary shares or warrants as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for U.S. federal income tax purposes; |
| ● | partnerships or other pass through entities and persons holding ordinary shares or warrants through partnerships or other pass through entities; or |
| ● | holders that own directly, indirectly or through attribution 5% or more of the total voting power or value of all of our outstanding shares. |
For purposes of this description, a “U.S. Holder” is a beneficial owner of our ordinary shares or warrants that, for U.S. federal income tax purposes, is:
| ● | an individual who is a citizen or resident of the United States; |
| ● | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any state thereof, including the District of Columbia; |
| ● | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
| ● | a trust if such trust has validly elected to be treated as a United States person for U.S. federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust. |
If a partnership (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our ordinary shares or warrants, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor as to the particular U.S. federal income tax consequences of acquiring, owning and disposing of our ordinary shares or warrants in its particular circumstance.
You should consult your tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of acquiring, owning and disposing of our ordinary shares and warrants.
Distributions on Ordinary Shares
Subject to the discussion below under “—Passive Foreign Investment Company Rules,” if we make distributions of cash or property on the ordinary shares, the gross amount of such distributions (including any amount of foreign taxes withheld) will be treated for U.S. federal income tax purposes first as a dividend to the extent of our current and accumulated earnings and profits (as determined for U.S. federal income tax purposes), and then as a tax-free return of capital to the extent of the U.S. Holder’s tax basis, with any excess treated as capital gain from the sale or exchange of the shares. If we do not provide calculations of our earnings and profits under U.S. federal income tax principles, a U.S. Holder should expect all cash distributions to be reported as dividends for U.S. federal income tax purposes. Dividends paid with respect to our ordinary shares will not be eligible for the “dividends-received” deduction generally allowed to corporate U.S. Holders in respect of dividends received from U.S. corporations.
Subject to the discussion below under “—Passive Foreign Investment Company Rules,” dividends received by certain non-corporate U.S. Holders (including individuals) may be “qualified dividend income,” which is taxed at the lower applicable capital gains rate, provided that:
| ● | either (a) the shares are readily tradable on an established securities market in the United States, or (b) we are eligible for the benefits of a qualifying income tax treaty with the United States that includes an exchange of information program; |
| ● | we are neither a PFIC (as discussed below under below under “—Passive Foreign Investment Company Rules”) nor treated as such with respect to the U.S. Holder for the taxable year in which the dividend is paid or the preceding taxable year; |
| ● | the U.S. Holder satisfies certain holding period requirements; and |
| ● | the U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. |
There can be no assurances that we will be eligible for benefits of an applicable comprehensive income tax treaty between the United States and Israel (the “Treaty”). In addition, there also can be no assurance that the ordinary shares will be considered “readily tradable” on an established securities market in the United States in accordance with applicable legal authorities. Furthermore, we will not constitute a “qualified foreign corporation” for purposes of these rules if we are a PFIC for the taxable year in which we pay a dividend or for the preceding taxable year. See “—Passive Foreign Investment Company Rules.” U.S. Holders should consult their own tax advisors regarding the availability of the lower rate for dividends paid with respect to the ordinary shares.
Subject to certain complex conditions and limitations, Israeli taxes withheld on any distributions on our ordinary shares and not refundable to a U.S. Holder may be eligible for credit against the U.S. Holder’s federal income tax liability or, at such holder’s election, may be eligible for a deduction in computing such holder’s U.S. federal income tax liability. However, as a result of recent changes to the U.S. foreign tax credit rules, a withholding tax generally may need to satisfy certain additional requirements in order to be considered a creditable tax for a U.S. Holder. We have not determined whether these requirements have been met and, accordingly, no assurance can be given that any withholding tax on dividends paid by us will be creditable. The election to deduct, rather than credit, foreign taxes, is made on a year-by-year basis and applies to all foreign taxes paid by a U.S. Holder or withheld from a U.S. Holder that year. Subject to certain exceptions, dividends on the ordinary shares will generally constitute foreign source income for foreign tax credit limitation purposes. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to the ordinary shares generally should constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.” The rules relating to the determination of the foreign tax credit are complex, and U.S. Holders should consult their tax advisor to determine whether and to what extent such holder will be entitled to this credit.
Sale, Exchange, Redemption or Other Taxable Disposition of Ordinary Shares and Warrants.
Subject to the discussion below under “—Passive Foreign Investment Company Rules,” a U.S. Holder generally will recognize gain or loss on any sale, exchange, redemption or other taxable disposition of ordinary shares or warrants in an amount equal to the difference between (i) the amount realized on the disposition and (ii) such U.S. Holder’s adjusted tax basis in such ordinary shares and/or warrants. Any gain or loss recognized by a U.S. Holder on a taxable disposition of ordinary shares or warrants generally will be capital gain or loss. A non-corporate U.S. Holder, including an individual, who has held the ordinary shares and/or warrants for more than one year generally will be eligible for reduced tax rates for such long-term capital gains. The deductibility of capital losses is subject to limitations.
Any such gain or loss recognized generally will be treated as U.S. source gain or loss for U.S. foreign tax credit purposes, subject to certain possible exceptions under the Treaty. U.S. Holders are urged to consult their own tax advisor regarding the ability to claim a foreign tax credit and the application of the Treaty to such U.S. Holder’s particular circumstances.
Exercise or Lapse of a Warrant
Except as discussed below with respect to the cashless exercise of a warrant, a U.S. Holder generally will not recognize gain or loss upon the acquisition of an ordinary share on the exercise of a warrant for cash. A U.S. Holder’s tax basis in ordinary shares received upon exercise of the warrant generally should be an amount equal to the sum of the U.S. Holder’s tax basis in the warrant received therefore and the exercise price. The U.S. Holder’s holding period for an ordinary share received upon exercise of the warrant will begin on the date following the date of exercise (or possibly the date of exercise) of the warrant and will not include the period during which the U.S. Holder held the warrant. If a warrant is allowed to lapse unexercised, a U.S. Holder that has otherwise received no proceeds with respect to such warrant generally will recognize a capital loss equal to such U.S. Holder’s tax basis in the warrant.
The tax consequences of a cashless exercise of a warrant are not clear under current U.S. federal income tax law. A cashless exercise may be tax-deferred, either because the exercise is not a realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either situation, a U.S. Holder’s basis in the ordinary shares received would equal the U.S. Holder’s basis in the warrants exercised therefore. If the cashless exercise is not treated as a realization event, a U.S. Holder’s holding period in the ordinary shares would be treated as commencing on the date following the date of exercise (or possibly the date of exercise) of the warrants. If the cashless exercise were treated as a recapitalization, the holding period of the ordinary shares would include the holding period of the warrants exercised therefore.
It is also possible that a cashless exercise of a warrant could be treated in part as a taxable exchange in which gain or loss would be recognized in the manner set forth above under “—Sale, Exchange, Redemption or Other Taxable Disposition of Ordinary Shares and Warrants.” In such event, a U.S. Holder could be deemed to have surrendered warrants equal to the number of ordinary shares having an aggregate fair market value equal to the exercise price for the total number of warrants to be exercised. The U.S. Holder would recognize capital gain or loss in an amount generally equal to the difference between (i) the fair market value of the warrants deemed surrendered and (ii) the U.S. Holder’s tax basis in such warrants deemed surrendered. In this case, a U.S. Holder’s tax basis in the ordinary shares received would equal the sum of (i) U.S. Holder’s tax basis in the warrants deemed exercised and (ii) the exercise price of such warrants. A U.S. Holder’s holding period for the ordinary shares received in such case generally would commence on the date following the date of exercise (or possibly the date of exercise) of the warrants.
Due to the absence of authority on the U.S. federal income tax treatment of a cashless exercise of warrants, there can be no assurance which, if any, of the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly, U.S. Holders should consult their own tax advisors regarding the tax consequences of a cashless exercise of warrants.
Possible Constructive Distributions
The terms of each warrant provide for an adjustment to the number of ordinary shares for which the warrant may be exercised or to the exercise price of the warrant in certain events. An adjustment which has the effect of preventing dilution generally is not taxable. A U.S. Holder of a warrant would, however, be treated as receiving a constructive distribution from us if, for example, the adjustment increases the holder’s proportionate interest in our assets or earnings and profits (for instance, through an increase in the number of ordinary shares that would be obtained upon exercise of such warrant) as a result of a distribution of cash or other property such as other securities to the holders of the ordinary shares which is taxable to the U.S. Holders of such shares as described under “—Distributions on Ordinary Shares” above. Such constructive distribution would be subject to tax as described under that section in the same manner as if the U.S. Holder of such warrant received a cash distribution from us equal to the fair market value of such increased interest.
Passive Foreign Investment Company Rules
The treatment of U.S. Holders of the ordinary shares or warrants could be materially different from that described above, if we are treated as a PFIC for U.S. federal income tax purposes. A non-U.S. entity treated as a corporation for U.S. federal income tax purposes generally will be a PFIC for U.S. federal income tax purposes for any taxable year if either:
| ● | at least 75% of its gross income for such year is passive income; or |
| ● | at least 50% of the value of its assets (generally based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. |
For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other entity treated as a corporation for U.S. federal income tax purposes in which we owns, directly or indirectly, 25% or more (by value) of the stock.
We believe we were not a PFIC in 2024. Based on the current and anticipated composition of our and our subsidiaries’ income, assets and operations, there is a risk that we may be treated as a PFIC for future taxable years. However, there can be no assurances in this regard, nor can there be any assurances with respect to our status as a PFIC in any future taxable year. Moreover, the application of the PFIC rules is subject to uncertainty in several respects, and we can make no assurances that the IRS will not take a contrary position or that a court will not sustain such a challenge by the IRS.
Whether we are or any of our subsidiaries is treated as a PFIC is determined on an annual basis. The determination of whether we are or any of our subsidiaries is a PFIC is a factual determination that depends on, among other things, the composition of our income and assets, and the market value of our and our subsidiaries’ shares and assets. Changes in the composition of our or any of our subsidiaries’ income or composition of our or any of our subsidiaries’ assets may cause us to be or become a PFIC for the current or subsequent taxable years. Moreover, the value of our assets (including unbooked goodwill) for purposes of the PFIC determination may be determined by reference to our market capitalization, which could fluctuate significantly.
Under the PFIC rules, if we were considered a PFIC at any time that a U.S. Holder owns ordinary shares or warrants, we would continue to be treated as a PFIC with respect to such investment unless (i) we ceased to be a PFIC and (ii) the U.S. Holder made a “deemed sale” election under the PFIC rules. If such election is made, a U.S. Holder will be deemed to have sold its ordinary shares or warrants at their fair market value on the last day of the last taxable year in which we are classified as a PFIC, and any gain from such deemed sale would be subject to the consequences described below. After the deemed sale election, the ordinary shares or warrants with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.
For each taxable year that we are treated as a PFIC with respect to a U.S. Holder’s ordinary shares or warrants, the U.S. Holder will be subject to special tax rules with respect to any “excess distribution” (as defined below) received and any gain realized from a sale or disposition (including a pledge) of its ordinary shares (collectively the “Excess Distribution Rules”), unless the U.S. Holder makes a valid QEF election or mark-to-market election as discussed below. Distributions received by a U.S. Holder in a taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or the U.S. Holder’s holding period for the ordinary shares will be treated as excess distributions. Under these special tax rules:
| ● | the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares; |
| ● | the amount allocated to the current taxable year, and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are a PFIC, will be treated as ordinary income; and |
| ● | the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for each such year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
Under the Excess Distribution Rules, the tax liability for amounts allocated to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses, and gains (but not losses) realized on the sale of the ordinary shares or warrants cannot be treated as capital gains, even though the U.S. Holder holds the ordinary shares or warrants as capital assets.
Certain of the PFIC rules may impact U.S. Holders with respect to equity interests in subsidiaries and other entities which we may hold, directly or indirectly, that are PFICs (collectively, “Lower-Tier PFICs”). There can be no assurance, however, that we do not own, or will not in the future acquire, an interest in a subsidiary or other entity that is or would be treated as a Lower-Tier PFIC. U.S. Holders should consult their own tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
If we are a PFIC, a U.S. Holder of ordinary shares (but not warrants) may avoid taxation under the Excess Distribution Rules described above by making a “qualified electing fund” (“QEF”) election. However, a U.S. Holder may make a QEF election with respect to its ordinary shares only if we provide U.S. Holders on an annual basis with certain financial information specified under applicable U.S. Treasury regulations. There can be no assurance that we will have timely knowledge of our status as a PFIC in the future or that we will timely provide U.S. Holders with the required information on an annual basis to allow U.S. Holders to make a QEF election with respect to our ordinary shares in the event we are treated as a PFIC for any taxable year. The failure to provide such information on an annual basis could prevent a U.S. Holder from making a QEF election or result in the invalidation or termination of a U.S. Holder’s prior QEF election. In addition, U.S. Holders of warrants will not be able to make a QEF election with respect to their warrants.
In the event we are a PFIC, a U.S. Holder that makes a QEF election with respect to its ordinary shares would generally be required to include in income for each year that we are treated as a PFIC the U.S. Holder’s pro rata share of our ordinary earnings for the year (which would be subject to tax as ordinary income) and net capital gains for the year (which would be subject to tax at the rates applicable to long-term capital gains), without regard to the amount of any distributions made in respect of the ordinary shares. Any net deficits or net capital losses of ours for a taxable year would not be passed through and included on the tax return of the U.S. Holder, however. A U.S. Holder’s basis in the ordinary shares would be increased by the amount of income inclusions under the qualified electing fund rules. Dividends actually paid on the ordinary shares generally would not be subject to U.S. federal income tax to the extent of prior income inclusions and would reduce the U.S. Holder’s basis in the ordinary shares by a corresponding amount.
If we own any interests in a Lower-Tier PFIC, a U.S. Holder generally must make a separate QEF election for each Lower-Tier PFIC, subject to us providing the relevant tax information for each Lower-Tier PFIC on an annual basis.
If a U.S. Holder does not make a QEF election (or a mark-to-market election, as discussed below) effective from the first taxable year of a U.S. Holder’s holding period for the ordinary shares in which we are a PFIC, then the ordinary shares will generally continue to be treated as an interest in a PFIC, and the U.S. Holder generally will remain subject to the Excess Distribution Rules. A U.S. Holder that first makes a QEF election in a later year may avoid the continued application of the Excess Distribution Rules to its ordinary shares by making a “deemed sale” election. In that case, the U.S. Holder will be deemed to have sold the ordinary shares at their fair market value on the first day of the taxable year in which the QEF election becomes effective, and any gain from such deemed sale would be subject to the Excess Distribution Rules described above. A U.S. Holder that is eligible to make a QEF election with respect to its ordinary shares generally may do so by providing the appropriate information to the IRS in the U.S. Holder’s timely filed tax return for the year in which the election becomes effective.
U.S. Holders should consult their own tax advisors as to the availability and desirability of a QEF election.
Alternatively, a U.S. Holder of “marketable stock” (as defined below) may make a mark-to-market election for its ordinary shares to elect out of the Excess Distribution Rules discussed above if we are treated as a PFIC. If a U.S. Holder makes a mark-to-market election with respect to its ordinary shares, such U.S. Holder will include in income for each year that we are treated as a PFIC with respect to such ordinary shares an amount equal to the excess, if any, of the fair market value of the ordinary shares as of the close of the U.S. Holder’s taxable year over the adjusted basis in the ordinary shares. A U.S. Holder will be allowed a deduction for the excess, if any, of the adjusted basis of the ordinary shares over their fair market value as of the close of the taxable year. However, deductions will be allowed only to the extent of any net mark-to-market gains on the ordinary shares included in the U.S. Holder’s income for prior taxable years. Amounts included in income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ordinary shares, will be treated as ordinary income. Ordinary loss treatment will also apply to the deductible portion of any mark-to-market loss on the ordinary shares, as well as to any loss realized on the actual sale or disposition of the ordinary shares, to the extent the amount of such loss does not exceed the net mark-to-market gains for such ordinary shares previously included in income. A U.S. Holder’s basis in the ordinary shares will be adjusted to reflect any mark-to-market income or loss. If a U.S. Holder makes a mark-to-market election, any distributions we make would generally be subject to the rules discussed above under “—Distributions on Ordinary Shares,” except the lower rates applicable to qualified dividend income would not apply. U.S. Holders of warrants will not be able to make a mark-to-market election with respect to their warrants.
The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. The ordinary shares, which are currently listed on Nasdaq, are expected to qualify as marketable stock for purposes of the PFIC rules provided the ordinary shares remain listed on Nasdaq, but there can be no assurance that the ordinary shares will remain listed on Nasdaq or be “regularly traded” for purposes of these rules. Because a mark-to-market election cannot be made for equity interests in any Lower-Tier PFICs, a U.S. Holder that does not make the applicable QEF elections generally will continue to be subject to the Excess Distribution Rules with respect to its indirect interest in any Lower-Tier PFICs as described above, even if a mark-to-market election is made for us.
If a U.S. Holder does not make a mark-to-market election (or a QEF election, as discussed above) effective from the first taxable year of a U.S. Holder’s holding period for the ordinary shares in which we are a PFIC, then the U.S. Holder generally will remain subject to the Excess Distribution Rules. A U.S. Holder that first makes a mark-to-market election with respect to the ordinary shares in a later year will continue to be subject to the Excess Distribution Rules during the taxable year for which the mark-to-market election becomes effective, including with respect to any mark-to-market gain recognized at the end of that year. In subsequent years for which a valid mark-to-mark election remains in effect, the Excess Distribution Rules generally will not apply. A U.S. Holder that is eligible to make a mark-to-market with respect to its ordinary shares may do so by providing the appropriate information on IRS Form 8621 and timely filing that form with the U.S. Holder’s tax return for the year in which the election becomes effective. U.S. Holders should consult their own tax advisors as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests in any Lower-Tier PFICs.
A U.S. Holder of a PFIC may be required to file an IRS Form 8621 on an annual basis. U.S. Holders should consult their own tax advisors regarding any reporting requirements that may apply to them if we are a PFIC.
U.S. Holders are strongly encouraged to consult their tax advisors regarding the application of the PFIC rules to their particular circumstances.
Information Reporting and Backup Withholding
Information reporting requirements may apply to dividends received by U.S. Holders of ordinary shares and the proceeds received on sale or other taxable disposition of ordinary shares or warrants effected within the United States (and, in certain cases, outside the United States), in each case other than U.S. Holders that are exempt recipients (such as corporations). Backup withholding (currently at a rate of 24%) may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number (generally on an IRS Form W-9 provided to the paying agent of the U.S. Holder’s broker) or is otherwise subject to backup withholding. U.S. Holders should consult their own tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding generally may be credited against the taxpayer’s U.S. federal income tax liability, and a taxpayer may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for a refund with the IRS and furnishing any required information.
Foreign asset reporting
Certain U.S. Holders may be required to file IRS Form 926, Return by U.S. Transferor of Property to a Foreign Corporation, and IRS Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, reporting transfers of cash or other property to us and information relating to the U.S. Holder and us. Substantial penalties may be imposed upon a U.S. Holder that fails to comply. See also the discussion regarding Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund, above.
Certain U.S. Holders are required to report their holdings of certain foreign financial assets, including equity of foreign entities, if the aggregate value of all of these assets exceeds certain threshold amounts, by filing IRS Form 8938 with their federal income tax return. Our ordinary shares and warrants are expected to constitute foreign financial assets subject to these requirements unless they are held in an account at certain financial institutions. U.S. Holders are urged to consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition of our ordinary shares and/or warrants and the significant penalties for non-compliance.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO AN INVESTOR. EACH INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES OR WARRANTS IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. Our filings with the SEC are also available to the public through the SEC’s website at http://www.sec.gov. This site contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each subsequent fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm. We also intend to furnish certain other material information to the SEC under cover of Form 6-K.
I. Subsidiary Information
Not applicable.
J. Annual Report to Security Holders
Not applicable.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of foreign currency exchange rates and interest rates, which are discussed in detail below.
Foreign currency risk
Our financial results are reported in U.S. dollars, changes in exchange rate between the USD and local currencies in those countries in which we operate (primarily the ILS) may affect the results of our operations. The USD cost of our operations in countries other than the United States, is negatively influenced by revaluation of the USD against other currencies.
During 2024, the value of the U.S. dollar strengthened against the ILS by approximately 0.72%. Our most significant foreign currency exposures are related to our operations in Israel.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
None.
Item 15. Controls and Procedures
(a) Disclosure Controls and Procedures
Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2024. Based upon that evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of December 31, 2024, our disclosure controls and procedures were not effective due to the material weaknesses identified by management, as described below. Our disclosure and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosures.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on that assessment, our management concluded that our internal control over financial reporting was not effective as of December 31, 2024 due to material weaknesses in internal control over financial reporting.
As defined in Regulation 12b-2 under the Exchange Act, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented, or detected on a timely basis.
Material weaknesses in internal control over financial reporting
In connection with the Internal Investigation described in this Annual Report and the audit of our consolidated financial statements included in this Annual Report, our management identified material weaknesses in our internal control over financial reporting as of December 31, 2022 and 2021 relating to deficiencies in the design and operation of the procedures relating to the closing of our financial statements. We continued to identify material weaknesses in our internal control over financial reporting as of December 21, 2023.
These included: (i) lack of sufficient number of personnel with an appropriate level of knowledge and experience in accounting for complex or non-routine transactions; (ii) the fact that our policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed, not properly put in place or not operating effectively; (iii) deficiencies in the design and operations of the procedures relating to the timely closing of financial books at the quarter and fiscal year end; (iv) insufficient oversight of certain signatory rights relating to our financial accounts; (v) ineffective design and implementation of Information Technology General Controls (“ITGC”) including improperly designed controls pertaining to change management and user access rights over systems that are critical to the Company’s system of financial reporting; and (v) incomplete segregation of duties in certain types of transactions and processes (excluding monetary transactions, where there is a clear distinction between the preparer and the signer vis-a-vis financial institutions).
During the fourth quarter of 2024, we undertook certain corrective action in order to address and remediate these material weaknesses including (i) the recruitment of additional financial personnel in our finance department with an appropriate level of knowledge and experience; (ii) the establishment of risk and control matrices and implemented controls over material business processes; (iii) the design of operation of procedures related to timely closing of financial books, including the assignment of clear responsibilities, deadlines and appropriate segregation of duties; (iv) the formalization of signatory rights; and (v) establishment of controls over the change management process and permissions to the financial system. However, since the implementation of these controls only commenced in the fourth quarter of 2024, these controls were not in place a sufficient period of time to allow management to conclude they were operating effectively throughout a significant portion of the year. Accordingly, management concluded that internal control over financial reporting was not effective as of December 31, 2024 due to these material weaknesses. We intend to continue take steps to remediate the material weaknesses described above and further continue re-assessing the design of controls, the testing of controls and modifying processes designed to improve our internal control over financial reporting. We plan to continue to assess our internal controls and procedures and intend to take further action as necessary or appropriate to address any other matters it identifies or are brought to our attention. We will not be able to fully remediate these material weaknesses until these steps have been completed and have been operating effectively for a sufficient period of time. The implementation of our remediation will be ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles. We may also conclude that additional measures may be required to remediate the material weaknesses in our internal control over financial reporting.
We cannot assure you that the measures we have been taking or that we take in the future will be sufficient to remediate the material weaknesses we identified or avoid the identification of additional material weaknesses in the future. If the steps we take do not remediate the material weaknesses in a timely manner, there could continue to be a reasonable possibility that this control deficiency or others could result in another material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis.
For more information, see “Item 1A. Risk Factors – Risks Related to Our Business and Industry - We have identified a material weakness in our internal control over financial reporting. If our remediation of the material weakness is not effective, or we fail to develop and maintain effective internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.”
(c) Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting due to an exemption for emerging growth companies provided in the JOBS Act.
(d) Changes in internal control over financial reporting
Except as otherwise described herein, there were no changes in our internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this Annual Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our board of directors has determined that each of Ilan Flato and Renah Persofsky is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the listing rules of Nasdaq.
Our board of directors has determined that each member of our audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence of board and committee members.
Item 16B. Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all our employees, officers and directors. Our Code of Business Conduct and Ethics addresses, among other things, competition and fair dealing, gifts and entertainment, conflicts of interest, international business laws, financial matters and external reporting, company assets, confidentiality and corporate opportunity requirements and the process for reporting violations of the Code of Business Conduct and Ethics. Our Code of Business Conduct and Ethics is intended to meet the definition of “code of ethics” under Item 16B. of Form 20-F under the Exchange Act.
We will disclose on our website any amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics that applies to our directors or executive officers to the extent required under the rules of the SEC or Nasdaq. Our Code of Business Conduct and Ethics is available on our website at https://www.investors.hubsecurity.com. The information contained on or through our website, or any other website referred to herein, is not incorporated by reference in this Annual Report. We granted no waivers under our Code of Business Conduct and Ethics.
Item 16C. Principal Accounting Fees and Services
The table below sets out the total amount of services rendered to us by Kost, Forer, Gabbay & Kasierer, a member of EY Global, for services performed in the years ended December 31, 2023 and 2024, and breaks down these amounts by category of service:
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Audit Fees | $ | 1,100 | $ | 1,100 | ||||
| Audit Related Fees | 450 | 200 | ||||||
| Tax Fees | 200 | 100 | ||||||
| Total | 1,750 | 1,400 | ||||||
Audit Fees
Audit fees for the years ended December 31, 2024 and 2023 include fees for the audit of our annual financial statements. This category also includes services that the independent accountant generally provides, such as consents and assistance with and review of documents filed with the SEC.
Audit Related Fees
Audit related fees for the years ended December 31, 2024 and December 31, 2023 relate to the audit of our annual financial statements. This category also includes services that the independent accountant generally provides, such as consents and assistance with and review of documents filed with the SEC.
Tax Fees
Tax fees for the years ended December 31, 2024 and 2023 were related to ongoing tax and grant-related advisory, tax compliance and tax planning services.
Pre-Approval Policies and Procedures
The advance approval of the Audit Committee or members thereof, to whom approval authority has been delegated, is required for all audit and non-audit services provided by our auditors.
All services provided by our auditors are approved in advance by either the Audit Committee or members thereof, to whom authority has been delegated, in accordance with the Audit Committee’s pre-approval policy.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F. Change in Registrant’s Certifying Accountant
None.
Item 16G. Corporate Governance
As an Israeli company, we are subject to various corporate governance requirements under the Companies Law, relating to matters such as external directors, the audit committee, the compensation committee and an internal auditor.
We are a “foreign private issuer”, as such term is defined in Rule 405 under the Securities Act. As a foreign private issuer we will be permitted to comply with Israeli corporate governance practices instead of the certain listing rules of Nasdaq, provided that we disclose which requirements we are not following and the equivalent Israeli requirements.
We rely on this “foreign private issuer exemption” with respect to the following:
| ● | Distribution of certain reports to shareholders. As opposed to the Nasdaq Listing Rules, which require listed issuers to make certain reports, such as annual reports, interim reports and quarterly reports, available to shareholders in one of a number of specific manners, Israeli law does not require us to distribute periodic reports directly to shareholders, and the generally accepted business practice in Israel is to distribute such reports to shareholders, but to make such reports available through a public website. In addition to making such reports available on a public website, we plan to make our audited financial statements available to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt from the SEC’s proxy solicitation rules. See “Item 10. Additional Information—Documents on Display” for a description of our Exchange Act reporting obligations. |
| ● | Quorum requirement for shareholder meetings. Under Nasdaq corporate governance rules, a quorum would require the presence, in person or by proxy, of holders of at least 33.3% of the total issued outstanding voting power of our shares at each general meeting of shareholders. Pursuant to the Articles and as permitted under the Companies Law, the quorum required for a general meeting of shareholders will consist of at least two shareholders present in person or by proxy who hold or represent at least 33.3% of the total outstanding voting power of our shares, except if (i) any such general meeting of shareholders was initiated by and convened pursuant to a resolution adopted by the board of directors and (ii) at the time of such general meeting, we qualify as a “foreign private issuer,” in which case the requisite quorum will consist of two or more shareholders present in person or by proxy who hold or represent at least 25% of the total outstanding voting power of our shares (and if the meeting is adjourned for a lack of quorum, the quorum for such adjourned meeting will be, subject to certain exceptions, any number of shareholders). |
| ● | Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under requirements of the Companies Law, rather than seeking approval for corporate actions in accordance with Nasdaq Capital Market Listing Rule 5635. In particular, under this Nasdaq Capital Market rule, shareholder approval is generally required for: (i) an acquisition of shares or assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rights or if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leading to a change of control; (iii) adoption or amendment of equity compensation arrangements; and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable for, equity) of a listed company via a private placement (or via sales by directors, officers or 5% shareholders) if such equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, under the Companies Law, shareholder approval is required for, among other things: (i) transactions with directors or the chief executive officer concerning the terms of their service or indemnification, exemption and insurance for their service (or for any other position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required (provided that, under regulations promulgated under the Companies Law, the insurance of office holders shall not require shareholder approval and may be approved by only the compensation committee in certain circumstances), (ii) material private placements of shares, which require shareholder approval under the conditions described under “Item 6. Directors, Senior Management and Employees—C. Board Practices—Approval of Private Placements under Israeli Law,” (iii) Extraordinary Transactions with controlling shareholders of publicly held companies, which require the special approval described under “Item 6. Directors, Senior Management and Employees—C. Board Practices—Approval of Related Party Transactions under Israeli Law,” and (iv) terms of office and employment or other engagement of the controlling shareholder of the Company or such controlling shareholder’s relative, which require the special approval described under “Item 6. Directors, Senior Management and Employees—B. Compensation” and “Item 6. Directors, Senior Management and Employees—C. Board Practices—Approval of Related Party Transactions under Israeli Law.” In addition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies. See also “Compensation of officers” above. |
We otherwise intend to comply with the rules generally applicable to U.S. domestic companies listed on the Nasdaq. We may, however, in the future decide to rely upon the “foreign private issuer exemption” for purposes of opting out of some or all of the other Nasdaq listing rules.
Item 16H. Mine Safety Disclosure
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Item 16J. Insider Trading Policies
We have adopted an Insider Trading Policy which governs the purchase, sale and other dispositions of our securities by our directors, officers, employees and contractors that is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations and the listing standards of Nasdaq. A copy of our Insider Trading Policy is filed as Exhibit 11.1 to this Annual Report.
Item 16K. Cybersecurity
Cybersecurity Risk Management and Strategy
We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems, information, and our customers’ data. Our cybersecurity policies, standards, processes, and practices are part of our information security management program, which is aligned to our ISO 27001 certification, an international standard to manage information security.
Our cybersecurity risk management program includes a secure software development program intended to reduce the introduction of risks into our software, a software vulnerability and patch management program, and cybersecurity incident detection, response, and recovery programs, among others. Our cybersecurity risk team aims to integrate cybersecurity risks into our overall company’s risk management system and processes on an on-going basis.
Key elements of our cybersecurity risk management program include, but are not limited to the following:
| ● | a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents and risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; |
| ● | a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; |
| ● | the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; and |
| ● | a third-party risk management process for key service providers based on our assessment of their criticality to our operations and respective risk profile. |
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
Cybersecurity Governance
Our Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee oversight of cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program.
Additionally, our risk monitoring systems, including our cybersecurity monitoring systems, are regularly audited by our internal auditors as well as cyber security audit companies. We consider the results of external and internal audits of our risk detection and monitoring systems and implement modifications as necessary.
The Audit Committee receives reports from management and the internal auditor on our cybersecurity risks. In addition, management updates the Audit Committee and Board of Directors, as necessary, regarding significant cybersecurity incidents. In addition, the Audit Committee regularly receives reports from management on such topic.
Our cybersecurity management team, including our CEO, Interim Chief Financial Officer, VP Information Technology, Chief Technology Officer (CTO and acting Chief Information Security Officer – CISO) and General Counsel and Chief Legal Officer, are responsible for assessing and managing our material risks from cybersecurity threats. The team is primarily responsible for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. By the nature of our business, our management team gained expertise in cybersecurity, each member bringing years of experience and strategic leadership in cyber security. Our CTO and acting CISO, who holds a B.S. in Computer Science, and has over 25 years of experience, actively participates in formal courses and conferences to stay current with evolving threats.
Our cybersecurity management team is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
PART III
Item 17. Financial Statements
We have provided financial statements pursuant to Item 18.
Item 18. Financial Statements
The audited consolidated financial statements as required under Item 18 are attached hereto starting on page F-1 of this Annual Report. The audit report of Kost, Forer, Gabbay & Kasierer, a member of EY Global, an independent registered public accounting firm, is included herein preceding the audited consolidated financial statements.
Item 19. Exhibits
List all exhibits filed as part of the registration statement or Annual Report, including exhibits incorporated by reference.
| 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 Definition Linkbase Document. | * | ||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | * | ||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | * | ||
| 104 | Inline XBRL for the cover page of this Annual Report on Form 20-F (embedded within the Inline XBRL document) | |||
| * | Filed herewith. |
| ** | Furnished herewith. |
| # | Unofficial English translation from Hebrew original. |
| † | Schedules and exhibits to this Exhibit omitted pursuant to Instructions as to Exhibits to Form 20-F. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. |
| †† | Indicates management contract or compensatory plan or arrangement. |
| ^ | Portions of this exhibit (indicated by asterisks) have been omitted under rules of the U.S. Securities and Exchange Commission permitting the confidential treatment of select information. |
Certain agreements filed as exhibits to this Annual Report contain representations and warranties that the parties thereto made to each other. These representations and warranties have been made solely for the benefit of the other parties to such agreements and may have been qualified by certain information that has been disclosed to the other parties to such agreements and that may not be reflected in such agreements. In addition, these representations and warranties may be intended as a way of allocating risks among parties if the statements contained therein prove to be incorrect, rather than as actual statements of fact. Accordingly, there can be no reliance on any such representations and warranties as characterizations of the actual state of facts. Moreover, information concerning the subject matter of any such representations and warranties may have changed since the date of such agreements.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
| HUB CYBER SECURITY LTD. | ||
| Date: April 30, 2025 | By: | /s/ Noah Hershcoviz |
| Name: | Noah Hershcoviz | |
| Title: | Chief Executive Officer | |
HUB CYBER SECURITY LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2024
INDEX
F-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
HUB CYBER SECURITY LTD.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of the financial position of Hub Cyber Security Ltd. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of profit or loss, comprehensive income (loss), changes in equity (deficit) and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB).
The Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1e, to the financial statements, as of December 31, 2024 , the Company has incurred accumulated losses in the amount of $226,245 thousand, has negative working capital in the amount of $87,672 thousand, has not complied with certain covenants of a loan agreement with a bank, is currently in default on covenants and payments required under other debt facilities it currently has outstanding, has net cash used from operating activities in the amount of $17,110 thousand for the year ended on December 31, 2024, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1e. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
| /s/ KOST FORER GABBAY & KASIERER |
A Member of EY Global
We have served as the Company’s auditor since 2021.
Tel-Aviv, Israel
April 30, 2025
F-
HUB CYBER SECURITY LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
USD in thousands
| December 31, | |||||||||||
| Note | 2024 | 2023 | |||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | 6 | 3,085 | 3,522 | ||||||||
| Restricted cash and bank deposit | 528 | 1,637 | |||||||||
| Trade receivables, net | 7 | 7,897 | 9,867 | ||||||||
| Other assets | 8 | 6,892 | 5,083 | ||||||||
| 18,402 | 20,109 | ||||||||||
| NON-CURRENT ASSETS: | |||||||||||
| Long-term receivables | 26 | 725 | |||||||||
| Long-term restricted deposit | 165 | 151 | |||||||||
| Long-term deposit | 177 | ||||||||||
| Property and equipment, net | 10 | 487 | 1,035 | ||||||||
| Right-of-use assets | 9 | 2,151 | 2,510 | ||||||||
| Goodwill | 11 | 1,874 | 2,467 | ||||||||
| Intangible assets, net | 11 | 4,337 | 5,416 | ||||||||
| 9,014 | 12,481 | ||||||||||
| 27,416 | 32,590 | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-
HUB CYBER SECURITY LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
USD in thousands
| December 31, | |||||||||||
| Note | 2024 | 2023 | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Short-term loans | 13 | 13,534 | 11,878 | ||||||||
| Convertible loans | 17 | 24,763 | 14,449 | ||||||||
| Trade payables | 14 | 8,200 | 9,867 | ||||||||
| Current maturities of lease liabilities | 9 | 975 | 733 | ||||||||
| Current maturities of other liabilities | 11c | 5,244 | 5,078 | ||||||||
| Warrants liabilities* | 17 | 13,884 | 6,047 | ||||||||
| Other accounts payable | 15 | 39,474 | 32,427 | ||||||||
| 106,074 | 80,479 | ||||||||||
| NON-CURRENT LIABILITIES: | |||||||||||
| Long-term liabilities | 16a | 217 | 147 | ||||||||
| Lease liabilities | 9 | 1,212 | 1,712 | ||||||||
| Deferred tax liabilities | 25 | 79 | 116 | ||||||||
| Net employee defined benefit liabilities | 19 | 651 | 869 | ||||||||
| 2,159 | 2,844 | ||||||||||
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: | 20 | ||||||||||
| Share capital and premium | 117,247 | 103,386 | |||||||||
| Share options | 10,918 | 10,918 | |||||||||
| Treasury shares | (1,230 | ) | (1,230 | ) | |||||||
| Other reserves | 18,523 | 19,905 | |||||||||
| Accumulated deficit | (226,245 | ) | (186,488 | ) | |||||||
| (80,787 | ) | (53,509 | ) | ||||||||
| Non-controlling interests | (30 | ) | 2,776 | ||||||||
| Total shareholders’ equity (deficit) | (80,817 | ) | (50,733 | ) | |||||||
| 27,416 | 32,590 | ||||||||||
| * | Reclassified refer to note 4(a)(1) for further information. |
The accompanying notes are an integral part of the consolidated financial statements.
F-
HUB CYBER SECURITY LTD.
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
USD in thousands, except share and per share data
| Year ended December 31, | ||||||||||||||||
| Note | 2024 | 2023 | 2022 | |||||||||||||
| Revenues | 29,562 | 42,657 | 50,002 | |||||||||||||
| Cost of revenues | 24a | 24,515 | 41,907 | 45,914 | ||||||||||||
| Gross profit | 5,047 | 750 | 4,088 | |||||||||||||
| Research and development expenses, net | 24b | 2,002 | 5,886 | 5,574 | ||||||||||||
| Sales and marketing expenses | 24c | 5,457 | 10,694 | 21,674 | ||||||||||||
| General and administrative expenses (*) | 24d | 23,630 | 49,172 | 57,271 | ||||||||||||
| Other expenses, net | 24e | 181 | 12,723 | |||||||||||||
| Operating loss | (26,223 | ) | (77,725 | ) | (80,430 | ) | ||||||||||
| Finance income | 24f | (2,220 | ) | (484 | ) | (469 | ) | |||||||||
| Finance expenses | 24f | 12,586 | 7,194 | 1,384 | ||||||||||||
| Loss before taxes on income | (36,589 | ) | (84,435 | ) | (81,345 | ) | ||||||||||
| Taxes on income (tax benefit) | 25 | 557 | 171 | (776 | ) | |||||||||||
| Net loss from continuing operation | (37,146 | ) | (84,606 | ) | (80,569 | ) | ||||||||||
| Net income (loss) from discontinued operation | (1,885 | ) | (2,030 | ) | 569 | |||||||||||
| Attributable to: | ||||||||||||||||
| Equity holders of the Company | (39,757 | ) | (87,446 | ) | (81,595 | ) | ||||||||||
| Non-controlling interests | 726 | 810 | 1,595 | |||||||||||||
| (39,031 | ) | (86,636 | ) | (80,000 | ) | |||||||||||
| Net loss per share attributable to equity holders of the Company ($): | 26 | |||||||||||||||
| Basic and diluted net loss per share from continuing operation | $ | (14.3 | ) | $ | (88.2 | )** | $ | (93.8 | )** | |||||||
| Basic and diluted net profit (loss) per share from discontinued operation | $ | (0.7 | ) | $ | (2.1 | )** | $ | 0.7 | ** | |||||||
| Weighted average number of shares outstanding used in computation of basic and diluted loss per share | 2,645,478 | 968,600 | ** | 852,887 | ** | |||||||||||
| *) | Including $525 of allegedly misappropriated expenses by two former senior officers of the Company, during the year 2022. See note 26(4) below. |
| **) | Shares and per share amounts have been retroactively adjusted to reflect the reverse share splits at a ratio of 1:10 in December 2023 and 1:10 in March 2025. |
The accompanying notes are an integral part of the consolidated financial statements.
F-
HUB CYBER SECURITY LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
USD in thousands
| Year ended December 31, | ||||||||||||||
| Note | 2024 | 2023 | 2022 | |||||||||||
| USD in thousands | ||||||||||||||
| Net loss from continuing operation | (37,146 | ) | (84,606 | ) | (80,569 | ) | ||||||||
| Net (loss) profit from discontinued operation | (1,885 | ) | (2,030 | ) | 569 | |||||||||
| Other comprehensive loss, net of taxes: | ||||||||||||||
| Amounts that will not be reclassified subsequently to profit or loss: | ||||||||||||||
| Actuarial gain (loss) from defined benefit plan | 168 | 92 | (121 | ) | ||||||||||
| Foreign currency translation from functional currency to presentation currency | (242 | ) | (940 | ) | (5,473 | ) | ||||||||
| Total other comprehensive loss | (74 | ) | (848 | ) | (5,594 | ) | ||||||||
| Total comprehensive loss | (39,105 | ) | (87,484 | ) | (85,594 | ) | ||||||||
| Attributable to: | ||||||||||||||
| Equity holders of the Company | (39,781 | ) | (88,232 | ) | (87,095 | ) | ||||||||
| Non-controlling interests | 676 | 748 | 1,501 | |||||||||||
| (39,105 | ) | (87,484 | ) | (85,594 | ) | |||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-
HUB CYBER SECURITY LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
USD in thousands
| Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||||||||||||||
| Share capital and premium |
Treasury shares |
Share options |
Reserve for transactions with noncontrolling 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 deficit Shareholders’ equity |
||||||||||||||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2024 | 103,386 | (1,230 | ) | 10,918 | 24,165 | (670 | ) | (3,590 | ) | (186,488 | ) | (53,509 | ) | 2,776 | (50,733 | ) | ||||||||||||||||||||||||||||
| Total loss | (39,757 | ) | (39,757 | ) | 726 | (39,031 | ) | |||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | 168 | (192 | ) | (24 | ) | (50 | ) | (74 | ) | |||||||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | 168 | (192 | ) | (39,757 | ) | (39,781 | ) | 676 | (39,105 | ) | ||||||||||||||||||||||||||||||||||
| Warrants exercise | 3,422 | 3,422 | 3,422 | |||||||||||||||||||||||||||||||||||||||||
| Options exercise | 143 | (142 | ) | 1 | 1 | |||||||||||||||||||||||||||||||||||||||
| Conversion of convertible loans | 7,876 | 7,876 | 7,876 | |||||||||||||||||||||||||||||||||||||||||
| Issuance of shares | 2,420 | 2,420 | 2,420 | |||||||||||||||||||||||||||||||||||||||||
| Transactions with Non controlling interest | (3,286 | ) | (3,286 | ) | (3,482 | ) | (6,768 | ) | ||||||||||||||||||||||||||||||||||||
| Cost of share-based payment | 2,070 | 2,070 | 2,070 | |||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | 117,247 | (1,230 | ) | 10,918 | (3,286 | ) | 26,093 | (502 | ) | (3,782 | ) | (226,245 | ) | (80,787 | ) | (30 | ) | (80,817 | ) | |||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-
HUB CYBER SECURITY LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
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 |
||||||||||||||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2023 | 81,620 | (1,230 | ) | 10,291 | 76 | 18,172 | (762 | ) | (2,712 | ) | (99,042 | ) | 6,413 | 2,397 | 8,810 | |||||||||||||||||||||||||||||
| Total loss | - | - | - | - | - | - | - | (87,446 | ) | (87,446 | ) | 810 | (86,636 | ) | ||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | 92 | (878 | ) | (786 | ) | (62 | ) | (848 | ) | ||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | - | - | - | - | - | 92 | (878 | ) | (87,446 | ) | (88,232 | ) | 748 | (87,484 | ) | |||||||||||||||||||||||||||||
| Warrants exercise | 286 | (52 | ) | 234 | - | 234 | ||||||||||||||||||||||||||||||||||||||
| Options exercise | (1,122 | ) | 1,771 | - | 1,771 | |||||||||||||||||||||||||||||||||||||||
| Issuance of shares to Equity line of Credit (“ELOC’) | 1,570 | - | - | - | - | - | - | - | 1,570 | - | 1,570 | |||||||||||||||||||||||||||||||||
| Conversion of convertible loans | 6,143 | - | - | - | - | - | - | - | 6,143 | - | 6,143 | |||||||||||||||||||||||||||||||||
| Issuance of shares and warrants related to the PIPE, net of issuance expenses | 3,557 | - | - | - | - | - | - | - | 3,557 | - | 3,557 | |||||||||||||||||||||||||||||||||
| Issuance of shares and warrants | 110 | - | 679 | (76 | ) | - | - | - | - | 712 | - | 712 | ||||||||||||||||||||||||||||||||
| Issuance of shares related to RNER merger transaction (Note 5) | 7,208 | - | - | - | - | - | - | - | 7,208 | - | 7,208 | |||||||||||||||||||||||||||||||||
| Dividend distribution to non-controlling interests | - | - | - | - | - | - | - | - | - | (369 | ) | (369 | ) | |||||||||||||||||||||||||||||||
| Cost of share-based payment | - | - | 7,115 | - | - | - | 7,115 | - | 7,115 | |||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | 103,386 | (1,230 | ) | 10,918 | - | 24,165 | (670 | ) | (3,590 | ) | (186,488 | ) | (53,509 | ) | 2,776 | (50,733 | ) | |||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-
HUB CYBER SECURITY LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
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 |
||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2022 | 70,762 | (1,230 | ) | 1,102 | - | 9,574 | (608 | ) | 2,634 | (17,447 | ) | 64,787 | 991 | 65,778 | ||||||||||||||||||||||||||||||
| Total loss | - | - | - | - | - | - | - | (81,595 | ) | (81,595 | ) | 1,595 | (80,000 | ) | ||||||||||||||||||||||||||||||
| Other comprehensive loss | - | - | - | - | - | (154 | ) | (5,346 | ) | - | (5,500 | ) | (94 | ) | (5,594 | ) | ||||||||||||||||||||||||||||
| Total comprehensive loss | - | - | - | - | - | (154 | ) | (5,346 | ) | (81,595 | ) | (87,095 | ) | 1,501 | (85,594 | ) | ||||||||||||||||||||||||||||
| Warrants exercise | 451 | - | - | - | (81 | ) | - | - | - | 370 | - | 370 | ||||||||||||||||||||||||||||||||
| Options exercise | 2,553 | - | - | - | (1,837 | ) | - | - | - | 716 | - | 716 | ||||||||||||||||||||||||||||||||
| Extension of options to equity holders of the Company (Note 18f) | (5,102 | ) | - | 5,102 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Dividend to non-controlling interests | - | - | - | - | - | - | - | - | - | (95 | ) | (95 | ) | |||||||||||||||||||||||||||||||
| Issuance of shares and options, net of issuance expenses (Note 20) | 12,956 | - | 4,087 | 76 | - | - | - | - | 17,119 | - | 17,119 | |||||||||||||||||||||||||||||||||
| Cost of share-based payment | - | - | 10,516 | - | - | - | 10,516 | - | 10,516 | |||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | 81,620 | (1,230 | ) | 10,291 | 76 | 18,172 | (762 | ) | (2,712 | ) | (99,042 | ) | 6,413 | 2,397 | 8,810 | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-
HUB CYBER SECURITY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
USD in thousands
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| USD in thousands | ||||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net loss | (39,031 | ) | (86,636 | ) | (80,000 | ) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Adjustments to the profit or loss items: | ||||||||||||
| Finance expenses, net | 1,231 | 13 | 896 | |||||||||
| Other expenses | 445 | 192 | ||||||||||
| Financial liabilities recorded as listing expenses | 7,648 | |||||||||||
| Finance expenses related to convertible loans and warrants | 7,227 | 5,016 | ||||||||||
| Revaluation of liability to Legacy | 267 | 810 | ||||||||||
| ELOC | 1,570 | |||||||||||
| Share listing expenses | 12,312 | |||||||||||
| Issuance of shares to consultants | 2,420 | |||||||||||
| Depreciation and amortization | 2,379 | 7,637 | 7,791 | |||||||||
| Impairment of goodwill and intangible assets | 653 | 15,258 | 23,356 | |||||||||
| Change in employee benefit liabilities, net | (42 | ) | (43 | ) | (364 | ) | ||||||
| Change in deferred tax liabilities | (37 | ) | (39 | ) | (1,059 | ) | ||||||
| Cost of share-based payment | 2,070 | 7,115 | 10,516 | |||||||||
| 16,615 | 57,489 | 41,136 | ||||||||||
| Changes in asset and liability items: | ||||||||||||
| Decrease (increase) in trade receivables | 1,890 | 13,242 | (1,453 | ) | ||||||||
| Decrease (increase) in other assets | 665 | (4,730 | ) | 2,462 | ||||||||
| Increase (decrease) in trade payables | (1,591 | ) | (3,436 | ) | 544 | |||||||
| Decrease (increase) in inventories | 1,812 | (288 | ) | |||||||||
| Change in balances of government grants | 70 | (824 | ) | |||||||||
| Increase in other accounts payable | 7,776 | 7,980 | 15,216 | |||||||||
| 8,810 | 14,044 | 16,481 | ||||||||||
| Cash paid and received during the year for: | ||||||||||||
| Interest paid,net | (277 | ) | (717 | ) | (806 | ) | ||||||
| Taxes paid | (3,227 | ) | (382 | ) | (243 | ) | ||||||
| (3,504 | ) | (1,099 | ) | (1,049 | ) | |||||||
| Net cash used in operating activities | (17,110 | ) | (16,202 | ) | (23,432 | ) | ||||||
F-
HUB CYBER SECURITY LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
USD in thousands
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| USD in thousands | ||||||||||||
| Cash flows from investing activities: | ||||||||||||
| Investment in restricted bank deposit | (660 | ) | ||||||||||
| Withdrawal from restricted bank deposit | 1,407 | 3,926 | ||||||||||
| (Investment in) restricted cash | (337 | ) | (1,493 | ) | 140 | |||||||
| Change in long-term deposits | 177 | |||||||||||
| Purchase of property and equipment | (84 | ) | (297 | ) | (624 | ) | ||||||
| Assets acquisition | (5,405 | ) | ||||||||||
| Credit line to a related party | (1,615 | ) | ||||||||||
| Net cash provided by (used in) investing activities | (452 | ) | 2,136 | (6,549 | ) | |||||||
| Cash flows from financing activities: | ||||||||||||
| Issuance of ordinary shares, net of issuance expenses | 2,379 | 18,836 | ||||||||||
| Short-term loans, net | 1,780 | |||||||||||
| Repayment of lease liabilities | (1,017 | ) | (1,711 | ) | (2,065 | ) | ||||||
| Receipt on account of issuance of shares | 2,251 | |||||||||||
| Dividend distribution to non-controlling interests | (95 | ) | ||||||||||
| Exercise of options and warrants | 5,146 | 2,005 | 1,086 | |||||||||
| Government grants | 77 | |||||||||||
| Receipt of short-term loans | 19,815 | 15,227 | ||||||||||
| Acquisition of non-controlling interest | (6,768 | ) | ||||||||||
| Repayment of short-term loans | (4,973 | ) | (1,210 | ) | ||||||||
| Net cash provided by financing activities | 17,176 | 12,927 | 20,660 | |||||||||
| Exchange rate differences on cash and cash equivalents | (51 | ) | 667 | (659 | ) | |||||||
| (decrease) in cash and cash equivalents | (437 | ) | (472 | ) | (9,980 | ) | ||||||
| Cash and cash equivalents at the beginning of the year | 3,522 | 3,994 | 13,974 | |||||||||
| Cash and cash equivalents at the end of the year | 3,085 | 3,522 | 3,994 | |||||||||
| Non-cash transactions: | ||||||||||||
| Right-of-use asset and liability | 627 | (2,516 | ) | 1,306 | ||||||||
| Assets acquisition | 4,796 | |||||||||||
| Employee benefit assets and liabilities | 168 | 97 | 121 | |||||||||
| Reclassification of deferred issuance cost to equity | 1,384 | 1,717 | ||||||||||
| Dividend distribution to non-controlling interests | 369 | |||||||||||
| Reclassification of liability to equity | 2,670 | |||||||||||
| Conversion of convertible loans | 7,876 | 6,143 | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 1:- | GENERAL |
| a. |
Operation |
HUB Cyber Security Ltd.
(formerly: Hub Cyber Security (Israel) Ltd.) (“the Company” or “HUB”) 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 headquarters are located in Tel Aviv, Israel. The Company and its subsidiaries (collectively, “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 TLV Ltd, the Company also operates in the Confidential Computing and network security industry.
The Company’s ordinary shares began trading on Nasdaq Capital Market on March 1, 2023. The Company’s ordinary shares were previously listed on the Tel Aviv Stock Exchange from January 23, 2000 to February 28, 2023.
On May 20, 2024, the Company received a letter from the Nasdaq Stock Market (“Nasdaq”) regarding the Company’s failure to timely file its Annual Report on 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”). On July 19, 2024 the Company responded to the aforementioned letter from Nasdaq, stating its intention to comply with the Filing Requirement, and asked for an extension. On July 30, 2024 the Company received a reply from Nasdaq, granting its request for an extension to comply with the Filing Requirement until August 19, 2024. The Form 20-F, including the Company’s consolidated financial statements for the fiscal year ended December 31, 2023, was filed with the SEC on August 16, 2024.
On July 16, 2024, the Company received a deficiency notice from Nasdaq informing us that the Company ordinary shares have failed to comply with the $1.00 minimum bid price required for continued listing under Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Price Requirement”) based upon the closing bid price of the Company ordinary shares for the 30 consecutive business days prior to the date of the deficiency notice. The deficiency notice did not result in the immediate delisting of the Company ordinary shares from Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was given 180 calendar days from, or until January 13, 2025, to regain compliance with the Minimum Bid Price Requirement.
In addition, on August 23, 2024 the Company received a deficiency notice from Nasdaq informing it that it is no longer in compliance with Nasdaq Listing Rule 5450(b)(3) (the “Total Assets and Total Revenue Requirement”) because its 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 $50 million threshold for continued listing on The Nasdaq Global Market. In accordance with Nasdaq Listing Rule 5810(c)(2)(A), the Company had 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”). On October 9, 2024, the Company submitted the Compliance Plan to Nasdaq. On December 11, 2024, the Company received another notice from Nasdaq stating that the Compliance Plan did not evidence the Company's ability to achieve near term compliance with continued listing requirements or sustain such compliance over an extended period of time. Accordingly, the Company was notified that its securities would be delisted from the Nasdaq Global Market, unless we request a hearing before the Nasdaq Hearings Panel (the “Panel”), which request would stay any further action by the Staff at least until the hearing process concludes. On December 18, 2024, the Company requested a hearing before the Panel. On January 14, 2025, the Company received a notice from Nasdaq that it did not regain compliance with the Minimum Bid Price Requirement prior to January 13, 2025 and that such failure to regain compliance with the Minimum Bid Price Requirement served as an additional basis for delisting of its securities from the Nasdaq Global Market. The hearing before the Panel was held on February 6, 2025.
On February 27, 2025, the Company received a notice from Nasdaq informing the Company that Nasdaq granted its request to continue listing on the Nasdaq Stock Market, subject to (i) on or before March 5, 2025, its filing of an application to transfer its securities to the Nasdaq Capital Market and (ii) on or before March 31, 2025, the Company’s demonstrating compliance with the minimum bid price requirement and the continued listing requirement that the Company maintains either a minimum of $2,500 thousand in shareholders’ equity or $35,000 thousand market value of listed securities or $500 thousand of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years, as set forth in Nasdaq Listing Rule 5550(b)(2) (“MVLS Rules”). On February 26, 2025, the Staff confirmed to the Company via email that it had regained compliance with the MVLS Rules.
On March 4, 2025, the Company filed an application to transfer its securities to the Nasdaq Capital Market.
| b. | On March 28, 2025, the Company effected a 1-for-10 reverse share split of its ordinary shares in an effort to regain compliance with the Nasdaq minimum bid price requirement. |
| c. | 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 0.712434 ordinary shares of the Company (the “February 2023 Share Split”). In addition, and as part of the February 2023 Share Split, each outstanding option to purchase an ordinary share was converted into an option to purchase 0.712434 ordinary shares and the exercise price of such option was increased by dividing the exercise price by 0.712434. As a result of the February 2023 Share Split, the ordinary shares, options to purchase ordinary shares, exercise price and net loss per share amounts were adjusted retroactively for all periods presented in these consolidated financial statements as if the February 2023 Share Split had been in effect as of the date of these consolidated financial statements. Please refer to Note 20a.
The Transactions were accounted for as a reverse recapitalization, in accordance with the relevant International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standard Board (“IASB”) and the Group was deemed to be the accounting acquirer. RNER did not meet the definition of a business in accordance with IFRS 3 - “Business Combinations”, and the Transactions were instead accounted for within the scope of IFRS 2 - “Share-based payment” (“IFRS 2”), as a share-based payment transaction in exchange for a public listing service. In accordance with IFRS 2 the Company recorded a one-time share-based Share listing expense of $12,312 thousands at the closing of the Merger Agreement that was calculated based on the excess of the fair value of the Company issued to public investors over the fair value of the identifiable net assets of RNER that were acquired. For more details, please refer to Note 5.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 1:- | GENERAL (Cont.) |
| d. | Credit line to a related party |
During 2024 and 2023,the Company has provided Blackswan Technologies, Inc. (“BST”), a related party, an aggregated amount of $2,662 thousand under the BST Loan Agreement (as defined below). For additional information, please refer to Note 26.
| e. | 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 2025-2026 business plan. However, the Company still faces significant uncertainty regarding the adequacy of its liquidity and capital resources and its ability to repay its obligations as they become due.
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.
As of December 31, 2024, the Company has incurred accumulated losses in the amount of $226,245 thousand, and had a negative working capital in the amount of $87,672 thousand. Also, for the year ended December 31, 2024 the Company used $17,110 thousand in operating activities. The Company expects to continue to incur losses in 2025 and potentially thereafter as well. On December 31, 2024, the Company’s cash and cash equivalents position is not sufficient to fund the Company’s planned operations for at least a year beyond the date of the filing date of the consolidated financial statements and the Company requires an immediate cash injection to fund its operations. Furthermore, there are several legal claims against the Company, for addition information refer Note 22c. Those factors raise substantial doubts about the Company’s ability to continue as a going concern.
In 2024 and also in the beginning of 2025, the Company undertook efforts to renegotiate with key creditors and loan agreements. For more details, please refer to Note 28.
The consolidated financial statements for the year ended December 31, 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.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 1:- | GENERAL (Cont.) |
| f. | Internal investigation |
As previously disclosed, on April 20, 2023, the Company’s board of directors appointed a Special Committee of Independent Directors (the “Special Committee”) to oversee an internal investigation (the “Internal Investigation”) in order to review certain allegations of misappropriation of Company funds and other potential fraudulent actions regarding the use of Company funds by a former senior officer of the Company. During the course of the Internal Investigation, the Special Committee, together with its outside advisers, believed that it found sufficient evidence to support a determination that the Company’s former Chief Executive Officer and President of U.S. operations and former member of the board of directors (“former CEO”), and the Company’s former Chief of Staff and wife of the former CEO, misappropriated (from a Company bank account over which the Company’s former CEO had sole signatory rights) a total of approximately NIS 2,000 thousand (approximately $582 thousand) for personal use. Further, in certain instances, evidence reviewed by the Special Committee demonstrated that the Company’s former CEO authorized payments to contractors without either (i) proper documentation and signatory approval; or (ii) required budget and expense reports. The employment of the former CEO, was terminated effective July 24, 2023 for cause and the Company’s former CEO resigned from the Company’s board on August 15, 2023. Additionally, the Company has commenced two legal actions in Israel against the Company’s former Chief of Staff and against the Company’s former CEO to omitted their requests for severance payments in accordance with Israeli law in connection with these determinations by the Special Committee.
Additionally, the Special Committee believed that it found sufficient evidence to determine that, one of the controllers of the Company, with the permission of the Company’s former CEO, used Company credit cards for personal use in the amount of approximately NIS 400 thousand (approximately $110 thousand). These personal expenses were neither factored into the controller’s payroll nor properly documented in the Company’s financial books and records. Additionally, the Company’s former CEO approved a bonus of NIS 250 thousand to the controller. However, this bonus was not paid to the controller but instead was paid to a third-party at the controller’s direction. Prior to the commencement of legal proceedings, the Company reached a settlement with the controller whereby the amount of the bonus in the amount of NIS 250 thousand plus VAT was repaid to the Company in 2023. The Internal Investigation is complete, although the Company aims to continue pursuing recovery of the misappropriated funds. These events regarding the Special Committee and Internal Investigation are the subject of possible regulatory review and expose the Company and its directors and officers to possible investigations and possible enforcement actions by regulators both in Israel and the United States, including the Israel Securities Authority (“ISA”), Israel Tax Authority, U.S. Securities and Exchange Commission (“SEC”), the Nasdaq Stock Market LLC (“Nasdaq”) and/or U.S. Department of Justice (“DOJ”). The Company has provided certain information and documentation to certain regulatory authorities and is prepared to respond to any regulatory inquiry it may receive. The Company’s management and its board of directors do not currently believe there are any impacts on the Company’s financial statements. If the Company were to be subject to an investigation or enforcement action from a regulatory agency it could have a material adverse effect on the Company’s business, financial position and results of operations.
If any federal authorities were to ultimately determine that the Company violated any laws or regulations, the Company may be exposed to a broad range of civil and criminal sanctions including, but not limited to, injunctive relief, disgorgement, fines, penalties, modifications to business practices including the termination or modification of existing business relationships, the imposition of compliance programs and the retention of a monitor to oversee future compliance by the Company, which could be costly and burdensome to the management, and could adversely impact the Company’s business, prospects, reputation, financial condition, liquidity, results of operations or cash flows. Even if an inquiry or investigation does not result in any adverse determinations, it potentially could create negative publicity and give rise to third-party litigation or other actions, which could also have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.
The Special Committee is neither a civil nor criminal court of law and no court has yet substantiated the findings of the Special Committee. It is possible that a court of law may find differently than the Special Committee has, which could expose the Company to counterclaims from the Former Senior Officer, the former Chief of Staff or others. Additionally, while the Company has informed the Former Senior Officer that he has been summarily dismissed as an employee and has commenced a legal action in Israel against the former Chief of Staff to omitted her requests for severance payments in accordance with Israeli law, there can be no assurance that the Former Senior Officer, the former Chief of Staff or others will not bring forth any claims or commence any litigation against the Company in connection with the former Senior Officer dismissal, the Company’s challenging the former Chief of Staff severance payments or the publication of the Special Committee’s findings from the Internal Investigation.
As of December 31,2024, following the completion of the Internal Investigation as described above, the Company has commenced legal actions in Israel against the Company’s former Chief of Staff and against the Company’s former CEO to dispute their requests for severance payments in accordance with Israeli law. Two actions were undertaken against the Company’s former Chief of Staff. In the initial action, the court granted an injunction preventing her from accessing her accumulated severance package. In the second action, it was requested that the court order that these sums be returned to the Company. In the action against the Company’s former CEO, the court was requested to grant an injunction against accessing the accumulated severance package and to order the return of the sums to the Company. These actions are time limited, so the initial action against the Company’s former Chief of Staff was initiated prior to the completion of the Special Committee Report and as such was based upon the limited information known at that time. The preliminary hearing in both of these cases is set for the coming months and both will be heard in front of the same judge who granted the injunction against the Company’s former Chief of Staff. For a full description of the claims currently being conducted against the Company’s former Chief of Staff and against the Company’s former CEO, please refer to Note 22C below.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 1:- | GENERAL (Cont.) |
There can be no assurance that the Company’s former CEO, the Company’s former Chief of Staff or others will not bring forth any claims or commence any litigation against us in connection with the Company’s former CEO’s dismissal, his resignation from the board, the Company’s challenging the Company’s former Chief of Staff’s severance payments or the publication of the Special Committee’s findings from the Internal Investigation.
Further, the Company incurred substantial costs and diverted management resources in connection with the Internal Investigation. The Company may also incur material costs associated with the indemnification arrangements with the current and former directors and certain of the Company’s officers, as well as other indemnitees related to law suits or regulatory proceedings that have arisen and may arise in the future from the Internal Investigation.
Since the completion of the Internal Investigation, the Company performed a rehaul of its top management and executive officers, in addition to enacting and enforcing tougher anti-fraud and anti-corruption policies, oversight, reviews and checks. Substantially all of the management and executive officers that served in the Company during the time when the misappropriation occurred have since left the Company and been replaced. The Company assumes that the past misappropriation of funds has no current or further impact on the Company, its finances and its business, and is not expected to affect the Company or its expected growth in the future.
| g. | 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 Internal Investigation conducted by the special committee appointed by the Company’s board of directors in April 2023. On April 22, 2025, investigators from the Israeli Tax Authority visited the offices of the Company. To the Company’s best knowledge, the visit related to developments in the Internal Investigation related to the actions of a former financial controller of the Company, which were also addressed in the Internal Investigation. |
| NOTE 2:- | MATERIAL ACCOUNTING POLICIES |
The following accounting policies have been applied consistently in the financial statements for all periods presented, unless stated otherwise.
| a. | Basis of presentation of the financial statements: |
These financial statements have been prepared in accordance with IFRS as issued by the IASB.
The Company’s financial statements have been prepared on a cost basis, except for financial instruments measured at fair value through profit or loss.
The Company has elected to present the profit or loss items using the function of expense method.
| b. | The operating cycle: |
The Company’s operating cycle is one year.
| c. | Consolidated financial statements: |
The consolidated financial statements comprise the financial statements of companies that are controlled by the Company (subsidiaries). Control is achieved when the Company has power over the subsidiary, is exposed or has rights to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. In assessing control, the effect of potential voting rights is considered only if they are substantive.
Non-controlling interests in subsidiaries represent the equity in subsidiaries not attributable, directly or indirectly, to a parent. Non-controlling interests are presented in equity separately from the equity attributable to the equity holders of the Company. Profit or loss and components of other comprehensive income are attributed to the Company and to non-controlling interests. Losses are attributed to non-controlling interests even if they result in a negative balance of non-controlling interests in the consolidated statement of financial position. For more information please refer to Note 23(b).
| d. | Business combinations and goodwill: |
To determine whether a transaction is accounted for as an asset acquisition or business combination, the Company applies a concentration test to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the test is met, the transaction is accounted for as an asset acquisition. If the concentration test is not met, the integrated set of activities and assets is considered a business based on whether there are inputs and substantive processes in place. For transactions accounted for as asset acquisitions, the cost, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 2:- | MATERIAL ACCOUNTING POLICIES (Cont.) |
Business combinations are accounted for by applying the acquisition method. The cost of the acquisition is measured at the fair value of the consideration transferred on the acquisition date with the addition of non-controlling interests in the acquiree. In each business combination, the Company chooses whether to measure the non-controlling interests in the acquiree based on their fair value on the acquisition date or at their proportionate share in the fair value of the acquiree’s net identifiable assets.
Direct acquisition costs are carried to the statement of profit or loss as incurred.
Goodwill is initially measured at cost which represents the excess of the acquisition consideration and the amount of non-controlling interests over the net identifiable assets acquired and liabilities assumed.
| e. | Functional currency, presentation currency and foreign currency: |
| 1. | Functional currency and presentation currency: |
The Group determines the functional currency of each entity in the Group. Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Company’s functional currency is New Israeli Shekel (“NIS”). The consolidated financial statements are presented in US dollars (“USD”), which is the Company’s presentation currency.
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentational currency are translated into the presentational currency as follows:
| ● | Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position. |
| ● | Income and expenses for each statement of profit or loss and statement of comprehensive loss are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions), and |
| ● | All resulting exchange differences are recognized in other comprehensive income (loss). |
| 2. | Transactions, assets and liabilities in foreign currency: |
Transactions denominated in foreign currency (other than the functional currency) are recorded upon initial recognition at the exchange rate at the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at each reporting date into the functional currency at the exchange rate at that date. Exchange rate differences, other than those capitalized to qualifying assets , are recognized in profit or loss. Non-monetary assets and liabilities denominated in foreign currency and measured at cost are translated at the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate prevailing at the date when the fair value was determined.
| f. | Revenue recognition: |
Revenue from contracts with customers is recognized when the control over the goods or services is transferred to the customer.
Revenue from rendering of services:
Revenue from rendering of services is recognized over time, during the period the customer simultaneously receives and consumes the benefits provided by the Company’s performance. The Company charges its customers based on payment terms agreed upon in specific agreements. Payment terms and conditions vary by contract type, although terms generally include a requirement to pay within 30 to 90 days. When payments are made before or after the service is performed, the Company recognizes the resulting contract asset or liability.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 2:- | MATERIAL ACCOUNTING POLICIES (Cont.) |
Contract balances:
The Company charges customers as the work progresses in accordance with the contractual terms. Amounts billed are classified as trade receivables in the statement of financial position. When revenue from performance obligation of a contract are recognized in profit or loss before the customer is charged, the unbilled amounts are recorded as part of the trade receivables.
Amounts received from customers in advance of performance by the Company are recorded as contract liabilities and recognized as revenue in profit or loss when the work is performed.
Determining the transaction Price
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The Company applies the practical expedient of significant finance component. That is, the promised amount of consideration is not adjusted for the effects of a significant financing component if the period between the transfer of the promised good or service and the payment is one year or less.
Costs of obtaining a contract:
The Company has elected to apply the practical expedient allowed by IFRS 15 according to which incremental costs of obtaining a contract are recognized as an expense when incurred if the amortization period of the asset is one year or less.
| g. | Taxes on income: |
Deferred taxes:
Deferred taxes are computed in respect of temporary differences between the carrying amounts in the financial statements and the amounts attributed for tax purposes.
Deferred taxes are measured at the tax rate that is expected to apply when the asset is realized or the liability is settled, based on tax laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductible carryforward losses and temporary differences for which deferred tax assets had not been recognized are reviewed at each reporting date and a respective deferred tax asset is recognized to the extent that their utilization is probable.
Taxes that would apply in the event of the disposal of investments in subsidiaries have not been taken into account in computing deferred taxes, as long as the disposal of the investments in subsidiaries is not probable in the foreseeable future. Also, deferred taxes that would apply in the event of distribution of earnings by subsidiaries as dividends have not been taken into account in computing deferred taxes, since the distribution of dividends does not involve an additional tax liability or since it is the Company’s policy not to initiate distribution of dividends from a subsidiary that would trigger an additional tax liability.
Deferred taxes are offset if there is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate to the same taxpayer and the same taxation authority.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 2:- | MATERIAL ACCOUNTING POLICIES (Cont.) |
| h. | Intangible assets: |
Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, are recognized in profit or loss when incurred.
Intangible assets with a finite useful life are amortized over their useful life on a straight-line basis and reviewed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.
Patents:
The patents are for a period of ten years with an option for renewal at the end of the period.
The useful life of intangible assets is as follows:
| Years | ||||
| Patents | 10 | |||
| Customer relations | 3.5 – 10 | |||
| Order backlog | 1 | |||
| Technology | 2 – 4 | |||
Gains or losses from the derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the cost of the asset and carried to profit or loss.
| i. | Impairment of non-financial assets: |
The Company evaluates the need to record an impairment of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount.
The recoverable amount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in profit or loss.
An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.
A reversal of an impairment loss for each cash generating unit shall be allocated to the assets of the unit, except for goodwill, pro rata with the carrying amount to each of the assets within the measurement scope of IAS 36. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 2:- | MATERIAL ACCOUNTING POLICIES (Cont.) |
The following criteria are applied in assessing impairment of these specific assets:
Goodwill in respect of subsidiaries:
The Company reviews goodwill for impairment at least once a year, on December 31, or more frequently if events or changes in circumstances indicate that there is an impairment.
Goodwill is tested for impairment by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units) to which the goodwill has been allocated. Each cash-generating unit to which the goodwill is allocated shall represent the lowest level within the Company at which the goodwill is monitored for internal management purposes and not be larger than an operating segment. An impairment loss is recognized if the recoverable amount of the cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is less than the carrying amount of the cash-generating unit (or group of cash-generating units). Any impairment loss is allocated first to goodwill. Impairment losses recognized for goodwill cannot be reversed in subsequent periods.
| j. | Financial instruments: |
| 1. | Financial liabilities: |
| a) | Financial liabilities measured at amortized cost: |
Financial liabilities are initially recognized at fair value less transaction costs that are directly attributable to the issue of the financial liability. After initial recognition, the Company measures all financial liabilities at amortized cost.
| b) | Financial liabilities measured at fair value through profit or loss: |
At initial recognition, the Company measures financial liabilities that are not measured at amortized cost at fair value. Transaction costs are recognized in profit or loss. After initial recognition, changes in fair value are recognized in profit or loss.
| 2. | Derecognition of financial liabilities: |
A financial liability is derecognized only when it is extinguished, that is when the obligation specified in the contract is discharged or cancelled or expires. A financial liability is extinguished when the debtor discharges the liability by paying in cash, other financial assets, goods or services; or is legally released from the liability.
When there is a modification in the terms of an existing financial liability, the Company evaluates whether the modification is substantial.
If the terms of an existing financial liability are substantially modified, such modification is accounted for as an extinguishment of the original liability and the recognition of a new liability. The difference between the carrying amounts of the above liabilities is recognized in profit or loss.
If the modification is not substantial, the Company recalculates the carrying amount of the liability by discounting the revised cash flows at the original effective interest rate and any resulting difference is recognized in profit or loss.
When evaluating whether the modification in the terms of an existing liability is substantial, the Company considers both quantitative and qualitative factors.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 2:- | MATERIAL ACCOUNTING POLICIES (Cont.) |
| 3. | Warrants to ordinary shares: |
According to IAS 32, “Financial Instruments: Presentation”, derivatives which will be settled only by the issuer exchanging fixed amounts of cash to fixed numbers of the Company’s ordinary shares will be classified as equity. Otherwise, the instrument should be classified as a financial liability. Therefore, the Group has classified such warrants as a financial liability. The warrant instrument is initially recognized at fair value, and subsequently measured at fair value. Changes in fair value are recognized in profit or loss. When the fair value of the identified financial instruments measured at Level 3 in the fair value hierarchy exceeds the total consideration received by the Company, the ‘Day 1’ loss is deferred and recognized on a straight-line basis over the term of the instruments.
| k. | Fair value measurement: |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Fair value measurement is based on the assumption that the transaction will take place in the asset’s or the liability’s principal market, or in the absence of a principal market, in the most advantageous market.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
Fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities measured at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based on the lowest level input that is significant to the entire fair value measurement:
| ● | Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| ● | Level 2 - inputs other than quoted prices included within Level 1 that are observable directly or indirectly. |
| ● | Level 3 - inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data). |
| l. | Provisions: |
A provision in accordance with IAS 37 is recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects part or all of the expense to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense is recognized in the statement of profit or loss net of any reimbursement.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 2:- | MATERIAL ACCOUNTING POLICIES (Cont.) |
Following are the type of provisions included in the financial statements:
A provision for claims is recognized when the Group has a present legal or constructive obligation as a result of a past event, that it is more likely than not that an outflow of resources embodying economic benefits will be required by the Group to settle the obligation and a reliable estimate can be made of the amount of the obligation.
| m. | Employee benefit liabilities: |
The Group has several employee benefit plans:
| 1. | Short-term employee benefits: |
Short-term employee benefits are benefits that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus is recognized when the Group has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.
| 2. | Post-employment benefits: |
The plans are normally financed by contributions to insurance companies and classified as defined contribution plans or as defined benefit plans.
The Group has defined contribution plans pursuant to section 14 to the Severance Pay Law under which the Group usually pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed concurrently with performance of the employee’s services.
The Group also operates a defined benefit plan in respect of severance pay pursuant to the Severance Pay Law. According to the Law, employees are entitled to severance pay upon dismissal or retirement. The liability for termination of employment is measured using the projected unit credit method. The actuarial assumptions include expected salary increases and rates of employee turnover based on the estimated timing of payment. The amounts are presented based on discounted expected future cash flows using a discount rate determined by reference to market yields at the reporting date on high quality corporate bonds that are linked to the Consumer Price Index with a term that is consistent with the estimated term of the severance pay obligation.
In respect of its severance pay obligation to certain of its employees, the Company usually makes current deposits in severance pay funds and insurance companies (“the plan assets”). Plan assets comprise assets held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the Group’s own creditors and cannot be returned directly to the Group.
The liability for employee benefits shown in the statement of financial position reflects the present value of the defined benefit obligation less the fair value of the plan assets.
Remeasurements of the net liability are recognized in other comprehensive income in the period in which they occur.
| n. | Basic and diluted net profit (loss) per share: |
In computing diluted loss per share for the years ended December 31, 2024, December 31, 2023, December 31, 2022 no account was taken of the potential dilution that could occur upon the exercise of employee and investors stock options, amounting to 3,273,013, 669,264 and 274,000 respectively, since they had an anti-dilutive effect on loss per share.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3 – | SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS |
In the process of applying the significant accounting policies, the Group has made the following judgments which have the most significant effect on the amounts recognized in the financial statements:
| a. | Estimates and assumptions: |
The preparation of the financial statements requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are reported in the period of the change in estimate.
The key assumptions made in the financial statements concerning uncertainties at the reporting date and the critical estimates computed by the Group that may result in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
| - | Impairment of goodwill: |
The Group reviews goodwill for impairment at least once a year. This requires management to make an estimate of the projected future cash flows from the continuing use of the cash-generating unit (or a group of cash-generating units) to which the goodwill is allocated and also to choose a suitable discount rate for those cash flows. See more information in Note 2i above.
| - | Impairment of other intangible assets |
The carrying values of the long-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. If any indication exists, then the asset’s recoverable amount is estimated. Determining the recoverable amount is subjective and requires management to estimate future growth, profitability, discount and terminal growth rates, and project future cash flows, among other factors. Future events and changing market conditions may impact the assumptions as to prices, costs or other factors that may result in changes to the estimates of future cash flows. If the Company concludes that a definite or indefinite long-lived intangible asset is impaired, the company recognize a loss in an amount equal to the excess of the carrying value of the asset over its fair value at the date of impairment.
The fair value at the date of the impairment becomes the new cost basis and will result in a lower depreciation expense than for periods before the asset’s impairment.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 3 – | SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS (Cont.) |
| - | Legal claims: |
In estimating the likelihood of outcome of legal claims filed, threatened litigation and unasserted claim against the Group, the companies in the Group rely on the opinion of their legal counsel. These estimates are based on the legal counsel’s best professional judgment, taking into account the stage of proceedings and legal precedents in respect of the different issues. Since the outcome of the claims will be determined in courts, the results could differ from these estimates.
| - | Deferred tax assets: |
Deferred tax assets are recognized for unused carryforward tax losses and deductible temporary differences to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the timing and level of future taxable profits, its source and the tax planning strategy. See also Note 2g above.
| - | Severances and other post-employment benefits: |
The liability in respect of post-employment defined benefit plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about, among others, the discount rate, rate of salary increases and employee turnover rate. The carrying amount of the liability may be significantly affected by changes in these estimates.
| NOTE 4 – | DISCLOSURE OF NEW STANDARDS IN THE PERIOD |
| 1. | Changes in accounting policies - initial application of new financial reporting and accounting standards and amendments to existing financial reporting and accounting standards: |
| a) | 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.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 4 – | DISCLOSURE OF NEW STANDARDS IN THE PERIOD (Cont.) |
The Amendments did not have impact on the Company’s 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.
| b) | 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.
| c) | 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.
The application of the Amendment did not have a material impact on the Company’s consolidated financial statements.
| 2. | 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: |
| a) | 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.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 4 – | DISCLOSURE OF NEW STANDARDS IN THE PERIOD (Cont.) |
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.
| b) | 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.
| NOTE 5 – | MERGER AGREEMENT WITH SPECIAL PURPOSE ACQUISITION COMPANY (“SPAC”) |
On March 22, 2022, the Company’s board of directors approved the Company’s engagement in a merger transaction, which consisted of signing a series of binding agreements including a merger agreement (“the merger transaction”), between the Company and RNER. (“RENR”), an unrelated third party which was traded on the Nasdaq Global Market that raised approximately $175,000 thousand as a SPAC. The Company hired A-Labs Advisory and Finance Ltd., (“A-Labs”) an investment banking firm in which the Company’s chief executive officer serves as a managing partner, and Oppenheimer & Co. Inc. (“Oppenheimer”) to assist the merger transaction.
The merger transaction relied on the proforma Enterprise Value of the merged company of approximately $1.28 billion (before the money), as agreed upon with Mount Rainier and with the PIPE investors (as defined below), including share options and potential free cash flows of up to approximately $225,000 thousand in the merged company (insofar as none of the SPAC shareholders redeem their investment before the merger transaction closing in keeping with their rights, see further details below).
In connection with the merger transaction, qualifying Israeli and U.S. institutional investors (“the PIPE investors”) engaged to invest $50,000 thousand based on the merger company’s agreed value as described above (in a private placement) to be invested in the Company at closing.
On January 11, 2023 the Company announced that all the suspending conditions for the merger transaction have been met and the completion of the merger transaction was subject only to the absence of a legal impediment. Shortly before the closing date of merger transaction, the Company affected a reverse share split to cause the value of the outstanding ordinary shares immediately prior to the transaction closing date to be equal to $10 per share (pre reverse stock split of 1:10).
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 5 – | MERGER AGREEMENT WITH SPECIAL PURPOSE ACQUISITION COMPANY (“SPAC”) (Cont.) |
The Company’s shares began trading on Nasdaq on March 1, 2023.
99% of the shareholders entitled to withdraw their investment of $175,000 thousand elected to redeem their investment upon the approval of the merger.
In March 2023, the Company raised $4,000 thousand from two of the PIPE investors, and, while the Company is considering possible alternatives in order to pursue the majority of the remaining funds committed as a part of the PIPE investment from the investors, it is uncertain if the Company will be able to receive the remaining PIPE funds. As of December 31, 2022, the Company recorded $872 thousand as advance issuance expense, which were classified in 2023 to premium.
In December 2021, the Company entered into an agreement with Oppenheimer to provide financial advisory services. In connection with the Reverse Recapitalization, the Company agreed to pay to Oppenheimer a transaction fee upon the consummation of the Reverse Recapitalization equal to 1% of the aggregate value of the Company implied by the value of the Company’s ordinary shares issued to RNER’s stockholders in the Reverse Recapitalization on a fully diluted basis, plus the principal amount of any debt or other liabilities of HUB outstanding as of the closing date of the Reverse Recapitalization. Based on the valuation of $1.28 billion ascribed to the shares issued to RNER’s stockholders in the Reverse Recapitalization in March 2023, the amount owed to Oppenheimer at the closing of the Reverse Recapitalization was approximately $12,800 thousand. As of December 31, 2024 and 2023, the Company recorded $12,800 thousand.
On June 12, 2023 a lawsuit was filed by Oppenheimer against the Company 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 Reverse Recapitalization with Mount Rainier Acquisition Corp. During the beginning of 2025, the parties agreed to a settlement. For additional information, refer to Note 22(c).
The Transactions were accounted for as a reverse recapitalization, in accordance with the relevant “IFRS” and the Group was deemed to be the accounting acquirer. RNER did not meet the definition of a business in accordance with IFRS 3 - “Business Combinations”, and the Transactions were instead accounted for within the scope of IFRS 2 - “Share-based payment” (“IFRS 2”), as a share-based payment transaction in exchange for a public listing service. In accordance with IFRS 2, the Company recorded a one-time share-based Share listing expense of $12,312 thousand at the closing of the Reverse Recapitalization that was calculated based on the excess of the fair value of the Company issued to public investors over the fair value of the identifiable net assets of RNER that were acquired:
| Amount | Number
of shares*) |
|||||||
| USD
in thousands except to share amount |
||||||||
| Shares issued to RNER shareholders | 45,332 | |||||||
| Closing price of the Company’s share on Nasdaq as of March 1, 2023 ($) | 159 | |||||||
| (A) Fair value of the Company’s shares issued to RNER shareholders | 7,208 | |||||||
| Public Warrants issued to RNER shareholders | 155,078 | |||||||
| Closing price of the Company’s warrants on Nasdaq as of March 1, 2023 ($) | 17 | |||||||
| Private Warrants issued to RNER shareholders | 5,360 | |||||||
| Fair Value of the Company’s warrants on as of March 1, 2023 ($) | 13.3 | |||||||
| (B) Fair value of the Company’s warrants issued to RNER shareholders | 2,711 | |||||||
| RNER assets | 588 | |||||||
| RNER liabilities | (2,981 | ) | ||||||
| (C) Net liabilities of RNER | (2,393 | ) | ||||||
| IFRS 2 Listing expenses (A+B-C) | 12,312 | |||||||
| *) | Shares and per share amounts have been retroactively adjusted to reflect the reverse share splits as described in note 20a. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 6 – | CASH AND CASH EQUIVALENTS |
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Cash and cash equivalents in NIS | 858 | 3,201 | ||||||
| Cash and cash equivalents in USD | 2,213 | 227 | ||||||
| Cash and cash equivalents in Euro | 12 | 2 | ||||||
| Cash and cash equivalents in other currency | 2 | 92 | ||||||
| 3,085 | 3,522 | |||||||
| NOTE 7 – | TRADE RECEIVABLES, NET |
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Account receivable | 8,325 | 10,051 | ||||||
| Unbilled receivable | 768 | 902 | ||||||
| Checks collectible | 29 | 27 | ||||||
| Allowance for doubtful debt | (1,225 | ) | (1,113 | ) | ||||
| Trade receivables, net | 7,897 | 9,867 | ||||||
The Company grants its customers interest-free credit for an average period of 90 days. Impaired debts are accounted for through recording an allowance for doubtful accounts.
The Company policy is to accrue a provision of 5% out of overdue debts in a period greater than 120 days.
For debts greater than 364 days a specific provision will accrue in full.
Following is information about the credit risk exposure of the Company’s trade receivables:
| Past due trade receivables | ||||||||||||||||||||||||||||
| Not past due |
< 30 days |
31-60 days |
60-90 days |
90-120 days |
>120 days |
Total | ||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||
| Trade receivables before allowance for doubtful accounts | 4,897* | 168 | 111 | 50 | 10 | 3,886 | 9,122 | |||||||||||||||||||||
| Allowance for doubtful accounts | 1,225 | 1,225 | ||||||||||||||||||||||||||
| December 31, 2024 | 4,897 | 168 | 111 | 50 | 10 | 2,661 | 7,897 | |||||||||||||||||||||
| December 31, 2023 | 4,349 | 1,838 | 1,341 | 989 | 520 | 830 | 9,779 | |||||||||||||||||||||
| (*) | Includes unbilled account receivables balance |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 8 – | OTHER ASSETS |
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Government authorities | 1,934 | 1,604 | ||||||
| Prepaid expenses | 1,128 | 1,483 | ||||||
| Grants receivables (1) | 1,159 | |||||||
| Other assets (2) | 3,830 | 837 | ||||||
| 6,892 | 5,083 | |||||||
| (1) | In November 2023, the Company has been granted $1,159 thousand in war grants associated with Israel-Hamas war. |
| (2) | Refer to note 26 |
| NOTE 9 – | LEASES |
| a. | Disclosures for leases in which the Company acts as lessee: |
| 1) | The Group companies have entered into leases of buildings and motor vehicles which are used for their ongoing operations. |
| 2) | The Company’s leases of buildings have a lease term of 2-10 years whereas leases of motor vehicles have lease terms of 3-4 years. |
| 3) | Information on leases: |
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| USD in thousands | ||||||||||||
| Interest expense on lease liabilities | 193 | 181 | 258 | |||||||||
| Total cash outflow for leases | 1,017 | 1,711 | 2,240 | |||||||||
| b. | Lease extension and termination options: |
The Company has leases that include both extension and termination options. These options provide flexibility in managing the leased assets and align with the Company’s business needs.
In leases that contain noncancelable lease periods of 3-10 years, the Company did not include in the lease term the exercise of extension options existing in the lease agreements.
In leases of motor vehicles, the Company does not include in the lease term the exercise of extension options since the Company does not ordinarily exercise options that extend the lease period beyond five years (without the extension option).
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 9 – | LEASES (Cont.) |
| c. | Disclosures in respect of right-of-use assets, net: |
2024
| Office lease | Motor Vehicles |
Total | ||||||||||
| USD in thousands | ||||||||||||
| Cost: | ||||||||||||
| Balance as of January 1,2024 | 4,124 | 2,418 | 6,542 | |||||||||
| Additions during the year: | ||||||||||||
| New leases | 633 | 633 | ||||||||||
| Terminated lease | (25 | ) | (25 | ) | ||||||||
| Classification | (168 | ) | (168 | ) | ||||||||
| Adjustments arising from indexation | 47 | 47 | ||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | (22 | ) | (7 | ) | (29 | ) | ||||||
| Balance as of December 31,2024 | 4,149 | 2,851 | 7,000 | |||||||||
| Accumulated depreciation: | ||||||||||||
| Balance as of January 1,2024 | 2,532 | 1,500 | 4,032 | |||||||||
| Additions during the year: | ||||||||||||
| Depreciation in the year | 343 | 452 | 795 | |||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | 22 | (1 | ) | 21 | ||||||||
| Balance as of December 31,2024 | 2,897 | 1,951 | 4,848 | |||||||||
| Depreciated cost as of December 31,2024 | 1,252 | 900 | 2,152 | |||||||||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 9 – | LEASES (Cont.) |
2023
| Office lease | Motor Vehicles |
Total | ||||||||||
| USD in thousands | ||||||||||||
| Cost: | ||||||||||||
| Balance as of January 1, 2023 | 7,231 | 1,794 | 9,025 | |||||||||
| Additions during the year: | ||||||||||||
| New leases | 643 | 643 | ||||||||||
| Terminated lease | (2,961 | ) | (80 | ) | (3,041 | ) | ||||||
| Classification | 71 | 71 | ||||||||||
| Adjustments arising from indexation | 137 | 137 | ||||||||||
| Other | (19 | ) | (19 | ) | ||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | (264 | ) | (10 | ) | (274 | ) | ||||||
| Balance as of December 31, 2023 | 4,124 | 2,418 | 6,542 | |||||||||
| Accumulated depreciation: | ||||||||||||
| Balance as of January 1, 2023 | 1,528 | 990 | 2,518 | |||||||||
| Additions during the year: | ||||||||||||
| Depreciation in the year | 1,033 | 530 | 1,563 | |||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | (29 | ) | (20 | ) | (49 | ) | ||||||
| Balance as of December 31, 2023 | 2,532 | 1,500 | 4,032 | |||||||||
| Depreciated cost as of December 31, 2023 | 1,591 | 918 | 2,510 | |||||||||
| d. | As for an analysis of maturity dates of lease liabilities, see Note 16b. |
| e. | The Company has leases of motor vehicles for a period of up to 12 months and low value leases of office furniture. The Company applies the practical expedient in IFRS 16 in respect of these leases and recognizes lease payments as an expense using the straight-line method over the lease term. |
| f. | Lease commitments: |
| In May 2017, the Company entered into a lease of offices in an area of 1,600 sq.m. in the city of Or Yehuda, Israel. The lease is for a period of ten years with an option for extension by another five years. The monthly lease fees are approximately NIS 110 thousand ($30 thousand), linked to the CPI of May 2017 with the addition of VAT. The lease period began on April 1, 2018. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 10:- | PROPERTY AND EQUIPMENT, NET |
Composition and movement:
2024
| Motor vehicles |
Office furniture and equipment |
Computers and peripheral equipment |
Leasehold improvements |
Total | ||||||||||||||||
| USD in thousands | ||||||||||||||||||||
| Cost: | ||||||||||||||||||||
| Balance as of January 1, 2024 | 33 | 236 | 1,030 | 520 | 1,819 | |||||||||||||||
| Purchases in the year | 62 | - | 18 | 5 | 85 | |||||||||||||||
| Disposals during the year | (95 | ) | (45 | ) | (104 | ) | (305 | ) | (549 | ) | ||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | (1 | ) | (6 | ) | (7 | ) | (14 | ) | ||||||||||||
| Balance as of December 31, 2024 | - | 190 | 938 | 213 | 1,341 | |||||||||||||||
| Accumulated depreciation: | ||||||||||||||||||||
| Balance as of January 1, 2024 | 30 | 108 | 530 | 116 | 784 | |||||||||||||||
| Depreciation in the year | 41 | 18 | 199 | 75 | 333 | |||||||||||||||
| Disposals during the year | (71 | ) | (16 | ) | (96 | ) | (74 | ) | (257 | ) | ||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | (1 | ) | (4 | ) | (1 | ) | (6 | ) | ||||||||||||
| Balance as of December 31, 2024 | 0 | 109 | 629 | 116 | 854 | |||||||||||||||
| Depreciated cost as of December 31, 2024 | 0 | 81 | 309 | 97 | 487 | |||||||||||||||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 10 – | PROPERTY AND EQUIPMENT, NET (Cont.) |
2023
| Motor vehicles |
Office furniture and equipment |
Computers and peripheral equipment |
Leasehold improvements |
Total | ||||||||||||||||
| USD in thousands | ||||||||||||||||||||
| Cost: | ||||||||||||||||||||
| Balance as of January 1, 2023 | 197 | 235 | 798 | 598 | 1,828 | |||||||||||||||
| Purchases in the year | - | 8 | 251 | 38 | 297 | |||||||||||||||
| Disposals during the year | (156 | ) | - | - | (97 | ) | (253 | ) | ||||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | (8 | ) | (7 | ) | (19 | ) | (19 | ) | (53 | ) | ||||||||||
| Balance as of December 31, 2023 | 33 | 236 | 1,030 | 520 | 1,819 | |||||||||||||||
| Accumulated depreciation: | ||||||||||||||||||||
| Balance as of January 1, 2023 | 53 | 89 | 296 | 76 | 514 | |||||||||||||||
| Depreciation in the year | 21 | 21 | 239 | 60 | 341 | |||||||||||||||
| Disposals during the year | (43 | ) | - | - | (18 | ) | (61 | ) | ||||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | (1 | ) | (2 | ) | (5 | ) | (2 | ) | (10 | ) | ||||||||||
| Balance as of December 31, 2023 | 30 | 108 | 530 | 116 | 784 | |||||||||||||||
| Depreciated cost as of December 31, 2023 | 3 | 128 | 500 | 404 | 1,035 | |||||||||||||||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 11 – | GOODWILL AND INTANGIBLE ASSETS, NET |
| a. | As for charges, see Note 22a. |
Composition and movement:
| Patents | Goodwill | Customer relations, order backlog |
Technology (2) | Total | ||||||||||||||||
| USD in thousands | ||||||||||||||||||||
| Cost: | ||||||||||||||||||||
| Balance as of January 1, 2023 | 32 | 13,702 | 20,823 | 1,126 | 35,683 | |||||||||||||||
| Impairment recognized in the year (1) | - | (10,643 | ) | (4,615 | ) | - | (15,258 | ) | ||||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | (1 | ) | (592 | ) | (613 | ) | (34 | ) | (1,240 | ) | ||||||||||
| Balance as of December 31, 2023 | 31 | 2,467 | 15,595 | 1,092 | 19,185 | |||||||||||||||
| Impairment recognized in the year (1) | - | (571 | ) | (82 | ) | - | (653 | ) | ||||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | (1 | ) | (22 | ) | (99 | ) | (6 | ) | (128 | ) | ||||||||||
| Balance as of December 31, 2024 | 30 | 1,874 | 15,414 | 1,086 | 18,404 | |||||||||||||||
| Accumulated amortization: | ||||||||||||||||||||
| Balance as of January 1, 2023 | 9 | - | 5,113 | 661 | 5,783 | |||||||||||||||
| Amortization recognized in the year (1) | 9 | - | 5,278 | 446 | 5,733 | |||||||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | * | - | (199 | ) | (15 | ) | (214 | ) | ||||||||||||
| Balance as of December 31, 2023 | 18 | - | 10,192 | 1,092 | 11,302 | |||||||||||||||
| Amortization recognized in the year (1) | 6 | - | 947 | - | 953 | |||||||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | - | (56 | ) | (6 | ) | (62 | ) | |||||||||||||
| Balance as of December 31, 2024 | 24 | - | 11,083 | 1,086 | 12,193 | |||||||||||||||
| Net balance: | ||||||||||||||||||||
| As of December 31, 2024 | 6 | 1,874 | 4,331 | - | 6,211 | |||||||||||||||
| As of December 31, 2023 | 13 | 2,467 | 5,403 | - | 7,883 | |||||||||||||||
| *) | Less than 1 thousand US dollars. |
| 1) | Customer relations, order backlog and brand amortization expenses are classified in the statement of profit or loss under sales and marketing expenses. |
| 2) | Technology and supplier relationships amortization expenses are classified in the statement of profit or loss under cost of sales expenses. Patents amortization expenses are classified in the statement of profit or loss under general and administrative expenses. |
| b. | For the years ended December 31, 2024 and 2023, the criteria for recognition in intangible asset related to development have not been met and therefore all development costs have been recognized as an expense in profit or loss. |
| c. | In May 2022, the Company entered into an Asset Purchase Agreement with Legacy Technologies Gmbh (“Legacy”) a European cyber firm that has an extensive EMEA distribution network of cyber solutions for major government and enterprise data centers. The acquired assets were mainly comprised of customer relationships of Legacy. The asset acquisition was completed on July 5, 2022. The total consideration for the sale and transfer of the acquired assets was $10,000 thousand in cash and additional contingent consideration of up to $12,000 thousand in restricted share units (RSUs) of the Company subject to compliance of several milestones established in the agreement. Half of the cash consideration was paid at the contract closing and the other half was scheduled to be paid in accordance with the payment terms established in the agreement over 2.5 years. The RSUs were treated as post combination transaction (for further details, please refer to Note 21 – Share-Based Payment). |
As of December 31, 2024 and 2023, $5,244 thousand and $5,078 thousand respectively, out of the remaining consideration liability are classified in the balance sheet under line-item Current maturities of other liabilities.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 11 – | GOODWILL AND INTANGIBLE ASSETS, NET (Cont.) |
The transaction was analyzed in accordance with IFRS 3 – Business Combinations to first determine whether the acquired assets constitute a business. The Company had applied the concentration test. Based on the concentration test, substantially all of the fair value of the gross assets acquired is concentrated in the customer relationships. As a result, the transaction was treated as asset acquisition.
The following represented the fair value of the identifiable assets as of the acquisition date:
The purchase price allocation was as follows (in thousands):
| Technology | 500 | |||
| Customer relationships | 9,453 | |||
| Total consideration | 9,953 |
As of December 31, 2022, the Company identified indicators of impairment since no binding purchase orders had been signed nor significant progress had been made on the purchased customer relationships as was expected upon the purchase date. As a result, management determined that the assets acquired should be fully impaired. As such, for the year ended December 31, 2022, the Company recorded an impairment loss of $8,738 thousand for the assets acquired from Legacy.
| d. | Impairment loss of goodwill and intangible assets with defined useful life |
For annual impairment testing of goodwill and intangible assets with defined useful life the goodwill and other intangible assets of the Company were allocated to the operating segments which constitute three groups of cash generating units as follow:
| ● | Comsec Consulting |
| ● | Professional Services |
| ● | Products And Technology |
The carrying amount as of December 31, 2024 of the goodwill and the intangible assets which were allocated to each cash-generating unit:
| Professional Services |
Consulting | Total | ||||||||||
| Patents | 6 | - | 6 | |||||||||
| Goodwill | 1,874 | - | 1,874 | |||||||||
| Customer relationship, Suppliers relationship and Backlog | 924 | 3,407 | 4,331 | |||||||||
| Total | 2,804 | 3,407 | 6,211 | |||||||||
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 11 – | GOODWILL AND INTANGIBLE ASSETS, NET (Cont.) |
The Company performed its annual impairment tests in December 31, 2024 and 2023, respectively. The recoverable amount of each cash generating unit was assessed using the income approach model.
Products and Technology
The recoverable amount of the Products and Technology cash-generating unit (“CGU”) as of December 31, 2024 have been determined based on a value in use calculation using cash flow projection from financial budget approved by senior management covering a five-year period. The discount rate applied to cash flow projection is 24.5% for Products and Technology cash-generating unit. Cash flows beyond the five-year period are extrapolated using a 3% growth rate. As a result of this analysis, the value in use of the Products and Technology cash-generating unit was determined to be lower than their carrying amounts. Thus an impairment in the amount of $ 571 thousand was recognized in Products and Technology Software CGU. The provision was recorded in impairment of goodwill and intangible assets expenses.
Professional Services
The recoverable amount of the Professional Services CGU as of December 31, 2024 have been determined based on a value in use calculation using cash flow projections from financial budget approved by senior management covering a five-year period. The discount rate applied to cash flow projection is 20% for Professional Services cash-generating unit. Cash flows beyond the five-year period are extrapolated using a 3% growth rate. As a result of this analysis, the value in use of the Professional Services cash-generating unit was determined to be higher than their carrying amounts.
Consulting
The recoverable amount of the consulting a technology platform developed by the Company subsidiary, Comsec Ltd. (“Comsec”), CGUs as of December 31, 2024 have been determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period. The discount rate applied to cash flow projections is 20% for both the Consulting and distribution and Dstorm cash-generating units. Cash flows beyond the five-year period are extrapolated using a 3% growth rate for both cash generating units. As a result of this analysis, the value in use of the Consulting and distribution and Dstorm cash-generating units were determined to be higher of their carrying amounts.
Key assumptions
The calculation of value in use for all of the cash generating units is most sensitive to the following key assumptions:
| ● | Discount rates |
| ● | Growth rate used for the forecast period and to extrapolate cash flows beyond the forecast period. |
Discount rates − Discount rates represent the current market assessment of the risks specific to each cash-generating unit, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Company and its operating segments and is derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 12 – | DISCONTINUED OPERATIONS |
In November 2021, the Company completed the acquisition of Comsec 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 starting from December 31, 2023 there are no employees in this activity.
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 and 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 Comsec 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 $431 thousand and $1,900 thousand, respectively were recognized in order to ascertain that the carrying amount of the account receivables and inventory is not higher than their recoverable amount.
Below are data of the operating results attributed to the discontinued operation:
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| USD in thousands | ||||||||||||
| Revenues from sales | - | 5,459 | 29,741 | |||||||||
| Cost of sales | - | (5,931 | ) | (27,383 | ) | |||||||
| Gross profit (loss) | - | (472 | ) | 2,358 | ||||||||
| Sales and marketing expenses | - | 351 | 1,126 | |||||||||
| General and administrative expenses | - | 851 | 308 | |||||||||
| Operating income (loss) | - | (1,674 | ) | 924 | ||||||||
| Finance expenses, net | 1,523 | 356 | 317 | |||||||||
| Income (loss) before taxes on income | (1,523 | ) | (2,030 | ) | 607 | |||||||
| Taxes on income | 362 | - | 38 | |||||||||
| Income (loss) after taxes on income | (1,885 | ) | (2,030 | ) | 569 | |||||||
Below are data of the net cash flows provided by (used in) the discontinued operation:
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| USD in thousands | ||||||||||||
| Net cash provided by discontinued operating activities | 995 | 1,917 | 1,867 | |||||||||
| Net cash provided by (used in) discontinued investing activities | - | (1,026 | ) | 949 | ||||||||
| Net cash used in discontinued financing activities | (1,015 | ) | (1,375 | ) | (2,429 | ) | ||||||
| Total net cash provided by (used in) discontinued operation | (20 | ) | (484 | ) | 387 | |||||||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 13 – | SHORT-TERM LOANS |
| a. | Composition: |
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Short-term loan (1)-(13) | 13,224 | 11,750 | ||||||
| Accrued interest | 310 | 128 | ||||||
| 13,534 | 11,878 | |||||||
| 1) | Loan received in July 2020, by Comsec Distribution (fully owned subsidiary), with an original principal amount of NIS 5,000 thousand ($1,452 thousand) and repayable in 18 installments from January 2025. The loan bearing interest of Prime (Bank of Israel intrabank) + 1.5%. As of December 31, 2024 the remaining principal amount is $627 thousand. |
| 2) | Loan received in September 2021, by Comsec (fully owned subsidiary), with an original principal amount of NIS 980 thousand ($309 thousand) and repayable in 47 installments from February 2021. The loan bearing interest of Prime (Bank of Israel intrabank) + 1.5%. As of December 31, 2024 the remaining principal amount is $53 thousand. |
| 3) | Loan received in September 2021, by Comsec (fully owned subsidiary), with an original principal amount of NIS 6,000 thousand ($1,934 thousand) and repayable in two annual installments from September 2023. The loan bearing interest of Prime (Bank of Israel intrabank) + 1.95%. As of December 31, 2024 the remaining principal amount is $877 thousand. |
| 4) | On-call loans received by Comsec, in an aggregate principal amount of NIS 34,106 thousand ($9,692 thousand). The loan bearing interest of 8.1%. As of December 31, 2024 the remaining principal amount is $4,527 thousand. |
| 5) | Loan received in May 2023, by Aginix Engineering and Project Management Ltd. (“Aginix”), a second-tier subsidiary, with an original principal amount of NIS 1,000 thousand ($267 thousand) and repayable in 12 installments from June 2023. The loan bearing interest of 7.25%. As of December 31, 2024 the loan has been fully repaid. |
| 6) | Loan received in July 2024, by Aginix, a second-tier subsidiary, with an original principal amount of NIS 1,200 thousand ($334 thousand) and repayable in 12 installments from August 2024. The loan bearing interest of 7%. As of December 31, 2024 the remaining principal amount is $195 thousand. |
| 7) | Loan received in December 2024, by Aginix, a second-tier subsidiary, with an original principal amount of NIS 500 thousand ($137 thousand) and repayable in 12 installments from January 2025. The loan bearing interest of 6.5%. As of December 31, 2024 the remaining principal amount is $137 thousand. |
| 8) | Loan received in May 2023, by Qpoint Technologies Ltd. (“Qpoint”), with an original principal amount of NIS 1,700 thousand ($469 thousand) and repayable in 12 installments from June 2023. The loan bearing interest of Prime + 1.1%. As of December 31, 2024 the loan has been fully repaid. |
| 9) | Loan received in May 2024, by Qpoint, with an original principal amount of NIS 1,200 thousand ($321 thousand) and repayable in 12 installments from June 2024. The loan bearing interest of 7.10%. As of December 31, 2024 the remaining principal amount is $240 thousand. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 13 – | SHORT-TERM LOANS (Cont.) |
| 10) | On-call loans received by Qpoint, in an aggregate principal amount of NIS 6,300 thousand ($1,703 thousand). The loan bearing interest of Prime + 1.1%. As of December 31, 2024 the remaining principal amount is $521 thousand. |
| 11) | Loan received in February 2023, by HUB, in an aggregate principal amount of NIS 3,300 thousand ($900 thousand) and repayable in one installment in January 2026 in an amount of $1,000 thousand. The loan bearing interest of 12%. As of December 31, 2024 the remaining principal amount is $961 thousand (including an interest of $238 thousand). The Company did not meet the interest payments, therefore the loan is classified as short-term loan. |
| 12) |
Loan received in February 2023, by HUB, in an aggregate principal amount of $2,500 thousand upon closing of the Business Combination (the “Secured Promissory Note”). The Secured Promissory Note will bear interest at a rate of 10% per annum and is due on demand. The Company failed to meet the contractual terms of the Secured Promissory Note. As a result, the Company is required to pay Dominion Capital LLC and its affiliates (“Dominion”) an interest rate of 24% immediately. As of December 31, 2024 the remaining principal amount is $3,715 thousand.
Subsequent to December 31, 2024, the Company reached a settlement with Dominion. For more information please refer to Note 28(11). |
| 13) | In November 2024, the Company received from Claymore a loan the amount of $500 thousand. The loan accrued interest at the rate of 10% of the principal amount and the interest rate will increase by 5% of the principal amount each week following December 15, 2024 until it is repaid. The loan is repayable upon the closing of the Company’s next financing. |
Financial covenants:
In connection with bank loans whose balance as of December 31, 2024 approximates NIS 1,212 thousand ($332 thousand), the subsidiary, Aginix, has undertaken towards the lending bank to meet the following financial covenants: the subsidiary’s adjusted equity will not be lower than NIS 500 thousand and its ratio to balance sheet will not be lower than 10%.
In connection with bank loans whose balance as of December 31, 2024 approximates NIS 22,187 thousand ($6,129 thousand), the subsidiary, Comsec, has undertaken towards the lending bank to meet the following financial covenants: the subsidiary’s customer debt to on-call bank credit will not be lower than 1.2 and the ratio of long-term debt less cash to EBITDA will not be higher than 3.5 at all times.
As of December 31, 2024, the subsidiary, Comsec, has reached and signed a settlement agreement on the above mentioned bank facilities and as such all old financial covenants were dismissed.
| b. | As for collaterals and charges, see Note 22a below. |
| NOTE 14 – | TRADE PAYABLES |
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Open debts | 7,969 | 9,101 | ||||||
| Checks payable | 231 | 766 | ||||||
| 8,200 | 9,867 | |||||||
Trade payables are non-interest bearing and are normally settled on average of 120-days terms.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 15 – | OTHER ACCOUNTS PAYABLE |
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Employees and payroll accruals | 4,543 | 4,691 | ||||||
| Accrued vacation pay | 1,489 | 1,225 | ||||||
| Government authorities | 6,028 | 1,282 | ||||||
| Accrued expenses | 24,746 | 23,067 | ||||||
| Current liability of government grants | 270 | 265 | ||||||
| Deferred revenues | 680 | 1,205 | ||||||
| Other | 1,718 | 692 | ||||||
| 39,474 | 32,427 | |||||||
| NOTE 16 – | LONG-TERM LIABILITIES |
| a. | Composition of other long-term liabilities: |
December 31, 2024
| Effective interest rate |
Balance | Balance less current maturities |
||||||||||
| % | USD in thousands | |||||||||||
| Liabilities for government grants | 11.5 | 442 | 173 | |||||||||
December 31, 2023
| Effective interest rate |
Balance | Balance less current maturities |
||||||||||
| % | USD in thousands | |||||||||||
| Liabilities for government grants | 11.5 | 412 | 147 | |||||||||
The liabilities for government grants are linked to the USD-NIS exchange rate.
Government grants:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Balance as of January 1, | 412 | 1,289 | ||||||
| Grants received during the year | - | - | ||||||
| Liability revaluation | 30 | (877 | ) | |||||
| Balance as of December 31, | 442 | 412 | ||||||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 16 – | LONG-TERM LIABILITIES (Cont.) |
Presented in the statement of financial position as follows:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| In current liabilities | 270 | 265 | ||||||
| In non-current liabilities | 172 | 147 | ||||||
| $ | 442 | $ | 412 | |||||
Government grants:
The Company received from the Government of Israel grants for participation in research and development in return for the payment of royalties of 3.5% on sales of products resulting from the funded research and development up to 100% of the grants received.
The financial statements include the liability in the amount which management expects to repay the Israel Innovation Authority (“IIA”) within ten years, discounted at a rate of 11.5%.
| b. | The maturity profile of lease liabilities and liabilities for government grants: |
December 31, 2024
| First year |
Second year |
Third year |
Fourth year |
Fifth year |
Sixth year and onwards |
Total | ||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||
| Lease liabilities | 975 | 740 | 408 | 64 | - | - | 2,187 | |||||||||||||||||||||
| Liabilities for government grants | 270 | 27 | 24 | 22 | 20 | 79 | 442 | |||||||||||||||||||||
| Total | $ | 1,245 | $ | 767 | $ | 432 | $ | 86 | $ | 20 | $ | 79 | $ | 2,629 | ||||||||||||||
As of December 31, 2024, total grants received by HUB amount to $973 thousand and no material amount was paid. No new grants were received during 2024.
As of December 31, 2024, total grants received by ALD Software Ltd. (“ALD Software”), amount to $1,873 thousand and the total royalties paid were $467 thousand.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | 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 10,000 thousand (approximately $2,800 thousand), NIS 5,000 thousand (approximately $1,400 thousand) and NIS 1,850 thousand (approximately $500 thousand) respectively (each a “Shayna Loan" and, together, the “Shayna Loans”). The Shayna Loans will not bear interest unless the Company defaults in making certain payments under the Shayna Loans. In the event that the Company defaults on certain payments under the Shayna Loans, then Shayna Loans will bear interest at an annual rate of 8% until paid in full. |
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 $20.00 per ordinary share.
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 35% lower than the average price of Company’s ordinary shares in the five trading days preceding a conversion notice . The warrants are exercisable for 36 months from the signing date of the first Shayna Loan Agreement. Under the second Shayna Loan Agreement, the exercise price was amended to be equal to the conversion rate under the second Shayna Loan Agreement, which is 40% lower than the average price of Company’s ordinary shares in the (a) five trading days preceding a conversion notice, or (b) the five trading days preceding the signing date of the second Shayna Loan Agreement, whichever is lower. The expiration date was also amended to be 24 months from the date of issuance of such warrant. Under the third Shayna Loan Agreement, the exercise price was changed to be equal to the conversion rate under the third Shayna Loan Agreement, which is: 40% lower than the average price of Company’s ordinary shares in the (a) five trading days preceding a conversion notice, or (b) the five trading days preceding July 8, 2023, whichever is lower.
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 our 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.
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 us, 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 we submit a registration document to the SEC to register our shares for sale by us or any other party and will also be entitled to participate in any sale of shares under that registration statement.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | FINANCIAL LIABILITIES (Cont.) |
In connection with the Shayna Loans, the Company agreed to pay commission totaling NIS 467 thousand (approximately $125 thousand) to an affiliate of Shayna. In addition, commencing on August 10, 2023, the Company agreed to pay to Shayna a consulting fee equal to $96 thousand per month (plus value added tax) in 12 equal monthly payments, totaling $1,151 thousand for advisory services to be provided pursuant to the Shayna Loan Agreements. The Company also agreed to pay a commission equal to NIS 375 thousand (approximately $105 thousand) together with warrants to purchase the Company’s ordinary shares having a value equal to NIS 375 thousand upon the date of grant to A-Labs.
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.
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. For more information please refer to Note 28(13).
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 512,937 ordinary shares (calculated under an agreed USD/NIS exchange rate of NIS 36.5 to $10.0, and at a conversion price of $9.0 per ordinary share), of which Akina will be entitled to receive 389,746 shares, and Shayna will be entitled to receive 123,192 shares. | |
| ● | 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 $9.0 per ordinary share. | |
| ● | Limitation on Beneficial Ownership: standard clause limiting each of Shayna and Akina to 4.99%. | |
| ● | 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 $1,151 thousand payable for consulting fee under the Convertible Loan Agreements, to 127,867 ordinary shares of the Company (calculated under a conversion rate of $9.0 per ordinary share) and 127,867 warrants (with an exercise Price of $8.0 per ordinary share and an exercise period of up to 6 months); and |
| (ii) | Approval of the sale of Shayna rights under the Shayna Loan Agreements to receive certain converted shares and to exercise certain warrants from Shayna to another lender. |
During the year ended December 31, 2024, Akina has converted the loan under the Shayna Loan Agreements into the Company’s ordinary shares, pursuant to which conversions the Company has issued 512,937 ordinary shares, and exercised a warrant to purchase 448,230 ordinary shares of the Company at an exercise price of $9.00 per share. In addition, Shayna exercised a warrant to purchased 127,867 ordinary shares of the Company at an exercise price of $8.00 per share.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | FINANCIAL LIABILITIES (Cont.) |
| 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”), up to two (2) secured convertible promissory notes in three tranches (the “Notes” and each a “Note”) for proceeds up to $16,000 thousand and warrants to purchase the Company’s ordinary shares. The first tranche occurred on May 8, 2023 and consisted of the issuance and sale of a Note with a price of $6,000 thousand, a principal amount of $7,200 thousand and the issuance of warrants to 245,821 ordinary shares with an exercise price of $35 and a term of 5 years. The price for the initial Note consisted of two separate funding amounts. |
On August 23, 2023, as consideration for the amendments to the first tranche, the Company agreed to amend the Note and increase the principal amount of the Note from $7,200 thousand to $9,600 thousand.
The initial funding of $4,500 thousand was received by the Company (less legal fees and a 3.5% commitment fee) and the funding of the remaining $1,500 thousand was received during September 2023 (the “First Closing”). The second tranche consisted of the issuance and sale to Lind of a Note for $10,000 thousand and a principal amount of $12,000 thousand, and the issuance of additional warrants to acquire ordinary shares on the same terms as the warrants issued to Lind described above. The second closing (the “Second Closing”) will occur sixty (60) days following the registration of the ordinary shares issuable upon conversion of the Note and the ordinary shares. The Second Closing is subject to certain conditions precedent as set forth in the SPA. As of the date of these financial statements, the Second Closing has not yet occurred.
The Note issued under the SPA in the First Closing has a maturity date of May 8, 2025, and the Note issued under the SPA in the Second Closing will have a maturity date of 2 years from the date of issuance (the “Maturity Date”). Beginning on the date that is either the earlier of (1) a registration statement registering the ordinary shares issuable upon the conversion of the Notes and exercise of the warrants being declared effective by the SEC and (2) 120 days from the issuance date of each Note, the Company shall repay the Note in twelve consecutive monthly installments, (each, a “Payment Date” and collectively the “Monthly Payments”) an amount equal to USD 600 thousands (the “Repayment Amount”), with the option of Lind to increase one Monthly Payment up to USD 1.5 million by providing written notice.
The Company has the option to make the Monthly Payments (i) in cash in the amount equal to the Repayment Amount multiplied by 1.05, (ii) ordinary shares, or (iii) a combination of cash and ordinary shares. The amount of ordinary shares to be issued upon repayment shall be calculate by dividing the Repayment Amount being paid in ordinary shares by the Repayment Share Price. The “Repayment Share Price” will be equal to ninety percent (90%) of the average of the lowest five (5) consecutive daily VWAPs during the twenty (20) Trading Days prior to the payment Date.
During the year ended December 31,2024, Lind converted an amount of $4,800 thousand into 705,582 ordinary shares.
During the year ended December 31,2023, Lind converted an amount of $4,800 thousand into 221,537 ordinary shares.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | 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 $5,219 thousand and $349 thousand of convertible notes, respectively. Each convertible note will bear interest at a rate of 6% per annum, has a maturity date of March 1, 2024, and will be optionally convertible for Company ordinary shares, at any time prior to the convertible notes being paid in full. |
On November 22, 2024, the Company and AGP entered into an amended and restated convertible note agreement (the “Amended Note”), which contemplates that AGP will convert $250 thousand of the principal amount in each of seven 30-day periods, up to an aggregate amount of $1.8 million (but the first conversion can be in the amount of $320 thousand and final conversion $230 thousand). Upon each conversion, one-seventh of the excess debt above $1,800 thousand will be cancelled. Upon conversion of the full $1.8 million, the Amended Note will be extinguished. If an aggregate amount of $1.8 million is not converted by May 30, 2025, the terms of the Original Note will again apply, unless otherwise agreed by the parties. The Amended Note contains a conversion price equal to 93% of the prevailing market price, subject to a $4.00 floor. The floor price may be adjusted downward after three months if the market price falls below the floor price and does not subsequently increase above the floor price.
During the year ended December 31, 2023, the Company did not receive a conversion notice from AGP.
During the year ended December 31, 2024, AGP converted an aggregate amount of $1,070 thousand which was allocated to two parts: until November 2024, an aggregate amount of $500 thousand which was converted into 67,016 ordinary shares, while the remaining amount of $570 thousand, which was subject to the November 2024 Amended Note, converted into 127,729 ordinary shares.
| 4. | 2023-2024 Investment by Accredited Investors |
Between November 2023 and January 2024, the Company entered into Securities Purchase Agreements (the “First 2023-2024 Accredited Investor SPAs”) providing for the sale by the Company to certain accredited investors (the “First 2023-2024 Accredited Investors”), in unregistered private transactions, of convertible notes with an aggregate principal amount of $3,100 thousand (the “First 2023-2024 Accredited Investor Notes”), and warrants exercisable into one ordinary share for each ordinary share issuable to the Investors upon the conversion of the principal amount of the First 2023-2024 Accredited Investor Notes, assuming conversion on the respective issuance dates of the Notes (the “First 2023-2024 Accredited Investor Warrants”).
The aggregate principal amount of the First 2023-2024 Accredited Investor Notes was convertible into the Company’s ordinary shares at a rate of the lower of (i) $25.00 and (ii) the product of 75% multiplied by the arithmetic average of the volume-weighted average price of the ordinary shares in the five (5) trading days prior to the date of conversion, provided that such conversion rate would not be lower than $15.00. The First 2023-2024 Accredited Investor Notes did not bear interest and were repayable on the three-month anniversary of their issuance, subject to earlier conversion by the First 2023-2024 Accredited Investors. The First 2023-2024 Accredited Investors had the right to convert the First 2023-2024 Accredited Investors Convertible Notes, in whole or in part, at any time following their issuance.
Pursuant to the First 2023-2024 Accredited Investor SPAs, the Company issued First 2023-2024 Accredited Investor Warrants which are exercisable into 16,796 ordinary shares. The First 2023-2024 Accredited Investor Warrants are exercisable until January 1, 2027 for an exercise price equal to the closing price of the ordinary shares as of the respective issuance dates of the First 2023-2024 Accredited Investor Warrants and have a weighted average exercise price of $ 233.00.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | FINANCIAL LIABILITIES (Cont.) |
Second 2023-2024 Accredited Investor Financing Transaction 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” and together with the First 2023-2024 Accreditor Investors, the “2023-2024 Accreditor Investors”), in unregistered private transactions, of convertible notes with an aggregate principal amount of $550 thousand (the “Second 2023-2024 Accredited Investor Notes”), and warrants exercisable into between 0.05 and 0.1 ordinary share for each ordinary share issuable to the Investors upon the conversion of the principal amount of the Second 2023-2024 Accredited Investor Notes, assuming conversion on the respective issuance dates of the Notes (the “Second 2023-2024 Accredited Investor Warrants”).
The aggregate principal amount of the Second 2023-2024 Accredited Investor Notes is convertible into the Company’s ordinary shares at a rate equal to the arithmetic average of the volume-weighted average price of the ordinary shares in the five (5) trading days prior to the date of conversion, provided that such conversion rate would not be lower than $15.00. The Second 2023-2024 Accredited Investor Notes do not bear interest and are repayable on March 14, 2027, subject to earlier conversion by the Second 2023-2024 Accredited Investors. The Second 2023-2024 Accredited Investors have the right to convert the Second 2023-2024 Accredited Investors Convertible Notes, in whole or in part, at any time following their issuance.
As of December 31, 2024, the Company issued an aggregate of 181,689 ordinary shares following the conversion by the Second 2023-2024 Accredited Investors of Second 2023-2024 Accredited Investor Notes. Pursuant to the Second 2023-2024 Accredited Investor SPAs, the Company has issued Second 2023-2024 Accredited Investor Warrants which are exercisable into 20,000 ordinary shares. The Second 2023-2024 Accredited Investor Warrants are exercisable until September 14, 2025 for an exercise price of $150.. The exercise of the 2023-2024 Accredited Investor Warrants will be limited to the extent that, upon their exercise, a 2023-2024 Accredited Investor and its affiliates would in the aggregate beneficially own more than 4.99% of the Company’s ordinary shares.
| 5. | Tomas Gottdiener |
In March-November 2024, the Company sold to an accredited investor (the “March-November 2024 Investor”), in a series of unregistered private transaction, notes (the “March-November 2024 Notes”) with an aggregate principal amount of $11,000 thousand, and warrants (the “March-November 2024 Warrants”) pursuant to a Securities Purchase Agreement entered into with the March-November 2024 Investor (the “March-November 2024 Purchase Agreement”). The Company’s acquisition of QPoint’s shares that were not held by the Company to complete ownership of 100% of QPoint shares was partially funded by proceeds the Company received pursuant to the March-November 2024 Purchase Agreement.
The loan amount under the March-November 2024 Notes was repayable by the Company on (a) November 29, 2024 with respect to $1,000 thousand of the principal amount and (b) with respect to the remaining $10,000 thousand, the earlier of (i) August 10, 2024 with respect to $4,000 thousand of the principal amount and September 24, 2024 with respect to $6,000 thousand of the principal amount, or (ii) five (5) business days following the closing of a financing in the Company of at least $25,000 thousand. The principal amount under the March-November 2024 Notes carries a variable interest rate based on the date of repayment as follows: (a) with respect to $8,000 thousand of the principal amount, (i) for the principal amount repaid on or prior to May 12, 2024, 7%, (ii) for the principal amount repaid following May 12, 2024 and on or prior to June 12, 2024, a rate between 7% and 8.5% of such principal amount computed by adding to 7% the result obtained by multiplying 1.5 by the quotient of the number of days elapsed in such period until (and including) the repayment date divided by the number of days in such period, and (iii) for the principal amount repaid following June 12, 2024, 8.5% of such principal amount plus 15% per annum, on the basis of the actual number of days elapsed commencing from the date following June 12, 2024 and ending on the repayment date; (b) with respect to $2,000 thousand of the principal amount, (i) for the principal amount repaid on or prior to September 24, 2024, 10%, and (ii) for the principal amount repaid following September 24, 2024, 10% of such principal amount plus 15% per annum, on the basis of the actual number of days elapsed commencing from the date following September 24, 2024 and ending on the repayment date; and (c) with respect to $2,000 thousand of the principal amount, (i) for the principal amount repaid on or prior to November 29, 2024, 8.5% of such principal amount, and (ii) for the principal amount repaid following November 29, 2024, 8.5% of such principal amount plus 15% per annum, on the basis of the actual number of days elapsed commencing from the date following November 29, 2024 and ending on the repayment date.
If the March-November 2024 Notes are not repaid prior to the applicable maturity date, the March-November 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 (5) trading days prior to the date of conversion, provided that such conversion rate shall not be lower than $5.00. 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-November 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.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | FINANCIAL LIABILITIES (Cont.) |
The March-November 2024 Warrants issued under the March-November 2024 Purchase Agreement were exercisable as follows: (i) March-November 2024 Warrants exercisable into 444,444 ordinary shares were exercisable at an exercise price equal to $7.00 per share until March 12, 2027, (ii) March-November 2024 Warrants exercisable into 400,000 ordinary shares were exercisable at an exercise price equal to $7.00 per share until April 3, 2027, (iii) March-November 2024 Warrants were exercisable into 100,000 ordinary shares are exercisable at an exercise price equal to $5.00 per share until June 26, 2027, (iv) March-November 2024 Warrants were exercisable into 200,000 ordinary shares are exercisable at an exercise price equal to $7.00 per share until June 26, 2027, and (v) March-November 2024 Warrants were exercisable into 150,000 ordinary shares are exercisable at an exercise price equal to $5.50 per share until June 26, 2027.
The conversion of the March-November 2024 Notes and the exercise of the March-November 2024 Warrants will be limited to the extent that, upon the conversion or exercise, the March-November 2024 Investor and its affiliates would in aggregate beneficially own more than 4.99% of the ordinary shares. As of December 31, 2024, the entire amount of the loan was still outstanding.
| 6. | J.J. Astor Financing |
In December 2024, the Company entered into a Loan Agreement with J.J. Astor & Co. (“Astor”) pursuant to which Astor agreed to loan the Company $2,200 thousand in consideration for a promissory `note in the principal amount of $2,750 thousand (the “December 2024 Note”). After fees and expenses, the net proceeds of the loan were $2,087 thousand. The December 2024 Note is payable in 40 weekly installments of $68,750 each in cash or registered ordinary shares, at the Company’s election.
The Company is entitled to prepay the December 2024 Note at any time, with declining discounts for prepayment within 30, 60 or 90 days. Upon an event of default, the outstanding principal amount will increase to 110% of the outstanding principal amount, plus interest thereon at the rate of 16% per annum. The December 2024 Note will be convertible by Astor following an event of default.
The conversion price of the December 2024 Note is 80% of the average of the four lowest VWAP prices for the 20 trading days prior to conversion but not lower than the 20% of the average of the four lowest VWAP prices for the 20 trading days prior to the closing date. To the extent that the conversion price is lower than such minimum price, the Company will be required to pay a make-whole payment.
One-half of the net proceeds of the amount the Company raises in any subsequent equity financing of less than $5 million will be required to be used to prepay the December 2024 Convertible Note, and all of larger equity financings will be required to be used to prepay the December 2024 Convertible Note.
The Company agreed to issue to Astor a five-year warrant to purchase 129,412 ordinary shares at an exercise price of $8.50 per share (the “December 2024 Warrant”), subject to adjustment in certain circumstances, including dilutive issuances. The Company undertook to register the shares issuable upon conversion of the December 2024 Convertible Note and upon exercise of December 2024 Warrant on the Company’s registration statement on Form F-1. If there is no such registration statement in effect, the holder of the December 2024 Warrant will be entitled to exercise on a cashless basis. The Company could be required to pay liquidated damages of up to 10% of the principal amount of the Note if the Company does not satisfy its obligations under the registration rights agreement on a timely basis. The December 2024 Convertible Note and December 2024 Warrant are subject to a limitation that prohibits ownership of more than 4.99% the Company’s outstanding share capital at any time.
Each of the Company’s subsidiaries agreed to guarantee the December 2024 Convertible Note and the Company and each of its subsidiaries agreed to grant a subordinated pledge over its assets to secure the December 2024 Convertible Note, each to become effective following an event of default and receipt of consent from the Company’s senior lenders. Failure to obtain such consents will be deemed an event of default under the December 2024 Convertible Note. While the Company is currently in default of certain terms under the Loan Agreement with Astor, the Company is in discussions with Astor to restructure its obligations thereunder.
| 7. | Claymore Capital Financings |
In August 2024, the Company entered into Securities Purchase Agreements with multiple private investors to raise gross proceeds of approximately $3.3 million in exchange for the issuance of convertible notes (the “August 2024 Notes”) with an aggregate principal amount of approximately $4,000 thousand and warrants to acquire an aggregate of approximately 4.7 million ordinary shares of the Company. The August 2024 Notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price equal to the lower of $7.00 and the price per share at which the Company sells ordinary shares to a third party, but in no event less than $5.00. The August 2024 Warrants are exercisable for a period of three years at an exercise price of $10.00 per share. In the event that the conversion price of the August 2024 Notes is reduced, the exercise price of the August 2024 Warrants will be reduced proportionately. Claymore Capital PTY Ltd. (“Claymore”) served as the placement agent for this transaction and received a fee of approximately $233 thousand in cash and a warrant to purchase approximately 110,000 ordinary shares of the Company on terms substantially similar to the terms of the August 2024 Warrants.
In August 2024, Claymore agreed to extend a loan to the Company in the amount of $500 thousand with interest at the rate of 10% of the principal amount until it was subsequently repaid in August 2024. In November 2024, Claymore agreed to extend a loan of an additional $200 thousand with interest at the cumulative rate of 20% of the principal amount until it was subsequently repaid in December 2024.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | FINANCIAL LIABILITIES (Cont.) |
In addition, in November and December 2024, Claymore and investors introduced by Claymore made follow-on investments on the terms of the August 2024 financing in the aggregate amount of $1,100 thousand in exchange for convertible notes with an aggregate principal amount of $1,331 thousand and warrants to purchase an aggregate of 157,143 ordinary shares. The convertible notes are unsecured, have a term of two years and do not accrue interest. They are convertible into ordinary shares of the Company at any time at the option of the holder of each note at a price of $7.00, subject to adjustment in certain circumstances, including dilutive issuances, but no lower than $5.00. The warrants to purchase an aggregate of 157,143 ordinary shares are exercisable for a period of three years at an exercise price of $10.00 per share. In the event that the conversion price of the note is reduced, the exercise price of the warrant will be reduced proportionately. Claymore’s placement fees for the foregoing follow-on investments amounted to $77 thousand in cash, 110,000 ordinary shares and a warrant to purchase 36,666 ordinary shares on the same terms of the investors’ warrants.
In addition, in December 2024, Claymore and investors introduced by Claymore loaned the Company an aggregate of $111,250 in exchange for notes with an aggregate principal amount of $123,611 and warrants to purchase an aggregate of 111,250 ordinary shares. The notes are unsecured, and do not accrue interest. However, in the event that the note has not been repaid by the maturity date, interest will accrue at a rate of 5% per month. The notes are repayable at the earlier of (i) the six-month anniversary of the issuance of the note or (ii) five business days following the closing of a financing of at least $10,000 thousand or the sale of the Company’s Qpoint subsidiary. If the notes are not repaid by the maturity date, they will be convertible at a conversion price at 20% below the arithmetic average of the closing market prices per share of the ordinary shares in the five trading days prior to the maturity date, but not less than $5.00. The warrants to purchase an aggregate of 111,250 ordinary shares are exercisable for a period of three years at an exercise price of $5.00 per share. In the event that the conversion price of the note is reduced, the exercise price of the warrant will be reduced proportionately. Claymore’s placement fees for the foregoing loan amounted to $77,875 in cash, and a warrant to purchase 111,250 ordinary shares on the same terms of the investors’ warrants.
The conversion of the notes and warrants issued in the foregoing financings are limited to the extent that, upon conversion or exercise, the holder and its affiliates would in the aggregate beneficially own more than 4.99% of the Company’s outstanding ordinary shares. The Company has undertaken to register the resale of the ordinary shares underlying such notes and warrants on a registration statement with the SEC.
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. | 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 $115.00 per whole share (exercisable only for whole shares) (each, a “RNER Warrant”).
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | FINANCIAL LIABILITIES (Cont.) |
In addition, each RNER Share issued and outstanding immediately prior to the Effective Time automatically converted into the right to receive 0.0899 Company ordinary shares, and each RNER Warrant issued and outstanding immediately prior to the Effective Time converted into the right to receive 0.0899 warrants of the Company (a “New Warrant”) subject to downward adjustment to the next whole number in case of fractions of warrants.
A total of 160,438 New Warrants to purchase three-fourths of one ordinary share of the Company were issued to holders of the RNER warrants, of which 5,359 warrants are private warrants and the remaining 155,078 warrants are public warrants. As a result of this conversion the New Warrants’ and the reverse share split at a ratio of 1:10 that was effected in December 2023 and in March 2025, the exercise price increased to $1,280 per each share.
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 December 31, 2024, no warrants were exercised into ordinary shares of the Company.
| c. |
Fair Value measurements
The carrying amounts of cash and cash equivalents, restricted cash, restricted bank deposit, trade receivables, other account receivables, inventories, other short term loans, trade payables, other payables and other long term loans approximate their fair values due to the short-term maturities of such instruments. |
The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| December 31, 2024 | ||||||||
| Level 1 | Level 3 | |||||||
| Public warrants | 583 | |||||||
| Private warrants | 13,301 | |||||||
| Conversion component of convertible loans | 5,141 | |||||||
| Total | 583 | 18,442 | ||||||
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 December 31, 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.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | FINANCIAL LIABILITIES (Cont.) |
The key inputs into the Black-Scholes models for the private warrants were as follows:
Input
| December 31, 2024 |
||||
| Risk- free interest rate | 4.25 | % | ||
| Expected term (years) | 1.119-2.2 | |||
| Expected volatility | 143.23 | % | ||
| Exercise price | 11.7-28.5 | |||
| Underlying share price | 6.9 | |||
The key inputs into the Black-Scholes or Monte Carlo simulation models for the Conversion component of convertible loans were as follows:
Shayna- Loan Agreements -Black Scholes- option
Input
| December 31, 2024 |
||||
| Risk- free interest rate | 4.18 | % | ||
| Expected term (years) | 1.25 | |||
| Expected volatility | 149.39 | % | ||
| Exercise price | 9.0 | |||
| Underlying share price | 6.9 | |||
Lind-Black Scholes- option
Input
| December 31, 2024 |
||||
| Risk- free interest rate | 4.3 | % | ||
| Expected term (years) | 3.65 | |||
| Expected volatility | 143.23 | % | ||
| Exercise price | 35.0 | |||
| Underlying share price | 6.9 | |||
2024 Accreditor Investors- Conversion component
Input
| December 31, 2024 |
||||
| Risk- free interest rate | 4.26 | % | ||
| Expected term (years) | 2.5 | |||
| Expected volatility | 143.23 | % | ||
| Underlying share price | 6.9 | |||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | FINANCIAL LIABILITIES (Cont.) |
Gottdiener-Black Scholes- option
Input
| December 31,
2024 |
||||
| Risk- free interest rate | 4.1-4.26 | % | ||
| Expected term (years) | 2.19-2.85 | |||
| Expected volatility | 140-143.23 | % | ||
| Exercise price | 5.0-7.0 | |||
| Underlying share price | 6.9 | |||
Gottdiener-Monte Carlo- Conversion component
Input
| December 31, 2024 |
||||
| Risk- free interest rate | 4.4 | % | ||
| Expected term (years) | 0.59 | |||
| Expected volatility | 135.82 | % | ||
| Underlying share price | 6.9 | |||
Claymore-Black Scholes- option
Input
| December 31,
2024 |
||||
| Risk- free interest rate | 4.27-4.68 | % | ||
| Expected term (years) | 1.63-2.91 | |||
| Expected volatility | 140.24-143.57 | % | ||
| Exercise price | 5.0-7.0 | |||
| Underlying share price | 6.9 | |||
Claymore-Black Scholes- Conversion component
Input
| December 31,
2024 |
||||
| Risk- free interest rate | 4.24-4.25 | % | ||
| Expected term (years) | 1.63-1.91 | |||
| Expected volatility | 143.57 | % | ||
| Exercise price | 5.0 | |||
| Underlying share price | 6.9 | |||
Claymore- Monte Carlo- Conversion component
Input
| December 31, 2024 |
||||
| Risk- free interest rate | 4.25 | % | ||
| Expected term (years) | 0.45 | |||
| Expected volatility | 135.38 | % | ||
| Underlying share price | 6.9 | |||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 17 – | FINANCIAL LIABILITIES (Cont.) |
JJ-Black Scholes- option
Input
| December 31, 2024 |
||||
| Risk- free interest rate | 4.32 | % | ||
| Expected term (years) | 5 | |||
| Expected volatility | 143.23 | % | ||
| Exercise price | 8.5 | |||
| Underlying share price | 6.9 | |||
The following table presents the changes in the fair value of liabilities:
| Public Warrants |
Private Warrants |
Conversion Component |
Total | |||||||||||||
| Fair value as of December 31, 2023 | $ | 217 | $ | 5,830 | $ | 4,215 | $ | 10,262 | ||||||||
| Issuance of conversion component related to the convertible loans. | 2,411 | 2,411 | ||||||||||||||
| Issuance of warrants related to the convertible loans | 10,370 | 10,370 | ||||||||||||||
| Exercise of warrants | (886 | ) | (886 | ) | ||||||||||||
| Conversion of convertible loans into ordinary shares | (4,220 | ) | (4,220 | ) | ||||||||||||
| Change in fair value | 366 | (2,038 | ) | 2,734 | 1,062 | |||||||||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | 25 | 1 | 26 | |||||||||||||
| Fair value as of December 31, 2024 | $ | 583 | $ | 13,301 | $ | 5,141 | $ | 19,025 | ||||||||
| NOTE 18 – | FINANCIAL INSTRUMENTS |
| a. | Financial assets: |
Financial assets at amortized cost:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Trade receivable and other assets | 14,789 | 14,950 | ||||||
| Restricted bank deposit | 388 | 61 | ||||||
| Total current assets | 15,177 | 15,011 | ||||||
| Long-term deposit | 165 | 328 | ||||||
| Total non-current assets | 165 | 328 | ||||||
| b. | Other financial liabilities: |
| Other financial liabilities at amortized cost: | ||||||||
| Short-term loans (1) | 13,534 | 11,878 | ||||||
| Convertible loans | 24,763 | 14,449 | ||||||
| Trade payables | 8,200 | 9,867 | ||||||
| Other accounts payable | 39,474 | 32,427 | ||||||
| Liabilities for government grants | 442 | 412 | ||||||
| Total other financial liabilities at amortized cost | 86,413 | 69,033 | ||||||
| Total current liabilities | 86,240 | 68,886 | ||||||
| Total non-current liabilities | 173 | 147 | ||||||
| (1) | The interest rate is Prime (Bank of Israel intrabank plus 1.5%) + 0.7%-4.85%. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 18 – | FINANCIAL INSTRUMENTS (Cont.) |
| c. | Financial risk management objectives and policies: |
The Company’s principal financial liabilities, other than derivatives, are comprised of loans and borrowings, receivables and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Company’s operations and to provide guarantees to support its operations. The Company’s principal financial assets include cash and short-term deposits that derive directly from financing rounds and convertible loans.
The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The Company established a financial risk committee that advises senior management on financial risks and the appropriate financial risk governance framework for the Company.
The financial risk committee provides assurance to the senior management that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and objectives. All derivative activities for risk management purposes are carried out by specialist teams that have the appropriate skills, experience and supervision. It is the Company’s policy that no trading in derivatives for speculative purposes may be undertaken.
| d. | Financial risks factors: |
The Group’s activities expose it to various financial risks such as market risks (foreign currency risk, interest risk and price risk), credit risk and liquidity risk. The Group’s comprehensive risk management plan focuses on activities that reduce to a minimum any possible adverse effects on the Group’s financial performance.
Risk management is performed by the Company’s chief executive officer.
| 1) | Exchange rate risk: |
The Group operates internationally and is therefore exposed to exchange rate risk arising from exposure to various foreign currencies, mainly the USD and the Euro. Exchange rate risk arises from future commercial contracts, recognized assets and liabilities that are denominated in a foreign currency other than the functional currency and net investments in foreign operations.
| 2) | Credit risk: |
As of December 31, 2024, cash and cash equivalents amounted to $3,085 thousand. The entire cash and cash equivalents are invested with high quality financial institutions. The Company and the subsidiaries monitor customer debts on an ongoing basis and include specific allowances for doubtful accounts which adequately reflect the loss inherent in debts whose collection is doubtful as per the estimate of the Company and the subsidiaries.
| 3) | Liquidity risk: |
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts and loans (see also Note 1c).
| 4) | Interest rate risk: |
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term liabilities with floating interest. The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans (see also note 1c).
| e. | Fair value: |
The carrying amount of cash and cash equivalent, trade receivables net, other accounts receivable, short-term bank loans, Trade payables and other accounts payable approximates their fair value.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 19 – | NET EMPLOYEE DEFINED BENEFIT LIABILITIES |
Employee benefits consist of post-employment benefits and other long-term benefits.
Post-employment benefits:
According to the labor laws and Severance Pay Law in Israel, the Company is required to pay compensation to an employee upon dismissal or retirement or to make current contributions in defined contribution plans pursuant to section 14 to the Severance Pay Law, as specified below. The Company’s liability is accounted for as a post-employment benefit. The computation of the Company’s employee benefit liability is made according to the current employment contract based on the employee’s salary and employment term which establish the entitlement to receive the compensation.
The post-employment employee benefits are normally financed by contributions classified as defined benefit plan or as defined contribution plan, as detailed below.
| a. | Defined contribution plans: |
Section 14 to the Severance Pay Law, 1963 applies to part of the compensation payments, pursuant to which the fixed contributions paid by the Group into severance pay funds and/or policies of insurance companies release the Group from any additional liability to employees for whom said contributions were made. These contributions and contributions for benefits represent defined contribution plans.
| Year ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| USD in thousands | ||||||||
| Expenses in respect of defined contribution plans | 1,632 | 2,264 | ||||||
| b. | Defined benefit plans: |
The Group accounts for that part of the payment of compensation that is not covered by contributions in defined contribution plans, as above, as a defined benefit plan for which an employee benefit liability is recognized and for which the Group deposits amount in central severance pay funds or accrue for such provision (when the deposits are not made on time) in qualifying insurance policies.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 19 – | NET EMPLOYEE DEFINED BENEFIT LIABILITIES (Cont.) |
| c. | Changes in the defined benefit obligation and fair value of plan assets |
2024
| Expenses recognized in profit or loss | Gain
(loss) from remeasurement in other comprehensive income |
Contributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance
as of January 1, 2024 |
Current
service cost |
Net
interest expense |
Past
service cost and effect of settlements |
Total
expense recognized in profit or loss for the period |
Payments
from the plan |
Return
on plan assets (excluding amounts included in net interest expenses) |
Actuarial
gain (loss) arising from changes in demographic assumptions |
Actuarial
gain (loss) arising from changes in financial assumptions |
Actuarial
gain (loss) arising from experience adjustments |
Total
effect on other comprehensive income for the period |
Effect
of changes in foreign exchange rates |
by
employer |
by
plan’s participants |
Balance
as of December 31, 2024 |
||||||||||||||||||||||||||||||||||||||||||||||
| NIS in thousands | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Defined benefit obligation | 3,135 | 126 | 150 | - | 276 | (537 | ) | - | - | (13 | ) | 36 | 23 | (21 | ) | - | - | 2,876 | ||||||||||||||||||||||||||||||||||||||||||
| Fair value of plan assets | (2,266 | ) | - | (108 | ) | 28 | (80 | ) | 424 | (191 | ) | - | - | - | (191 | ) | 13 | (125 | ) | - | (2,225 | ) | ||||||||||||||||||||||||||||||||||||||
| Net defined benefit liability (asset) | 869 | 126 | 42 | 28 | 196 | (113 | ) | (191 | ) | - | (13 | ) | 36 | (168 | ) | (8 | ) | (125 | ) | - | 651 | |||||||||||||||||||||||||||||||||||||||
2023
| Expenses recognized in profit or loss | Gain
(loss) from remeasurement in other comprehensive income |
Contributions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance
as of January 1, 2023 |
Current
service cost |
Net
interest expense |
Past
service cost and effect of settlements |
Total
expense recognized in profit or loss for the period |
Payments
from the plan |
Return
on plan assets (excluding amounts included in net interest expenses) |
Actuarial
gain (loss) arising from changes in demographic assumptions |
Actuarial
gain (loss) arising from changes in financial assumptions |
Actuarial
gain (loss) arising from experience adjustments |
Total
effect on other comprehensive income for the period |
Effect
of changes in foreign exchange rates |
by
employer |
by
plan’s participants |
Balance
as of December 31, 2023 |
||||||||||||||||||||||||||||||||||||||||||||||
| NIS in thousands | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Defined benefit obligation | 3,163 | 152 | 150 | (212 | ) | 90 | (36 | ) | - | - | (24 | ) | 36 | 12 | (94 | ) | - | - | 3,135 | |||||||||||||||||||||||||||||||||||||||||
| Fair value of plan assets | (2,123 | ) | - | (104 | ) | 111 | 7 | 29 | (109 | ) | - | - | - | (109 | ) | 60 | (130 | ) | - | (2,266 | ) | |||||||||||||||||||||||||||||||||||||||
| Net defined benefit liability (asset) | 1,040 | 152 | 46 | (101 | ) | 97 | (7 | ) | (109 | ) | - | (24 | ) | 36 | (97 | ) | (34 | ) | (130 | ) | - | 869 | ||||||||||||||||||||||||||||||||||||||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 19 – | NET EMPLOYEE DEFINED BENEFIT LIABILITIES (Cont.) |
| d. | The principal assumptions underlying the defined benefit plan: |
| 2024 | 2023 | |||||||
| % | ||||||||
| Discount rate (1) | 5.32 | 5.57 | ||||||
| Expected rate of salary increase | 3.18 | 3.19 | ||||||
| (1) | The discount rate is based on high-quality CPI-linked corporate bonds. |
| e. | Amount, timing and uncertainty of future cash flows: |
| Change
in defined benefit obligation |
||||
| USD in thousands | ||||
| December 31, 2024 | ||||
| Sensitivity test for changes in the expected rate of salary increase: | ||||
| The change as a result of: | ||||
| 1% salary increase | (209 | ) | ||
| 1% salary decrease | 168 | |||
| Sensitivity test for changes in the discount rate of the plan assets and liability: | ||||
| The change as a result of: | ||||
| 1% increase in discount rate | 186 | |||
| 1% decrease in discount rate | (230 | ) | ||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 20 – | EQUITY |
| a. | Composition of share capital: |
| December 31, 2024 | December 31, 2023 | |||||||||||||||
| Authorized | Issued
and outstanding |
Authorized | Issued
and outstanding |
|||||||||||||
| Number of shares in thousands | ||||||||||||||||
| Ordinary shares with no par value | 100,000 | 3,545 | 14,249 | 1,185 | ||||||||||||
Effective from February 28, 2023, the Company’s shares were split in a ratio of 1:0.712434. Effective December 14, 2023, the Company’s shares were reverse split in a ratio of 10:1, In addition, effective March 28, 2025, the Company’s shares were reverse split in a ratio of 10:1 As a result, all ordinary shares, options for shares, warrants to purchase ordinary shares, exercise price and net loss per share amounts were adjusted retroactively for all periods presented in these consolidated financial statements as if the stock split had been in effect as of the date of these consolidated financial statements.
| b. | Movement in share capital: |
| i. | Issued and outstanding share capital: |
|
Number of shares of no |
||||
| in thousands | ||||
| Balance as of January 1, 2024 | 1,185 | |||
| Issuance of shares | 1,774 | |||
| Exercise of options and warrants | 586 | |||
| Balance as of December 31, 2024 | 3,545 | |||
| ii. | Shares issued : |
| 1. | SPAC |
As for the accounting treatment of the Reverse Recapitalization in respect of the transaction with RNER, see Note 1c above.
In February 2023, at the effective date of the Reverse Recapitalization, the Company issued 45,332 ordinary shares and 160,438 warrants.
| 2. | PIPE |
On March 23, 2022, concurrently with the execution of the business combination agreement, the Company entered into the Subscription Agreements with certain investors (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to subscribe for and purchase, and the Company agreed to issue and sell to such PIPE Investors, an aggregate of 5,000 ordinary shares at $10.00 per share for gross proceeds of approximately $50,000 thousand (the “PIPE Financing”) on the Closing Date. The PIPE Financing did not consummate at closing of the Reverse Recapitalization as the PIPE Investors failed To remit payment for the shares to be purchased. In March 2023, the Company received approximately $4,000 thousand of the $50,000 thousand in proceeds from the PIPE Financing and issued approximately 4,000 shares in respect thereof. While the Company is considering possible alternatives in order to pursue the majority of the remaining funds committed as a part of the PIPE investment from the investors, it is uncertain if the Company will be able to receive the remaining PIPE funds.
| 3. | 2022 Investors |
In October 2022, the Company signed investment agreements with different investors for a total of 9,119 shares in the price of NIS 863 ($247) – each unit includes 1 ordinary share with no par value and one warrant with an exercise price of NIS 949 ($260). The warrants vested immediately upon issuance and will be exercisable for 30 months from the respective date of issuance. The aggregate amount raised through this private offering was approximately NIS 7,900 thousand ($2,250 thousand) with an issuance cost of $224 thousand. According to the terms of the investment agreement, the Company has 45 days from the closing date to issue the shares to the investors or otherwise it would need to repay it with an additional 10% interest. The actual issuance of shares took place on February 2023, and therefore as of December 31, 2022, the total investment amount was classified as a liability. The shares were issued during February 2023.
F-
| 4. | Investors Settlement Agreement |
In order to settle various claims by the Company past investors, several allocations were made during 2023 to such past investors. Such allocations were as follows:
* Elyakim Shmuel Baruch Kislev – 2,000 shares (pre-split) were allocated.
* Lior Tamar Investments – 2,500 shares (pre-split) were allocated.
| 5. | ELOC - Equity Line of Credit |
On March 28, 2023 the Company and Dominion Capital LLC (“Dominion”), the manager of RNER’s sponsor, entered into a Firm commitment for an ELOC, which is an equity line instrument whereby the Company, subject to the terms in the equity purchase agreement, may issue up to $10,000 thousand of the Company’s ordinary shares over the course of 36 months. In consideration for Dominion’s commitment to purchase the Company’s ordinary shares, upon execution of the equity purchase agreement, the Company issued to Dominion 100,000 of the Company’s ordinary shares. Expense of $1,570 thousands related to these shares was recognized within other expenses in the Company’s consolidated statements of profit and loss. As of December 31, 2023 the Company did not meet the terms in the Equity purchase agreement and no shares were issued under the equity purchase agreement. In addition, Dominion advanced the Company an aggregate amount of $2,500 thousand upon closing of the Reverse Recapitalization, as the upfront commitment. In connection with the equity line of credit, the Company and Dominion entered into a senior secured demand promissory note (the “Secured Promissory Note”) to evidence the Company’s obligation to repay the equity line of credit commitment. The Secured Promissory Note will bear interest at a rate of 10% per annum and is due on demand. Dominion claims that the Company failed to meet the contractual terms of the Secured Promissory Note. As a result, the Company is required to pay Dominion an interest rate of 24% immediately.
| 6. | Lind |
During November and December 2023, pursuant to Lind SPA as described in Note 17(2) Lind converted an aggregated amount of $4,800 thousand into 221,537 ordinary shares.
| 7. | Accredited Investors |
During 2023, pursuant to Accredited Investor Notes as described in Note 17(4) certain Accredited Investors converted an aggregated amount of $1,300 thousand into 115,022 ordinary shares.
| 8. | Warrants exercise |
During the year ended December 31, 2023, 1,300 warrants were exercised into 1,300 ordinary shares of the Company for total consideration of $233 thousand.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 20 – | EQUITY (Cont.) |
| 9. | Accredited Investors |
During 2024, pursuant to Accredited Investor Notes as described in Note 17(4) certain Accredited Investors converted an aggregated amount of $1,000 thousand into 66,667 ordinary shares.
| 10. | Lind |
During 2024, pursuant to Lind SPA as described in Note 17(2) Lind converted an aggregated amount of $4,800 thousand into 705,582 ordinary shares.
| 11. | AGP |
During 2024, pursuant to AGP Convertible Loan Agreement as described in Note 17(3) A.G.P converted an aggregated amount of $1,070 thousand into 194,747 ordinary shares.
| 12. | Shayna |
During November and December 2023, pursuant to Shayna Convertible Loan Agreement as described in Note 17(1) Akina converted an aggregated amount of $4,616 thousand into 512,937 ordinary shares.
| 13. | Claymore |
During November 2024, pursuant to Claymore Convertible Loan Agreement as described in Note 17(7) Claymore converted an aggregated amount of $275 thousand into 50,000 ordinary shares.
| 14. | Finders Fee |
| a. | In April 2024, pursuant to a Finder Fee Agreement, the Company allocated an aggregated amount of 14,231 ordinary shares. |
| b. | In April 2024, pursuant to a Finder Fee Agreement, the Company allocated an aggregated amount of 20,000 ordinary shares. |
| 15. | Investors Settlement Agreement |
In order to settle various claims by the Company past investors, several allocations were made during 2024 to certain past investors in the amount of 6,903 ordinary shares.
| 16. | IR Services Agreements |
During March and June 2024, pursuant to an IR services agreement, the Company granted an aggregated amount of 94,545 ordinary shares.
| 17. | Consulting Agreement |
In June 2024, pursuant to a Consulting Agreement, the consultant was allocated an aggregated amount of 3,202 ordinary shares.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 20 – | EQUITY (Cont.) |
| 18. | Private warrants exercise |
During the year ended December 31, 2024, 57,096 private warrants were exercised into 57,096 ordinary shares of the Company for total consideration of $5,057 thousand.
| c. | Warrants classified as equity: |
The Company has 182,778 registered and outstanding warrants that are exercisable into 182,778 ordinary shares of no par value each for an average exercise increment price of $223.16. These warrants are classified in equity.
| d. | Treasury shares - Company shares held by the Company: |
The interests of the Company in the Company’s shares are as follows:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| % | ||||||||
| % of issued share capital | 0.24 | 0.54 | ||||||
| e. | Capital management in the Company: |
The Company’s capital management objectives are:
| 1. | To preserve the Group’s ability to ensure business continuity thereby creating a return for the shareholders, investors and other interested parties. |
| 2. | To ensure adequate return for the shareholders by pricing of products and services that is adjusted to the level of risk in the Group’s business activity. |
The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and risk characteristics of its activity and its current and future liquidity constraints. To maintain or adjust the required capital structure, the Company may apply various measures such as adjust the dividend payment to shareholders, raise capital by way of issue of shares, capital purchases from shareholders and disposal of assets to reduce its debts.
| NOTE 21 – | SHARE-BASED PAYMENT |
| a. | Expenses recognized in the financial statements: |
The expense recognized in the financial statements for services received from employees and officers is shown in the following table:
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| USD in thousands | ||||||||||||
| Equity-settled share-based payment plans | 2,070 | 7,115 | 10,516 | |||||||||
| b. | Grants of options to employees and interested parties: |
As part of the business combination agreement described in Note 1b above, on June 21, 2021, the Company allocated 178,108 share options to senior officers, employees and consultants of the Company and to an investment bank assisting the transaction, consisting of grants to employees, key management personnel and interested parties. Following are data of the value of share options granted to key management personnel and interested parties in HUB.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 21 – | SHARE-BASED PAYMENT (Cont.) |
| 1. | 2021 Employee Stock Option Plan: |
The Company has authorized through its 2021 Employee Stock Option Plan (the “Plan”), an available pool of ordinary shares of the Company from which to grant options and RSUs to officers, directors, advisors, management and other key employees of up to 106,865 ordinary shares. The options granted generally have a four-year vesting period and expire ten years after the date of the grant, subject to the terms set forth in the Plan. Options granted under the Plan that are cancelled or forfeited before expiration become available for future grant. As of December 31, 2024 there are no options available for future grants.
| c. | Movement of share options during the year: |
The following table presents the changes in the number of share options and the weighted average exercise prices of share options:
| 2024 | 2023 | |||||||||||||||
| Number
of options |
Weighted average exercise price |
Number
of options |
Weighted average exercise price |
|||||||||||||
| Share options outstanding at beginning of year | 37,157 | 100.4 | 84,415 | 160.2 | ||||||||||||
| Share options granted during the year | - | - | 12,824 | 11.4 | ||||||||||||
| Share options exercised during the year | (680 | ) | 0.5 | 14,588 | 12.8 | |||||||||||
| Share options forfeited during the year | (132 | ) | 0.4 | 955 | 0.4 | |||||||||||
| Share options expired during the year | (19,912 | ) | 165.1 | 44,538 | 179.1 | |||||||||||
| Share options outstanding at end of year | 16,433 | 28.4 | 37,158 | 100.1 | ||||||||||||
| Share options exercisable at end of year | 16,104 | 25.2 | 35,969 | 99.5 | ||||||||||||
Each option is exercisable into one ordinary share of no par value.
The weighted average remaining contractual life for the share options outstanding as of December 31, 2024 was 7.6 years.
The range of exercise prices for share options outstanding as of December 31, 2024 was NIS 1.4- NIS 610.9 ($0.4-$165.1).
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 21 – | SHARE-BASED PAYMENT (Cont.) |
A summary of the status of RSUs under the Plan as of December 31, 2024 and changes during the relevant period ended on that date is presented below:
| Number
of RSU |
||||
| Outstanding at beginning of year* | 161,569 | |||
| Granted | - | |||
| Vested | (43,697 | ) | ||
| Forfeited and cancelled | (13,094 | ) | ||
| Outstanding at end of year | 104,778 |
| * | This includes shares granted with performance obligations which were not fulfilled as of December 31, 2024. |
The total equity-based compensation expense related to all of the Company’s equity-based awards recognized for the years ended December 31, 2024, 2023 and 2022, was comprised as follows:
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Cost of revenues | - | 35 | 206 | |||||||||
| Research and development expenses | (11 | ) | 3,010 | 603 | ||||||||
| Sales and marketing expenses | (32 | ) | 211 | 1,504 | ||||||||
| General and administrative expenses | 2,113 | 3,859 | 8,203 | |||||||||
| Total share-based payment | 2,070 | 7,115 | 10,516 | |||||||||
| NOTE 22 – | COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES |
| a. |
Charges
To secure its liabilities to banks, the Group recorded a floating charge on its entire assets and a fixed charge on share capital and goodwill and all other assets and rights of any type or kind that the Company has or will have in the future. The balance of the amounts pledged under said charge amounts to $688 thousand as of December 31, 2024 ($1,788 thousand as of December 31, 2023) in order to receive guarantees in an aggregate of $946 thousand. |
The Company also recorded a charge in respect of a mortgage on vehicles, on the entire rights the mortgagers have and will have in the future from insuring the mortgaged vehicle, whether by the mortgagers or by banks, and on any right to compensation or indemnification the mortgagers will have towards a third party.
Moreover, to receive credit by a subsidiary, the Company and the subsidiary recorded a senior charge on the mortgagers’ rights in connection with a contract signed on September 6, 2012 with the Israeli Ministry of Defense as a result of a tender published by the Ministry for the procurement of training courses, including the entire collaterals and guarantees granted to the mortgagers for securing the above rights and all the rights related to said rights.
| b. |
Guarantees
As of December 31, 2024, the consolidated statement of financial position includes bank guarantees totaling approximately to $946 thousand that have been granted to customers and suppliers in connection with tender-based performance contracts and office lease. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 22 – | COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES (Cont.) |
| c. | 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’s office holders as to which indemnification is currently being sought, and, except as described below, HUB 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 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 800 thousand (approximately $250 thousand) per year, and HUB’s previous announcement stated that the contract tender would have a material effect on its 2022 financial results. HUB was notified of the cancellation of the award of the tender on the afternoon of Wednesday, March 23, 2022, which was the same day that HUB announced its execution of the Business Combination Agreement. HUB reported the cancellation of the award on Sunday, March 27, 2022. The applicable rules of the Tel Aviv Stock Exchange (TASE) and the Israel Securities Authority, require announcements of this kind to be made not later than the trading day following a company’s receipt of the relevant information. Friday is not a trading day on the TASE, so HUB’s report can be said to have been made one day late. The price of HUB’s ordinary shares on the TASE fell by approximately 35% on March 27, 2022. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 22 – | COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES (Cont.) |
The plaintiff’s request to the court cites total damages at NIS 229,000 thousand (approximately $70,000 thousand). On October 20, 2022, the amount claimed was reduced from NIS 229,440 thousand to NIS 5,440 thousand (approximately $1,480 thousand).
On January 30, 2023, the amount requested was increased to NIS 64,000 thousand. On February 2, 2023, a partial judgment was issued in which the motion to withdraw against the directors was approved, leaving the motion pending against the Company and its former Chief Executive Officer only. The answer to the amended approval request was submitted by September 3, 2023, and the response by the plaintiffs was submitted on October 22, 2023.
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, and on that day the court ruled that the parties would submit their written summaries by November 3, 2024. The plaintiffs filed their summaries on October 1, 2024 and the defendants filed their summaries on February 19, 2025. A provision was recorded in the financial statements at the amount of $300 thousand based on legal counsel assessment.
| 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. On December 2, 2024, the Applicant filed a motion to summon additional witnesses. As part of this motion, the Applicant asked the court to summon several additional witnesses, including the PIPE investors, the remaining respondents in the motion to certify, and other individuals associated with the Company.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 22 – | COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES (Cont.) |
On December 29, 2024, the Applicant filed a motion to remove the confidentiality protection from several documents provided to him by the Company. On January 5, 2025, the court denied the applicant's motion to remove confidentiality of the documents that were transferred, without requiring a response from the respondents.
On January 5, 2025, the respondents filed their response to the motion to summon additional witnesses. On January 15, 2025, the Applicant filed his reply to the respondents' response on this matter. The court has yet to issue its decision regarding this matter. At this stage, it is difficult to assess or determine what would be the level of exposure if any.
On March 31, 2025, the court issued a decision regarding the request to summon additional witnesses. The court approved the summoning of three witnesses. The court allowed the possibility of submitting an affidavit by one of the witnesses. On March 27, 2025, the respondents informed the court that they wish to submit an affidavit on behalf of one of the witnesses. On the same day, the court issued a decision stating that the affidavit submitted by May 4, 2025. The date was extended to May 29, 2025.
On April 6, 2025, a decision was issued by the court stating that, due to the court’s constraints, the previously scheduled evidentiary hearings in this case must be postponed to another date. Alternative evidentiary hearings were scheduled for October 20–21, 2025.
On April 7, 2025, a request to review the case was submitted by Yuval Lev (the Applicant in Lev case). On the same day, the court issued a decision requiring the parties to respond to this request by April 27, 2025 (the date was postponed to May 7, 2025. On April 10, 2025, a response was submitted on behalf of the petitioner in this case, stating that he agrees to the request for case review.
| 4. | Oppenheimer Suit - On June 12, 2023, 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 RNER. The complaint alleges that the Company owes Oppenheimer in excess of $12,000 thousand (as well as its costs and legal fees associated with the claim) with regards to the business combination, pursuant to a financial advisory agreement entered into by and between Oppenheimer and the Company in December 2021. As a settlement agreement was reached in February 20, 2025 this claim was dismissed on February 21, 2025. |
| 5. | Dominion Capital Suit and Insolvency Petition - In December 2023, Dominion, a sponsor of the SPAC, RNER., sued the Company in a New York State Court alleging that the Company failed to repay $2,500 thousand million that the sponsor allegedly disbursed to the Company pursuant to a promissory note. The sponsor asserted that it was entitled to damages in the amount of the loan principal plus interest and attorneys’ fees and was awarded summary judgment. |
On April 10, 2024, Dominion, 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 was set for October 7, 2024.
On February 20, 2025, the Company and Dominion agreed to settle the claims for $4.5 million, with $400 thousand being payable by February 21, 2025, $200 thousand payable by March 3, 2025 and the remaining balance payable in ten monthly payments of $390 thousand from March to December 2025. Dominion agreed that, upon receipt of the first installment payment, it will file a motion to stay the Israeli insolvency proceedings, and upon receipt of the second installment payment, it will file a motion to cancel the Israeli insolvency proceedings. The Israeli insolvency proceedings were eventually dismissed on March 7, 2025
As part of the settlement arrangement, Claymore agreed to make on the Company’s behalf all the payments that the Company is required to make under the settlement agreement with Dominion. In consideration, the Company issued Claymore a convertible note in the principal amount of $7.5 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 20, 2030, subject to earlier conversion by Claymore. The note is convertible into ordinary shares at a rate equal to 25% below the lower of (i) the closing price per share of the ordinary shares immediately preceding the conversion and (ii) the volume-weighted average price of the ordinary shares over the five trading days prior to the conversion, subject to a collar between $15.00 and the Nasdaq floor price.
In the event Claymore defaults on its installment payment obligations to Dominion, the principal amount of the note will be reduced by 1.667 times the amount of such installment. The Company also undertook to grant Claymore liens on the Company’s shares in BST. and on incoming revenues of the Company in the amount of $6 million in the event that an insolvency event occurs prior to August 20, 2025 or if Nasdaq does not grant the Company the opportunity to come into compliance with its listing conditions by no earlier March 31, 2025.
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 22 – | COMMITMENTS, GUARANTEES, CHARGES AND CONTINGENT LIABILITIES (Cont.) |
| 6. | 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. The Company moved to dismiss the action, and the Court dismissed certain portions of the Plaintiffs’ claims. Discovery has now commenced.
| 7. | A few former Israeli employees filed a claim in the Tel Aviv Labor Court: |
| i. | A former employee filed a claim against Comsec in the amount of NIS 846,716 alleging unlawful termination and entitlement to various employment rights, including, but not limited to, unlawful termination compensation, severance pay, advanced notice compensation, and bonuses according to the employment agreement. On December 26, 2023, Comsec submitted its statement of defense, denied, and rejected the plaintiff’s claims and demands. A preliminary hearing occurred on March 13, 2024. The plaintiff filed an affidavit with the court on May 27, 2024. On February 23, 2025 the case was settled for NIS 50,000. |
| ii. | An additional former Israeli employee filed a claim in the Tel Aviv Labor Court against the Company in the amount of NIS 271,593. The plaintiff alleges that this amount is owed to him due to violation of the employment agreement signed with him. The plaintiff claims a signing bonus that he claims was not paid to him, an unconditional quarterly bonus including social benefits for him, and the registration of 20,000 RSUs in his name, compensation for bad faith and misrepresentation. A preliminary hearing is set for February 2, 2025. A settlement between the Company and the plaintiff was signed at an amount of $34 thousand on November 7, 2024. The settlement was paid upon two installments on January 17, 2025 and March 30,2025. |
| 8. | Following the findings 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 chief executive officer, 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 thousand. 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 next hearing in the claims is scheduled for September 8, 2025. |
| (b) | On November 11, 2023, the Company filed a claim against its former chief executive officer 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 chief executive officer 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 a 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. On February 16, 2025, the former CEO filed a discovery affidavit and the Company must file its affidavits in response on May 14, 2025. On September 8, 2025, an evidentiary hearing is scheduled to be held. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 23 – | INVESTMENTS IN SUBSIDIARIES |
| a. | Investment in ALD Software: |
On December 28, 2007, the Company signed an agreement with ALD Software whereby on the record date, January 1, 2008, the Company transferred and sold to ALD Software the software department operation, free of any debt, liability, charge, foreclosure, mortgage, lien or any third party right, other than the liability to the IIA, as a result of which on the transaction completion date, ALD Software will become the legal owner of the software department operation and its underlying rights. The Company holds 98.63% of ALD Software.
| b. | Investment in Qpoint: |
On May 26, 2010, the Company signed an agreement for investing in Qpoint, which is engaged in IT and software testing. According to the agreement, after the investment is made, the Company will hold 46.52% of Qpoint’s issued and outstanding share capital on a fully diluted basis and will have the power to determine Qpoint’s financial and operational policies, among others by having veto rights on budgets, capital raising, financing, dividend distribution and appointing the chief executive officer and chief financial officer to Qpoint’s board of directors, since each of the two other shareholders in Qpoint had provided the Company an irrevocable proxy for approximately 7% each of Qpoint’s ordinary shares owned by them, conferring the Company about 60% of the voting rights in general meetings. Consequently, the Company consolidates Qpoint in its financial statements from the second quarter of that year.
The Company’s total investment in Qpoint amounted to NIS 1,200 thousand ($312 thousand), paid in instalments over three quarters after the closing date. On July 1, 2010, with the completion of the Qpoint acquisition transaction, the Company was allocated 174 shares of Qpoint, conferring the Company 46.52% of Qpoint’s issued and outstanding share capital on a fully diluted basis. In April 2024, after the balance sheet date, the Company acquired the remaining shares of Qpoint. Following this acquisition, the Company holds 100% of Qpoint.
As part of the investment agreement, the parties signed a service agreement according to which the Company will grant Qpoint various services such as comprehensive accounting, marketing, management, administration and office maintenance. In return, Qpoint will pay the Company management fees of 3%. Of the annual tunrover This agreement remains in effect as long as the Company holds 25% of Qpoint’s share capital.
On April 3, 2024 the Company acquired for NIS 25,000 thousand in cash the shares of Qpoint. Payments were agreed to be carried out in three installments as follows: (i) NIS 4,000 thousand on the signing date; (ii) NIS 16,000 thousand on the closing date (which was April 8, 2024); (iii) an additional NIS 5,000 thousand no later than February 10, 2025 (of which NIS 2,500 thousand was already paid by June 5, 2024). As of December 2024, the Company paid the full transaction fee.
Following this acquisition the Company holds 100% of Qpoint. This acquisition is strategically aligned with the Company’s mission to establish a leading global secure data fabric ecosystem.
Qpoint, which was established in 2009, comprises five subsidiaries and provides solutions and consulting across various verticals, including innovative data management and security solutions.
| c. | Acquisition of Comsec Ltd.: |
On September 27, 2021, the Company signed an agreement for the purchase of the entire issued and outstanding share capital on a fully diluted basis of Comsec, including owners’ loans and capital notes (collectively – “the securities”), from Eldav Investments Ltd. (“the seller”). In return for the securities, the Company paid NIS 70,000 thousand ($21,848 thousand) (“the purchase price”), of which NIS 40,000 thousand ($12,484 thousand) in cash and NIS 30,000 thousand ($9,363 thousand) in Company shares. The purchase price was paid to the seller upon closing.
Comsec was a private company that provides cybersecurity consulting, design, testing and control services and sells data security and cybersecurity software and hardware solutions by itself and through its subsidiaries in Israel and overseas. In the first half of 2021, Comsec completed the technological development of a cyber automation solution and began marketing and profiting from its internally developed D-Storm product.
The acquisition transaction was completed on November 17, 2021 and from that date, the Company consolidated the financial statements of Comsec in the consolidated financial statements.
| d. | Debt Arrangement with Comsec Creditors and a Vendor Settlement |
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 13,656 thousand according to the following payment schedule:
| (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 |
Commencing in 2025, the Company has paid in full the entire outstanding debt owed to the vendor.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 24 – | ADDITIONAL INFORMATION TO PROFIT OR LOSS ITEMS |
| Year ended December 31, | |||||||||||||
| 2024 | 2023 | 2022 | |||||||||||
| USD in thousands | |||||||||||||
| a. | Cost of revenue: | ||||||||||||
| Salaries and related expenses | 19,790 | 28,098 | 29,972 | ||||||||||
| Subcontractors and consultants | 3,879 | 8,359 | 12,980 | ||||||||||
| Depreciation, amortization and impairment | - | 4,757 | 1,659 | ||||||||||
| Material | 48 | - | 461 | ||||||||||
| Impairment expenses | - | - | 438 | ||||||||||
| Other | 798 |
693 | 401 | ||||||||||
24,515 |
41,907 | 45,911 | |||||||||||
| b. | Research and development expenses, net: | ||||||||||||
| Salaries and related expenses | 1,994 | 6,879 | 5,201 | ||||||||||
| Other | 8 | 298 | 406 | ||||||||||
| 2,002 | 7,177 | 5,607 | |||||||||||
| Less – government grants | - | (1,291 | ) | (33 | ) | ||||||||
| 2,002 | 5,886 | 5,574 | |||||||||||
| c. | Sales and marketing expenses: | ||||||||||||
| Salaries and related expenses | 2,732 |
4,239 | 7,972 | ||||||||||
| Advertising and public relations | 1,329 | 236 | 306 | ||||||||||
| Depreciation, amortization and impairment | 1,030 | 6,026 | 12,688 | ||||||||||
| Other | 366 | 193 | 708 | ||||||||||
5,457 |
10,694 | 21,674 | |||||||||||
| d. | General and administrative expenses: | ||||||||||||
| Salaries and related expenses | 6,369 |
8,409 | 16,089 | ||||||||||
| Depreciation and amortization | 1,111 |
1,463 | 1,680 | ||||||||||
| Office Maintenance | 1,600 | 1,392 | 1,410 | ||||||||||
| Consulting | 4,466 | 16,716 | 16,627 | ||||||||||
| Professional services | 5,799 | 3,486 | 3,575 | ||||||||||
| Impairment expenses | 572 | 10,643 | 14,618 | ||||||||||
| Insurance | 1,983 | 1,622 | 26 | ||||||||||
| Other | 1,730 |
5,441 | 3,246 | ||||||||||
23,630 |
49,172 | 57,271 | |||||||||||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 24 – | ADDITIONAL INFORMATION TO PROFIT OR LOSS ITEMS (Cont.) |
| Year ended December 31, | |||||||||||||
| 2024 | 2023 | 2022 | |||||||||||
| USD in thousands | |||||||||||||
| e. | Other expenses, net: | ||||||||||||
| Governmental grants income | (173 | ) | (1,159 | ) | |||||||||
| Loss on disposal of assets | 354 | ||||||||||||
| ELOC | 1,570 | ||||||||||||
| RNER listing expenses | 12,312 | ||||||||||||
| 181 | 12,723 | ||||||||||||
| f. | Finance income and expenses: | ||||||||||||
| Finance income: | |||||||||||||
| Gain from exchange rate differences | 271 | 19 | |||||||||||
| Changes in fair value of financial instruments | 1,672 | ||||||||||||
| Interest income | 548 | 213 | 450 | ||||||||||
| 2,220 | 484 | 469 | |||||||||||
| Finance expenses: | |||||||||||||
| Loss from exchange rate differences | 391 | ||||||||||||
| Bank fees | 286 | 109 | 145 | ||||||||||
| Changes in fair value of financial instruments | 247 | ||||||||||||
| Interest expenses | 11,909 | 6,838 | 1,239 | ||||||||||
| 12,586 | 7,194 | 1,384 | |||||||||||
| NOTE 25 – | TAXES ON INCOME |
Tax laws applicable to the Group companies:
Income Tax (Inflationary Adjustments) Law, 1985:
According to the law, until 2007, the results for tax purposes were adjusted for the changes in the Israeli CPI.
In February 2008, the Knesset (Israeli parliament) passed an amendment to the Income Tax (Inflationary Adjustments) Law, 1985, which limits the scope of the law starting 2008 and thereafter. Since 2008, the results for tax purposes are measured in nominal values, excluding certain adjustments for changes in the Israeli CPI carried out in the period up to December 31, 2007. Adjustments relating to capital gains such as for sale of property (betterment) and securities continue to apply until disposal. Since 2008, the amendment to the law includes, among others, the cancellation of the inflationary additions and deductions and the additional deduction for depreciation (in respect of depreciable assets purchased after the 2007 tax year).
| A. | Tax rates applicable to the Group companies: |
The Israeli corporate tax rate was 23% in 2024, 2023 and 2022.
A Company is taxable on its real capital gains at the corporate income tax rate in the year of sale.
In August 2013, the Law for Changing National Priorities (Legislative Amendments for Achieving Budget Targets for 2013 and 2014), 2013 (“the Budget Law”) was published. The Law includes, among others, provisions for the taxation of revaluation gains effective from August 1, 2013. The provisions regarding revaluation gains will become effective only after the publication of regulations defining what should be considered as “retained earnings not subject to corporate tax” and regulations that set forth provisions for avoiding double taxation of foreign assets. As of the date of approval of these financial statements, these regulations have not been published.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 25 – | TAXES ON INCOME (Cont.) |
| B. | Principal tax rates applicable to subsidiaries resident outside of Israel: |
Company incorporated in the United States – tax rate of 24%.
Company incorporated in the Netherland – tax rate of 19%.
| C. | Final tax assessments: |
The Company and its subsidiaries had tax assessments through the 2018 tax year, and are deemed final.
| D. | Carryforward tax losses: |
The Company has business losses that can be carried forward totaling approximately $174,078 thousand. The Company did not create deferred taxes in respect of these business losses and other temporary differences as it does not expect to generate taxable income in the foreseeable future.
| E. | Deferred taxes: |
Composition and movement in deferred taxes:
| In non-current liabilities (1) |
In non-current assets (1) |
|||||||
| USD in thousands | ||||||||
| Balance as of January 1, 2023 | (3,432 | ) | 3,271 | |||||
| Charged to profit or loss | 1,725 | (1,686 | ) | |||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | 132 | (126 | ) | |||||
| Balance as of December 31, 2023 | (1,575 | ) | 1,459 | |||||
| Charged to profit or loss | 404 | (368 | ) | |||||
| Adjustments arising from translating financial statements from functional currency to presentation currency | 14 | (13 | ) | |||||
| Balance as of December 31, 2024 | (1,157 | ) | 1,078 | |||||
| As shown on balance sheet (2): | (79 | ) | ||||||
| (1) | The deferred taxes are computed at a tax rate of 23%. |
| (2) | The deferred tax shown above is not netted off within companies. The balance sheet shows the net position. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 25 – | TAXES ON INCOME (Cont.) |
| F. | Taxes on income included in profit or loss: |
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022* | ||||||||||
| USD in thousands | ||||||||||||
| Current taxes | 276 | 210 | 131 | |||||||||
| Deferred taxes | (37 | ) | (39 | ) | (1,039 | ) | ||||||
| Tax previous years | 318 | 132 | ||||||||||
| 557 | 171 | (776 | ) | |||||||||
| * | Comparative figures including the discontinued operation results. |
| G. | Theoretical tax: |
The reconciliation between the tax expense, assuming that all the income and expenses, gains and losses in profit or loss were taxed at the statutory tax rate and the taxes on income recorded in profit or loss, is as follows:
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| USD in thousands | ||||||||||||
| Loss before taxes on income | (36,589 | ) | (84,435 | )* | (80,739 | )* | ||||||
| Statutory tax rate | 23 | % | 23 | % | 23 | % | ||||||
| Tax computed at the statutory tax rate | (8,415 | ) | (19,420 | ) | (18,570 | ) | ||||||
| Increase (decrease) in taxes on income resulting from the following factors: | ||||||||||||
| Adjustment of deferred tax balances relating to prior years | (37 | ) | ||||||||||
| Different tax rate applicable to foreign subsidiary | (4 | ) | (2 | ) | (225 | ) | ||||||
| Utilization of carryforward losses for which no deferred taxes were computed in the past | (31 | ) | (98 | ) | ||||||||
| Other losses and temporary differences for which no deferred taxes were computed | 7,380 | 19,026 | 17,699 | |||||||||
| Non-deductible expenses for tax purposes | 853 | |||||||||||
| Tax previous years | 318 | 132 | ||||||||||
| Other, net | 493 | 665 | 225 | |||||||||
| Taxes on income | 557 | 171 | (739 | ) | ||||||||
| * | Comparative figures including the discontinued operation results. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 26 – | BALANCES AND TRANSACTIONS WITH INTERESTED AND RELATED PARTIES |
| a. | Balances with interested and related parties: |
December 31, 2024
| For details see |
Directors | Key management personnel |
||||||||||
| Note | USD in thousands | |||||||||||
| Other accounts payable | 15 | 725 | 33 | |||||||||
| Loan | - | 66 | ||||||||||
December 31, 2023
| For details see |
Directors | Key management personnel |
||||||||||
| Note | USD in thousands | |||||||||||
| Other accounts payable | 15 | 220 | 18 | |||||||||
| Loan | - | 66 | ||||||||||
Credit Line to BST
The Company provided a loan to BST, a company whose board of directors includes the Company’s Chief Executive Officer.
On December 4, 2023 the parties entered into a Loan and Security Agreement (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 $6,000 thousand.
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 (15%) and are repayable on January 1, 2025, provided that BST has the right to prepay the any outstanding loan amounts upon at least two days prior notice. Upon the occurrence of certain customary events of default, any outstanding loan amounts are immediately repayable and overdue obligation will carry interest at a fixed rate per annum equal to eighteen percent (18%).
Through December 31, 2024, the Company has provided to BST an aggregated amount of $2,662 thousand under the BST Loan Agreement, of which $1,023 thousand was provided until December 31, 2023 and $1,639 thousand was provided until December 31, 2024, while $323 thousand were recorded as selling and marketing expenses in 2023 and $399 thousand were recorded as finance income. As of December 31, 2024, $2,739 thousand was presented as part of other receivables. Please also refer to Note 28.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 26 – | BALANCES AND TRANSACTIONS WITH INTERESTED AND RELATED PARTIES (Cont.) |
| b. | Salaries and benefits to interested and related parties: |
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| 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) | 592 | 132 | ||||||||||
| Fees of directors not employed by the Company including cost of share-based payment (7) | 625 | 566 | 312 | |||||||||
| Salary and related benefits to formerly Deputy CEO including cost of share-based payment (2) | 476 | 811 | 3,872 | |||||||||
| Salary and related benefits to the former VP Human Resources including cost of share-based payment (4) | 28 | 1,140 | ||||||||||
| Salary and related benefits to formerly Chairman of the Board including cost of share-based payment (3) (6) | 2,355 | |||||||||||
| Salary and related benefits to formerly Deputy CEO and COO including cost of share-based payment (5) (6) | 1,777 | |||||||||||
| 1,693 | 1,537 | 9,456 | ||||||||||
| (1) | Relates to the cost of employment of Mr. Noah Hershkovitz, director of the Company as of October 3, 2023 and chief executive officer of the Company as of December 4, 2023. |
| (2) | Relates to the cost of employment of Mr. Uzi Moskowitz director and former chief executive officer in the Company, who no longer serves as the chief executive officer of Company since December 4, 2023. and Eyal Moshe former director and former chief executive officer of the Company who is also controlling shareholder in the Company, excluding any misappropriates expenses. Mr. Moshe ceased his role as chief executive officer on February 2, 2023, and his employment was terminated effective July 24, 2023 for cause in connection with these unauthorized expenses. |
| (3) | Relates to the cost of employment of Dr. Zigmund Bluvband, formerly the Chairman of the Company’s board of directors. Dr. Zigmund no longer works at the Company since April 30, 2022. |
| (4) | Relates to the cost of employment of Ms. Ayelet Bitan, Chief of Staff in the Company and the spouse of Mr. Eyal Moshe, a controlling shareholder in the Company, excluding any allegedly misappropriated expenses as detailed in Note 1d. Ms. Bitan resigned in February 2023. |
| (5) | Relates to the cost of employment of Mr. Dotan Moshe, former Deputy chief executive officer and chief operating officer in the Company, who is also the son-in-law of Dr. Zigmund Bluvband. Mr. Dotan no longer works at the Company since May 15, 2022. In February 2023 he began consulting the Company. |
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 26 – | BALANCES AND TRANSACTIONS WITH INTERESTED AND RELATED PARTIES (Cont.) |
| (6) | Key management personnel. |
| (7) | Other interested and related parties. |
| ● | The salary and related benefits amounts including the additional expenses of the extension in 2022 of the expiry date of options as detailed in note 17. |
| ● | Mr. Hershcoviz holds 9.99% of one of the Company service providers, A-Labs. Therefore, any decision regarding A-Labs transactions will require special approval as a related party transaction. In addition, Mr. Hershcoviz is also acting as a director in BST. |
| c. | Transactions with interested and related parties: |
Year ended December 31, 2024
| Controlling shareholder |
Key management personnel |
Other interested and related parties |
Total | |||||||||||||
| USD in thousands | ||||||||||||||||
| General and administrative expenses | 1,068 | 625 | 1,693 | |||||||||||||
| 1,068 | 625 | 1,693 | ||||||||||||||
Year ended December 31, 2023
| Controlling shareholder |
Key management personnel |
Other interested and related parties |
Total | |||||||||||||
| USD in thousands | ||||||||||||||||
| General and administrative expenses | 141 | 829 | 566 | 1,537 | ||||||||||||
| 141 | 829 | 566 | 1,537 | |||||||||||||
| NOTE 27 – | 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 two operating segments based on the products and services of the business units and has operating segments as follows.
| 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. |
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 27 – | SEGMENTS (Cont.) |
| 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.
Below is data relating to business segments:
| Year ended December 31, 2024 | ||||||||||||||||
| Professional services |
Products and technology |
Unallocated* | Total | |||||||||||||
| USD in thousands | ||||||||||||||||
| Revenues from external customers | 28,523 | 1,039 | 29,562 | |||||||||||||
| Total revenues | 28,523 | 1,039 | 29,562 | |||||||||||||
| Segment results (operating loss)** | (17,086 | ) | (9,137 | ) | (26,223 | ) | ||||||||||
| Finance expenses, net | (10,366 | ) | ||||||||||||||
| Loss before taxes on income | (36,589 | ) | ||||||||||||||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 27 – | SEGMENTS (Cont.) |
| Year ended December 31, 2023 | ||||||||||||||||
| Professional services |
Products and technology |
Unallocated* | Total | |||||||||||||
| USD in thousands | ||||||||||||||||
| Revenues from external customers | 41,589 | 1,068 | 42,657 | |||||||||||||
| Total revenues | 41,589 | 1,068 | 42,657 | |||||||||||||
| Segment results (operating loss)** | (30,690 | ) | (33,153 | ) | (13,882 | ) | (77,725 | ) | ||||||||
| Finance expenses, net | 6,710 | |||||||||||||||
| Loss before taxes on income | (84,435 | ) | ||||||||||||||
| * | Expenses related to RNER merger transaction and ELOC See Note 5 and Note 28 respectively. |
| ** | In the year ended December 31, 2023, the Company recorded impairment of goodwill and intangible assets related to professional service and product and technology segments in the amount of $12,735 thousand and $2,523 thousand, respectively. |
| b. | Geographical segments: |
Below is revenue by country, based on customer location, geographical segments were not analyzed due to immateriality (most of the Company revenues and the carrying amounts of non-current assets are in the Company’s country of domicile (Israel)):
Year ended December 31, 2024
| Israel | America | Europe | Asia Pacific | Total | ||||||||||||||||
| USD in thousands | ||||||||||||||||||||
| Revenues | 27,808 |
699 | 1,055 | 29,562 | ||||||||||||||||
Main customers:
| Year ended December 31, 2024 |
||||
| USD in thousands |
||||
| Turnover with main customers (1): | ||||
| Customer A | 2,373 | |||
| Customer B | 2,104 | |||
| 4,477 | ||||
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HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 27 – | SEGMENTS (Cont.) |
(1) Customers in the Professional Services segment.
| % of total sales |
||||
| Customer A | 8.02 | % | ||
| Customer B | 7.11 | % | ||
| 15.13 | % | |||
Year ended December 31, 2023
| Israel | America | Europe | Asia Pacific | Total | ||||||||||||||||
| USD in thousands | ||||||||||||||||||||
| Revenues | 40,364 | 334 | 1,669 | 290 | 42,657 | |||||||||||||||
Main customers:
| Year ended December 31, 2023 |
||||
| USD in thousands |
||||
| Turnover with main customers (1): | ||||
| Customer A | 7,602 | |||
| Customer B | 4,726 | |||
| 12,328 | ||||
(1) Customers in the Professional Services segment.
| % of total sales |
||||
| Customer A | 17.82 | % | ||
| Customer B | 11.08 | % | ||
| 28.9 | % | |||
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 28 – | EVENTS AFTER THE REPORTING DATE |
1. BST Acquisition
On January 15, 2025, the Company entered into an Agreement and Plan of Merger with BST, pursuant to which, on January 27, 2025, BST merged with and into a wholly-owned subsidiary of the Company. As a result of the merger, BST and its subsidiaries became subsidiaries of the Company and the equityholders of BST received 2,965,366 ordinary shares of the Company and pre-funded warrants to purchase 664,373 ordinary shares of HUB. Such shares constituted approximately 42.56% of the Company’s outstanding ordinary shares on a post-closing basis and approximately 29.91% of the Company’s share capital on a fully-diluted, post-closing basis (after giving effect to additional shares issuable pursuant to adjustment mechanisms under existing securities but excluding existing warrants that are significantly out-of-the-money, unvested equity grants, and convertible notes that are expected to be repaid and not converted). The exercise of the pre-funded warrants is limited to the extent that, upon exercise, the holder and its affiliates would hold more than 4.99% of the Company’s outstanding ordinary shares.
The ordinary shares issued in the transaction are subject to transfer restrictions for a period of 18 months following the closing date. Specifically, all such shares are restricted from transfer for a period of six-months. After six months, each former BST equityholder will be entitled to transfer up to 28% of its shares. Over the following 12 months, an additional 6% of the shares will be released from the lock-up each month.
Approximately ten percent of the shares were deposited in escrow upon the closing of the transaction in order to secure certain indemnification obligations of BST’s former equityholders. No change in the Company’s management or board of directors occured as a result of the merger.
2. Receipt of Staff’s Delisting notice
On February 27, 2025, the Company received a notice from Nasdaq informing the Company that Nasdaq granted its request to continue listing on the Nasdaq Stock Market, subject to (i) on or before March 5, 2025, its filing of an application to transfer its securities to the Nasdaq Capital Market and (ii) on or before March 31, 2025, the Company’s demonstrating compliance with the minimum bid price requirement and the continued listing requirement that the Company maintains either a minimum of $2,500 thousand in shareholders’ equity or $35,000 thousand market value of listed securities or $500 thousand of net income from continuing operations for the most recently completed fiscal year or two of the three most recently completed fiscal years, as set forth in Nasdaq Listing Rule 5550(b)(2) (“MVLS Rules”). On February 26, 2025, the Staff confirmed to the Company via email that it had regained compliance with the MVLS Rules.
On March 4, 2025, the Company filed an application to transfer its securities to the Nasdaq Capital Market. On March 28, 2025, the Company effected a 1-for-10 reverse share split of its ordinary shares in an effort to regain compliance with the minimum bid price requirement.
3. Julestar Financing
On February 4, 2025, the Company entered into a Loan Agreement (the “Julestar Loan Agreement”) with Julestar LLC, a New York limited liability company (“Julestar”), pursuant to which Julestar agreed to loan us $2,650 thousand in consideration for a promissory note in the principal amount of $3,117,647 (the “Julestar Note”). The principal amount, and interest thereon, is required to be repaid in 40 weekly installments over the 10-month term of the loan. The Julestar Note will accrue interest at a rate of 10% per annum. To secure the repayment of the Julestar Note, the Company undertook to grant a subordinated pledge over the shares of certain of its subsidiaries, subject to the consent of a senior lender within 60 days.
The Julestar Loan Agreement also provides for the issuance of five-year warrants to purchase 530,000 ordinary shares subject to downward adjustment in the number of underlying shares in the event of early repayment of the Note in full or upward adjustment in the event the Julestar Note is not repaid in full within 90 days of the issuance date, as detailed below. The exercise price of the warrants is $5.00 per share, subject to adjustment in certain circumstances, including dilutive issuances. The warrants are subject to a limitation that prohibits ownership of more than 4.99% of Company’s outstanding share capital at any time.
The Company undertook to register with the Securities and Exchange Commission on a Form F-1 or Form F-3 the shares issuable upon the exercise of the Warrants.
The net proceeds of the amount we the Company raises in any single subsequent financing or asset sale outside the ordinary course of business of more than $5.0 million, or multiple subsequent financings or asset sales outside the ordinary course of business of more than $7.0 million in the aggregate, will be required to be used to prepay the Julestar Note in full. The Company is entitled to prepay a minimum of $100 thousand of the Julestar Note at any time, with no prepayment penalties, with declining incentives for early prepayment consisting of a decrease in the principal amount and a decrease in the number of shares issuable under the warrants. If the Julestar Note is not repaid in full within 90 days, the number of shares issuable under the warrants will increase and the exercise price of the additional shares could be set lower, to half the lowest 10-day average market price during the period, subject to a floor price.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 28– | EVENTS AFTER THE REPORTING DATE (Cont.) |
As a result of the issuance of the warrants, the exercise price of the warrant to purchase 129,412 ordinary shares issued in an earlier financing transaction on December 30, 2024 automatically decreased from $8.5 to $5.00 per share. While the Company is currently in default of certain terms under the Julestar Loan Agreement, it is in discussions with Julestar to restructure its obligations thereunder.
4. Settlement of Dominion Capital LLC Suit
As discussed in Note 22(5) above, in December 2023, Dominion, sued the Company in a New York State Court alleging that the Company failed to repay $2.5 million that Dominion allegedly disbursed on behalf of the Company pursuant to a promissory note. Dominion asserted that it was entitled to damages in the amount of the loan principal plus interest and attorneys’ fees and was awarded summary judgment. Dominion also submitted to the Tel Aviv District Court a petition to commence insolvency proceedings.
On February 20, 2025, the Company and Dominion agreed to settle the claims for $4.5 million, with $400 thousand being payable by February 21, 2025, $200 thousand payable by March 3, 2025 and the remaining balance payable in ten monthly payments of $390 thousand from March to December 2025. Dominion agreed that, upon receipt of the first installment payment, it will file a motion to stay the Israeli insolvency proceedings, and upon receipt of the second installment payment, it will file a motion to cancel the Israeli insolvency proceedings.
As part of the settlement arrangement, Claymore agreed to make on the Company’s behalf all the payments that the Company is required to make under the settlement agreement with Dominion. In consideration, the Company issued Claymore a convertible note in the principal amount of $7.5 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 20, 2030, subject to earlier conversion by Claymore. The note is convertible into ordinary shares at a rate equal to 25% below the lower of (i) the closing price per share of the ordinary shares immediately preceding the conversion and (ii) the volume-weighted average price of the ordinary shares over the five trading days prior to the conversion, subject to a collar between $15 and the Nasdaq floor price.
In the event Claymore defaults on its installment payment obligations to Dominion, the principal amount of the note will be reduced by 1.667 times the amount of such installment. The Company also undertook to grant Claymore liens on the Company’s shares in BST. and on incoming revenues of the Company in the amount of $6 million in the event that an insolvency event occurs prior to August 20, 2025 or if Nasdaq does not grant the Company the opportunity to come into compliance with its listing conditions by no earlier March 31, 2025.
5. Settlement of Oppenheimer & Co. Suit
As previously reported, on June 12, 2023, 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 2023 business combination with Mount Rainier Acquisition Corp. The complaint alleged that the Company owes Oppenheimer in excess of $12 million (as well as its costs and legal fees associated with the claim) with regards to the business combination, pursuant to a financial advisory agreement entered into by and between Oppenheimer and the Company in December 2021.
Effective February 19, 2025, the Company and Oppenheimer agreed to settle the claim for $3 million, with $1.1 million being paid on the effective date and the remaining balance payable in ten monthly payments of $200 thousand from March to December 2025 (with the first payment being $100 thousand).
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 28– | EVENTS AFTER THE REPORTING DATE (Cont.) |
As part of the settlement arrangement, Claymore agreed to make on the Company’s behalf, all the payments that the Company is required to make under the settlement agreement with Oppenheimer. In consideration, the Company issued Claymore a convertible note in the principal amount of $6 million. The note does not bear interest and is repayable by way of conversion into the Company’s ordinary shares on February 18, 2030, subject to earlier conversion by Claymore. The note is convertible into ordinary shares at a rate equal to 25% below the lower of (i) the closing price per share of the ordinary shares immediately preceding the conversion and (ii) the volume-weighted average price of the ordinary shares over the five trading days prior to the conversion, subject to a collar between $15 and the Nasdaq floor price.
In the event Claymore defaults on its payment obligations, the principal amount of the note will be reduced by twice the amount of such payment. The Company also undertook to grant Claymore liens to secure the Company’s repayment obligations under the note, following the repayment of note issued to JJ Astor & Co. on December 30, 2024 and the Company’s receipt of the consent of the applicable senior lien.
6. Debt Restructuring
On February 17, 2025, the Company and Tamas Gottdiener (the “Investor”) agreed to amend the terms of the various series of convertible notes and warrants previously purchased by the Investor. Pursuant to the amended terms, the maturity date of each of the convertible notes, having an aggregate principal amount of $11 million (plus accrued interest), was extended to August 16, 2025. Additionally, per the amendment terms, in the event the notes are not paid or converted in full by April 1, 2025, from and after April 1, 2025, the current interest rate of the notes will increase from 15% per annum to 20% per annum.
Pursuant to the amendment, the exercise price of each of the warrants previously issued to the Investor in connection with four tranches of investments during the course of 2024, which are exercisable for an aggregate of 1,294,444 ordinary shares, was changed to a unified exercise price of NIS 17.77 (being the NIS equivalent of $5 per share based on the last published exchange rate published by the Bank of Israel on the date of the amendment) and the term of the warrants was extended to a unified end date of February 17, 2030. Prior to the amendment, the various warrants had exercise prices ranging from $5 to $7 per share and expiration dates during the course of 2027. The Company also issued to the Investor an additional warrant exercisable into 205,556 ordinary shares at an exercise price of $5 per share and a pre-funded warrant exercisable into 1,000,000 ordinary shares, in each case until February 17, 2030. Like the previously issued warrants, the exercise of the new warrants will be limited to the extent that, upon the exercise of the new warrants, the Investor would not beneficially own more than 4.99% of our outstanding ordinary shares.
Additionally, pursuant to the amended terms, the Investor will sell all or a signification portion of the notes to a third party who will convert the notes and attempt to sell the resulting conversion shares. The Investor agreed by no later than April 2, 2025, to inform the Company in writing of the amount of proceeds the Investor irrevocably received from the sale of such conversion shares by the third party, in which case the Company shall be deemed to have repaid the principal and accrued interest under the converted notes in the amount equal to the sale proceeds. In the event that the sale proceeds are lower than the aggregate principal and accrued interest under the converted notes thereon, the Company agreed to issue to the Investor a convertible note in the principal amount equal to such shortfall amount (and if the sale proceeds (and any repayments from the Company) are less than $6.5 million, also the interest that would have accrued on the converted notes in accordance with their terms had they not been converted). The new note would have an interest rate of 20% per annum, commencing retroactively from the date of conversion of the converted notes, and a maturity date of August 16, 2025, and otherwise the same terms and conditions as the converted notes. In the event that, at April 2, 2025, the Investor holds unsold conversion shares, then warrants held by the Investor will be exercised for an equivalent number of ordinary shares pursuant to the terms thereof and such conversion shares will be deemed to be issued pursuant to such exercise in lieu of the issuance of new ordinary shares.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 28– | EVENTS AFTER THE REPORTING DATE (Cont.) |
7. Promissory Notes
On March 27, 2025, the Company completed the issuance of a series of notes (the “Promissory Notes”) to certain investors, including Keystone Capital Partners, LLC as the lead investor (the “Lead Investor,” and collectively with the other investors, the “Note Investors”), in an aggregate principal amount of $1,625 thousand and original issue discount of $325 thousand, for an aggregate purchase price of $1,300 thousand. The Promissory Notes mature on December 11, 2025, do not bear interest, and include a prepayment option at a premium of 125%. In addition, the Company is required to use the cash proceeds deriving from a financing in which it receives proceeds of at least $10 million to repay the Promissory Notes.
The Note Investors have the right to convert the principal amount into ordinary shares of the Company upon the occurrence of a subsequent equity financing pursuant to which the Company receives at least $5,000 thousand, subject to certain conditions.
The conversion of the Promissory Notes will be limited to the extent that, upon their conversion, a Note Investor and its affiliates would in aggregate beneficially own more than 4.99% of the Company’s outstanding share capital at any time.
8. ELOC Transaction
Concurrently with the investment by the Note Investors described above, and as part of the Company’s compliance plan presented to the Nasdaq Hearings Panel (the “Panel”) on February 6, 2025, following which the Panel granted the Company’s request to continue its listing on The Nasdaq StockMarket, the Company entered into an Ordinary Shares Purchase Agreement (the “ELOC Purchase Agreement”) with the Lead Investor, pursuant to which the Company has the right to sell to the Lead Investor up to an aggregate of $50 million of newly issued ordinary shares (the “ELOC Shares”). The Company intends to sell ELOC Shares if it determines that such sale would be advisable in order to comply with the Nasdaq market value listing requirement.
As consideration for the Lead Investor’s commitment to purchase ELOC Shares upon the terms of and subject to satisfaction of the conditions set forth in the ELOC Purchase Agreement, the Company agreed to issue to the Lead Investor a note in a principal amount of $1,000 thousand, does not bear interest, and has a maturity date of December 11, 2025 (the “Commitment Note”). The Commitment Note is due by way of conversion into the Company’s shares based on the closing share price of the Company’s shares on the date immediately prior to the maturity date, provided that in each case the applicable conversion price shall not be lower than twenty percent (20%) of the closing sale price of the Company’s shares on the issuance date of the Commitment Note. The Commitment Note can be converted prior to the maturity date by either the Company or the Lead Investor at any time following the earlier of (i) the date on which the shares issuable upon conversion are registered under a registration statement filed with the Securities and Exchange Commission or (ii) September 11, 2025. In the event of a conversion prior to the maturity date, the number of Company shares to be issued upon the conversion of the Commitment Note will be based on the closing share price on the day prior to the issuance of the conversion notice provided that the closing sale price on the day prior to the issuance of the conversion notice is not lower than 10% as compared to the closing sale price on the date immediately prior thereto. The conversion of the Commitment Note will be limited to the extent that, upon its conversion, the Lead Investor and its affiliates would in aggregate beneficially own more than 4.99% of the Company’s outstanding share capital at any time.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 28– | EVENTS AFTER THE REPORTING DATE (Cont.) |
In addition, in connection with the ELOC Purchase Agreement, the Company and the Lead Investor entered into a Registration Rights Agreement pursuant to which the Company undertook to register with the SEC the shares issuable upon conversion of the Conversion Note and the ELOCS hares that the Company has the right to sell to the Lead Investor.
The Company does not have a right to commence any sales of ELOC Shares to the Lead Investor under the ELOC Purchase Agreement before a registration statement of such shares is declared effective by the SEC and the final form of prospectus is filed with the SEC (the “Commencement Date”). Following such date, the Company will control the timing and amount of any sales of ELOC Shares to the Lead Investor. Actual sales of shares of ELOC Shares to the Lead Investor under the ELOC Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the ELOC Shares and determinations by the Company as to the appropriate sources of funding for the Company and its operations. The Company is obligated to use 33% proceeds from the sale of ELOC Shares to repay the principal amount under the Promissory Notes.
Under the ELOC Purchase Agreement, on any business day on which the closing sale price of the Company’s shares is equal to or greater than $0.50 (the “Fixed Purchase Date”), the Company may direct the Lead Investor to purchase shares (a “Fixed Purchase”) at a purchase price equal to 95% of the lesser of (i) the daily volume-weighted average price (the “VWAP”) of the Company’s shares for the five (5) trading days immediately preceding the applicable fixed purchase date and (ii) the lowest sale price on the applicable Fixed Purchase Date, provided, that the Lead Investor’s committed obligation under any single Fixed Purchase shall not exceed $50 thousand.
In addition to Fixed Purchases, on any business day on which the Company has directed the Lead Investor to purchase the maximum allowable Fixed Purchase amount, the Company may also direct the Lead Investor to purchase additional shares on the trading day immediately following the purchase date for such Fixed Purchase (the “VWAP Purchase Date” and such purchase, a “VWAP Purchase”)at a purchase price equal to 90% of the lesser of (i) the closing sale price of the Company’s shares on the applicable VWAP Purchase Date and (ii) the VWAP during the period on the applicable VWAP Purchase Date beginning at the opening of trading and ending on the earlier of (1) close of trading, (2) the time at which the trading volume of the Company’s shares on Nasdaq has reached the number of shares to be sold in the VWAP Purchase divided by 30%, and (3) the time at which the sale price of the Company’s shares on Nasdaq is 75% of the closing sale price on the date on which the Company directs the Lead Investor to make a VWAP Purchase (such period, the “VWAP Purchase Period”), provided, that the Lead Investor’s committed obligation under any single VWAP Purchase shall not exceed the lesser of (a) 300% of the number of shares sold in the corresponding Fixed Purchase and (b) 30% of the trading volume of the VWAP Purchase Period.
In addition, on a VWAP Purchase Date, the Company may also direct the Lead Investor to purchase on such day, an additional number of shares(an “Additional VWAP Purchase”) at a purchase price equal to 90% of the lesser of (i) the VWAP beginning at the completion of any prior VWAP Purchases and the last Additional VWAP Purchase, as applicable, and ending on the earlier of (1) close of trading, (2) the time at which the trading volume of the Company’s shares on Nasdaq has reached the number of shares to be sold in the Additional VWAP Purchase divided by 30%, and (3) the time at which the sale price of the Company’s shares on Nasdaq is 75% of the closing sale price on the date on which the Company directs the Lead Investor to make an Additional VWAP Purchase (such period, the “Additional VWAP Purchase Period”), and (ii) the lowest sale price on such day, provided, that the Lead Investor’s committed obligation under any single Additional VWAP Purchase shall not exceed the lesser of (a) 300%of the number of shares soldin the Fixed Purchase that corresponded to the VWAP Purchase corresponding to the Additional VWAP Purchase and (b) 30% of the trading volume of the Additional VWAP Purchase Period.
The Lead Investor’s aggregate committed obligation under a VWAP Purchase and all Additional VWAP Purchases for a particular VWAP Purchase Date shall not exceed $1,000 thousand in the aggregate.
The ELOC Purchase Agreement provides that the Company may not issue or sell any shares under the ELOC Purchase Agreement if the issuance or sale of such shares would result in the Lead Investor and its affiliates beneficially owning more than 4.99% of the Company’s outstanding share capital at any time.
F-
HUB CYBER SECURITY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 28– | EVENTS AFTER THE REPORTING DATE (Cont.) |
9. Shayna agreement
On January 26, 2025 a settlement agreement was signed between BST, Shayna and an additional individual investor, pursuant to which Akina, Shayna and the additional individual investor waived, among other things, on any rights they were still entitled to under the Convertible Loan Agreements signed between Hub and Shayna on February 23, 2023, June 11, 2023 and July 7, 2023, as amended on August 17, 2023, and as amended and signed by Hub, Shayna and Akina on March 31, 2024 (First Amendment to Convertible Loan Agreements), April 18, 2024 (Second Amendment to Convertible Loan Agreements) and May 9, 2024 (Third Amendment to Convertible Loan Agreements), including on any right to the allocation of shares and/or to the exercise of warrants under said Convertible Loan Agreements as amended.
Under the terms of the settlement agreement, and in lieu of said waived shares and warrants, it was agreed that of the total amount of Company shares which were to be allocated to BST under the terms of the merger agreement between BST and the Company, Shayna will be granted 320,000 shares of the Company, and the individual investor will be granted 184,560 shares of the Company. For the avoidance of doubt, said figures are both pre-split, both include shares that Shayna and the individual investor were already entitled to receive under the terms of the Merger Agreement as existing shareholders of BST, and were both subject to the lock-up restrictions stipulated in the Merger Agreement with regards to shares allocated to BST.
F-82
Exhibit 2.1
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
HUB Cyber Security Ltd. has three classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: ordinary shares and two classes of warrants to purchase ordinary shares. References herein to “we,” “us,” “our” and the “Company” refer to HUB Cyber Security Ltd. and not to any of its subsidiaries. The following description may not contain all of the information that is important to you, and we therefore refer you to our amended and restated articles of association (our “Articles”), a copy of which is filed with the Securities and Exchange Commission (“SEC”) as an exhibit to this annual report on Form 20-F (“Annual Report”).
ORDINARY SHARES
Share Capital
Our authorized share capital consists of 100,000,000 ordinary shares, no par value. All of our outstanding ordinary shares are validly issued, fully paid and non-assessable. Our ordinary shares are not redeemable and do not have any pre-emptive rights.
Our board of directors may determine the issue prices and terms for such shares or other securities, and may further determine any other provision relating to such issue of shares or securities. We may also issue and redeem redeemable securities on such terms and in such manner as our board of directors shall determine.
Registration Number and Purposes of the Company
We are registered with the Israeli Registrar of Companies. Our registration number is 51-102937-3. Our affairs are governed by our Articles of Association (the “Articles”), applicable Israeli law and specifically, the Companies Law. Our purpose as set forth in the Articles is to carry on any business and to engage in any lawful act or activity.
Voting Rights
All ordinary shares have identical voting and other rights in all respects.
Transfer of Shares
Our fully paid ordinary shares are issued in registered form and may be freely transferred under the Articles, unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of the Nasdaq. The ownership or voting of ordinary shares by non-residents of Israel is not restricted in any way by the Articles or the laws of the State of Israel, except for ownership by nationals of some countries that are, have been, or expected to be, in a state of war with Israel.
Election of Directors
Under the Articles, the board of directors must consist of not less than three (3) but no more than eleven (11) directors. Each director is elected by a simple majority vote of the ordinary shares participating and voting at a general meeting of shareholders, provided that (i) in the event of a contested election, the method of calculation of the votes and the manner in which the resolutions will be presented to our shareholders at the general meeting shall be determined by our board of directors in its discretion, and (ii) in the event that our board of directors does not or is unable to make a determination on such matter, then the directors will be elected by a plurality of the voting power represented at the general meeting in person or by proxy and voting on the election of directors.
In addition, our directors are divided into three classes, one class being elected each year at the annual general meeting of its shareholders, and serve on the board of directors until the third annual general meeting following such election or re-election or until they are removed by a vote of 65% of the total voting power of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events in accordance with the Companies Law and the Articles. In addition, the Articles, provides that the board of directors of may fill vacancies on the board of directors to appoint new directors up to the maximum number of directors permitted under the Articles, by a vote of a simple majority of the directors then in office. A director so appointed will hold office until the next annual general meeting of shareholders for the election of the class of directors in respect of which the vacancy was created, or in the case of a vacancy due to the number of directors being less than the maximum number of directors stated in the Articles, until the next annual general meeting of shareholders for the election of the class of directors to which such director was assigned by our board of directors.
Dividend and Liquidation Rights
We may make “distributions”, as such term is defined in the Companies Law (which definition includes the payment of dividends and a company’s repurchase of its outstanding shares) to the holders of ordinary shares in proportion to their respective shareholdings, subject to certain limitations imposed by the Companies Law. Under the Companies Law, dividend distributions are determined by the board of directors and do not require the approval of the shareholders of a company unless the company’s articles of association provide otherwise. The Articles do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our board of directors.
Pursuant to the Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous two years, according to the company’s most recently reviewed or audited financial statements (less the amount of previous distributions, if not reduced from the earnings), provided that the end of the period to which the financial statements relate is not more than six months prior to the date of the distribution. If a company does not meet such criteria, then it may make distributions only with court approval. As we are a Nasdaq-listed company, court approval is not required for our repurchase of our shares, provided that we notify our creditors of the proposed repurchase and allow such creditors an opportunity to initiate a court proceeding to review the repurchase. If within 30 days such creditors do not file an objection, then we may proceed with the repurchase. In each case, we are only permitted to make the distribution if our board of directors and, if applicable, the court, determines that there is no reasonable concern that such distribution will prevent us from satisfying our existing and foreseeable obligations as they become due.
In the event of the Company’s liquidation, after satisfaction of liabilities to creditors, its assets will be distributed to the holders of ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights which may be authorized in the future.
Registration Rights
Certain of our shareholders are entitled to certain registration rights under the terms of our Registration Rights Agreement. For a discussion of such rights, see “Related Party Transactions – Registration Rights Agreement” in our Annual Report.
Exchange Controls
There are currently no Israeli currency control restrictions on remittances of dividends on ordinary shares, proceeds from the sale of the ordinary shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that at the time are, or have been, in a state of war with Israel.
Shareholder Meetings
Under Israeli law, we are required to hold an annual general meeting of shareholders once every calendar year and no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to in the Articles as special general meetings. Our board of directors may call special general meetings of our shareholders whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law provides that our board of directors is required to convene a special general meeting of our shareholders upon the written request of (i) any two or more of our directors, (ii) one-quarter or more of the serving members of our board of directors or, (iii) as we are a Nasdaq-listed company, one or more shareholders holding, in the aggregate, either (a) 10% or more of our issued and outstanding shares and 1% or more of our outstanding voting power or (b) 10% or more of our outstanding voting power.
Under the Companies Law, one or more shareholders holding at least 1% of the voting rights at the general meeting of shareholders may request that the board of directors include a matter in the agenda of a general meeting of shareholders to be convened in the future, provided that it is appropriate to discuss such a matter at the general meeting, and provided, however, that, as we are a Nasdaq-listed company, in order to request that our board of directors include a matter in the agenda that relates to the election or removal of a director, such shareholder(s) must hold at least 5% of the voting rights at the general meeting of shareholders. The Articles contain procedural guidelines and disclosure items with respect to the submission of shareholder proposals for general meetings. Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings of shareholders are the shareholders of record on a date to be decided by the board of directors, which, as we are a Nasdaq-listed company, may be between four and 60 days prior to the date of the meeting.
Furthermore, the Companies Law requires that resolutions regarding the following matters must be passed at a general meeting of shareholders:
| ● | amendments to the articles of association; |
| ● | appointment, terms of service and termination of services of auditors; |
| ● | appointment of directors, including external directors (if applicable); |
| ● | approval of certain related party transactions; |
| ● | increases or reductions of authorized share capital; |
| ● | a merger; and |
| ● | the exercise of the board of director’s powers by a general meeting, if the board of directors is unable to exercise its powers and the exercise of any of its powers is required for proper management of the company. |
For companies whose articles of association do not require the company to provide advance notice of any annual general meeting or special general meeting, such as in the case of the Company, the Companies Law requires that a notice of any such meeting be provided to shareholders at least 14 prior to the meeting; otherwise, the Companies Law requires that a notice of any annual general meeting or special general meeting be provided to shareholders at least 21 days prior to the meeting provided that, in each case, if the agenda of the meeting includes (among other things) the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, or an approval of a merger, notice must be provided at least 35 days prior to the meeting. Under the Companies Law and the Articles, shareholders are not permitted to take action by way of written consent in lieu of a meeting.
Quorum
Holders of the ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before the shareholders at a general meeting. The quorum required for our general meetings of shareholders consists of at least two shareholders present in person or by proxy who hold or represent at least 33 and 1/3% of the total outstanding voting power of our shares, except that if (i) any such general meeting was initiated by and convened pursuant to a resolution adopted by the board of directors and (ii) at the time of such general meeting we qualify as a “foreign private issuer,” the requisite quorum will consist of two or more shareholders present in person or by proxy who hold or represent at least 25% of our total outstanding voting rights. The requisite quorum may be present within half an hour of the time fixed for the commencement of the general meeting. A general meeting adjourned for lack of a quorum shall be adjourned to the same day in the next week, at the same time and place, to such day and at such time and place as indicated in the notice to such meeting, or to such day and at such time and place as the chairperson of the meeting shall determine. At the reconvened meeting, any number of shareholders present in person or by proxy shall constitute a quorum, unless a meeting was called pursuant to a request by shareholders, in which case the quorum required is one or more shareholders, present in person or by proxy and holding the number of shares required to call the meeting as described above in “Shareholder Meetings.”
Vote Requirements
Unless otherwise required by the Companies Law or by the Articles, all shareholder resolutions require a simple majority vote of under the Companies Law, certain actions require the approval of a special majority, including: (i) an extraordinary transaction with a controlling shareholder or in which the controlling shareholder has a personal interest, (ii) the terms of employment or other engagement of a controlling shareholder of the company or a controlling shareholder’s relative (even if such terms are not extraordinary) and (iii) certain compensation-related matters. Under the Articles, if at any time our share capital is divided into different classes of shares, the rights attached to any class, unless otherwise provided by the Articles, may be modified or cancelled by us by a resolution of the shareholders of the holders of all shares as one class, without any required separate resolution of any class of shares.
Under the Articles, the approval of the holders of at least 65% of the total voting power of our shareholders is generally required to remove any of our directors from office. Another exception to the simple majority vote requirement is a resolution for the voluntary winding up, or an approval of a scheme of arrangement or reorganization, of the company pursuant to Section 350 of the Companies Law, which requires the approval of a majority of the shareholders present and represented at the meeting, and holding at least 75% of the voting rights represented at the meeting and voting on the resolution.
Access to Corporate Records
Under the Companies Law, all shareholders generally have the right to review minutes of our general meetings, our shareholder register (including with respect to material shareholders), our Articles, our financial statements, other documents as provided in the Companies Law, and any document we are required by law to file publicly with the Israeli Registrar of Companies or the Israeli Securities Authority. Any shareholder who specifies the purpose of its request may request to review any document in our possession that relates to any action or transaction with a related party which requires shareholder approval under the Companies Law. We may deny a request to review a document if it determines that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwise impair its interests.
Acquisitions under Israeli Law
Full Tender Offer
A person wishing to acquire shares of a public Israeli company who would, as a result, hold over 90% of the target company’s voting rights or the target company’s issued and outstanding share capital (or of a class thereof), is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company (or the applicable class). If (a) the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company (or the applicable class) and the shareholders who accept the offer constitute a majority of the offerees that do not have a personal interest in the acceptance of the tender offer or (b) the shareholders who did not accept the tender offer hold less than 2% of the issued and outstanding share capital of the company (or of the applicable class), all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. A shareholder who had its shares so transferred may petition an Israeli court within six months from the date of acceptance of the full tender offer, regardless of whether such shareholder agreed to the offer, to determine whether the tender offer was for less than fair value and whether the fair value should be paid as determined by the court. However, an offeror may provide in the offer that a shareholder who accepted the offer will not be entitled to petition the court for appraisal rights as described in the preceding sentence, as long as the offeror and the company disclosed the information required by law in connection with the full tender offer. If the full tender offer was not accepted in accordance with any of the above alternatives, the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s voting rights or the company’s issued and outstanding share capital (or of the applicable class) from shareholders who accepted the tender offer. Shares purchased in contradiction to the full tender offer rules under the Companies Law will have no rights and will become dormant shares.
Special Tender Offer
The Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company. This requirement does not apply if there is already another holder of 25% or more of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company. These requirements do not apply if (i) the acquisition occurs in the context of a private placement by the company that received shareholder approval as a private placement whose purpose is to give the purchaser 25% or more of the voting rights in the company, if there is no person who holds 25% or more of the voting rights in the company or as a private placement whose purpose is to give the purchaser 45% of the voting rights in the company, if there is no person who holds 45% of the voting rights in the company, (ii) the acquisition was from a shareholder holding 25% or more of the voting rights in the company and resulted in the purchaser becoming a holder of 25% or more of the voting rights in the company, or (iii) the acquisition was from a shareholder holding more than 45% of the voting rights in the company and resulted in the purchaser becoming a holder of more than 45% of the voting rights in the company. A special tender offer must be extended to all shareholders of a company. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer (excluding the purchaser, its controlling shareholders, holders of 25% or more of the voting rights in the company and any person having a personal interest in the acceptance of the tender offer, or anyone on their behalf, including any such person’s relatives and entities under their control).
In the event that a special tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the offer, or shall abstain from expressing any opinion if it is unable to do so, provided that it gives the reasons for its abstention. The board of directors shall also disclose any personal interest that any of the directors has with respect to the special tender offer or in connection therewith. An office holder in a target company who, in his or her capacity as an office holder, performs an action the purpose of which is to cause the failure of an existing or foreseeable special tender offer or is to impair the chances of its acceptance, is liable to the potential purchaser and shareholders for damages, unless such office holder acted in good faith and had reasonable grounds to believe he or she was acting for the benefit of the company. However, office holders of the target company may negotiate with the potential purchaser in order to improve the terms of the special tender offer, and may further negotiate with third parties in order to obtain a competing offer.
If a special tender offer is accepted, then shareholders who did not respond to or that had objected the offer may accept the offer within four days of the last day set for the acceptance of the offer and they will be considered to have accepted the offer from the first day it was made.
In the event that a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity at the time of the offer may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer. Shares purchased in contradiction to the special tender offer rules under the Companies Law will have no rights and will become dormant shares.
Merger
The Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain conditions described under the Companies Law are met, a simple majority of the outstanding shares of each party to the merger that are represented and voting on the merger. The board of directors of a merging company is required pursuant to the Companies Law to discuss and determine whether in its opinion there exists a reasonable concern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations towards its creditors, such determination taking into account the financial status of the merging companies. If the board of directors determines that such a concern exists, it may not approve a proposed merger. Following the approval of the board of directors of each of the merging companies, the boards of directors must jointly prepare a merger proposal for submission to the Israeli Registrar of Companies. For purposes of the shareholder vote of a merging company whose shares are held by the other merging company, or by a person or entity holding 25% or more of the voting rights at the general meeting of shareholders of the other merging company, or by a person or entity holding the right to appoint 25% or more of the directors of the other merging company, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares voted on the matter at the general meeting of shareholders (excluding abstentions) that are held by shareholders other than the other party to the merger, or by any person or entity who holds 25% or more of the voting rights of the other party or the right to appoint 25% or more of the directors of the other party, or any one on their behalf including their relatives or corporations controlled by any of them, vote against the merger. In addition, if the non-surviving entity of the merger has more than one class of shares, the merger must be approved by each class of shareholders. If the transaction would have been approved but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the valuation of the merging companies and the consideration offered to the shareholders. If a merger is with a company’s controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders.
Under the Companies Law, each merging company must deliver to its secured creditors the merger proposal and inform its unsecured creditors of the merger proposal and its content. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of a merging company, and may further give instructions to secure the rights of creditors.
In addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger is filed with the Israeli Registrar of Companies and 30 days from the date that shareholder approval of both merging companies is obtained.
Private Placements
Under the Companies Law, a private placement of securities requires approval by the board of directors and the shareholders of a company if it will cause a person to become a controlling shareholder or if:
| ● | the securities issued amount to 20% or more of the company’s outstanding voting rights before the issuance; |
| ● | some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and |
| ● | the transaction will increase the relative holdings of a shareholder that holds 5% or more of the company’s outstanding share capital or voting rights or that will cause any person to become, as a result of the issuance, a holder of more than 5% of the company’s outstanding share capital or voting rights. |
Anti-Takeover Measures
The Companies Law allows us to create and issue shares having rights different from those attached to the ordinary shares, including shares providing certain preferred rights with respect to voting, distributions or other matters and shares having pre-emptive rights. No preferred shares are authorized under the Articles. In the future, if we do authorize, create and issue a specific class of preferred shares, such class of shares, depending on the specific rights that may be attached to it, may have the ability to frustrate or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of the ordinary shares. The authorization and designation of a class of preferred shares will require an amendment to the Articles, which requires the prior approval of the holders of a majority of the voting power attached to our issued and outstanding shares at a general meeting of our shareholders. The convening of the meeting, the shareholders entitled to participate and the vote required to be obtained at such a meeting will be subject to the requirements set forth in the Companies Law and the Articles, as described above in “-Shareholder Meetings.” In addition, as disclosed under “-Election of Directors,” we have a classified board structure, which effectively limits the ability of any investor or potential investor or group of investors or potential investors to gain control of our board of directors.
Borrowing Powers
Pursuant to the Companies Law and the Articles, our board of directors may exercise all powers and take all actions that are not required under law or under the Articles to be exercised or taken by our shareholders, including the power to borrow money for company purposes.
Changes in Capital
The Articles enable us to increase or reduce our share capital. Any such changes are subject to Israeli law and must be approved by a resolution duly passed by our shareholders at a general meeting of shareholders. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings or profits, require the approval of both our board of directors and an Israeli court.
Exclusive Forum
Exclusive Jurisdiction of Certain Actions
The Articles provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act and, for the avoidance of any doubt, such provision does not apply to any claim asserting a cause of action arising under the Exchange Act. Except as set forth in the preceding sentence, the Articles also provide that, unless we consent in writing to the selection of an alternative forum, the competent courts in Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders or (iii) any action asserting a claim arising pursuant to any provision of the Articles, the Companies Law or the Israeli Securities Law. This exclusive forum provision is intended to apply to claims arising under Israeli law and would not apply to claims brought pursuant to the Securities Act or any other claim for which U.S. federal courts would have exclusive jurisdiction. Such exclusive forum provision in the Articles will not relieve us of our duties to comply with U.S. federal securities laws and the rules and regulations thereunder, and our shareholders will not be deemed to have waived our compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us, our directors, officers and employees. However, the enforceability of similar forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and there is uncertainty as to whether courts would enforce the exclusive forum provisions in the Articles.
Transfer Agent and Registrar
The transfer agent and registrar for our ordinary shares is American Stock Transfer & Trust Company, LLC. Its address is 1 State Street, 30th Floor, New York, New York 10004.
Exchange Listing
Our ordinary shares are listed on the Nasdaq Capital Market under the symbol “HUBC.”
WARRANTS
Pre-SPAC Public Warrants
In connection with an offering conducted in Israel to institutional investors in February 2022, we issued an aggregate amount of 9,664,932 warrants, which we refer to as the “pre-SPAC public warrants.” The pre-SPAC public warrants are exercisable for an aggregate amount of 68,856 ordinary shares at an exercise price of $203.00 per whole share (following the reverse share splits that we effected immediately prior to the closing, in December 2023 and in March 2025). The pre-SPAC public warrants will expire on August 22, 2025. The pre-SPAC public warrants are currently trading on Nasdaq under the symbol “HUBCZ”.
SPAC Public Warrants
In connection with our business combination that closed on February 28, 2023, we issued an aggregate amount of 16,043,785 warrants, 15,507,801 of which were issued in exchange for the public warrants of Mount Rainier Acquisition Corp., a Delaware corporation (“RNER”) (the “SPAC public warrants”) and 535,984 of which were issued in exchange for the private warrants of RNER (the “SPAC private warrants” and together with the SPAC public warrants, the “SPAC warrants”). The SPAC public warrants are exercisable for an aggregate amount of 116,308 ordinary shares at an exercise price of $1,279.00 per whole share (following the reverse share splits that we effected immediately prior to the closing, in December 2023 and in March 2025). The SPAC public warrants will expire at 5:00 p.m., New York City time on February 28, 2028, unless redeemed by us or we are liquidated prior to that date. The SPAC public warrants are currently trading on Nasdaq under the symbol “HUBCW”.
Warrant Agreement
The SPAC public warrants were issued in registered form pursuant to the Warrant Agreement dated October 4, 2021, by and between RNER and American Stock Transfer & Trust Company, LLC (“AST”), as amended by the Amended and Restated Warrant Agreement, dated February 28, 2023, by and among AST, RNER and us (the “Warrant Agreement”). You should review a copy of the Warrant Agreement and the form of warrant, as publicly disclosed, for a complete description of the terms and conditions of the SPAC public warrants and the Warrant Agreement.
Duration and Exercise Price Adjustments
The exercise price and number of ordinary shares issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our ordinary shares and the exercise price. However, except as described below, the SPAC public warrants will not be adjusted for issuances of ordinary shares at a price below their respective exercise prices.
Exercisability
The SPAC public warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrantholders do not have the rights or privileges of holders of our ordinary shares and any voting rights until they exercise their warrants and receive ordinary shares. After the issuance of ordinary shares upon exercise of the SPAC public warrants, each holder will be entitled to one (1) vote for each share held of record on all matters to be voted on by shareholders.
Cashless Exercise
If, at the time a holder exercises SPAC public warrants, a registration statement registering the issuance of the ordinary shares underlying the SPAC public warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of ordinary shares determined according to a formula set forth in the warrant agreement (as defined below).
Redemption
We may call the SPAC public warrants for redemption:
| ● | in whole and not in part; |
| ● | at a price of $1.00 per warrant; |
| ● | upon not less than 30 days’ prior written notice of redemption (the “30 day redemption period”) to each warrantholder; and |
| ● | if, and only if, the reported last sale price of our ordinary shares equals or exceeds $1,800.00 per share (following the reverse share splits that we effected immediately prior to the closing, in December 2023 and in March 2025, and as may be further adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing on March 1, 2023 and ending three business days before the Company sends the notice of redemption to its warrantholders. |
Notice of redemption will be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days prior to the redemption date to the registered holders of the SPAC public warrants to be redeemed at their last addresses as they appear on the registration books of the Company.
The right to exercise will be forfeited unless the SPAC public warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.
The redemption criteria for warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.
If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of HUB Security common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Whether HUB Security will exercise its option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors including the price of HUB Security common shares at the time the warrants are called for redemption, HUB Security’s cash needs at such time and concerns regarding dilutive share issuances.
The warrants are issued in registered form under the Amended and Restated Warrant Agreement between American Stock Transfer & Trust Company, LLC, as warrant agent, and us. You should review a copy of the Amended and Restated Warrant Agreement, which is filed as an exhibit to our Annual Report for a complete description of the terms and conditions applicable to the SPAC public warrants. The Amended and Restated Warrant Agreement provides that the terms of the SPAC warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval, by written consent or vote, of the holders of a majority of the then outstanding SPAC warrants in order to make any change that adversely affects the interests of the registered holders.
Fractional Shares
Pursuant to the Amended and Restated Warrant Agreement, a warrant holder may exercise SPAC public warrants only for a whole number of ordinary shares. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of SPAC public warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of our ordinary shares to be issued to the warrant holder.
Transferability
Subject to applicable laws, each SPAC public warrant may be transferred at the option of the holder upon surrender of the warrant to us together with the appropriate instruments of transfer.
Warrant Agent
The warrant agent for our SPAC public warrants is American Stock Transfer & Trust Company.
9
Exhibit 4.4
HUB CYBER SECURITY LTD.
THE AMENDED AND RESTATED 2007 ISRAELI EMPLOYEE STOCK OPTION PLAN
(*In compliance with Amendment No. 132 of the Israeli Tax Ordinance, 2002)
TABLE OF CONTENTS
| 1. | NAME | 3 |
| 2. | INTERPRETATION | 3 |
| 3. | PURPOSE OF THE OPTION PLAN | 5 |
| 4. | ADMINISTRATION OF THE OPTION PLAN | 5 |
| 5. | DESIGNATION OF PARTICIPANTS | 6 |
| 6. | DESIGNATION OF OPTIONS PURSUANT TO SECTION 102 | 6 |
| 7. | TRUSTEE | 7 |
| 8. | ORDINARY SHARES RESERVED FOR THE OPTION PLAN | 7 |
| 9. | EXERCISE PRICE | 8 |
| 10. | ADJUSTMENTS | 8 |
| 11. | TERM AND EXERCISE OF OPTIONS | 9 |
| 12. | TERMINATION OF EMPLOYMENT OR HIRED SERVICES | 10 |
| 13. | VESTING OF OPTIONS | 11 |
| 14. | CONTINUATION OF EMPLOYMENT OR HIRED SERVICES | 11 |
| 15. | RIGHTS AS SHAREHOLDER | 11 |
| 16. | ORDINARY SHARES SUBJECT TO RIGHT OF FIRST REFUSAL | 12 |
| 17. | DIVIDENDS | 12 |
| 18. | ASSIGNABILITY AND SALE OF OPTIONS | 12 |
| 19. | TERM OF THE OPTION PLAN | 12 |
| 20. | AMENDMENTS OR TERMINATION | 13 |
| 21. | GOVERNMENT REGULATIONS | 13 |
| 22. | GOVERNING LAW & JURISDICTION | 13 |
| 23. | TAX CONSEQUENCES | 13 |
| 24. | NON-EXCLUSIVITY OF THE OPTION PLAN | 13 |
| 25. | MULTIPLE AGREEMENTS | 13 |
1. Name
This Plan, as amended from time to time, shall be known as the Hub Cyber Security Ltd. 2007 Stock Option Plan (the “Option Plan”).
2. Interpretation
The following terms as used in the Option Plan shall have the respective meanings set forth below:
| 2.1 | “Affiliate” means any affiliate of the Company, which is an “employing company” within the meaning of Section 102(a) of the Ordinance. |
| 2.2 | “Approved 102 Option” means an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Optionee. |
| 2.3 | “Board” means the Board of Directors of the Company. |
| 2.4 | “Capital Gain Option (CGO)” as defined in Section 6.4 below. |
| 2.5 | “Cause” means, (i) conviction of any felony involving moral turpitude or affecting the Company; (ii) any refusal to carry out a reasonable directive of the chief executive officer, the Board or the Optionee’s direct supervisor, which involves the business of the Company or its Affiliates and was capable of being lawfully performed; (iii) embezzlement of funds of the Company or its Affiliates; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company; including without limitation disclosure of confidential information of the Company; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company. |
| 2.7 | “Committee” means any committee of the Board to which the Board has delegated the responsibility of administering the Option Plan. |
| 2.8 | “Company” means Hub Cyber Security Ltd., an Israeli company. |
| 2.9 | “Companies Law” means the Companies Law 5759-1999, and any regulations, rules, orders of procedures promulgated thereunder as in effect from time to time. |
| 2.10 | “Controlling Shareholder” shall have the meaning ascribed to it in Section 32(9) of the Ordinance. |
| 2.11 | “Date of Grant” means the later of: (i) the date of grant of an Option as specified in the Option Agreement between the Company and the Optionee; and (ii) the date on which the grant of the Option has been approved by the Board or, if applicable, the Shareholders of the Company. |
| 2.12 | “Employee” means a person who is employed by the Company or its Affiliates, including an individual who is serving as a director or an office holder, but excluding a Controlling Shareholder. |
| 2.13 | “Exercise Price” means the price for each Ordinary Share subject to an Option. |
| 2.14 | “Expiration Date” means the date upon which an Option shall expire, as set forth in Section 11.3 of this Option Plan. |
| 2.15 | “Fair Market Value” means as of any date, the value of an Ordinary Share determined as follows: |
(i) If the Ordinary Shares are listed on any established stock exchange or a national market system, including without limitation the NASDAQ National Market system, or the NASDAQ SmallCap Market of the NASDAQ Stock Market, the Fair Market Value shall be the closing sales price for such Ordinary Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in the Wall Street Journal, or such other source as the Board deems reliable.
Without derogating from the above, solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the Date of Grant the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the Date of Grant, the Fair Market Value of an Ordinary Share at the Date of Grant shall be determined in accordance with the average value of the Company’s shares on the thirty (30) trading days preceding the Date of Grant or on the thirty (30) trading days following the date of registration for trading, as the case may be;
(ii) If the Ordinary Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Ordinary Shares on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Ordinary Shares, the Fair Market Value thereof shall be determined in good faith by the Board.
| 2.16 | “IPO” means the initial public offering of the Company’s shares. |
| 2.17 | “ITA” means the Israeli Tax Authorities. |
| 2.18 | “Non-Employee” means a consultant, adviser, service provider, Controlling Shareholder or any other person who is not an Employee. |
| 2.19 | “Ordinary Income Option (OIO)” as defined in Section 6.5 below. |
| 2.20 | “Option” means an option to purchase Ordinary Shares out of the Option Pool granted pursuant to the terms of this Option Plan. |
| 2.21 | “102 Option” means any Option granted to Employees pursuant to Section 102 of the Ordinance. |
| 2.22 | “3(i) Option” means an Option granted pursuant to Section 3(i) of the Ordinance to any person who is Non- Employee. |
| 2.23 | “Optionee” means an individual to whom an Option has been granted. |
| 2.24 | “Option Agreement” means the share option agreement by and between the Company and an Optionee that sets out the terms and conditions of an Option. |
| 2.25 | “Option Pool” means the aggregate number of Ordinary Shares issuable pursuant to the Option Plan as set forth in Section 8.1 below. |
| 2.26 | “Ordinance” means the Israeli Income Tax Ordinance [New Version], 1961 as now in effect or as hereafter amended and any regulations, rules, orders of procedures promulgated thereunder, as amended from time to time. |
| 2.27 | “Ordinary Shares” means Ordinary Shares par value of NIS 0.01 each of the Company. |
| 2.28 | “Section 102” means Section 102 of the Ordinance. |
| 2.29 | “Section 3(i)” means Section 3(i) of the Ordinance. |
| 2.30 | “Successor Company” means any entity which the Company is merged with and into or is acquired by, in which the Company is not the surviving entity. |
| 2.31 | “Transaction” means (i) a merger, acquisition, reorganization, amalgamation or consolidation of the Company with one or more other entities in which the Company is not the surviving entity; or (ii) a sale of all or substantially all of the assets of the Company. |
| 2.32 | “Trustee” means any individual appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance. |
| 2.33 | “Unapproved 102 Option” means an Option granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee. |
| 2.34 | “Vested Option” means any Option, which has already been vested according to the Vesting Dates. |
| 2.35 | “Vesting Dates” means, as determined by the Board or by the Committee, the date as of which the Optionee shall be entitled to exercise the Options or part of the Options, as set forth in section 11.2 of this Option Plan. |
3. Purpose of the Option Plan
The Option Plan is intended as an incentive to retain, in the employ of the Company and its Affiliates, persons of training, experience and ability, to attract new employees, directors, consultants, service providers and any other entity whose services are considered valuable, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company by providing them with opportunities to purchase shares in the Company.
4. Administration of the Option Plan
| 4.1 | The Board shall have the power to administer the Option Plan either directly or upon the recommendation of the Committee, all as provided by applicable law and in the Company’s Articles of Association. Notwithstanding the above, the Board shall automatically have residual authority if no Committee shall be constituted or if such Committee shall cease to operate for any reason. |
| 4.2 | The Committee shall have full power and authority to recommend to the Board and the Board shall have the full power and authority to: (i) designate participants; (ii) determine the terms and provisions of respective Option Agreements (which need not be identical) including, but not limited to the number of Options to be granted to each Optionee, the number of Ordinary Shares to be covered by each Option, provisions concerning the time or times when, and the extent to which, the Options may be exercised and the nature and duration of restrictions as to transferability or restrictions constituting substantial risk of forfeiture; (iii) cancel or suspend awards, as necessary; (iv) determine the Fair Market Value of the Ordinary Shares covered by each Option; (v) make an election as to the type of the Approved 102 Option; (vi) designate the type of Options; (vii) alter any restrictions and conditions of any Options or Ordinary Shares subject to any Options; (viii) determine the Exercise Price of the Option; (ix) prescribe, amend and rescind rules and regulations relating to the Option Plan; (x) accelerate the right of an Optionee to exercise, in whole or in part, any previously granted Option; (xi) interpret the provisions and supervise the administration of the Option Plan; and (xii) determine any other matter which is necessary or desirable for, or incidental to administration of the Option Plan. The Board and the Committee shall exercise all of their power and authority under all of the provisions of this Option Plan in good faith. |
| 4.3 | Resreved |
| 4.4 | Subject to the Company’s Articles of Association, all decisions and selections made by the Board or the Committee pursuant to the provisions of the Option Plan shall be made by a majority of its members pursuant to any restrictions or requirements set in the Companies Law and any other applicable law. Any decision reduced to writing shall be executed in accordance with the provisions of the Company’s Articles of Association. |
| 4.5 | The interpretation and construction by the Committee of any provision of the Option Plan or of any Option Agreement thereunder shall be final and conclusive unless otherwise determined by the Board. |
| 4.6 | Subject to the Company’s Articles of Association and the Company’s decision and to the extent permitted by applicable law, each member of the Board or the Committee shall be indemnified and held harmless by the Company against any cost or expense (including legal fees) reasonably incurred by him, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Option Plan unless arising out of such member’s own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the member may have as a director or otherwise under the Company’s Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise. |
5. Designation of Participants
| 5.1 | The persons eligible for participation in the Option Plan as Optionees shall include any Employees and/or Non-Employees of the Company or of any Affiliate; provided, however, that (i) Employees may only be granted 102 Options; (ii) Non-Employees may only be granted 3(i) Options; and (iii) Controlling Shareholders may only be granted 3(i) Options. |
| 5.2 | The grant of an Option hereunder shall neither entitle the Optionee to participate nor disqualify the Optionee from participating in, any other grant of Options pursuant to the Option Plan or any other option or share plan of the Company or any of its Affiliates. |
| 5.3 | Anything in the Option Plan to the contrary notwithstanding, all grants of Options to Office Holders, as such term is defined in the Companies Law, shall be authorized and implemented only in accordance with the provisions of the Company’s Articles of Association and the Companies Law or any successor act or regulation, as in effect from time to time. |
6. Designation of Options Pursuant to Section 102
| 6.1 | The Company may designate Options granted to Employees pursuant to Section 102 as Unapproved 102 Options or Approved 102 Options. |
| 6.2 | The grant of Approved 102 Options shall be made under this Option Plan adopted by the Board as described in Section 19 below, and shall be conditioned upon the approval of this Option Plan by the ITA. |
| 6.3 | Approved 102 Option may either be classified as Capital Gain Option (“CGO”) or Ordinary Income Option (“OIO”). |
| 6.4 | Approved 102 Option elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) shall be referred to herein as CGO. |
| 6.5 | Approved 102 Option elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) shall be referred to herein as OIO. |
| 6.6 | The Company’s election of the type of Approved 102 Options as CGO or OIO granted to Employees (the “Election”), shall be appropriately filed with the ITA before the Date of Grant of an Approved 102 Option. Such Election shall become effective beginning the first Date of Grant of an Approved 102 Option under this Option Plan and shall remain in effect until the end of the year following the year during which the Company first granted Approved 102 Options. The Election shall obligate the Company to grant only the type of Approved 102 Option it has elected, and shall apply to all Optionees who were granted Approved 102 Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the Company from granting Unapproved 102 Options simultaneously. |
| 6.7 | All Approved 102 Options must be held in trust by a Trustee, as described in Section 7 below. |
| 6.8 | For the avoidance of doubt, the designation of Unapproved 102 Options and Approved 102 Options shall be subject to the terms and conditions set forth in Section 102 of the Ordinance and the regulations promulgated thereunder. |
| 6.9 | With regards to Approved 102 Options, the provisions of the Option Plan and/or the Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the Option Plan and of the Option Agreement. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Option Plan or the Option Agreement, shall be considered binding upon the Company and the Optionees. |
7. Trustee
| 7.1 | Approved 102 Options granted under the Option Plan and any Ordinary Shares allocated or issued upon exercise of such Approved 102 Options and/or other shares received subsequently following any realization of rights under the Option Plan, including without limitation bonus shares, shall be issued to the Trustee and held for the benefit of the Optionees for a period of time as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the “Holding Period”). In the case the requirements for Approved 102 Options are not met, then the Approved 102 Options may be treated as Unapproved 102 Options, all in accordance with the provisions of Section 102 and regulations promulgated thereunder. |
| 7.2 | Anything to the contrary notwithstanding, the Trustee shall not release any Approved 102 Options or Ordinary Shares allocated or issued upon exercise of Approved 102 Options prior to the full payment by the Optionee of its tax liabilities arising from grant of Approved 102 Options or issuance of any Ordinary Shares allocated or issued upon exercise of such Options. |
| 7.3 | With respect to any Approved 102 Option, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, an Optionee shall not be entitled to sell or release from trust any Share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance. |
| 7.4 | Upon receipt of Approved 102 Option, the Optionee shall sign an undertaking to exempt the Trustee from any liability in respect of any action or decision taken and executed in good faith in relation with the Option Plan, or any Approved 102 Option or Ordinary Share granted to him thereunder. |
8. Ordinary Shares Reserved for the Option Plan; Restriction thereon
| 8.1 | Subject to adjustments as set forth in Section 10 below, the Board shall reserve at all times sufficient number of Ordinary Shares required to meet the Company's needs for allocation of Options under this Plan (the "Pool"). Should any Option expire or be canceled for any reason prior to its exercise or relinquishment in full, the Ordinary Shares subject to such Option may again be subjected to an Option under the Option Plan or under the Company’s other share option plans. |
| 8.2 | Each Option granted pursuant to the Option Plan, shall be evidenced by a written Option Agreement between the Company and the Optionee, in such form as the Board or the Committee shall from time to time approve. Each Option Agreement shall state, among other matters, the number of Ordinary Shares to which the Option relates, the type of Option granted thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(i) Option), the Vesting Dates, the Exercise Price per share, the Expiration Date and such other terms and conditions as the Committee or the Board in its discretion may prescribe, provided that they are consistent with this Option Plan. |
9. Exercise Price
| 9.1 | The Exercise Price of each Ordinary Share subject to an Option shall be determined by the Board in its sole and absolute discretion in accordance with applicable law. Unless otherwise determined in the Optionee’s Option Agreement the Exercise Price shall be 1.5 NIS. The Board in its sole discretion may set a different Exercise Price considering Optionee's seniority, position at the Company and/or any other relevant parameters. In any event, the Exercise Price shall not be lower than 1.37 NIS. |
| 9.2 | The Exercise Price shall be payable upon the exercise of the Option in a form satisfactory to the Board, by cash ,check, cash less or Net Exercise (as defined below). The Committee and/or the Board shall have the authority to postpone the date of payment on such terms as it may determine. |
| 9.3 | The Exercise Price shall be denominated in the currency of the primary economic environment of, either the Company or the Optionee (that is the functional currency of the Company or the currency in which the Optionee is paid) as determined by the Company. |
| 9.4 | Net Exercise. The Board may determine that instead of issuing one Ordinary Share as a result of the exercise of each one Option, all Options shall be exercised using the following method (the “Net Exercise”): |
| 9.4.1. | The Company shall issue to the Optionee (or to the Trustee, as applicable) a number of Ordinary Shares having an aggregate Market Value (as defined below) equal to the Benefit Amount (as defined below) (the “Net Exercise Shares”); |
For the purposes of this Section:
| (i) | The “Benefit Amount” shall mean the difference between: |
(A) the product of (i) the Market Value and (ii) the number of Ordinary Shares subject to the Options for which an Exercise Notice has been delivered to the Company; and
(B) the product of (i) the Exercise Price and (ii) the number of Ordinary Shares subject to the Options for which an Exercise Notice has been delivered to the Company.
| (ii) | “Market Value” shall mean the closing price for an Ordinary Share on the last trading day prior to the date of exercise, as reported or quoted on the Tel Aviv Stock Exchange or on any other stock market on which the Ordinary Shares are traded, as shall be determined by the Committee. |
| 9.4.2. | The Optionee shall not be required to pay to the Company any sum with respect to the exercise of such Options, other than a sum equal to the aggregate nominal value of the Net Exercise Shares (the “Nominal Value Sum”). However, the Company shall have the full authority in its discretion to determine at any time that the Nominal Value Sum shall not be paid and that the Company shall capitalize applicable profits or take any other action to ensure that it meets any requirement of applicable law regarding issuance of Ordinary Shares for consideration that is lower than the nominal value of such Shares. |
| 9.4.3. | No fractional shares will be issued to the Optionee and the number of shares granted to the Optionee under this Option Plan shall be rounded off (upward or downward) to the nearest whole number. |
10. Adjustments
Upon the occurrence of any of the following described events, the Optionee’s rights to purchase Ordinary Shares under the Option Plan shall be adjusted as hereafter provided:
| 10.1 | In the event of Transaction while unexercised Options are outstanding under the Option Plan, all of the Ordinary Shares subject to the unexercised portions of such outstanding Options shall be replaced or substituted by an appropriate number of shares of each class of shares or other securities of the Successor Company (or a parent or subsidiary of the Successor Company) as were distributed to the shareholders of the Company in respect of the Transaction, and appropriate adjustments shall be made in the Exercise Price per share to reflect such action and all other terms and conditions of the Option Agreements shall remain unchanged, including but not limited to the Vesting Dates, all as will be determined by the Board, the determination of which shall be final and conclusive. |
| 10.2 | However, subject to any applicable law, in the event that the Successor Company does not agree to assume or substitute the award as aforesaid, the Board or the Committee shall have full power and authority to determine that in certain Option Agreements the Vesting Dates shall be accelerated so that any unexercisable or unvested portion of the outstanding Options or any portion thereof shall be immediately exercisable and vested in full as of the date that is ten (10) days prior to the date of the Transaction. |
| 10.3 | For the purposes of section 10.1 above, an Option shall be considered assumed or substituted if, following the Transaction, the Option confers the right to purchase or receive, for each Ordinary Share underlying an Option immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by holders of shares held on the effective date of the Transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that the Committee may determine, in its discretion: (i) that the consideration to be received upon the exercise of the Option to be solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary equal in Fair Market Value to the per Ordinary Share consideration received by holders of a majority of the outstanding shares in the Transaction; or (ii) that in lieu of the replacement or substitution of Options for options of the Successor Company or its parent or subsidiary, such Options will be substituted for any other type of asset or property including cash which is fair under the circumstances. |
| 10.4 | If the Company is voluntarily liquidated or dissolved while unexercised Options remain outstanding under the Option Plan, then the Company shall immediately notify all unexercised Option holders of such liquidation, and the Option holders shall then have ten (10) days to exercise any unexercised Vested Option held by them at that time, in accordance with the exercise procedure set forth herein. Upon the expiration of such ten-days period, all remaining outstanding Options will terminate immediately. |
| 10.5 | If the outstanding shares of the Company shall at anytime be changed or exchanged by declaration of a stock dividend, stock split, combination or exchange of shares, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class and kind of Ordinary Shares subject to this Option Plan or subject to any Options therefore granted, and the Exercise Prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Ordinary Shares without changing the aggregate Exercise Price; provided, however, that no adjustment shall be made by reason of the distribution of subscription rights on outstanding stock. Upon happening of any of the foregoing, the class and Option Pool pursuant to the Option Plan (as set forth in section 8 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted, all as will be determined by the Board, the determination of which shall be final and conclusive. |
| 10.6 | Anything herein to the contrary notwithstanding, if prior to the completion of an IPO all or substantially all of the shares of the Company are to be sold, or upon a Transaction, the shares of the Company, or any class thereof, are to be exchanged for securities of another company, then each Optionee shall be obliged to sell or exchange, as the case may be, the Ordinary Shares such Optionee purchased under the Option Plan, in accordance with the instructions that shall be determined by the Board, the determination of which shall be final and conclusive. |
| 10.7 | As promptly as practicable following the Company’s IPO, if in the United States, the Company shall use reasonable commercial efforts to register the Ordinary Shares on a Form S-8 or similar registration statement, to the extent required to allow the sale of such Ordinary Shares under applicable securities laws. |
| 10.8 | The Optionee acknowledges that in the event that the Company’s shares shall be registered for trading in any public market, Optionee’s rights to sell the Ordinary Shares may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Optionee unconditionally agrees and accepts any such limitations. |
11. Term and Exercise of Options
| 11.1 | Options shall be exercised by the Optionee by giving written notice to the Company and/or to any third party designated by the Company (the “Representative”), in such form and method as may be determined by the Company and the Trustee and when applicable, conforming to Section 102 (the "Exercise Notice"), which exercise shall be effective upon receipt of such Exercise Notice by the Company and/or the Representative at its principal office and the full payment by the Optionee of the Exercise Price and the Optionee’s tax liabilities arising from the number of Options being exercised. The Exercise Notice shall specify the number of Ordinary Shares with respect to which the Option is being exercised. |
| 11.2 | The Options granted under this Option Plan shall vest in accordance with the Vesting Dates set forth in the respective Option Agreements pursuant to which the Options are granted. |
| 11.3 | Options, to the extent not previously exercised, shall terminate forthwith upon the earlier of: (i) the date set forth in the Option Agreement; and (ii) the expiration of any extended period in any of the events set forth in section 12.3 below. |
| 11.4 | The Options may be exercised by the Optionee in whole at any time or in part from time to time, to the extent that the Options become vested and exercisable, prior to the Expiration Date, and provided that subject to the provisions of Section 12 below, the Optionee is employed by or providing services to the Company or any of its Affiliates at all times during the period commencing upon the Date of Grant and ending upon the date of exercise. |
| 11.5 | Any form of Option Agreement authorized by the Option Plan may contain such other provisions as the Board may, from time to time, deem advisable. Without limiting the foregoing, the Board may from time to time cancel all or any portion of any Option then subject to exercise, and the Company’s obligation in respect of such Option may be discharged by (i) payment to the Optionee of an amount in cash equal to the excess, if any, of the Fair Market Value of the Ordinary Shares at the date of such cancellation, subject to the portion of the Option so canceled, over the aggregate Exercise Price of such Ordinary Shares, (ii) the issuance or transfer to the Optionee of Ordinary Shares of the Company with a Fair Market Value at the date of such transfer equal to any such excess, or (iii) a combination of cash and Ordinary Shares with a combined value equal to any such excess, all as determined by the Board in its sole discretion. |
12. Termination of Employment or Hired Services
| 12.1 | Subject to the provisions of section 12.3 below, in the event of termination of Optionee’s employment or services, with the Company or any of its Affiliates, all Options granted to such Optionee will immediately expire. A notice of termination of employment or service shall be deemed to constitute termination of employment or service. For the avoidance of doubt, in case of such termination of employment or service, the unvested portion of the Optionee’s Option shall not vest and shall not become exercisable. |
| 12.2 | An Optionee whose employment or service was terminated for Cause shall, at the discretion of the Company, lose any right that such Optionee may have had with respect to the Options that were granted to such Optionee (including vested Options which at the date of termination were not yet exercised), and such Options will immediately expire. |
| 12.3 | Notwithstanding anything to the contrary hereinabove and unless otherwise determined in the Optionee’s Option Agreement, an Option may be exercised after the date of termination of Optionee's employment or service with the Company or any Affiliates during an additional period of time beyond the date of such termination, but only with respect to the number of Vested Options at the time of such termination according to the Vesting Dates, if: |
(i) termination is without Cause, in which event an Option already vested at the time of such termination according to the Vesting Dates may be exercised by the Optionee within ninety (90) days after the date of termination of the Optionee's employment or service with the Company or any Affiliate of the Company, or within one (1) year following an IPO, whichever is later (the “Exercise Period”); (ii) termination is the result of death or disability of the Optionee, in which event any Vested Option still in force and unexpired may be exercised within a period of twelve (12) months after the date of such termination; or -
(iii) prior to the date of such termination, the Board or the Committee shall authorize an extension of the terms of all or part of the Vested Options beyond the date of such termination for a period not to exceed the period during which the Options by their terms would otherwise have been exercisable.
An Optionee who does not exercise the vested Options within the Exercise Period shall lose any right that such Optionee may have had to the Options, and such Options shall immediately expire.
| 12.4 | With respect to Unapproved 102 Option, if the Optionee ceases to be employed by the Company or any Affiliate, and wishes to continue and hold the Options granted to him, the Optionee shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102 and the rules, regulations or orders promulgated thereunder. |
13. Vesting of Options
| 13.1 | Subject to the provisions of the Option Plan, each Option shall vest following the Vesting Dates and for the number of Ordinary Shares as shall be provided in the Option Agreement. However, no Option shall be exercisable after the Expiration Date. |
| 13.2 | An Option may be subject to such other terms and conditions on the time or times when it may be exercised, as the Committee and/or the Board may deem appropriate. The vesting provisions of individual Options may vary. |
14. Continuation of Employment or Hired Services
Neither the Option Plan nor the Option Agreement with the Optionee shall impose any obligation on the Company or any Affiliate thereof to have any such Optionee continue in the Company’s employ or service, and nothing in the Option Plan or in any Option granted pursuant thereto shall confer upon any Optionee any right to continue in the employ or service of the Company or an Affiliate thereof or restrict the right of the Company or such Affiliate thereof to terminate such employment or service at any time.
15. Rights as Shareholder
| 15.1 | Subject to the provisions of Section 16 below, the Optionee shall not have any of the rights or privileges of shareholders of the Company in respect of any Ordinary Shares purchasable upon the exercise of any part of an Option unless and until the exercise of such Option in accordance of the provisions of this Option Plan and the registration of the Optionee as a holder of such Ordinary Shares in the Company’s register of shareholders, but in case of Options and Ordinary Shares held by the Trustee, subject to the provisions of Section 7 of the Option Plan. |
16. Ordinary Shares Subject to Right of First Refusal
| 16.1 | Notwithstanding anything to the contrary in the Articles of Association of the Company, the Optionee shall waive any right of first refusal to purchase shares of the Company offered by other shareholders of the Company and any preemptive rights the Optionee may have to purchase shares issued by the Company, to the extent such rights are granted under the Articles of Association of the Company as in effect from time to time. |
| 16.2 | Unless otherwise determined by the Committee, until such time as the Company shall complete an IPO, an Optionee shall not have the right to sell Ordinary Shares issued upon the exercise of an Option within six (6) months and one day of the date of exercise of such Option or issuance of such Ordinary Shares. Unless otherwise determined by the Committee and/or the Board, until such time as the Company shall complete an IPO, the sale of Ordinary Shares issuable upon the exercise of an Option shall be subject to the provisions the Company’s Articles of Association (and all amendments thereto). |
17. Dividends
With respect to all Ordinary Shares (in contrary to unexercised Options) issued upon the exercise of Options and held by the Optionee or by the Trustee, as the case may be, the Optionee shall be entitled to receive dividends in accordance with the quantity of such Ordinary Shares, subject to the provisions of the Company’s Articles of Association (and all amendments thereto) and subject to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of Section 102 and the rules, regulations or orders promulgated thereunder.
18. Assignability and Sale of Options
| 18.1 | No Option, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to them given to any third party whatsoever, and during the lifetime of the Optionee each and all of such Optionee’s rights to purchase Ordinary Shares hereunder shall be exercisable only by the Optionee. |
| 18.2 | As long as the Options and/or the Ordinary Shares are held by the Trustee in favor of the Optionee, then all rights the latter possesses over the Ordinary Shares shall be personal, and shall not be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution. |
19. Term of the Option Plan
The Option Plan shall be effective as of the date it was approved by the Board and shall terminate on the sixth anniversary from such day of approval.
20. Amendments or Termination
The Board may, at any time and from time to time, and when applicable subject to the written consent of the Trustee, amend, alter or discontinue the Option Plan, except that no amendment or alteration shall be made which would impair the rights of the Optionee therefore granted, without his or her consent. Termination of the Option Plan shall not affect the Board’s or the Committee’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Option Plan prior to the date of such termination.
21. Government Regulations
The Option Plan, and the granting and exercise of Options hereunder, and the obligation of the Company to sell and deliver the Ordinary Shares under such Options, shall be subject to all applicable laws, rules, and regulations, whether of the State of Israel or of the United States or any other State having jurisdiction over the Company and the Optionee, including the registration of the Ordinary Shares under the United States Securities Act of 1933, and the Ordinance and to such approvals by any governmental agencies or national securities exchanges as may be required. Unless specifically set forth in this Option plan nothing herein shall be deemed to require the Company to register the Ordinary Shares under the securities laws of any jurisdiction.
22. Governing Law; Jurisdiction
This Option Plan shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to this Option Plan.
23. Tax Consequences
| 23.1 | Any tax consequences arising from the grant or exercise of any Option, from the payment for Ordinary Shares covered thereby or from any other event or act (of the Company and/or its Affiliates, the Trustee or the Optionee), hereunder, shall be borne solely by the Optionee. The Company and/or its Affiliates and/or the Trustee shall withhold taxes as required in accordance with applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Optionee shall agree to indemnify the Company and/or its Affiliates/or and the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Optionee. |
| 23.2 | The Company and the Trustee shall not be required to release any share certificate to an Optionee until all required payments have been fully made. |
24. Non-Exclusivity of the Option Plan
The adoption of the Option Plan by the Board shall not be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock Options otherwise than under the Option Plan, and such arrangements may be either applicable generally or only in specific cases. For the avoidance of doubt, prior grant of options to Optionees of the Company under their employment agreements, and not in the framework of any previous option plan, shall not be deemed an approved incentive arrangement for the purpose of this section.
25. Multiple Agreements
The terms of each Option may differ from other Options granted under the Option Plan at the same time, or at any other time. The grant of an Option hereunder shall neither entitle the Optionee to participate nor disqualify him from participating in, any other grant of Options pursuant to this Option Plan or any other option or stock plan of the Company or any of its Affiliates, in addition to, or in substitution for, one or more Options previously granted to that Optionee.
Exhibit 4.5
HUB CYBER SECURITY LTD.
THE AMENDED AND RESTATED
2021 ISRAELI EMPLOYEE STOCK OPTION PLAN
(*In compliance with Amendment No. 132 of the Israeli Tax Ordinance, 2002)
TABLE OF CONTENTS
| 1. | NAME | 1 | ||
| 2. | INTERPRETATION | 1 | ||
| 3. | PURPOSE OF THE PLAN | 3 | ||
| 4. | ADMINISTRATION OF THE PLAN | 4 | ||
| 5. | DESIGNATION OF PARTICIPANTS | 5 | ||
| 6. | DESIGNATION OF AWARDS PURSUANT TO SECTION 102 | 5 | ||
| 7. | TRUSTEE | 6 | ||
| 8. | ORDINARY SHARES RESERVED FOR THE PLAN; RESTRICTION THEREON | 6 | ||
| 9. | EXERCISE PRICE | 7 | ||
| 10. | RESTRICTED SHARE UNITS. | 8 | ||
| 11. | ADJUSTMENTS | 8 | ||
| 12. | TERM AND EXERCISE OF OPTIONS | 9 | ||
| 13. | TERMINATION OF EMPLOYMENT OR HIRED SERVICES | 11 | ||
| 14. | VESTING OF AWARD | 12 | ||
| 15. | CONTINUATION OF EMPLOYMENT OR HIRED SERVICES | 13 | ||
| 16. | RIGHTS AS SHAREHOLDER | 13 | ||
| 17. | RESERVED | 13 | ||
| 18. | DIVIDENDS | 13 | ||
| 19. | ASSIGNABILITY AND SALE OF AWARD | 13 | ||
| 20. | TERM OF THE PLAN | 14 | ||
| 21. | AMENDMENTS OR TERMINATION | 14 | ||
| 22. | GOVERNMENT REGULATIONS | 14 | ||
| 23. | GOVERNING LAW; JURISDICTION | 14 | ||
| 24. | TAX CONSEQUENCES | 15 | ||
| 25. | NON-EXCLUSIVITY OF THE PLAN | 15 | ||
| 26. | MULTIPLE AGREEMENTS | 15 |
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| 1. | Name |
This Plan, as amended from time to time, shall be known as the HUB Cyber Security Ltd. 2021 Share Option Plan (the “Plan”).
| 2. | Interpretation |
The following terms as used in the Plan shall have the respective meanings set forth below:
| 2.1. | “Affiliate” means any affiliate of the Company, which is an “employing company” within the meaning of Section 102(a) of the Ordinance. |
| 2.2. | “Approved 102 Award” means an Award granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Participant. |
| 2.3. | “Award” means Options, Restricted Share Unit, Shares, Restricted Shares, Share Purchase Right or other equity-based awards under the Plan including any Additional Rights thereunder. |
| 2.4. | “Board” means the Board of Directors of the Company. |
| 2.5. | “Capital Gain Award (CGA)” as defined in Section 6.4 below. |
| 2.6. | “Cause” means, (i) conviction of any felony involving moral turpitude or affecting the Company; (ii) any refusal to carry out a reasonable directive of the chief executive officer, the Board or the Participant’s direct supervisor, which involves the business of the Company or its Affiliates and was capable of being lawfully performed; (iii) embezzlement of funds of the Company or its Affiliates; (iv) any breach of the Participant’s fiduciary duties or duties of care of the Company; including without limitation disclosure of confidential information of the Company; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company. |
| 2.7. | “Committee” means any committee of the Board to which the Board has delegated the responsibility of administering the Plan. |
| 2.8. | “Company” means HUB Cyber Security Ltd., an Israeli company. |
| 2.9. | “Companies Law” means the Companies Law 5759-1999, and any regulations, rules, orders of procedures promulgated thereunder as in effect from time to time. |
| 2.10. | “Controlling Shareholder” shall have the meaning ascribed to it in Section 32(9) of the Ordinance. |
| 2.11. | “Date of Grant” means the later of: (i) the date of grant of an Award as specified in the Award Agreement between the Company and the Participant; and (ii) the date on which the grant of the Award has been approved by the Board or, if applicable, the Shareholders of the Company. |
| 2.12. | “Employee” means a person who is employed by the Company or its Affiliates, including an individual who is serving as a director or an office holder, but excluding a Controlling Shareholder. |
| 2.13. | “Exercise Price” means the price for each Ordinary Share subject to an Award, as applicable. |
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| 2.14. | “Expiration Date” means the date upon which an Award shall expire, as set forth in Section 13.3 of this Plan. |
| 2.15. | “Fair Market Value” means as of any date, the value of an Ordinary Share determined as follows: |
(i) If the Ordinary Shares are listed on any established stock exchange or a national market system, including without limitation the NASDAQ National Market system, or the NASDAQ SmallCap Market of the NASDAQ Stock Market, the Fair Market Value shall be the closing sales price for such Ordinary Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in the Wall Street Journal, or such other source as the Board deems reliable.
Without derogating from the above, solely for the purpose of determining the tax liability pursuant to Section I 02(b)(3) of the Ordinance, if at the Date of Grant the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the Date of Grant, the Fair Market Value of an Ordinary Share at the Date of Grant shall be determined in accordance with the average value of the Company’s shares on the thirty (30) trading days preceding the Date of Grant or on the thirty (30) trading days following the date of registration for trading, as the case maybe;
(ii) If the Ordinary Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Ordinary Shares on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Ordinary Shares, the Fair Market Value thereof shall be determined in good faith by the Board.
| 2.16. | “IPO” means the initial public offering of the Company’s shares. |
| 2.17. | “ITA” means the Israeli Tax Authorities. |
| 2.18. | “Non-Employee” means a consultant, adviser, service provider, Controlling Shareholder or any other person, in each case who is a natural person and who is eligible to be issued Shares in an issuance that is registered on Form S-8 under the United States Securities Act of the 1933 who is not an Employee. |
| 2.19. | “Ordinary Income Award (OIA)” as defined in Section 6.5 below. |
| 2.20. | “Option” means an option to purchase Ordinary Shares out of the Pool granted pursuant to the terms of this Plan. |
| 2.21. | “102 Award” means any Award granted to Employees pursuant to Section 102 of the Ordinance. |
| 2.22. | “3(i) Award” means an Award granted pursuant to Section 3(i) of the Ordinance to any person who is Non-Employee. |
| 2.23. | “Participant” means an individual or entity to whom an Award has been granted, as applicable. |
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| 2.24. | “Award Agreement” means the agreement by and between the Company and a Participant that sets out the terms and conditions of an Award. |
| 2.25. | “Pool” means the aggregate number of Ordinary Shares issuable pursuant to the Plan as set forth in Section 8.1 below. |
| 2.26. | “Ordinance” means the Israeli Income Tax Ordinance [New Version], 1961 as now in effect or as hereafter amended and any regulations, rules, orders of procedures promulgated thereunder, as amended from time to time. |
| 2.27. | “Ordinary Shares” means Ordinary Shares par value of NIS 0.01 each of the Company. |
| 2.28. | “Restricted Share Unit” means an Award entitling a Participant to receive Shares under this Plan that is subject to the terms and conditions of Section 10 herein. |
| 2.29. | “Restricted Share” means a Share issued under this Plan to a Participant for such consideration, if any, and subject to the terms and conditions of Section 11 herein. |
| 2.30. | “Section 102” means Section 102 of the Ordinance. |
| 2.31. | “Section 3(i)” means Section 3(i) of the Ordinance. |
| 2.32. | “Share Purchase Right” means the Company’s offer to some or all Employees the right to purchase Ordinary Shares of the Company and to pay for such Ordinary Shares through (i) deductions from their salaries or other remuneration, (ii) a cash payment to the Company or (iii) by a combination of salary deductions and cash payments. |
| 2.33. | “Successor Company” means any entity which the Company is merged with and into or is acquired by, in which the Company is not the surviving entity. |
| 2.34. | “Transaction” means (i) a merger, acquisition, reorganization, amalgamation or consolidation of the Company with one or more other entities in which the Company is not the surviving entity; or (ii) a sale of all or substantially all of the assets of the Company. |
| 2.35. | “Trustee” means any individual appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance. |
| 2.36. | “Unapproved 102 Award” means an Award granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee. |
| 2.37. | “Vested Award” means any Award, which has already been vested according to the Vesting Dates. |
| 2.38. | “Vesting Dates” means, as determined by the Board or by the Committee, the date as of which the Participant shall be entitled to exercise the Options or part of the Options, or the Share Purchase Right, or shall be entitled to Ordinary Shares under the terms if the Restricted Share Unit, as set forth in section 12.2 of this Plan. |
| 3. | Purpose of the Plan |
The Plan is intended as an incentive to retain, in the employ of the Company and its Affiliates, persons of training, experience and ability, to attract new employees, directors, consultants, service providers and any other entity whose services are considered valuable, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company by providing them with opportunities to purchase shares in the Company.
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| 4. | Administration of the Plan |
| 4.1. | The Board shall have the power to administer the Plan either directly or upon the recommendation of the Committee, all as provided by applicable law and in the Company’s Articles of Association. Notwithstanding the above, the Board shall automatically have residual authority if no Committee shall be constituted or if such Committee shall cease to operate for any reason. |
| 4.2. | The Committee shall have full power and authority to recommend to the Board and the Board shall have the full power and authority to: (i) designate participants; (ii) determine the terms and provisions of respective Award Agreements (which need not be identical) including, but not limited to the number of Awards to be granted to each Participant, the number of Ordinary Shares to be covered by each Award, provisions concerning the time or times when, and the extent to which, the Award may be exercised and the nature and duration of restrictions as to transferability or restrictions constituting substantial risk of forfeiture; (iii) cancel or suspend awards, as necessary; (iv) determine the Fair Market Value of the Ordinary Shares covered by each Award; (v) make an election as to the type of the Approved 102 Award; (vi) designate the type of Awards; (vii) alter any restrictions and conditions of any Awards or Ordinary Shares subject to any Awards; (viii) determine the Exercise Price of the Option or Share Purchase Right; (ix) prescribe, amend and rescind rules and regulations relating to the Plan; (x) accelerate the right of a Participant to exercise, in whole or in part, any previously granted Award, if applicable; (xi) interpret the provisions and supervise the administration of the Plan; and (xii) determine any other matter which is necessary or desirable for, or incidental to administration of the Plan. The Board and the Committee shall exercise all of their power and authority under all of the provisions of this Plan in good faith; |
| 4.3. | Reserved |
| 4.4. | Subject to the Company’s Articles of Association, all decisions and selections made by the Board or the Committee pursuant to the provisions of the Plan shall be made by a majority of its members pursuant to any restrictions or requirements set in the Companies Law and any other applicable law. Any decision reduced to writing shall be executed in accordance with the provisions of the Company’s Articles of Association. |
| 4.5. | The interpretation and construction by the Committee of any provision of the Plan or of any Award Agreement thereunder shall be final and conclusive unless otherwise determined by the Board. |
| 4.6. | Subject to the Company’s Articles of Association and the Company’s decision and to the extent permitted by applicable law, each member of the Board or the Committee shall be indemnified and held harmless by the Company against any cost or expense (including legal fees) reasonably incurred by him, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan unless arising out of such member’s own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the member may have as a director or otherwise under the Company’s Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise. |
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5. Designation of Participants
| 5.1. | The persons eligible for participation in the Plan as Participants shall include any Employees and/or Non-Employees of the Company or of any Affiliate; provided, however, that (i) Employees may only be granted 102 Awards; (ii) Non-Employees may only be granted 3(i) Awards; and (iii) Controlling Shareholders may only be granted 3(i) Awards. |
| 5.2. | The grant of an Award hereunder shall neither entitle the Participant to participate nor disqualify the Participant from participating in, any other grant of Award pursuant to the Plan or any other equity incentive plan of the Company or any of its Affiliates. |
| 5.3. | Anything in the Plan to the contrary notwithstanding, all grants of Awards to Office Holders, as such term is defined in the Companies Law, shall be authorized and implemented only in accordance with the provisions of the Company’s Articles of Association and the Companies Law or any successor act or regulation, as in effect from time to time. |
| 6. | Designation of Awards Pursuant to Section 102 |
| 6.1. | The Company may designate Awards granted to Employees pursuant to Section 102 as Unapproved 102 Awards or Approved 102 Awards. |
| 6.2. | The grant of Approved 102 Awards shall be made under this Plan adopted by the Board as described in Section 20 below, and shall be conditioned upon the lapse of 30 days following filing of this Plan with the ITA. |
| 6.3. | Approved 102 Award may either be classified as Capital Gain Award (“CGA”) or Ordinary Income Award (“OIA”). |
| 6.4. | Approved 102 Award elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) shall be referred to herein as CGA. |
| 6.5. | Approved 102 Award elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) shall be referred to herein as OIA. |
| 6.6. | The Company’s election of the type of Approved 102 Awards as CGA or OIA granted to Employees (the “Election”), shall be appropriately filed with the ITA before the Date of Grant of an Approved 102 Award. Such Election shall become effective beginning the first Date of Grant of an Approved 102 Award under this Plan and shall remain in effect until the end of the year following the year during which the Company first granted Approved 102 Awards. The Election shall obligate the Company to grant only the type of Approved 102 Award it has elected, and shall apply to all Participants who were granted Approved 102 Awards during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the Company from granting Unapproved 102 Awards simultaneously. |
| 6.7. | All Approved 102 Awards must be held in trust by a Trustee, as described in Section 7 below. |
| 6.8. | For the avoidance of doubt, the designation of Unapproved 102 Awards and Approved 102 Awards shall be subject to the terms and conditions set forth in Section 102 of the Ordinance and the regulations promulgated thereunder. |
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| 6.9. | With regards to Approved 102 Awards, the provisions of the Plan and/or the Award Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the Plan and of the Award Agreement. Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Plan or the Award Agreement, shall be considered binding upon the Company and the Participants. |
| 7. | Trustee |
| 7.1. | Approved 102 Awards granted under the Plan and any Ordinary Shares allocated or issued upon exercise of such Approved 102 Awards and/or other shares received subsequently following any realization of rights under the Plan, including without limitation bonus shares, shall be issued to the Trustee and held for the benefit of the Participants for a period of time as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the “Holding Period”). In the case the requirements for Approved 102 Awards are not met, then the Approved 102 Awards may be treated as Unapproved 102 Awards, all in accordance with the provisions of Section 102 and regulations promulgated thereunder. |
| 7.2. | Anything to the contrary notwithstanding, the Trustee shall not release any Approved 102 Awards or Ordinary Shares allocated or issued upon exercise of Approved 102 Awards prior to the full payment by the Participant of its tax liabilities arising from grant of Approved 102 Awards or issuance of any Ordinary Shares allocated or issued upon exercise of such Awards. |
| 7.3. | With respect to any Approved 102 Award, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, a Participant shall not be entitled to sell or release from trust any Share received upon the exercise of an Approved 102 Award and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance. |
| 7.4. | Upon receipt of Approved 102 Award, the Participant shall sign an undertaking to exempt the Trustee from any liability in respect of any action or decision taken and executed in good faith in relation with the Plan, or any Approved 102 Award or Ordinary Share granted to him thereunder. |
8. Ordinary Shares Reserved for the Plan; Restriction thereon
| 8.1. | Subject to adjustments as set forth in Section 12 below, the Board shall reserve at all times sufficient number of Ordinary Shares required to meet the Company’s needs for allocation of Awards under this Plan (the “Pool”). Any of such Ordinary Shares out of the Pool which may remain unissued and which are not subject to outstanding Awards at the termination of the Plan shall cease to be reserved for the purpose of the Plan. Should any Award expire or be canceled for any reason prior to its exercise or relinquishment in full, the Ordinary Shares subject to such Award may again be subjected to an Award under the Plan. |
| 8.2. | Each Award granted pursuant to the Plan, shall be evidenced by a written Award Agreement between the Company and the Participant, in such form as the Board or the Committee shall from time to time approve. Each Award Agreement shall state, among other matters, the number of Ordinary Shares to which the Award relates, the type of Award granted thereunder (whether a CGA, OIA, Unapproved 102 Award or a 3(i) Award), if applicable, the Vesting Dates, the Exercise Price per share, the Expiration Date and such other terms and conditions as the Committee or the Board in its discretion may prescribe, provided that they are consistent with this Plan. |
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| 9. | Exercise Price |
| 9.1. | The Exercise Price of each Ordinary Share subject to an Option or Share Purchase Right shall be determined by the Board in its sole and absolute discretion in accordance with applicable law. The Board in its sole discretion may set a different Exercise Price considering Participant’s seniority, position at the Company and/or any other relevant parameters. |
| 9.2. | The Exercise Price shall be payable upon the exercise of the Option or Share Purchase Right, as applicable, in a form satisfactory to the Board, by cash, check, cash less or Net Exercise (as defined below). The Committee and/or the Board shall have the authority to postpone the date of payment on such terms as it may determine. |
| 9.3. | The Exercise Price shall be denominated in the currency of the primary economic environment of, either the Company or the Participant (that is the functional currency of the Company or the currency in which the Participant is paid) as determined by the Company. |
| 9.4. | Net Exercise. The Board may determine that instead of issuing one Ordinary Share as a result of the exercise of each one Option or Share Purchase Right, all Options and Share Purchase Rights shall be exercised using the following method (the “Net Exercise”): |
| 9.4.1. | The Company shall issue to the Participant (or to the Trustee, as applicable) a number of Ordinary Shares having an aggregate Fair Market Value equal to the Benefit Amount (as defined below) (the “Net Exercise Shares”); |
For the purposes of this Section The “Benefit Amount” shall mean the difference between:
| (A) | the product of (i) the Market Value and (ii) the number of Ordinary Shares subject to the Options or Share Purchase Rights for which an Exercise Notice has been delivered to the Company; and |
| (B) | the product of (i) the Exercise Price and (ii) the number of Ordinary Shares subject to the Options or Share Purchase Rights for which an Exercise Notice has been delivered to the Company. |
| 9.4.2. | The Participant shall not be required to pay to the Company any sum with respect to the exercise of such Options or Share Purchase Rights, other than a sum equal to the aggregate nominal value of the Net Exercise Shares (the “Nominal Value Sum”). However, the Company shall have the full authority in its discretion to determine at any time that the Nominal Value Sum shall not be paid and that the Company shall capitalize applicable profits or take any other action to ensure that it meets any requirement of applicable law regarding issuance of Ordinary Shares for consideration that is lower than the nominal value of such Shares. |
| 9.4.3. | No fractional shares will be issued to the Participant and the number of shares granted to the Participant under this Option Plan shall be rounded off (upward or downward) to the nearest whole number. |
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| 10. | Restricted Share Units. |
| 10.1. | Eligibility. Restricted Share Units may be granted to all Participants at any time and from time to time as determined by the Board, either alone or in addition to other Awards granted under the Plan. The Administrator shall determine the eligible Participants to whom, and the time or times at which, grants of Restricted Share Units will be made, the number of Restricted Share Units to be awarded, the number of Shares subject to the Restricted Share Units, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards as shall be set forth in the Award Agreement. The Administrator may condition the grant or vesting of Restricted Share Units upon the attainment of specified performance targets or such other factors as the Administrator may determine, in its sole discretion. |
| 10.2. | Vesting of Restricted Share Units. Shares shall be issued to or for the benefit of Participant promptly following each vesting date determined by the Board, provided that Participant is still engaged with the Company on the applicable vesting date. After each such vesting date the Company shall promptly cause to be issued for the benefit of Participant Shares with respect to Restricted Share Units that became vested on such vesting date. It is clarified that no Shares shall be issued pursuant to the Restricted Share Units to Participant until the vesting criteria determined by the Board is met. |
| 10.3. | Terms. Prior to the actual issuance of any Shares, each Restricted Share Unit will represent an unfunded and unsecured obligation of the Company, payable only from the general assets of the Company. |
| 10.4. | Rights as Shareholder. A Participant holding Restricted Share Units shall not be, nor have any of the rights or privileges of, a shareholder of the Company in respect of any Shares issuable upon the vesting of any part of the Restricted Share Units unless and until such Shares shall have been issued by the Company to such Participant (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, unless otherwise provided herein. |
| 10.5. | All other terms and conditions of the Plan applicable to Options, shall apply Restricted Share Units, mutatis mutandis. |
| 11. | Restricted Share |
| 11.1. | Eligibility. Restricted Shares may be granted to all Participants at any time and from time to time as determined by the Board, either alone or in addition to other Awards granted under the Plan. The Administrator shall determine the eligible Participants to whom, and the time or times at which, grants of Restricted Shares will be made, the number of Restricted Shares to be awarded, the vesting schedule, and all other terms and conditions of the Restricted Shares award as shall be set forth in the Award Agreement. The Administrator may condition the vesting of Restricted Shares upon the attainment of specified performance targets or such other factors as the Administrator may determine, in its sole discretion. |
| 11.2. | Purchase Price. Unless determined otherwise by the Board, no monetary payment (other than payments made for applicable Taxes or par value, if relevant) shall be required as a condition of receiving a grant of Restricted Share. |
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| 11.3. | Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted Shares may (but need not) be made subject to exercise conditions, as shall be established by the Administrator and set forth in the applicable Award Agreement evidencing such Award. During any restriction period in which Shares acquired pursuant to an award of Restricted Shares remain subject to performance or other vesting conditions, such Shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of unless otherwise provided in the Plan. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of Shares hereunder and the Company may place appropriate legends evidencing any such transfer restrictions on the relevant share certificates. |
| 11.4. | Voting Rights; Dividends and Distributions. Except as provided in this section and in any Award Agreement, during any restriction period applicable to Shares subject to an award of Restricted Shares, the Participant shall have all of the rights of a shareholder of the Company holding Shares, including the right to receive all dividends and other distributions paid with respect to such Shares. However, in the event of a dividend or distribution paid in Shares or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 12, any and all new, substituted or additional securities or other property to which the Participant is entitled by reason of the Participant’s award of Restricted Shares shall be immediately subject to the same exercise conditions as the Shares subject to the award of Restricted Shares with respect to which such dividends or distributions were paid or adjustments were made. |
| 11.5. | Termination of Employment. Unless otherwise provided by the Administrator, in the event of termination of Participant’s employment, for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then the Participant shall forfeit to the Company any Shares acquired by the Participant pursuant to an award of Restricted Shares which remain subject to exercise conditions as of the date of Participant’s termination of employment. |
| 11.6. | All other terms and conditions of the Plan applicable to Options, shall apply to Restricted Shares, mutatis mutandis. It is clarified, that without deviating from the foregoing in Sub-Section 11.5, the provisions of Section 14 herein, shall, mutatis mutandis, apply to Restricted Shares in the event of termination of Participant’s employment. |
| 12. | Adjustments |
Upon the occurrence of any of the following described events, the Participant’s rights to purchase Ordinary Shares under the Plan shall be adjusted as hereafter provided:
| 12.1. | In the event of Transaction while unexercised Options or Share Purchase Right or unvested Restricted Share Units are outstanding under the Plan, all of the Ordinary Shares subject to the unexercised portions of such outstanding Options, Share Purchase Rights or Restricted Share Unites shall be replaced or substituted by an appropriate number of shares of each class of shares or other securities of the Successor Company (or a parent or subsidiary of the Successor Company) as were distributed to the shareholders of the Company in respect of the Transaction, and appropriate adjustments shall be made in the Exercise Price per share to reflect such action and all other terms and conditions of the Award Agreements shall remain unchanged, including but not limited to the Vesting Dates, all as will be determined by the Board, the determination of which shall be final and conclusive. |
| 12.2. | However, subject to any applicable law, in the event that the Successor Company does not agree to assume or substitute the award as aforesaid, the Board or the Committee shall have full power and authority to determine that in certain Award Agreements the Vesting Dates shall be accelerated so that any unexercisable or unvested portion of the outstanding Award or any portion thereof shall be immediately exercisable and vested in full as of the date that is ten (10) days prior to the date of the Transaction. |
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| 12.3. | For the purposes of section 12.1 above, an Award shall be considered assumed or substituted if, following the Transaction, the Award confers the right to purchase or receive, for each Ordinary Share underlying an Award immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by holders of shares held on the effective date of the Transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that the Committee may determine, in its discretion: (i) that the consideration to be received upon the exercise or vesting of Award to be solely ordinary shares (or their equivalent) of the Successor Company or its parent or subsidiary equal in Fair Market Value to the per Ordinary Share consideration received by holders of a majority of the outstanding shares in the Transaction; or (ii) that in lieu of the replacement or substitution of Award for similar award or shares of the Successor Company or its parent or subsidiary, such Award will be substituted for any other type of asset or property including cash which is fair under the circumstances. |
| 12.4. | If the Company is voluntarily liquidated or dissolved while unexercised Options or Share Purchase Rights remain outstanding under the Plan, then the Company shall immediately notify all unexercised Option or Share Purchase Right holders of such liquidation, and the Option or Share Purchase Right holders shall then have ten (10) days to exercise any unexercised Vested Option or Vested Share Purchase Right held by them at that time, in accordance with the exercise procedure set forth herein. Upon the expiration of such ten-days period, all remaining outstanding Options and Share Purchase Right will terminate immediately. |
| 12.5. | If the outstanding shares of the Company shall at anytime be changed or exchanged by declaration of a stock dividend, stock split, combination or exchange of shares, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class and kind of Ordinary Shares subject to this Plan or subject to any Award therefore granted, and the Exercise Prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Ordinary Shares without changing the aggregate Exercise Price; provided, however, that no adjustment shall be made by reason of the distribution of subscription rights on outstanding stock. Upon happening of any of the foregoing, the class and Pool pursuant to the Plan (as set forth in section 8 hereof), in respect of which Award have not yet been exercised or vested, shall be appropriately adjusted, all as will be determined by the Board, the determination of which shall be final and conclusive. |
| 12.6. | Anything herein to the contrary notwithstanding, if prior to the completion of an IPO all or substantially all of the shares of the Company are to be sold, or upon a Transaction, the shares of the Company, or any class thereof, are to be exchanged for securities of another company, then each Participant shall be obliged to sell or exchange, as the case may be, the Ordinary Shares such Participant purchased under the Plan, in accordance with the instructions that shall be determined by the Board, the determination of which shall be final and conclusive. |
| 12.7. | As promptly as practicable following the Company’s IPO, if in the United States, the Company shall use reasonable commercial efforts to register the Ordinary Shares on a Form S-8 or similar registration statement, to the extent required to allow the sale of such Ordinary Shares under applicable securities laws. |
| 12.8. | The Participant acknowledges that in the event that the Company’s shares shall be registered for trading in any public market, Participant’s rights to sell the Ordinary Shares may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Participant unconditionally agrees and accepts any such limitations. |
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| 13. | Term and Exercise of Options |
| 13.1. | Options shall be exercised by the Participant by giving written notice to the Company and/or to any third party designated by the Company (the “Representative”), in such form and method as may be determined by the Company and the Trustee and when applicable, conforming to Section 102 (the “Exercise Notice”), which exercise shall be effective upon receipt of such Exercise Notice by the Company and/or the Representative at its principal office and the full payment by the Participant of the Exercise Price and the Participant’s tax liabilities arising from the number of Options being exercised. The Exercise Notice shall specify the number of Ordinary Shares with respect to which the Option is being exercised. |
| 13.2. | Exercise of a Share Purchase Right may be subject to the Participant’s execution of one or more consents to the Company, tax authorities, a public stock exchange or other third parties relating to deductions of salary, market hold-backs or other issues, as may be prescribed by the Board of Directors from time to time pursuant to the applicable Award Agreement. Payment for Ordinary Shares purchased under a Share Purchase Right may be affected in (i) cash, or (ii) by check payable to the order of the Company, (iii) through periodic deductions from the Participant’s salary or other remuneration, (iv) if the Ordinary Shares are listed for trading on any securities exchange or over-the-counter market, and if the Board of Directors of the Company so determines, all or part of the payment for exercise of a Share Purchase Right and any withholding taxes upon the exercise thereof may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell shares and to deliver all or part of the sales proceeds to the Company or the Trustee, or (v) if the Ordinary Shares are listed for trading on any securities exchange or over-the-counter market, and if the Board so determines, all or part of the exercise price of a Share Purchase Right and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Ordinary Shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company, (vi) if the exercise is part of or concurrent with the consummation of a Transaction wherein the primary consideration received from the acquiring party in such transaction is received by the Company in cash or marketable securities, then with the approval of the Board, in lieu of paying the exercise price for the Share Purchase Price being exercised, the Participant holding such Share Purchase Price may by written notice to the Board of Directors of the Company exercise the Share Purchase Price on a Net Exercise basis in accordance with Section 9.4 above, or (vii) such Transaction such other method of payment acceptable to the Company as determined by the Board of Directors of the Company, and shall be accompanied by a notice stating the number of Shares being paid for thereby. The Net Exercise process described above may be subject to special permission from the Israel Tax Authority. |
| 13.3. | The Options or Share Purchase Right granted under this Option Plan shall vest in accordance with the Vesting Dates as determined by the Board at its sole discretion and set forth in the respective Award Agreements pursuant to which the Options are granted. |
| 13.4. | Options and Share Purchase Rights, to the extent not previously exercised, shall terminate forthwith upon the earlier of: (i) the date set forth in the Award Agreement; and (ii) the expiration of any extended period in any of the events set forth in section 14.3 below. |
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| 13.5. | The Options or Share Purchase Right may be exercised by the Participant in whole at any time or in part from time to time, to the extent that the Options or Share Purchase Right become vested and exercisable, prior to the Expiration Date, and provided that subject to the provisions of Section 14 below, the Participant is employed by or providing services to the Company or any of its Affiliates at all times during the period commencing upon the Date of Grant and ending upon the date of exercise. |
| 14. | Termination of Employment or Hired Services |
| 14.1. | Subject to the provisions of section 14.3 below, in the event of termination of Participant’s employment or services, with the Company or any of its Affiliates, all Awards granted to such Participant will immediately expire. A notice of termination of employment or service shall be deemed to constitute termination of employment or service. For the avoidance of doubt, in case of such termination of employment or service, the unvested portion of the Participant’s Award shall not vest and shall not become exercisable. |
| 14.2. | A Participant whose employment or service was terminated for Cause shall, at the discretion of the Company, lose any right that such Participant may have had with respect to Awards that were granted to such Participant (including vested Options which at the date of termination were not yet exercised), and such Awards will immediately expire. |
| 14.3. | Notwithstanding anything to the contrary hereinabove and unless otherwise determined in the Participant’s Award Agreement, an Option or Share Purchase Right may be exercised after the date of termination of Participant’s employment or service with the Company or any Affiliates during an additional period of time beyond the date of such termination, but only with respect to the number of Vested Options or Share Purchase Right at the time of such termination according to the Vesting Dates, if: |
(i) termination is without Cause, in which event an Option or Share Purchase Right already vested at the time of such termination according to the Vesting Dates may be exercised by the Participant within ninety (90) days after the date of termination of the Participant’s employment or service with the Company or any Affiliate of the Company (the “Exercise Period”);
(ii) termination is the result of death or disability of the Participant, in which event any Vested Option or Share Purchase Right still in force and unexpired may be exercised within a period of twelve (12) months after the date of such termination; or -
(iii) prior to the date of such termination, the Board or the Committee shall authorize an extension of the terms of all or part of the Vested Options or Share Purchase Right beyond the date of such termination for a period not to exceed the period during which the Options or Share Purchase Right by their terms would otherwise have been exercisable.
A Participant who does not exercise the Vested Options or Share Purchase Right during the Exercise Period shall lose any right that such Participant may have had to the Options or Share Purchase Right, and such Options or Share Purchase Right shall immediately expire.
| 14.4. | With respect to Unapproved 102 Option, if the Participant ceases to be employed by the Company or any Affiliate, and wishes to continue and hold the Options or Share Purchase Right granted to him, the Participant shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section I02 and the rules, regulations or orders promulgated thereunder. |
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15.1. Vesting of Award
| 15.1. | Subject to the provisions of the Plan, each Award shall vest following the Vesting Dates and for the number of Ordinary Shares as shall be provided in the Award Agreement. However, no Option or Share Purchase Right shall be exercisable after the Expiration Date. |
| 15.2. | An Option may be subject to such other terms and conditions on the time or times when it may be exercised, as the Committee and/or the Board may deem appropriate. The vesting provisions of individual Options may vary. Unless otherwise resolved by the Committee and/or the Board and stated in the Award Agreement, and subject to Sections hereof, Awards shall vest and become exercisable under the following schedule: twenty-five percent (25%) of the Ordinary Shares covered by the Award, on the first anniversary of the vesting commencement date determined by the Committee and/or the Board (and in the absence of such determination, of date on which such Award was granted), and twelve and a half percent (12.50%) of the Ordinary Shares covered by the Award at the end of each subsequent six-month period thereafter over the course of the following three (3) years; provided that the Participant remains continuously as an Employee or Non-Employee of the Company or its Affiliates throughout such vesting dates. |
| 16. | Continuation of Employment or Hired Services |
Neither the Plan nor the Award Agreement with the Participant shall impose any obligation on the Company or any Affiliate thereof to have any such Participant continue in the Company’s employ or service, and nothing in the Plan or in any Award granted pursuant thereto shall confer upon any Participant any right to continue in the employ or service of the Company or an Affiliate thereof or restrict the right of the Company or such Affiliate thereof to terminate such employment or service at any time.
| 17. | Rights as Shareholder |
The Participant shall not have any of the rights or privileges of shareholders of the Company in respect of any Ordinary Shares purchasable upon the exercise of any part of an Award unless and until the exercise of such Option or Share Purchase Right or the vesting of Restriction Share Units in accordance of the provisions of this Plan and the registration of the Participant or the Trustee on the Participant’s behalf as a holder of such Ordinary Shares in the Company’s register of shareholders, but in case of Award and Ordinary Shares held by the Trustee, subject to the provisions of Section 7 of the Plan.
| 18. | RESERVED |
| 19. | Dividends |
With respect to all Ordinary Shares (in contrary to unexercised Options or Share Purchase Right or unvested Restricted Share Units) issued upon the exercise of Options or a Share Purchase Right or vesting of Restricted Share Units, and held by the Participant or by the Trustee, as the case may be, the Participant shall be entitled to receive dividends in accordance with the quantity of such Ordinary Shares, subject to the provisions of the Company’s Articles of Association (and all amendments thereto) and subject to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of Section 102 and the rules, regulations or orders promulgated thereunder.
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| 20. | Assignability and Sale of Award |
| 20.1. | No Award, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to them given to any third party whatsoever, and during the lifetime of the Participant each and all of such Participant’s rights to purchase Ordinary Shares hereunder shall be exercisable only by the Participant. |
| 20.2. | As long as the Award and/or the Ordinary Shares are held by the Trustee in favor of the Participant, then all rights the latter possesses over the Ordinary Shares shall be personal, and shall not be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution. |
| 21. | Term of the Plan |
The Plan shall be effective as of the date it was approved by the Board and shall terminate on the tenth anniversary from such day of approval.
| 22. | Amendments or Termination |
The Board may, at any time and from time to time, and when applicable subject to the written consent of the Trustee, amend, alter or discontinue the Plan, except that no amendment or alteration shall be made which would impair the rights of the Participant therefore granted, without his or her consent. Termination of the Plan shall not affect the Board’s or the Committee’s ability to exercise the powers granted to it hereunder with respect to Award granted under the Plan prior to the date of such termination.
| 23. | Government Regulations |
The Plan, and the granting and exercise of Options, a Share Purchase Right or a Restricted Share Unit hereunder, and the obligation of the Company to sell and deliver the Ordinary Shares under such Award, shall be subject to all applicable laws, rules, and regulations, whether of the State of Israel or of the United States or any other State having jurisdiction over the Company and the Participant, including the registration of the Ordinary Shares under the United States Securities Act of 1933, and the Ordinance and to such approvals by any governmental agencies or national securities exchanges as may be required. Unless specifically set forth in this Plan nothing herein shall be deemed to require the Company to register the Ordinary Shares under the securities laws of any jurisdiction.
| 24. | Governing Law; Jurisdiction |
This Plan shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to this Plan.
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| 25. | Tax Consequences |
| 25.1. | Any tax consequences arising from the grant, exercise or vesting of any Award, as applicable, from the payment for Ordinary Shares covered thereby or from any other event or act (of the Company and/or its Affiliates, the Trustee or the Participant), hereunder, shall be borne solely by the Participant. The Company and/or its Affiliates and/or the Trustee shall withhold taxes as required in accordance with applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Participant shall agree to indemnify the Company and/or its Affiliates/or and the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Participant. |
| 25.2. | The Company and the Trustee shall not be required to release any share certificate to a Participant until all required payments have been fully made. |
| 26. | Non-Exclusivity of the Plan |
The adoption of the Plan by the Board shall not be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of Awards otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases. For the avoidance of doubt, prior grant of Awards to Participants of the Company under their employment agreements, and not in the framework of any previous equity incentive plan, shall not be deemed an approved incentive arrangement for the purpose of this section.
| 27. | Multiple Agreements |
The terms of each Award may differ from other Award granted under the Plan at the same time, or at any other time. The grant of an Awards hereunder shall neither entitle the Participant to participate nor disqualify him from participating in, any other grant of Awards pursuant to this Plan or any other equity incentive plan of the Company or any of its Affiliates, in addition to, or in substitution for, one or more Award previously granted to that Participant.
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Exhibit 4.9
NEITHER THIS CONVERTIBLE PROMISSORY NOTE NOR THE SECURITIES THAT MAY BE ACQUIRED PURSUANT TO THIS CONVERTIBLE PROMISSORY NOTE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
HUB CYBER SECURITY LTD.
AMENDED AND RESTATED
CONVERTIBLE PROMISSORY NOTE
THIS IS AN AMENDMENT TO AND RESTATEMENT OF A CONVERTIBLE PROMISSORY NOTE (the “Note”), dated as of November 22, 2024, by and between HUB Cyber Security Ltd. (the “Maker”), having an office at 2 Kaplan St., Tel Aviv 6473403, Israel, and A.G.P./Alliance Global Partners (the “Holder”), having an address at 590 Madison Ave 28th Floor, New York, NY 10022;
WHEREAS, Maker executed and delivered a Note dated as of February 28, 2023 for the benefit of Holder in the original principal amount of Five Million Two Hundred Nineteen Thousand Three Hundred Eighteen Dollars and Fifty Four Cents ($5,219,318.54) (the “Note”) (Exhibit B);
WHEREAS, Maker and Holder are parties to that certain Convertible Promissory Note dated as of February 28, 2023, by and between Maker and Holder, as amended by the Amended and Restated Agreement dated as of November 22, 2024 between such parties (the “Amended and Restated Agreement”); 1. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Note.
WHEREAS, Maker and Holder desire to amend the Note as set forth herein.
NOW, THEREFORE, for other good and valuable consideration, the parties hereto hereby agree as follows:
2. From and after the date hereof, the Principal Amount of the Note shall be Five Million Two Hundred Nineteen Thousand Three Hundred Eighteen Dollars and Fifty-Four Cents ($5,219,318.54) (the “Principal Amount”) plus applicable interest.
3. All references to the Principal Amount contained in the Note shall be deemed to refer to the Principal Amount as amended by this Agreement, as the same may be further amended, restated, replaced, supplemented or otherwise modified from time to time.
4. Maker shall deliver to the Holder simultaneously with the execution of this Amended and Restated Note an Amended Irrevocable Transfer Agent Instruction letter in the form attached hereto as Amended Exhibit A, directing American Stock Transfer & Trust Company, LLC to issue the Holder that number of ordinary shares as called for based upon Holder’s exercise of Holder’s Conversion Rights. The Holder shall obtain a legal opinion that the Conversion shares may be resold without limitation pursuant to the Securities Act (a “No legend Opinion”). Such shares shall not bear any legend restricting the transfer of the Conversion Shares thereby and should not be subject to any stop-transfer restriction.
5. The Holder shall provide the Maker two Business Days’ notice that Holder wants to exercise its conversion rights for a specified number of shares, stating the applicable conversion price and support for the VWAP computation from Bloomberg, together with a legal opinion to the effect that the shares are not subject to resale restrictions under the Securities Act. Maker shall, within two Business Day notify the American Stock Transfer and Trust Company that the No Legend Opinion is valid, unless it is not.
6. Except as specifically modified and amended herein, all other terms, conditions and covenants contained in the Note shall remain in full force and effect.
This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.
FOR VALUE RECEIVED, HUB Cyber Security Ltd., a company organized under the laws of the State of Israel (“Maker” or the “Company”), promises to pay to A.G.P./Alliance Global Partners (“Holder”), or its registered assigns, in lawful money of the United States of America (i) the sum of Five Million Two Hundred Nineteen Thousand Three Hundred Eighteen Dollars and Fifty Four Cents ($5,219,318.54) (the “Principal Amount”); and (ii) interest accrued on the unpaid Principal Amount in accordance with Section 2. All Obligations (as defined below) under this convertible promissory note (the “Note”) shall be due and payable on (a) Installment Payment Dates set forth below and the Maturity Date (as defined below) of this Note; or (b) when, upon or after the occurrence and during the continuance of an Event of Default (as defined below), such amounts are declared due and payable by Holder or made automatically due and payable in accordance with the terms hereof, subject to the Agreement below. Maker and Holder may be individually referred to herein as a “Party” or collectively as the “Parties”.
The Parties agree that Holder shall be entitled to convert up to $250,000 of the outstanding amount due under the Note in each of seven 30-day periodic conversions (except as set forth in this paragraph below), on two Business Days’ notice to the Maker and the stock transfer agent, starting on or about November 22, 2024 and continuing in December 2024, and January, February, March, April and May 2025, up to the total of $1,800,000 by May 30, 2025, provided that no conversion shall be within less than 30 days of another conversion (the “Conversion Limitations”), except that the first conversion may be up to $320,000 and the final conversion in May 2025 may be up to $230,000. The conversion price for such conversions shall be the Alternative Conversion Price, subject to a minimum price of $0.40 (the “Minimum Price”)(except as set forth below). All share and dollar amounts in this Note shall be appropriately and equitably adjusted for any stock dividend, stock split, stock combination or other similar transaction. Should the Principal Amount be reduced by way of one or more cash repayments, at the election of the Maker, then the amount of permitted conversions into Conversion Shares shall be reduced dollar-for-dollar, starting with the next conversion. Automatically upon each conversion (or a repayment in cash in the same amount), the principal amount of the Note shall be reduced automatically by (i) the amount of such conversion or repayment plus (ii) by one-seventh (1/7) of the outstanding principal and accrued interest obligations under the Note that exceed $1,800,000 (the reduction pursuant to clause (ii) being referred to as “Pro Rata Reductions”). Upon the final conversion and/or repayment resulting in the aggregate conversion and/or repayment of $1,800,000, this Note shall be fully extinguished automatically. The foregoing conversion schedule shall supersede the schedule of installments set forth in Section 7 of the Note. If $1,800,000 has not been paid in Conversion Shares and/or cash pursuant to this Note by May 30, 2025 or if any one of the foregoing conversions are prevented by the Maker for any reason whatsoever, then, upon five Business Days’ notice to the Maker and the failure of the Maker to cure during such period, the amendments to this Note made as of November 22, 2024 shall terminate and the Note from February 28, 2023 shall again be in effect, with no tolling of the interest during the time when the Amended and Restated Note was in effect, subject to the reduction in the outstanding obligations under this Note effected by conversions, cash repayments, and/or Pro Rate Reductions.
If, prior to May 30, 2025, the VWAP of the Ordinary Shares during any 15-Trading Day period (the “Test Price”) is below the Minimum Price (the “Testing Mechanism”), then on the three-month anniversary of the final day of such period, the Minimum Price shall be adjusted to the price that is 40% below the Test Price, unless during such three-month period the VWAP of the Ordinary Shares during any subsequent period of 15 Trading Days equals or exceeds the original Minimum Price, at which point the Testing Mechanism shall restart. Notwithstanding the foregoing, in no event shall the conversion price be lower than $0.11.
1. Definitions.
| (a) | Preamble and Recitals: The terms defined above are incorporated herein. | |
| (b) | For purposes of this Note, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa): |
| i) | “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act. |
| ii) | “Business Day” means any day other than Saturday, Sunday or a day on which banking institutions in the State of New York are permitted or obligated by applicable law to remain closed. |
| iii) | “Ordinary Shares” means the Company’s ordinary shares. |
| iv) | “Conversion Price” means $1.00. |
| v) | “Alternate Conversion Price” means, as of the date of conversion, ninety three percent (93%) of the lowest daily VWAP (as defined herein) of the Ordinary Shares during the five (5) consecutive Trading Day period ending on the Trading Day prior to delivery of the notice of conversion. “VWAP” shall mean the daily dollar volume-weighted average sale price for the Ordinary Shares on the Principal Market on any particular Trading Day during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its “Volume at Price” functions or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the OTCBB or the “pink sheets” by the National Quotation Bureau, Inc. If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations of VWAP shall to be appropriately and equitably adjusted in accordance with the provisions set forth herein for any stock dividend, stock split, stock combination or other similar transaction occurring during any period used to determine the Market Price (or other period utilizing VWAPs). |
| vi) | “Event of Default” shall have the meaning set forth in Section 5. |
| vii) | “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. |
| viii) | “Fair Market Value” means, as of any date, the value of the shares of Ordinary Shares of Maker as determined below. If the shares are listed on any established stock exchange or a national market system, including, without limitation, the New York Stock Exchange or the Nasdaq Stock Market, the Fair Market Value shall be the closing price of a share (or if no sales were reported, the closing price on the date immediately preceding such date) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal. In the absence of an established market for the shares, the Fair Market Value shall be mutually determined between Maker and Holder in good faith. |
| ix) | “Holder Optional Conversion Amount” shall have the meaning set forth in Section 8(a). |
| x) | “Maturity Date” means March 1, 2024 pursuant to the Original Agreement, and April 30, 2025 for the Amended and Restated Agreement. |
| xi) | “Maximum Rate” shall have the meaning set forth in Section 2. |
| xii) | “Note Obligations” means, as of the date of measurement, the Company’s obligation to pay the aggregate sum of (i) the outstanding unpaid Principal Amount of this Note; (ii) all accrued and unpaid interest thereon calculated in accordance with Section 2; and (iii) any other amounts payable hereunder with respect to this Note. |
| xiii) | “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. |
| xiv) | “Prepayment Date” shall have the meaning set forth in Section 8(a). |
| xv) | “Prepayment Notice” shall have the meaning set forth in Section 8(a). |
| xvi) | “Principal Market” means the Nasdaq Global Market. |
| xvii) | “Securities” means this Note and, as applicable, the Ordinary Shares issuable upon conversion of the Note. |
| xviii) | “Securities Act” means the U.S. Securities Act of 1933, as amended. |
| xix) | “Trading Day” means a day on which the Principal Market is open for trading. |
2. Interest. Interest on the outstanding portion of the Principal Amount shall accrue at a rate equal to the lesser of six percent (6%) per annum and the maximum non-usurious interest rate permitted by applicable law (the “Maximum Rate”). Any overdue unpaid Principal Amount shall bear interest, before and after judgment, for each day that such amounts are overdue at a rate equal to the lesser of eighteen percent (18%) per annum and the Maximum Rate. All computations of interest shall be made on the basis of a 365-day year for the actual number of days occurring in the period for which such interest is payable.
3. Payment. Unless otherwise earlier converted pursuant to Section 8, the Principal Amount plus all accrued but unpaid interest shall be due and payable to Holder on the Maturity Date.
4. Prepayment. Upon notice to Holder, Maker may prepay this Note in whole or in part, provided that any such prepayment will be applied first to the payment of costs and expenses due under this Note, second to interest accrued on this Note and third, if the amount of prepayment exceeds the amount of all such costs, expenses and accrued interest, to the payment of the Principal Amount of this Note.
5. Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Note:
(a) Failure to Pay. Maker shall fail to pay when due any principal or interest payment on the due date hereunder or any other amount payable hereunder when due, whether at maturity or otherwise; or
(b) Voluntary Bankruptcy or Insolvency Proceedings. Maker shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property; (ii) admit in writing its inability, to pay its debts generally as they mature; (iii) make a general assignment for the benefit of its or any of its creditors; (iv) be dissolved or liquidated; or (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or
(c) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Maker or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Maker or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within 60 days of commencement; or (d) Agreements.
Maker shall fail to perform or observe in all material respects any of its covenants or agreements in this Note, the Settlement Agreement or the other documents entered into between Maker and Holder and such failure shall continue for five (5) days after Maker obtaining knowledge of such failure or receipt by Maker from Holder of a written notice of such failure; or
(e) Cross-Default. An event of default (or any other event which with the passage of time or the giving or notice or both would become an event of default) occurs under any other indebtedness of Maker; or
(f) Repudiation of Note. Maker shall provide at any time notice to the Payee, including by way of public announcement, of the Maker’s intention to not honor any provision of this Note (including requests for conversions of this Note in accordance with the terms hereof); or
(g) Corporate Authorization. Maker or any subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the actions described in any of the clauses above or takes any corporate or other action to authorize or otherwise for the purpose of effecting any such action; or
(h) Judgment. Any monetary judgment, writ or similar final process shall be entered or filed against the Maker or any of its subsidiaries or any of their assets and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of forty- five (45) calendar days; or
(i) Levy or Lien. The occurrence of any levy upon or seizure or attachment of or lien upon any asset of any Maker or any subsidiary thereof and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date; or
(j) Allegation of Fraud. Any allegation by any governmental or quasi-governmental authority of fraud, misconduct or other impropriety on the part of Maker; or
(k) Breach of Representations or Covenants. The Maker shall have breached any representation or warranty contained in this Note or shall fail to perform or observe any other material term, covenant or agreement contained herein on its part to be performed or observed.
6. Rights of Holder upon Default. Upon the occurrence or existence of any Event of Default (other than an Event of Default described in Sections 5(b) or 5(c)) and at any time thereafter during the continuance of such Event of Default, all outstanding Note Obligations payable by Maker hereunder shall become immediately due and payable upon election of the Holder without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. Upon the occurrence or existence of any Event of Default described in Sections 5(b) and 5(c), immediately and without notice, all outstanding Note Obligations payable by Maker hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Holder may exercise any other right power or remedy granted to it by this Note or otherwise permitted to it by applicable law, either by suit in equity or by action at law, or both.
7. Installment Payments.
(a) Principal Installment Payments. Commencing on the Payment Commencement Date, the Maker shall pay to the Holder the Outstanding Principal Amount hereunder in the schedule below in 7(b). The Installment Payments shall, at the Maker’s option, be made in (i) cash, (ii) Shares at the alternate conversion price, or (iii) a combination of cash and Shares at the alternate conversion price; provided that the number of Repayment Shares shall be determined by dividing the Principal Amount plus accrued interest (if any) being paid in Common Shares by the Alternate Conversion Price; provided, however, that no portion of the Principal Amount may be paid in Alternate Conversion Price Shares unless such Shares (A) may be immediately resold under Rule 144 without restriction on the number of shares to be sold or manner of sale, or (B) are registered for resale under the 1933 Act; and (C) the Maker’s average dollar volume traded over the prior 20 trading days must be $500,000 and the alternate conversion price must be at least $0.40, which shall be appropriately and equitably adjusted for any stock dividend, stock split, stock combination or other similar transaction. The Company must provide advance written notice to the Holder of whether it will elect to pay an Installment Payment in cash, Alternate Conversion Price Shares or a combination thereof as follows: (i) with respect to the first Installment Payment, at least ten (10) Business Days before the Payment Date, and (ii) with respect to each Installment Payment thereafter, within five (5) Business Days of the prior Payment Date; provided, however, that if no such notice is provided within the timeframes set forth above, such Installment Payments shall be made in Alternative Conversion Price Shares.
(b) The Maker shall pay the holder The Principal Installment Amounts as set forth below:
i) 15% of the Original Outstanding Principal of the Note on June 1, 2023; and
ii) 7.73% of the Original Outstanding Principal of the Note on the first of every month thereafter until the Note and Accrued Interest is fully paid off.
(c) Ownership Cap. Notwithstanding anything to the contrary contained herein, the Holder shall not be entitled to receive shares representing Equity Interests upon conversion of this Note to the extent (but only to the extent) that such exercise or receipt would cause the Holder Group (as defined below) to become, directly or indirectly, a “beneficial owner” (within the meaning of Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder) of a number of Equity Interests of a class that is registered under the 1934 Act which exceeds the Maximum Percentage (as defined below) of the Equity Interests of such class that are outstanding at such time. Any purported delivery of Equity Interests in connection with the conversion of this Note prior to the termination of this restriction in accordance herewith shall be void and have no effect to the extent (but only to the extent) that such delivery would result in the Holder Group becoming the beneficial owner of more than the Maximum Percentage of the Equity Interests of a class that is registered under the 1934 Act that is outstanding at such time. If any delivery of Equity Interests owed to the Holder following conversion of this Note is not made, in whole or in part, as a result of this limitation, the Company’s obligation to make such delivery shall not be extinguished and the Company shall deliver such Equity Interests as promptly as practicable after the Holder gives notice to the Company that such delivery would not result in such limitation being triggered or upon termination of the restriction in accordance with the terms hereof. To the extent limitations contained in this Section 7(c) apply, the determination of whether this Note is convertible and of which portion of this Note is convertible shall be the sole responsibility and in the sole determination of the Holder, and the submission of a notice of conversion shall be deemed to constitute the Holder’s determination that the issuance of the full number of Conversion Shares requested in the notice of conversion is permitted hereunder, and the Company shall be entitled to rely on the representations and other information set forth in any Conversion Notice and shall not have any obligation to verify or confirm the accuracy of such determination. For purposes of this Section 7(c), (i) the term “Maximum Percentage” shall mean 4.99%; provided, that if at any time after the date hereof the Holder Group beneficially owns in excess of 4.99% of any class of Equity Interests in the Company that is registered under the 1934 Act, then the Maximum Percentage shall automatically increase to 9.99% so long as the Holder Group owns in excess of 4.99% of such class of Equity Interests (and shall, for the avoidance of doubt, automatically decrease to 4.99% upon the Holder Group ceasing to own in excess of 4.99% of such class of Equity Interests); and (ii) the term “Holder Group” shall mean the Holder plus any other Person with which the Holder is considered to be part of a group under Section 13 of the 1934 Act or with which the Holder otherwise files reports under Sections 13 and/or 16 of the 1934 Act. In determining the number of Equity Interests of a particular class outstanding at any point in time, the Holder may rely on the number of outstanding Equity Interests of such class as reflected in (x) the Company’s most recent annual or quarterly reports filed with the Securities and Exchange Commission, as the case may be, (y) a more recent public announcement by the Company or (z) a more recent notice by the Company or its transfer agent to the Holder setting forth the number of Equity Interests of such class then outstanding. For any reason at any time, upon written or oral request of the Holder, the Company shall, within one (1) Business Day of such request, confirm orally and in writing to the Holder the number of Equity Interests of any class then outstanding. The provisions of this Section 7(c) shall be construed, corrected and implemented in a manner so as to effectuate the intended beneficial ownership limitation herein contained.
8. Conversion.
(a) Holder’s Optional Conversion. At any time prior to the payment of the Obligations in full, Holder, in its sole discretion and upon no less than two (2) Business Days written notice to Maker, may elect to have all or any portion of the outstanding Principal Amount and all interest accrued with respect to such outstanding portion of the Principal Amount through the date that the Holder notifies in writing Maker of its intent to convert pursuant to this Section 8(a) (such Principal Amount and accrued interest, the “Holder Optional Conversion Amount”) converted into that number of shares of Ordinary Shares equal to the quotient of (a) the Holder Optional Conversion Amount divided by (b) the Conversion Price (the “Holder’s Conversion Rights”). Notwithstanding the foregoing, upon written notice by Holder of the intent to convert, Maker may instead elect to pay all of the Note Obligations in full.
(b) Irrevocable Letter. In ensure the Holder’s ability to exercise Holder’s Conversion Rights, the Maker shall deliver to the Holder simultaneously with the execution of this Note a duly executed Amended Irrevocable Transfer Agent Instruction Letter addressed to ASTT directing ASTT to issue the Holder that number of ordinary shares as called for based upon Holder’s exercise of Holder’s Conversion Rights to the full extent provide by this Note. Notwithstanding the text of such letter, no request for conversion by Holder shall exceed the Conversion Limitations, and any such excess shall be invalid. The Irrevocable Transfer Agent Instruction Letter shall be in the form attached hereto as Exhibit A, as amended.
(c) Surrender of Note. Promptly after a conversion of all amounts due under this Note pursuant to this Section 8, but in no event more than five (5) Business Days thereafter, Holder shall deliver the original of this Note (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement acceptable to Maker whereby the holder agrees to indemnify Maker from any loss incurred by it in connection with this Note arising out of any claims that the Original Note was not lost, stolen or destroyed); provided, however, that upon Maker’s issuance of all amounts and/or Ordinary Shares required under Section 8(a), and Section 8(e), as applicable, this Note shall be deemed converted and of no further force and effect, whether or not it is delivered for cancellation as set forth in this Section 8(b).
(d) Reservation of Equity Securities. Maker covenants that all Ordinary Shares that shall be so issued shall be duly authorized, validly issued, fully paid, and non- assessable by Maker, not subject to any preemptive rights, and free from any taxes, liens, and charges with respect to the issue thereof. Maker has reserved for issuance from its duly authorized capital stock the maximum number of shares of Ordinary Shares issuable upon conversion of this Note. Maker shall take all such action as may be necessary to ensure that all such Ordinary Shares may be so issued without violation of any applicable law or regulation.
(e) Fractional Securities. No fractional shares of Ordinary Shares shall be issued upon conversion of this Note. In lieu of Maker issuing any fractional shares of Ordinary Shares to Holder upon the conversion of this Note, Maker shall round up to the nearest whole share.
(f) Issuance Taxes. The issuance of Ordinary Shares upon conversion of all or any portion of the outstanding Note Obligations in accordance with this Section 8 shall be made without charge to Holder for any issuance tax in respect thereof.
9. Representations and Warranties. The Maker hereby represents and warrants as of the date of this Note, as follows:
9.1 Existence. The Maker is a company organized, validly existing and in good standing under the laws of Israel.
9.2 Power and Authority. The Maker has the power and authority, and the legal right, to execute and deliver this Note and the Security Agreement and to perform its obligations hereunder and thereunder.
9.3 Authorization; Execution; and Delivery. The execution and delivery of this Note and the Security Agreement by the Maker and the performance of its obligations hereunder and thereunder have been duly authorized by all necessary corporate action in accordance with all applicable laws. The Maker has duly executed and delivered this Note and the Security Agreement.
9.4 Enforceability. Each of the Note and the Security Agreement is a valid, legal, and binding obligation of the Maker, enforceable against the Maker in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
9.5 No Approvals. No consent or authorization of, filing with, notice to or other act by, or in respect of, any governmental authority or any other person is required in order for the Maker to execute, deliver, or perform any of its obligations under this Note or the Security Agreement.
9.6 No Violations. The execution and delivery of this Note and the Security Agreement and the consummation by the Maker of the transactions contemplated hereby and thereby do not and will not (a) violate any provision of the Maker’s organizational documents; (b) violate any law or order applicable to the Maker or by which any of its properties or assets may be bound; or (c) constitute a default under any material agreement or contract by which the Maker may be bound.
10. Registration Rights. All shares of Ordinary Shares issuable upon a conversion pursuant to Section 8(a) shall have the benefit of registration rights on the terms set forth in the Registration Rights Agreement by and between Maker and Holder dated February 28, 2023, attached hereto as Exhibit B.
11. Assignment. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned by either Party, whether by operation of law or otherwise, without the other Party’s prior written consent (other than by merger), unless such transfer complies with applicable securities laws. Any purported attempt by a Party to assign this Note or any of the rights, interests or obligations hereunder in violation of this Section 11 shall be null and void. For the avoidance of doubt, the Holder shall not in any event transfer this Note or any of the rights, interests or obligation hereunder to any party other than Dominion Capital LLC or Loeb & Loeb LLP without the Maker’s prior written consent.
12. Unsecured Obligation. This Note is an unsecured obligation of the Company.
13. Notices. All notices, summonses, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and emailed, mailed or delivered to each party as follows:
(i) if to Maker, at the following address or email address (or at such other address or email address as Maker shall have furnished to Holder in writing)
HUB CYBER SECURITY LTD.
2 Kaplan Street
Tel Aviv, Israel
Attention: Noah Hershcoviz, CEO
Email: noah.hershcoviz@hubsecurity.io
with a copy (which will not constitute notice) to:
Goldfarb Gross Seligman & Co.
Azrieli Center, Round Tower, 39th Floor
Tel Aviv, Israel
Attention: Adam M. Klein
Email: adam.klein@goldfarb.com
(ii) if to Holder, at the following address or email address (or at such other address or email address as Holder shall have furnished to Maker in writing):
A.G.P./Alliance Global Partners
590 Madison Ave., 28th Floor
New York, NY 10022
Attention: Phillip Michals
Email: pm@allianceg.com
All such notices and communications will be deemed effectively given the earlier of (i) when received; (ii) when delivered personally; (iii) when emailed (with receipt of appropriate confirmation); (iv) one Business Day after being deposited with an overnight courier service of recognized standing; or (v) four days after being deposited in the U.S. mail, first class with postage prepaid.
14. Miscellaneous.
(a) Survival. The representations, warranties, covenants and agreements made herein shall survive the execution and delivery of this Note.
(b) Severability. If any provision of this Note shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
(c) Usury. In the event any interest is paid on this Note which is deemed to be in excess of the then Maximum Rate, then that portion of the interest payment representing an amount in excess of the then Maximum Rate shall be deemed a payment of principal and, notwithstanding Section 4, be applied against the principal of this Note.
(d) Waivers. Maker hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.
(e) Costs. Each of the Parties hereto shall pay its own fees, costs and expenses (including the fees of any attorneys, accountants or others engaged by such Party) in connection with this Note and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated. If Maker shall default on the payment of any of the Note Obligations, Maker shall reimburse Holder on demand for its reasonable, documented out-of-pocket costs of collection, including reasonable attorney’s fees and disbursements.
(f) No Drafting Presumption. The language used in this Note shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.
(g) Reservation of Rights. No failure on the part of Holder to exercise, and no delay in exercising, any right, power, privilege or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof by Holder preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy of Holder.
(h) CHOICE OF LAW. THIS NOTE AND ALL ACTIONS, CAUSES OF ACTION OR CLAIMS OF ANY KIND (WHETHER AT LAW, IN EQUITY, IN CONTRACT, IN TORT OR OTHERWISE) THAT MAY BE BASED UPON, ARISE OUT OF OR RELATE TO THIS NOTE, OR THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING WITHOUT LIMITATION NEW YORK LAWS RELATING TO APPLICABLE STATUTES OF LIMITATION AND BURDENS OF PROOF, AVAILABLE REMEDIES AND APPLICABLE EVIDENTIARY PRIVILEGES.
(i) Exclusive Jurisdiction. The courts of the State of New York, in the County of New York shall have exclusive jurisdiction in relation to all matters which may arise out of or in connection with this Note.
(j) Amendments and Waivers. Any term of this Note may be amended, modified or waived upon the written consent of Maker and the Holder. No such waiver or consent in any one instance shall be construed to be a continuing waiver or a waiver in any other instance unless it expressly so provides.
(k) Counterparts. This Note be manually or electronically executed in one or more counterparts (delivery of which may occur via facsimile or electronic transmission, including as an attachment to an electronic mail message in “pdf” or similar format), each of which shall be deemed an original, but all of which shall together constitute one and the same instrument. The words “execution,” “signed,” “signature,” and words of like import in this Note shall be deemed to include electronic signatures or electronic records, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act or any other similar state laws based on the Uniform Electronic Transactions Act.
[Signature Page Follows.]
IN WITNESS WHEREOF, the undersigned have executed this Amended and Restated Agreement as of November 22, 2024.
| HUB CYBER SECURITY LTD. | |||||
| By: | /s/ Noah Hershcoviz | /s/ Lior Davidsohn | |||
| Name: | Noah Hershcoviz | Lior Davidsohn | |||
| Title: | CEO | Interim CFO | |||
| A.G.P./ALLIANCE GLOBAL PARTNERS | ||
| By: | /s/ Thomas J. Higgins | |
| Name: | Thomas J. Higgins | |
| Title: | Managing Director | |
Exhibit A
(as amended)
Amended Irrevocable Transfer Agent Instruction Letter
Exhibit B
Registration Rights Agreement
Exhibit 4.26
AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This Amendment (this “Amendment”) to that certain Securities Purchase Agreement, dated as of ___________ (the “Securities Purchase Agreement”), by and between HUB Cyber Security Ltd., an Israeli company (the “Company”), and ___________ (the “Buyer”) is hereby made and entered into as of February __, 2025. Capitalized terms used but not defined herein shall have the meanings given to them in the Securities Purchase Agreement.
WHEREAS, on ___________, the Buyer loaned the Company an amount of $___________ in exchange for convertible notes (the “Notes”) and warrants to purchase an ___________ Ordinary Shares (the “Warrants”);
WHEREAS, on ___________, the Buyer converted the Notes into ___________ Ordinary Shares;
WHEREAS, the Securities Purchase Agreement, Notes and Warrants are attached hereto as Schedule A;
WHEREAS, the Buyer and the Company have agreed to amend the terms of the Warrants;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Amendments to Warrants. The Warrants shall be amended and restated, on the date hereof, in the form attached hereto as Exhibit A to reflect an amendment in the number of Warrant Shares and exercise price per Warrant Share.
2. Issuance of New Securities. On the date hereof, the Company shall issue to the Buyer ___________ Ordinary Shares (the “New Ordinary Shares”).
3. Representations and Warranties. The Buyer hereby represents and warrants to the Company that the representations and warranties of the Buyer set forth in Section 2 of the Securities Purchase Agreement are true and correct as of the date hereof.
4. Continued Validity of Transaction Documents. Except as specifically amended hereby, the Transaction Documents shall remain in full force. This Amendment shall be a “Transaction Document”, and the New Ordinary Shares shall be “Securities” for all purposes under the Securities Purchase Agreement.
5. Waiver and Release. The Buyer hereby waives and releases the Company and its subsidiaries and their respective directors, officers, employees, and affiliates, from any and all claims, causes of action, suits, liabilities, and damages, whether known or unknown, arising from the Securities Purchase Agreement and its purchase of the Notes and Warrants thereunder.
6. Counterparts. This Amendment may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
[signature page follows]
IN WITNESS WHEREOF, the Buyer and the Company has caused its signature page to this Amendment to be duly executed as of the date first written above.
| COMPANY: | ||
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
| BUYER: | ||
Schedule A
Securities Purchase Agreement, Notes and Warrants
Exhibit A
Amended Warrants
4
Exhibit 4.30
AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This Amendment (this “Amendment”) to that certain Securities Purchase Agreement, dated as of ___________ (the “Securities Purchase Agreement”), by and between HUB Cyber Security Ltd., an Israeli company (the “Company”), and ___________ (the “Buyer”) is hereby made and entered into as of February __, 2025. Capitalized terms used but not defined herein shall have the meanings given to them in the Securities Purchase Agreement.
WHEREAS, on ___________, the Buyer loaned the Company an amount of $___________ in exchange for convertible notes (the “Notes”) and warrants to purchase an ___________ Ordinary Shares (the “Warrants”);
WHEREAS, the Securities Purchase Agreement, Notes and Warrants are attached hereto as Schedule A;
WHEREAS, the Buyer and the Company have agreed to amend the terms of the Notes and Warrants;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Amendments to Warrants. The Warrants shall be amended and restated, on the date hereof, in the form attached hereto as Exhibit A to reflect an amendment in the number of Warrant Shares and exercise price per Warrant Share.
2. Amendments to Notes. The Notes shall be amended and restated, on the date hereof, in the form attached hereto as Exhibit B to reflect an amendment in the Conversion Price.
3. Representations and Warranties. The Buyer hereby represents and warrants to the Company that the representations and warranties of the Buyer set forth in Section 2 of the Securities Purchase Agreement are true and correct as of the date hereof.
4. Continued Validity of Transaction Documents. Except as specifically amended hereby, the Transaction Documents shall remain in full force. This Amendment shall be a “Transaction Document”, and the New Ordinary Shares shall be “Securities” for all purposes under the Securities Purchase Agreement.
5. Waiver and Release. The Buyer hereby waives and releases the Company and its subsidiaries and their respective directors, officers, employees, and affiliates, from any and all claims, causes of action, suits, liabilities, and damages, whether known or unknown, arising from the Securities Purchase Agreement and its purchase of the Notes and Warrants thereunder.
6. Counterparts. This Amendment may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
[signature page follows]
IN WITNESS WHEREOF, the Buyer and the Company has caused its signature page to this Amendment to be duly executed as of the date first written above.
| COMPANY: | ||
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
| BUYER: | ||
Schedule A
Securities Purchase Agreement, Notes and Warrants
Exhibit A
Amended Warrants
Exhibit B
Amended Note
5
Exhibit 4.36
Execution Version
THIRD AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This Amendment (this “Amendment”) to that certain Securities Purchase Agreement, dated as of March 12, 2024 (as amended on April 3, 2024 and June 26, 2024, the “Securities Purchase Agreement”), by and between HUB Cyber Security Ltd., an Israeli company (the “Company”), and Tamas Gottdiener (the “Buyer”) is hereby made and entered into as of November 5, 2024. Capitalized terms used but not defined herein shall have the meanings given to them in the Securities Purchase Agreement.
WHEREAS, the Buyer is willing to lend additional funds to the Company on the terms and conditions set forth herein;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Additional Loan. The Buyer shall lend the Company an additional amount of $1,000,000 (the “Additional Purchase Price”) in exchange for a secured Convertible Note having a repayment date of November 29, 2024 and bearing an interest rate of 8.5% for such period; to the extent that any portion of the Principal Amount is not repaid by the repayment date, it will bear interest at the rate of 15% per annum (on the basis of the actual number of days elapsed commencing from November 30, 2024 and ending on the payment date, in a year of 360 days) and otherwise on the same terms and conditions as the Outstanding Notes (the “Additional Note”). As collateral for the Additional Note, the Additional Note shall be secured pari passu by the same Charged Assets that secure the Outstanding Notes, and the pledge over the Charge Assets in favor of the Lender shall not be released before all the obligations under the Outstanding Notes and the Additional Note are repaid in full. The Buyer shall be permitted to pay the equivalent amount of Additional Purchase Price in Euros, in which case the Company shall repay the Principal Amount of the Additional Note in the same amount of Euros, without regard to the prevailing exchange rate at the time of repayment (notwithstanding anything in the Securities Purchase Agreement to the contrary). Notwithstanding the foregoing, the Additional Note and all monetary figures therein shall be denominated in U.S. Dollars.
2. Use of Proceeds. Effective as of the Closing Date, Section 4(a) of the Securities Purchase Agreement is hereby be supplemented with the following:
The Company shall use the proceeds from the Additional Purchase Price for general corporate purposes.
3. Additional Warrants. In consideration for the Additional Purchase Price, the Company shall issue to the Buyer a Warrant to purchase up to 1,500,000 Ordinary Shares at an exercise price of $0.55 per share (the “Additional Warrant”). The Additional Warrant shall be otherwise on the same terms and conditions as the Warrants previously issued by the Company to the Buyer pursuant to the Securities Purchase Agreement.
4. SEC Registration. The Company shall use its best efforts to file its financial statements for the quarter ended June 30, 2024 by November 30, 2024, to file an amendment to its draft registration statement on Form F-1 to register the issuance of the Registrable Securities with the SEC by December 7, 2024 and to cause such registration statement to be declared effective by the SEC as soon as practicable thereafter but in no event not later than sixty (60) days following the filing of the amendment to the registration statement. Prior to the registration statement becoming effective, the Company shall deliver to Buyer an indemnification undertaking in customary form relating thereto.
5. Event of Default. Any breach of the terms of this Amendment shall be deemed an Event of Default under the Outstanding Notes and the Additional Note.
6. The Securities Purchase Agreement shall be amended as follows:
| a. | Signature Page of the Securities Purchase Agreement (as amended). |
The definition “Exercise Price per Closing Warrant Share” shall be supplemented with the following:
“Exercise Price per Share of Additional Warrant for 1,500,000 shares: $0.55, subject to adjustment as provided therein.”
| b. | The term “Warrants” in the Securities Purchase Agreement shall include also the Additional Warrant. |
7. Closing. The aforementioned funding of the Additional Purchase Price and issuances, sales and deliveries of the Additional Warrant shall take place on or as soon as practicable following the date hereof, but no later than the Business Day following the satisfaction or waiver of all of the closing conditions set forth in Sections 6 and 7 of the Securities Purchase Agreement (except Section 7(vii)(Qpoint pay-off letter)) (the “Closing” and such date of a Closing being, the “Closing Date”).
8. Continued Validity of Transaction Documents. Except as specifically amended hereby, the Transaction Documents shall remain in full force. This Amendment shall be a Transaction Document for all purposes under the Securities Purchase Agreement.
9. Heter Iska. For the avoidance of doubt, the form of heter iska that appears in the Sefer Netivot Shalom written by Harav Shalom Yosef Gelber shall apply to the transactions contemplated by this Amendment.
10. Counterparts. This Amendment may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
[signature page follows]
IN WITNESS WHEREOF, the Buyer and the Company has caused its signature page to this Amendment to be duly executed as of the date first written above.
| COMPANY: | |||
| HUB CYBER SECURITY LTD. | |||
| By: | /s/ Noah Hershcoviz | /s/ Osher Partok Rheinisch | |
| Name: | Noah Hershcoviz | Osher Partok Rheinisch | |
| Title: | CEO | CLO | |
| BUYER: | |||
| /s/ Tamas Gottdiener | |||
| Tamas Gottdiener | |||
Exhibit 4.37
Execution Version
FOURTH AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This Amendment (this “Amendment”) to that certain Securities Purchase Agreement, dated as of March 12, 2024 (as amended on April 3, 2024, June 26, 2024 and November 5, 2024, the “Securities Purchase Agreement”), by and between HUB Cyber Security Ltd., an Israeli company (the “Company”), and Tamas Gottdiener (the “Buyer”) is hereby made and entered into as of February 17, 2025. Capitalized terms used but not defined herein shall have the meanings given to them in the Securities Purchase Agreement.
WHEREAS, the Buyer has loaned the Company an aggregate of $11,000,000 in exchange for convertible notes (the “Notes”) and warrants to purchase an aggregate of 12,944,444 Ordinary Shares (the “Warrants”), each dated March 12, 2024, April 3, 2024, June 26, 2024 and November 5, 2024;
WHEREAS, the maturity date of each of the Notes has passed, and the Company has requested that the Buyer continue not to enforce his rights under the Notes and to extend the maturity date of each of the Notes to six months from the date hereof;
WHEREAS, the Company has requested the Buyer to try to recoup its investment in the Company by converting Notes and selling the underlying Ordinary Shares;
WHEREAS, for stock exchange compliance purposes, the Company has requested that the Buyer agree to amend the Warrants to enable the Company to classify them as equity instruments pursuant to IFRS;
WHEREAS, such amendments including, among other things, changing the denomination of the exercise price from US$ to NIS and removing the cashless exercise provisions;
WHEREAS, on January 29, 2025, the Buyer agreed to make such amendments to the Warrants; and
WHEREAS, the Notes are secured by a first-priority pledge on the shares of the Company in the Qpoint group, but the Company recently noticed that the SPA omitted the shares of the Company in Qpoint Solutions Ltd. (“Qpoint Solutions”) and has informed the Buyer of its willingness to pledge such shares;
WHEREAS, the Buyer is willing to accept the foregoing in consideration for pre-funded warrants, a warrant to purchase 2,055,556 Ordinary Shares, resetting the exercise price of the Warrants to $0.50 per share and other undertakings of the Company, all as set forth herein;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Maturity Date Amendment; Interest. The maturity date of each of the Notes is hereby changed to August 16, 2025, and the payment defaults occurring until the date hereof are hereby waived. To the extent that the Notes are not paid or converted in full by April 1, 2025, then from and after April 1, 2025 the interest rate of the Notes (including the Shortfall Note) shall be 20% per annum.
2. Amendments to Warrants. Each of the Warrants shall be amended and restated, on the date hereof, in the form attached hereto as Exhibit A. The exercise price of each of the Warrants shall be NIS 1.777, being the NIS equivalent of $0.50 per share based on the last published exchange rate published by the Bank of Israel on the date hereof. The term of the Warrants shall be five years from the date hereof.
3. Issuance of New Securities. On the date hereof, the Company shall issue to the Buyer (i) a five-year warrant to purchase 2,055,556 Ordinary Shares for $0.50 per share in the form of the Warrants prior to the amendments contemplated by this Amendment and (ii) a pre-funded warrant to acquire ten million Ordinary Shares, in the form attached hereto as Exhibit B (together, the “New Warrants”).
4. Pledge of Qpoint Solutions. No later than three business days following the date hereof, the Company shall file with the Israeli Registrar of Companies, a pledge registration document (“Tofes 10”) for the registration of a pledge for the benefit of the Buyer on the Company’s shares in Qpoint Solutions to secure all the Notes and shall amend the registration of pledge #36 to cover all the Notes. The Company shall not record any other pledges on shares of companies in the Qpoint group prior to completion of such registrations.
5. Representations and Warranties. The Buyer hereby represents and warrants to the Company that the representations and warranties of the Buyer set forth in Section 2 of the Securities Purchase Agreement are true and correct as of the date hereof. The Company hereby represents and warrants to the Buyer that the representations and warranties of the Company set forth in Section 3 of the Securities Purchase Agreement are true and correct as of the date hereof, except as set forth on Schedule 5 hereof.
6. Conversion of Notes. The Buyer will sell all or a significant portion of the Notes to a third party buyer (the “Purchaser”) who is expected to convert the Notes (the Notes (or portion of a Note) so converted, the “Converted Notes”) and attempt to sell the resulting Ordinary Shares (the “Conversion Shares”). By no later than April 2, 2025, the Buyer shall inform the Company in writing of the amount of proceeds it irrevocably received from the sale of Conversion Shares (the “Sale Proceeds”), and the Company shall be deemed to have repaid the principal and accrued interest under the Converted Notes in the amount equal to the Sale Proceeds. In the event that the Sale Proceeds are lower than the aggregate principal amount of the Converted Notes and the accrued interest thereon (the amount of such shortfall, the “Shortfall”), the Company shall no later than April 4, 2025 issue to the Buyer a convertible note in the principal amount equal to the Shortfall (and if the Sale Proceeds (and any repayments from the Company) are less than $6,500,000, also the interest that would have accrued on the Converted Notes in accordance with their terms had they not been converted) (the “Shortfall Note”), with an interest rate of 20% per annum, commencing retroactively from the date of conversion of the Converted Notes, and a maturity date of August 16, 2025, and otherwise on the same terms and conditions (including first degree security interest on the shares of the Company in the Qpoint group senior to any other lender of the Company) as the Converted Notes. In the event that, at April 2, 2025, the Buyer holds unsold Conversion Shares (not including shares retained by the Purchaser or any third party), then Warrants shall be exercised for an equivalent number of Ordinary Shares pursuant to the terms thereof and such Conversion Shares shall be deemed to be issued pursuant to such exercise in lieu of the issuance of new Ordinary Shares. For the avoidance of doubt, nothing in this Amendment will derogate from the 4.99% ownership limitation set forth in the Notes and the Warrants.
7. Continued Validity of Transaction Documents. Except as specifically amended hereby, the Transaction Documents shall remain in full force. This Amendment shall be a “Transaction Document”, and the New Warrant and the New Ordinary Shares shall be “Securities” for all purposes under the Securities Purchase Agreement. For the avoidance of doubt, this Amendment shall not derogate from the Company’s obligations to repay the amount of the Notes plus interest to the Buyer, in accordance with their terms and conditions. The form of heter iska that appears in the Sefer Netivot Shalom written by Harav Shalom Yosef Gelber shall apply to the transactions contemplated by this Amendment, as well as to the Share Purchase Agreement and each amendment thereto.
8. Counterparts. This Amendment may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
[signature page follows]
IN WITNESS WHEREOF, the Buyer and the Company has caused its signature page to this Amendment to be duly executed as of the date first written above.
| COMPANY: | ||
| HUB CYBER SECURITY LTD. | ||
| By: | /s/ Noah Hershcoviz /s/ Lior Davidsohn | |
| Name: | Noah Hershcoviz and Lior Davidsohn | |
| Title: | CEO and Interim CFO | |
| BUYER: | ||
| /s/ Tamas Gottdiener | ||
| Tamas Gottdiener | ||
Schedule 5
In respect of Section 3(cc) of the SPA, the Company notes that the staff of the SEC has recently notified the Company of its position that the Company is considered a former shell company for purposes of SEC Rule 144(i) as a result of the Company’s merger with a SPAC.
4
Exhibit 4.40
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), FROM REPUTABLE COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT (“RULE 144”). NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
HUB CYBER SECURITY LTD.
Amended and Restated Warrant To Purchase Ordinary Shares
Date of Issuance: November 5, 2024 (“Issuance Date”)
Date of Amendment: February 17, 2025 (“Amendment Date”)
HUB Cyber Security Ltd., an Israeli company (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Tamas Gottdiener, the registered holder hereof or his permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Amended and Restated Warrant to Purchase Ordinary Shares (including any Warrants to Purchase Ordinary Shares issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), 1,500,000 (subject to adjustment as provided herein) fully paid and non-assessable Ordinary Shares (as defined below) (the “Warrant Shares”). This Warrant is one of the Warrants to purchase Ordinary Shares issued to Holder pursuant to that certain Securities Purchase Agreement, dated as of March 12, 2024, by and among the Company and the investor(s) referred to therein (as amended on April 3, 2024, June 26, 2024 and November 5, 2024, the “Securities Purchase Agreement”).
1.EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(c), this Warrant may be exercised by the Holder on any day on or after the Issuance Date (an “Exercise Date”) in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (in respect of such specific exercise, the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds. The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant certificate and issuance of a new Warrant certificate evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant certificate after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first (1st) Trading Day following the date on which the Company has received an Exercise Notice, the Company shall transmit by email an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached hereto as Exhibit B, to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice, the Company shall, (i) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (which the Company shall cause the Transfer Agent to do at Holder’s request) and provided the Company determines any legends could be removed from such Ordinary Shares in accordance with the Company’s sole discretion, upon the request of the Holder, credit such aggregate number of Ordinary Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/ Withdrawal at Custodian system, or (ii) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or the Company determines in its sole discretion that legends would not be eligible to be removed from such Ordinary Shares, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent to the address as specified in the applicable Exercise Notice, a certificate or book entry position, in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of Ordinary Shares to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates or book entry positions evidencing such Warrant Shares (as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then, at the request of the Holder and upon surrender hereof by the Holder at the principal office of the Company, the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 6(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional Ordinary Shares are to be issued upon the exercise of this Warrant, but rather the number of Ordinary Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes and fees which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.
(b) Exercise Price. For purposes of this Warrant, “Exercise Price” means NIS 1.777 per Warrant Share, subject to adjustment as provided herein.
(c) Limitations on Exercises and Exchanges. Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable or exchangeable by the Holder hereof to the extent (but only to the extent) that the Holder would hold (as defined for purposes of the Israeli Companies Law, 1999) or beneficially own (as defined for purposes of Section 13(d) of the 1934 Act) in excess of 4.99% of the number of Ordinary Shares outstanding after giving effect to the issuance of Ordinary Shares issuable upon exercise of the Warrants (the “Maximum Percentage”). To the extent the above limitation applies, the determination of whether this Warrant shall be exercisable or exchangeable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be exercisable or exchangeable (as among all such securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to exercise or exchange this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability or exchangeability. For the purposes of this paragraph, share holdings and all determinations and calculations (including, without limitation, with respect to calculations of percentage of holdings) shall be determined in accordance with the Israeli Companies Law, 1999 and with the U.S. Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder; in the event of a conflict between such two laws, the stricter one shall govern. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm in writing to the Holder the number of Ordinary Shares then outstanding, including by virtue of any prior conversion or exercise or exchange of convertible or exercisable or exchangeable securities into Ordinary Shares. The Maximum Percentage limitation shall not apply to the Holder if the Warrant is exercised and the Ordinary Shares are issued concurrently with the sale or cancelation of such Ordinary Shares upon the closing of an Exit Transaction.
(d) Reservation of Shares; Insufficient Authorized Shares. The Company shall initially reserve out of its authorized and unissued Ordinary Shares a number of Ordinary Shares equal to the maximum number of Warrant Shares issuable to satisfy the Company’s obligations to issue Ordinary Shares hereunder, and the Company shall at all times keep reserved for issuance under this Warrant a number of Ordinary Shares equal to the maximum number of Warrant Shares issuable to satisfy the Company’s obligation to issue Ordinary Shares hereunder.
(e) Activity Restrictions. For so long as the Holder holds this Warrant or any Warrant Shares, the Holder will not: (i) engage or participate in any actions, plans or proposals which relate to or would result in (a) acquiring additional securities of the Company, alone or together with any other Person, which would result in beneficially owning or holding (as such terms are defined in Section 1(c)), or being deemed to beneficially own or hold, more than 4.99% of the total outstanding Ordinary Shares or other voting securities of the Company, (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving Company, (c) a sale or transfer of a material amount of assets of the Company, (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board, (e) any material change in the present capitalization or dividend policy of the Company, (f) any other material change in the Company’s business or corporate structure, including but not limited to, if the Company is a registered closed-end investment company, any plans or proposals to make any changes in its investment policy for which a vote is required by Section 13 of the Investment Company Act of 1940, (g) changes in the Company’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any Person, (h) a class of securities of the Company being delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the 1934 Act, or (j) any action, intention, plan or arrangement similar to any of those enumerated above, or (ii) request the Company or its directors, officers, employees, agents or representatives to amend or waive any provision of this Section 1(e); provided, however, that notwithstanding anything to the contrary contain in clauses (i) and (ii) above, the Holder may vote any Ordinary Shares owned or controlled by it, solicit any proxies, or seek to advise or influence any Person with respect to any voting securities of the Company. The Holder may only exercise this Warrant for a cash exercise price if the trading price at the time of exercise is greater than the then applicable Exercise Price.
(f) No Short Sales. The Holder covenants that through and including the first Trading Day following the full exercise or expiration of this Warrant, none of the Holder any of its officers, or any entity managed or controlled by the Holder (each of the foregoing, a “Restricted Person”) shall, directly or indirectly, (i) engage in any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the 1934 Act) of the Ordinary Shares or (ii) engage in any hedging transaction, which establishes a net short position with respect to any securities of the Company (including the Ordinary Shares), with respect to each of clauses (i) and (ii) hereof, either for its own principal account or for the principal account of any other Restricted Person.
(g) Lock-Up. Notwithstanding anything herein to the contrary, the Holder agrees, for a period of six months from the Issuance Date, not to assign, lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, the Warrant or any portion thereof or any Warrant Shares, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Warrant or any Warrant Shares, except pursuant to an effective registration statement under the 1933 Act.
2.ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. During such time as this Warrant is outstanding, the Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 2.
(a) Stock Dividends and Splits. Without limiting any provision of Section 4, if the Company, at any time on or after the Issuance Date, (i) pays a stock dividend on one or more classes of its then outstanding Ordinary Shares or otherwise makes a distribution on any class of capital stock that is payable in Ordinary Shares, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding Ordinary Shares into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding Ordinary Shares into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Ordinary Shares outstanding immediately before such event and of which the denominator shall be the number of Ordinary Shares outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.
(b) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraph (a) of this Section 2, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise contained herein).
(c) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest 1/10000th of cent and the nearest 1/100th of a share, as applicable. The number of Ordinary Shares outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Ordinary Shares.
3.RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant to Section 2 above, if during such time as this Warrant is outstanding, the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Ordinary Shares, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, indebtedness, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction, other than a distribution of Ordinary Shares covered by Section 2(a)) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, provision shall be made so that upon exercise of this Warrant, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or the beneficial ownership of any such Ordinary Shares as a result of such Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).
4. PURCHASE RIGHTS.
(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at during such time as this Warrant is outstanding the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Ordinary Shares (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Ordinary Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).
5.WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 5, the Company shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company generally, contemporaneously with the giving thereof to the shareholders.
6.REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 6(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 6(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the 1933 Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provide to the Company an opinion of counsel selected by the Holder and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the 1933 Act.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 6(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 6(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional Ordinary Shares shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 6(a) or Section 6(c), the Warrant Shares designated by the Holder which, when added to the number of Ordinary Shares underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
7.NOTICES. All notices, consents, requests, approvals, demands, or other communication by any party to this Warrant must be in writing and shall be deemed to have been validly served, given, or delivered in the manner and to the addresses set forth in Section 10(f) of the Securities Purchase Agreement. The Company will give written notice to the Holder (i) at least five (5) Trading Days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Ordinary Shares, (B) with respect to any issuances of rights to purchase securities, indebtedness or other property pro rata to the holders of Ordinary Shares or (C) for determining rights to vote with respect to any Exit Transaction, dissolution or liquidation and (ii) at least five (5) Trading Days prior to the consummation of any Exit Transaction.
8.AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant (other than Section 1(c)) may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder, provided that the Company may lower the Exercise Price or extend the Expiration Date without the consent of the Holder. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.
9.SEVERABILITY. If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
10.GOVERNING LAW. This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Israel, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Israel or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Israel. The Company hereby irrevocably submits to the exclusive jurisdiction of the courts of Tel Aviv, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The form of heter iska that appears in the Sefer Netivot Shalom written by Harav Shalom Yosef Gelber shall apply to this Warrant.
11.CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.
12.DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise Price, or the arithmetic calculation of the Warrant Shares (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder or the Company (as the case may be) learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to agree upon such determination or calculation (as the case may be) of the Exercise Price, or the number of Warrant Shares (as the case may be) within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed arithmetic calculation of the Warrant Shares, the disputed determination of the Exercise Price, or the arithmetic calculation of the Warrant Shares (as the case may be) to an independent, reputable investment bank selected by the Holder, with the consent of the Company (which may not be unreasonably withheld, conditioned or delayed), or (b) if acceptable to the Holder, the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s or accountant’s determination or calculation (as the case may be) shall be binding upon all parties absent demonstrable error. The fees and expenses of such investment bank or accountant shall be borne by the parties in the same proportion as the respective amounts by which the investment bank’s or accountant’s determination differs from such party’s calculation.
13.REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). All payments made by the Company to Holder under this Warrant shall be made in full, without set-off or counterclaim and free and clear of, and without any deduction or withholding, and notwithstanding the above, if under any Israeli law or regulation, any payment of VAT or any deduction or withholding for tax is required (“Tax Payment”), the amount of the payment due from the Company to the Holder shall be increased to an amount which (after making any Tax Payment) leaves an amount equal to the payment which would have been due if no Tax Payment had been required (the “Gross Up”). The Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
14.TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.
15.CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “Business Day” means any day other than Friday, Saturday, Sunday or other day on which commercial banks in New York, New York or Israel are authorized or required by law to remain closed.
(b) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any Ordinary Shares.
(c) “Expiration Date” means the date that is five (5) years after the Amendment Date or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday, provided, however, that the Expiration Date shall be accelerated to the date of closing of an Exit Transaction.
(d) “Exit Transaction” means a share purchase, merger or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person(s) whereby (i) such other Person(s) acquire (or otherwise becomes the holder, directly or indirectly, of) more than 60% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person(s) or other Person(s) making or party to, or associated or affiliated with the other Person(s) making or party to, such transaction) and (ii) the Company ceases to be a public company for purposes of the Israeli Companies Law, 1999.
(e) “Options” means any rights, warrants or options to subscribe for or purchase Ordinary Shares or Convertible Securities.
(f) “Ordinary Shares” means the ordinary shares, no par value per share, of the Company and any other shares issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Ordinary Shares).
(g) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
(h) “Principal Market” means the Nasdaq Stock Market or, if such market is not the principal trading market for the Ordinary Shares, then on the principal securities exchange or securities market on which the Ordinary Shares is then traded.
(i) “Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Ordinary Shares, any day on which the Ordinary Shares is traded on the Principal Market, provided that “Trading Day” shall not include any day on which the Ordinary Shares are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Ordinary Shares are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Ordinary Shares, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.
(j) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
[signature page follows]
IN WITNESS WHEREOF, the Company has caused this Amended and Restated Warrant to Purchase Ordinary Shares to be duly executed as of the Amendment Date set out above.
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE ORDINARY SHARES
HUB CYBER SECURITY LTD.
The undersigned holder of the attached warrant (the “Warrant”) hereby exercises the right to purchase _________________ Ordinary Shares (the “Warrant Shares”) of HUB Cyber Security Ltd., an Israeli company (the “Company”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
| 1. | The Holder shall pay the Aggregate Exercise Price in the sum of ___________________ to the Company in accordance with the terms of the Warrant. |
| 2. | The undersigned holder hereby represents that the issuance of the Warrant Shares will not cause the undersigned holder’s holdings in the Company’s Ordinary Shares to exceed the Maximum Percentage, as defined in Section 1(c) of the Warrant, based on the number of outstanding Ordinary Shares provided to the holder by the Company in writing. |
| Date: | _______________ __, ______ | |
| By: | ||
| Name: | ||
EXHIBIT B
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs Equiniti to issue the above indicated number of Ordinary Shares.
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 4.41
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), FROM REPUTABLE COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
HUB CYBER SECURITY LTD.
Warrant To Purchase Ordinary Shares
Date of Issuance: February 17, 2025 (“Issuance Date”)
HUB Cyber Security Ltd., an Israeli company (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Tamas Gottdiener, the registered holder hereof or his permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, upon exercise of this Warrant to Purchase Ordinary Shares (including any Warrants to Purchase Ordinary Shares issued in exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the Issuance Date, 10,000,000 (ten million) (subject to adjustment as provided herein), fully paid and non-assessable Ordinary Shares (as defined below) (the “Warrant Shares”).
1. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(c)), this Warrant may be exercised by the Holder on any day on or after the Issuance Date in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant certificate and issuance of a new Warrant certificate evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant certificate after delivery of the Warrant Shares in accordance with the terms hereof. On or before the second (2nd) Trading Day following the date on which the Company has received such Exercise Notice, the Company shall instruct its transfer agent (the “Transfer Agent”), (i) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (which the Company shall cause the Transfer Agent to do at Holder’s request) and provided the legends would be eligible to be removed from such Ordinary Shares in the discretion of the Company, upon the request of the Holder, to credit such aggregate number of Ordinary Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/ Withdrawal at Custodian system, or (ii) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or the legends would not be eligible to be removed from such Ordinary Shares in the discretion of the Company, to issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent to the address as specified in the applicable Exercise Notice, a certificate or book entry position, in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of Ordinary Shares to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates or book entry positions evidencing such Warrant Shares (as the case may be). If the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then, at the request of the Holder and upon surrender hereof by the Holder at the principal office of the Company, the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional Ordinary Shares are to be issued upon the exercise of this Warrant, but rather the number of Ordinary Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes and fees which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.
(b) No Exercise Price. This Warrant is pre-funded and may be exercised by the Holder, in whole or in part from time to time, for no consideration, subject to the Maximum Percentage.
(c) Limitations on Exercises and Exchanges. Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable or exchangeable by the Holder hereof to the extent (but only to the extent) that the Holder would hold (as defined for purposes of the Israeli Companies Law, 1999) or beneficially own (as defined for purposes of Section 13(d) of the 1934 Act) in excess of 4.99% of the number of Ordinary Shares outstanding after giving effect to the issuance of Ordinary Shares issuable upon exercise of the Warrant (the “Maximum Percentage”). No prior inability to exercise or exchange this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability or exchangeability. For the purposes of this paragraph, share holdings and all determinations and calculations (including, without limitation, with respect to calculations of percentage of holdings) shall be determined in accordance with the Israeli Companies Law, 1999 and with the U.S. Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder; in the event of a conflict between such two laws, the stricter one shall govern. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm in writing to the Holder the number of Ordinary Shares then outstanding, including by virtue of any prior conversion or exercise or exchange of convertible or exercisable or exchangeable securities into Ordinary Shares. The Maximum Percentage limitation shall not apply to the Holder if the Warrant is exercised and the Ordinary Shares are issued concurrently with the sale or cancelation of such Ordinary Shares upon the closing of an Exit Transaction.
(d) Reservation of Shares; Insufficient Authorized Shares. The Company shall initially reserve out of its authorized and unissued Ordinary Shares a number of Ordinary Shares equal to the maximum number of Warrant Shares issuable to satisfy the Company’s obligations to issue Ordinary Shares hereunder, and the Company shall at all times keep reserved for issuance under this Warrant a number of Ordinary Shares equal to the maximum number of Warrant Shares issuable to satisfy the Company’s obligation to issue Ordinary Shares hereunder.
(e) Activity Restriction. For so long as the Holder holds this Warrant or any Warrant Shares, the Holder will not acquire additional securities of the Company, alone or together with any other Person, which, following the acquisition thereof, would result in holding, directly or indirectly, more than the Maximum Percentage, and any Ordinary Shares held by the Holder in excess thereof shall be dormant shares. For the avoidance of any doubt, the Holder may vote any Ordinary Shares held or controlled by it up to the Maximum Percentage, solicit any proxies, or seek to advise or influence any Person with respect to any voting securities of the Company, in its sole discretion.
(f) No Short Sales. The Holder covenants that through and including the first Trading Day following the full exercise or termination of this Warrant, none of the Holder or any of its officers, or any entity managed or controlled by the Holder (each of the foregoing, a “Restricted Person”) shall, directly or indirectly, (i) engage in any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the 1934 Act) of the Ordinary Shares or (ii) engage in any hedging transaction, which establishes a net short position with respect to any securities of the Company (including the Ordinary Shares), with respect to each of clauses (i) and (ii) hereof, either for its own principal account or for the principal account of any other Restricted Person.
2.ADJUSTMENT TO NUMBER OF WARRANT SHARES. During such time as this Warrant is outstanding, the number of Warrant Shares issuable upon exercise of this Warrant is subject to adjustment from time to time as set forth in this Section 2.
(a) Stock Dividends and Splits. If the Company, at any time on or after the Issuance Date of this Warrant, (i) distributes a stock dividend on one or more classes of its then outstanding Ordinary Shares or otherwise makes a distribution on any class of capital stock that is payable in Ordinary Shares, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding Ordinary Shares into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding Ordinary Shares into a smaller number of shares, then in each such case the number of Warrant Shares that may be issued upon exercise of this Warrant shall be increased or decreased proportionately, as the case may be. Any of the adjustment set forth above shall become effective immediately after the effective date of the applicable event.
(b) Calculations. All calculations under this Section 2 shall be made by rounding to the nearest 1/100th of a share. The number of Ordinary Shares outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Ordinary Shares.
3.NONCIRCUMVENTION. During such time as this Warrant is outstanding, the Company hereby covenants and agrees that the Company will not, by amendment of its articles of association or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Ordinary Shares upon the exercise of this Warrant, and (ii) shall, so long as the Warrant is outstanding, take all actions necessary to reserve and keep available out of its authorized and unissued Ordinary Shares, solely for the purpose of effecting the exercise of the Warrant, the maximum number of Ordinary Shares as shall from time to time be necessary to effect the exercise of the Warrant then outstanding; provided, however, that such amount of reserved Ordinary Shares shall be limited by the Maximum Percentage of Ordinary Shares as set forth in Section 1(c).
4.RIGHTS UPON DISTRIBUTION OF ASSETS. In addition to any adjustments pursuant to Section 2 above, if during such time as this Warrant is outstanding, the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Ordinary Shares, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, indebtedness, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction, other than a distribution of Ordinary Shares covered by Section 2(a)) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, provision shall be made so that upon exercise of this Warrant, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or the beneficial ownership of any such Ordinary Shares as a result of such Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).
5. PURCHASE RIGHTS.
(a) Purchase Rights. In addition to any adjustments pursuant to Section 2 above, if at during such time as this Warrant is outstanding the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Ordinary Shares (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Ordinary Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).
6.WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
7.REISSUANCE OF WARRANTS.
(a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144 under the Securities Act, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provide to the Company an opinion of counsel selected by the Holder, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred securities under the Securities Act.
(b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional Ordinary Shares shall be given.
(d) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of Ordinary Shares underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
8.NOTICES. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) as soon as practicable upon each adjustment of the number of Warrant Shares in accordance with the terms of this Warrant, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least two (2) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Ordinary Shares, (B) with respect to any grants, issuances or sales of any rights to purchase shares, warrants, securities, indebtedness or other property pro rata to the holders of Ordinary Shares or (C) for determining rights to vote with respect to any Exit Transaction, dissolution or liquidation, provided in each case that such information, to the extent it constitutes, or contains, material, non-public information regarding the Company, shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least two (2) Trading Days prior to the consummation of any Exit Transaction. It is expressly understood and agreed that the time of execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company. The Holder’s address for the provision of notices to the Holder shall be provided in writing by the Holder to the Company, to the attention of its general counsel.
9.AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder, provided that the Company may extend the Expiration Date without the consent of the Holder. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.
10.SEVERABILITY. If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
11.GOVERNING LAW. This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Israel, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdictions other than the State of Israel. The Company hereby irrevocably submits to the exclusive jurisdiction of the courts of Tel Aviv, Israel, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to enforce a judgment or other court ruling in favor of the Holder.
12.CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.
13.REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
14.TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned by the Holder without the consent of the Company, provided that such sale, transfer or assignment of any of the Company’s securities represented hereunder shall not be effected (i) in the absence of (a) an effective registration statement under the Securities Act of 1933, as amended, or applicable state securities laws, or (b) an opinion of counsel to the Holder, if requested by the Company, from reputable counsel, that registration is not required under such laws; or (ii) unless sold or eligible to be sold pursuant to Rule 144 under said Act.
15.CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) “Business Day” means any day other than Friday, Saturday, Sunday or other day on which commercial banks in New York, New York or Israel are authorized or required by law to remain closed.
(b) “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any Ordinary Shares.
(c) “Expiration Date” means the date that is five years after the Issuance Date or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday, provided, however, that the Expiration Date shall be accelerated to the date of closing of an Exit Transaction.
(d) “Exit Transaction” means a share purchase, merger or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person(s) whereby (i) such other Person(s) acquire (or otherwise becomes the holder, directly or indirectly, of) more than 60% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person(s) or other Person(s) making or party to, or associated or affiliated with the other Person(s) making or party to, such transaction) and (ii) the Company ceases to be a public company for purposes of the Israeli Companies Law, 1999.
(e) “Options” means any rights, warrants or options to subscribe for or purchase Ordinary Shares or Convertible Securities.
(f) “Ordinary Shares” means the ordinary shares, no par value per share, of the Company and any other shares issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Ordinary Shares).
(g) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
(h) “Principal Market” means the Nasdaq Stock Market or, if such market is not the principal trading market for the Ordinary Shares, then on the principal securities exchange or securities market on which the Ordinary Shares is then traded.
(i) “Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Ordinary Shares, any day on which the Ordinary Shares is traded on the Principal Market, provided that “Trading Day” shall not include any day on which the Ordinary Shares are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Ordinary Shares are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Ordinary Shares, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.
(j) “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
[Signature page follows]
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Ordinary Shares to be duly executed as of the Issuance Date set out above.
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
[Signature page to Warrant to Purchase Ordinary Shares]
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE ORDINARY SHARES
HUB CYBER SECURITY LTD.
The undersigned holder of the attached warrant (the “Warrant”) hereby exercises the right to purchase in respect of _________________ Ordinary Shares (“Warrant Shares”) of HUB Cyber Security Ltd., an Israeli company (the “Company”). The undersigned holder hereby represents that the issuance of the Warrant Shares will not cause the undersigned holder’s holdings in the Company’s Ordinary Shares to exceed the Maximum Percentage, as defined in Section 1(c) of the Warrant, based on the number of outstanding Ordinary Shares provided to the holder by the Company in writing.
Date: _______________ __, ______
| Name of Registered Holder |
| By: | |||
| Name: | |||
| Title: | |||
EXHIBIT B
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated number of Ordinary Shares.
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 4.63
LOAN AGREEMENT
This LOAN AGREEMENT (this “Agreement”),
dated as of February 4, 2025, by and between HUB Cyber Security Ltd., an Israeli company number 51-102937-3, having its principal
office at 2 Kaplan Street, Tel Aviv, Israel 6473403 (the “Borrower”) and Julestar LLC, a Delaware limited liability
company, having its principal office at 8002 Kew Gardens Rd, STE 307,
Kew Gardens, NY, United States 11415-3602 (the “Lender”).
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lender to make available for it a loan, and the Lender has agreed to the request of the Borrower under the terms and conditions set out herein; and
WHEREAS, in addition to the foregoing, in order to induce the Lender to provide the Loan and to accept the request of the Borrower, the Borrower has agreed to make certain representations, warranties and covenants hereinafter set forth, including, among others, to grant the Warrants (as defined in this Agreement) to the Lender or to the Initial Warrant Holders, and to accept the other terms, conditions and provisions hereinafter set forth; and
WHEREAS, the Borrower and the Lender are executing and delivering this Agreement in reliance upon an exemption from securities registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), afforded by the provisions of Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated thereunder by the U.S. Securities and Exchange Commission (the “SEC”).
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Borrower and the Lender agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Definitions. In addition to the terms defined above, the following terms, as used herein, shall have the meanings set forth below:
(a) “Affiliate” shall mean any Person that, directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with a Person.
(b) “Agreement” or “Loan Agreement” shall mean this Agreement and any and all schedules thereto, as amended or otherwise modified from time to time.
(c) “Board of Directors” means the board of directors of the Borrower.
(d) “Business Day” shall mean any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York or the State of Israel are authorized or required by law or other governmental action to close.
(e) “Bankruptcy Event” shall mean any of the following events: (i) the Borrower or any Subsidiary thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, stay proceeding, insolvency or liquidation or similar law of any jurisdiction (including, among others, Insolvency and Financial Rehabilitation Law 5778-2018) relating to the Borrower or any Subsidiary thereof, (ii) there is commenced against the Borrower or any Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (iii) the Borrower or any Subsidiary thereof is adjudicated insolvent or bankrupt or in stay proceeding or order to commence proceeding (צו פתיחת הליכים) or any similar order of relief or other order approving any such case or proceeding is entered, (iv) any appointment of any custodian, trustee, receiver, administrator, settlement manager or the like (whether in a temporary position or other position) for Borrower or any Subsidiary thereof or any substantial part of Borrower’s or any Subsidiary’s property that is not discharged or stayed within 60 calendar days after such appointment, (v) the Borrower or any Subsidiary thereof makes a general assignment for the benefit of creditors, (vi) the Borrower or any Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (viii) the Borrower or any Subsidiary thereof admits in writing that it is generally unable to pay its debts as they become due, (ix) the Borrower or any Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
(f) “Change of Control Transaction” means the occurrence after the date hereof of any of: (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Borrower, by contract or otherwise) of in excess of 50% of the voting securities of the Borrower (other than by means of conversion of Note), (ii) the Borrower or its significant Subsidiaries merges into or consolidates with any other Person, or any Person merges into or consolidates with the Borrower or its significant Subsidiaries and, after giving effect to such transaction, the stockholders of the Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of the Borrower or the successor entity of such transaction or less than 50% of the equity of its significant Subsidiaries, (iii) the Borrower sells or transfers all or substantially all of its assets or the assets of its Subsidiaries to another Person and the stockholders of the Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (iv) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors as of the Closing Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (v) the execution by the Borrower of an agreement to which the Borrower is a party or by which it is bound, providing for any of the events set forth in clauses (i) through (iv) above.
(g) “Closing” means the closing of the transactions contemplated by this Agreement pursuant to SECTION 3.01.
(h) “Closing Date” means the Business Day when all of the Loan Documents have been executed and delivered by the applicable parties thereto, and conditions precedent to: (i) the Lender’s obligations to fund the Loan, and (ii) the Borrower’s obligations to deliver the Note and the other Loan Documents have been satisfied or waived by the Lender.
(i) “Comsec” means Comsec Ltd., an Israeli company (company number 511187304).
(j) “Contingent Obligation” means, with respect to any Loan Party any obligation of such Loan Party guaranteeing or intended to guarantee any Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Loan Party of the obligation of a primary obligor, (b) the obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement, and (c) any obligation of such Loan Party, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term “Contingent Obligation” shall not include any product warranties, indemnification obligations or agreements to pay liquidated damages extended in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation with respect to which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto (assuming such Loan Party is required to perform thereunder), as determined by such Loan Party in good faith.
(k) “Control” shall have the meaning assigned to such term by the Israeli Securities Act of 1968 (the “Israeli Securities Act”).
(l) “Dollars” or “$” refers to lawful money of the United States of America.
(m) “Flow of Funds Agreement” shall mean the agreement in the form of Exhibit A annexed hereto executed by the Borrower and the Lender directing the payment of the Funding Amount, less the amount of the Lender’s expenses set forth in SECTION 3.05.
(n) “Funding Amount” shall mean, with respect to the Loan, US$2,650,000 (two million six hundred fifty thousand Dollars), being eighty-five percent (85%) of the Principal Amount (as defined under SECTION 2.02. The Funding Amount for the Loan takes into account the Origination Fee (as defined under SECTION 2.02), which shall be retained by the Lender at Closing of the Loan for its own account.
(o) “Event of Default” shall mean any Event of Default set forth in ARTICLE VII.
(p) “Governmental Authority” means the government of the State of Israel or the United States of America or any political subdivision of any of them, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central Lender or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
(q) “Indebtedness” shall mean with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables and accrued expenses or other accounts payable incurred in the ordinary course of such Person’s business); (c) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or upon which interest payments are customarily made; (d) all reimbursement, payment or other obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreement with respect to property used and/or acquired by such Person, even though the rights and remedies of the lessor, seller and/or lender thereunder may be limited to repossession or sale of such property, (e) all capitalized lease obligations of such Person; (f) all obligations and liabilities, contingent or otherwise, of such Person, in respect of letters of credit, acceptances and similar facilities, other than obligations and liabilities that are cash collateralized on terms reasonably satisfactory to the applicable bank; (g) all net obligations and liabilities, calculated on a basis reasonably satisfactory to the Lender and in accordance with accepted practice, of such Person under Hedging Agreements; (h) all monetary obligations under any receivables factoring, receivable sales or similar transactions and all monetary obligations under any synthetic lease, tax ownership/operating lease, off-balance sheet financing or similar financing; (i) all Contingent Obligations; and (j) all obligations referred to in clauses (a) through (i) of this definition of another Person secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien upon property owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, provided, however that if recourse in respect of any Indebtedness of the foregoing is limited to specific assets, then such Indebtedness shall be deemed to be equal to the lesser of (x) the aggregate unpaid amount of such Indebtedness and (y) the fair market value of the asset encumbered thereby as determined by such Person in good faith; provided further, that Indebtedness shall not include (i) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase price of an asset to satisfy warranties or other unperformed obligations of the seller of such asset, (ii) endorsements of checks or drafts arising in the ordinary course of business, and (iii) any earnout or similar purchase price obligation until such obligation is required to be reflected on the balance sheet of such Person in accordance with IFRS. The Indebtedness of any Person shall include the Indebtedness of any partnership of or joint venture in which such Person is a general partner or a joint venturer, so long as, in the case of a joint venture, such Indebtedness is recourse to any Loan Party. For the avoidance of doubt, “Indebtedness” shall exclude operating leases.
(r) “Interest Payment Date” shall mean the due date of each payment of principal of the Loan pursuant to SECTION 2.04(a).
(s) “Lien” shall mean with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
(t) “Loan Documents” shall mean collective reference to this Agreement, the Note, the Subsidiary Guarantee, the Security Agreement, the Registration Rights Agreement, the Warrants, the Transfer Agent Instructions, and all other appendices, exhibits and schedules hereto and thereto and any other documents or agreements executed in connection with any of the foregoing agreements or the transactions contemplated hereunder.
(u) “Loan Parties” shall mean the Borrower and its Existing Subsidiaries.
(v) “Material Adverse Effect” shall mean (a) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Borrower and each of its Subsidiaries or any of their respective material assets or lines of business, individually; provided, however, that “Material Adverse Effect” under this clause (a) shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions, (ii) conditions generally affecting the industry in which the Borrower or any Existing Subsidiary operates, (iii) any changes in financial or securities markets in general, (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof, (v) any pandemic, epidemics or human health crises (including COVID-19), (vi) any changes in applicable laws or accounting rules; provided further, however, that any such event, occurrence, fact, condition, or change of clause (i) through (v), shall be excluded from a Material Adverse Effect, only to the extent that it does not have a disproportionate effect on the Borrower or any Subsidiary, relative to other companies operating in the same industry, (vii) the announcement, pendency or completion of the transactions contemplated by the Loan Documents; or (b) a material adverse effect on the legality, validity or enforceability of any Loan Document; or (c) an adverse effect on the Borrower’s or any of its Subsidiaries’ ability to perform on a timely basis its obligations under any Loan Document.
(w) “Maturity Date” shall mean the date which is 10 months from the Closing Date.
(x) “Minimum Market Capitalization and Volume Trading Requirement” shall mean the requirement that (a) the total value of the outstanding Ordinary Shares of the Borrower, as traded on the Principal Market or other trading market (the “Market Capitalization”) over any ten consecutive Trading Days shall be not less than $8,000,000, and (b) the average daily trading volume of the Ordinary Shares, as traded on the Principal Market or other trading market over any ten consecutive Trading Days shall be not less than 350,000 Ordinary Shares.
(y) “Note” shall mean the promissory note of the Borrower, delivered pursuant to SECTION 2.03.
(z) “Ordinary Shares” shall mean the ordinary shares, no par value per share, of the Borrower and any other class of securities into which such securities may hereafter be reclassified or changed.
(aa) “Ordinary Shares Equivalent” shall mean any convertible security or warrant, option or other right to subscribe for or purchase any additional Ordinary Shares or any Ordinary Shares Equivalent.
(bb) “Permitted Indebtedness” shall mean the collective reference to (a) the Senior Indebtedness, (b) the unsecured Indebtedness of the Borrower outstanding on the date hereof as reflected on Schedule 4.17 of the Borrower Disclosure Schedule, (c) a basket of unsecured Indebtedness to be taken following the Closing Date in up to an aggregate amount of $7,000,000 (provided that any such additional Indebtedness shall be used to repay the Loan and any accrued and unpaid interest and payments due under the Loan Documents in full immediately upon closing of such additional Indebtedness if required by SECTION 6.04), (d) intercompany Indebtedness, and (e) any Indebtedness used to repay the Note and the other Loan Documents in full.
(cc) “Permitted Liens” shall mean:
(i) Liens securing the payment of taxes, assessments or other governmental charges or levies either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to a Loan Party, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien and with respect to which adequate reserves have been set aside on its books in accordance with IFRS;
(ii) non-consensual statutory Liens (other than Liens arising under ERISA or securing the payment of taxes) arising in the ordinary course of a Loan Party’s business that do not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s, materialmen’s, landlords’, workmen’s, suppliers’, repairmen’s, mechanics’ and growers’ Liens up to an aggregate amount of US$ 500,000 and solely, to the extent : (i) such Liens do not in the aggregate materially detract from the value of the property of a Loan Party and do not materially impair the use thereof in the operation of a Loan Party, (ii) such Liens secure Indebtedness which is not overdue or is fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to a Loan Party, in each case prior to the commencement of foreclosure or other similar proceedings, which proceedings (or orders entered in connection with such proceeding) have the effect of preventing the forfeiture or sale of the property subject to any such Lien and with respect to which adequate reserves have been set aside on its books in accordance with IFRS;
(iii) security interests in equipment arising after the date hereof to secure Permitted Indebtedness, whether such Indebtedness is assumed or incurred by a Loan Party;
(iv) pledges and deposits of cash by a Loan Party after the date hereof in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security benefits consistent with the current practices of such Loan Party as of the date hereof;
(v) pledges and deposits of cash by a Loan Party after the date hereof to secure the performance of tenders, bids, leases, trade contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations in each case in the ordinary course of business consistent with the current practices of such Loan Party as of the date hereof up to an aggregate amount of US$ 1,000,000;
(vi) Liens arising from (i) operating leases and the precautionary UCC financing statement filings in respect thereof and (ii) equipment or other materials which are not owned by a Loan Party located on the premises of a Loan Party (but not in connection with, or as part of, the financing thereof) from time to time in the ordinary course of business and consistent with current practices of such Loan Party and the precautionary UCC financing statement filings in respect thereof; (vii) statutory or common law Liens or rights of setoff of depository banks with respect to funds of a Loan Party at such banks to secure fees and charges in connection with returned items or the standard fees and charges of such banks in connection with the deposit accounts maintained by a Loan Party at such banks (but not any other Indebtedness or obligations);
(viii) judgments and other similar Liens arising in connection with court proceedings that do not constitute an Event of Default, provided, that, (i) such Liens are being contested in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other appropriate provision, if any, as are required by IFRS have been made therefor, (iii) a stay of enforcement of any such Liens is in effect and (iv) Agent may establish a reserve with respect thereto up to an aggregate amount of US$ 500,000;
(ix) leases or subleases of real property granted by a Loan Party in the ordinary course of business and consistent with current practices of such Loan Party to any Person so long as any such leases or subleases do not interfere in any material respect with the ordinary conduct of the business of such Loan Party as presently conducted thereon;
(x) Liens on goods in favor of customs and revenue authorities arising as a matter of law to secure custom duties in connection with the importation of such goods; and
(xi) existing Liens set forth on Section 4.14 of the Borrower Disclosure Schedule.
(dd) “Person” shall mean any natural person, limited liability company, corporation, business trust, joint venture, association, company, partnership or government, or any agency or political subdivision thereof.
(ee) “Principal Market” means the Nasdaq Global Market or the Nasdaq Stock Exchange.
(ff) “Proceeding” shall mean an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
(gg) “Qpoint Subsidiaries” means, collectively, (i) Qpoint Technologies Ltd, (ii) Aginix Engineering and Project Management Ltd, (iii) Integral Telemanagement Services Ltd; (iv) Sensecom Consulting and Projects Management Ltd.; and (v) Qpoint Solutions Ltd.
(hh) “Record” shall mean the record, including computer records, maintained by the Lender with respect to the Loan.
(ii) “Security Agreement” means the Pledge Debenture, in the form of Exhibit B attached hereto.
(jj) “Senior Indebtedness” shall mean the Indebtedness secured by liens and security interest on the assets of the Borrower and any of its Subsidiaries, as disclosed on Schedule 4.17 of the Borrower Disclosure Schedule.
(kk) “Senior Lender” as such term is defined in on Schedule 4.17 of the Borrower Disclosure Schedule.
(ll) “Subsidiary” shall mean all existing subsidiaries of the Borrower as set forth and listed in Section 4.01 of the Borrower Disclosure Schedule (the “Existing Subsidiaries”) and shall, where applicable, include any direct or indirect subsidiary of the Borrower formed or acquired after the date hereof.
(mm) “Subsidiary Guarantee” shall mean the Subsidiary Guarantee to be executed by each Subsidiary of the Borrower, other than the Qpoint Subsidiaries and Comsec, substantially in the form of Exhibit C, attached hereto.
(nn) “taxes” shall mean all present and future taxes, levies, withholdings, impost duties, stamp duties, deductions, fees or charges of whatever nature together with interest thereon and penalties in respect thereof imposed, levied or made within or by any applicable jurisdiction or governmental authority;
(oo) “Trading Day” shall mean a day on which shares trade on Nasdaq Stock Market LLC.
(pp) “Warrants” shall mean the five-year warrants in the form of Exhibit D hereto entitling the Lender or the Initial Warrant Holders to purchase in the aggregate 5,300,000 (five million three hundred thousand) Ordinary Shares of the Borrower (the “Initial Warrant Shares”), as such number may be increased in accordance with the terms of this Agreement and/or the Warrants (including, among others, to reflect the Additional Warrant Shares (if any) and such adjustments as result of stock dividends, splits, reclassification and other events); which each Warrant shall (i) contain customary adjustment provisions including full rachet anti-dilution adjustments, and (ii) for each holder of Warrants, cashless exercise provisions with respect to the exercise by such holder of Warrant Shares up and until that holder exercises 50% of the Warrant Shares of such holder’s Warrants.
(qq) “Warrant Shares” shall mean the number of Ordinary Shares issuable upon exercise of the Warrant, including the Initial Warrant Shares and the Additional Warrant Shares.
SECTION 1.02. Accounting Terms; Consolidation. Except as otherwise specifically provided in this Agreement, each accounting term used in this Agreement shall have the meaning given to it under IFRS.
SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
ARTICLE II. THE TERM LOAN
SECTION 2.01. The Loan. Subject to the terms and conditions hereof, including without limitation, SECTION 2.02 below, the Borrower hereby agrees to borrow from the Lender, and the Lender, relying upon the representations and warranties and covenants contained in this Agreement, hereby agrees to make available to the Borrower, at the Closing, a loan in the principal amount (subject to SECTION 2.02. ) of US$3,117,647 (three million one hundred seventeen thousand six hundred forty seven Dollars) (the “Principal Amount” or the “Loan”).
SECTION 2.02. Original Issue Discount. Notwithstanding any other provision contained in this Agreement to the contrary, the Principal Amount shall bear a one-time fixed origination and processing fee due from the Borrower to the Lender in an amount equal to US$467,647 (four hundred sixty seven thousand six hundred forty seven Dollars) (the “Origination Fee”). The Origination Fee shall be deducted at the source from the Principal Amount, resulting in the Funding Amount to be provided by the Lender to the Borrower at the Closing. The full Principal Amount of the Loan, including the Origination Fee, shall be due and payable by the Borrower to the Lender in accordance with this Agreement, including SECTION 2.04 below. The Borrower acknowledges and agrees that the repayment obligation and interest thereon include the Origination Fee, and the Borrower agrees to repay the full Principal Amount (with the Origination Fee), and interest thereon as specified in this Agreement.
SECTION 2.03. Note. The Loan shall be evidenced by a promissory note of the Borrower in the form of Exhibit E attached hereto (the “Note”), appropriately completed, dated as of the Closing Date, duly executed and delivered on behalf of the Borrower and payable to the order of the Lender in the Principal Amount, plus interest accrued thereon, as set forth in this Agreement. The outstanding amount of the Loan set forth on the Lender’s Record shall be prima facie evidence absent manifest error of the principal amount thereof owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on the Lender’s Record shall not limit or otherwise affect the obligations of Borrower hereunder or under the Note to make payments of principal of or interest on the Note when due. In case of the loss, theft or destruction of the Note as notified by the Lender to the Borrower, upon delivery of an affidavit thereof by the Lender, or, in the case of any mutilation of the Note, upon surrender and cancellation of the Note, Borrower will execute and deliver, in lieu thereof, a replacement Note, identical in form and substance to the Note and dated as of the date of the Note and upon such execution and delivery all references in the Loan Documents to such Note shall be deemed to refer to such replacement Note.
SECTION 2.04. Repayment of the Loan.
(a) The Borrower shall repay the Loan to the Lender as follows: (i) on the date which is fourteen (14) days of the Closing, an amount of US$ 155,882.35 (one hundred fifty five thousand eight hundred eighty two Dollars and thirty five cents); and (ii) on the date which is twenty eight (28) days of the Closing, an amount of US$ 155,882.35 (one hundred fifty five thousand eight hundred eighty two Dollars and thirty five cents); and (iii) beginning on the fifth week anniversary following the Closing Date, the remaining Principal Amount shall be repaid in 36 consecutive weekly anniversary installments, each in the amount of US$ 77,941.18 (seventy seven thousand nine hundred forty one Dollars and eighteen cents); provided, that if any such day is not a Business Day, such principal shall be payable on the next succeeding Business Day with additional accrued interest until paid. Without derogating from the foregoing, on the Maturity Date, the entire outstanding Principal Amount shall become immediately due and payable. Weekly anniversary means the same day of the week in each subsequent week.
(b) In the event that the outstanding principal amount of the Loan, any accrued and unpaid interest thereon, and any other amounts owed by the Borrower to the Lender under this Agreement and the other Loan Documents have not been paid in full within ninety (90) days following the Closing Date (the “Early Repayment Deadline” and the “Non-Early Payment Event”, respectively), the number of Warrant Shares under the Warrant shall automatically be increased, for no additional consideration, by an additional number of Warrant Shares equal to (i) the total outstanding balance of the Loan as of the Early Repayment Deadline (including all unpaid Principal Amount (including the Origination Fee), accrued and unpaid interest, and any other amounts due under this Agreement) divided by (ii) the Additional Warrant Shares Exercise Price (the “Additional Warrant Shares”), and the exercise price under the Warrants for those Additional Warrant Shares will be the Additional Warrant Shares Exercise Price. If the calculation of Additional Warrant Shares Exercise Price pursuant to this Section 2.04(b) results in an exercise price above the Ceiling Price, the Additional Warrant Shares Exercise Price shall be set at the Ceiling Price. For purpose of this Agreement, “Additional Warrant Shares Exercise Price” shall equal to the greater of: (i) fifty percent (50%) of the lowest average closing Trading Price of the Borrower’s Ordinary Shares for any ten (10) consecutive Trading Day period from the Closing Date to the Early Repayment Deadline; and (ii) nineteen cents ($0.19); provided, however, that in no event shall the Additional Warrant Shares Exercise Price exceed $0.50 per share (the “Ceiling Price”).
For illustrative purposes only, and without limiting the actual calculation to be performed if this provision is triggered, the following examples demonstrates the mechanics of this provision: (1) assuming outstanding loan balance (including all unpaid principal amount, accrued and unpaid interest, and any other amounts due under this Agreement) of $3,000,000 and the lowest average 10-day trading price between the Closing Date and the Early Repayment Deadline is $0.40, then the number of Additional Warrant Shares will be 15,000,000 (= $3,000,000 ÷ $0.20) and the Additional Warrant Shares Exercise Price shall be $0.2 (=50% of $0.40 which is higher than $0.19); or (2) assuming outstanding loan balance (including all unpaid principal amount, accrued and unpaid interest, and any other amounts due under this Agreement) of $3,000,000 and the lowest average 10-day trading price between the Closing Date and the Early Repayment Deadline is $2.50, then the number of Additional Warrant Shares will be 6,000,000 (= $3,000,000 ÷ $0.50) and the Additional Warrant Shares Exercise Price shall be $0.5 (=50% of $2.5 which is higher than the Ceiling Price and accordingly the Additional Warrant Shares Exercise Price will be $0.50).
For the avoidance of any doubt, the failure of the Borrower to repay the Loan and all accrued interest thereon by the Early Repayment Deadline, without failing to pay any amount required to be paid pursuant to this Agreement until the Early Repayment Deadline, shall not be considered an Event of Default and shall not result in a higher interest rate.
SECTION 2.05. Interest Rate.
(a) Commencing on the date hereof, interest shall accrue daily on the Principal Amount at the per annum rate equal to 10% (ten percent), as such rate may be increased pursuant to the provisions of SECTION 2.06 and/or SECTION 7.03 below.
(b) Accrued interest on the Loan shall be payable in arrears on each Interest Payment Date; provided that (i) default interest accrued pursuant to SECTION 2.06 and/or SECTION 7.03. shall be payable on demand, and (ii) in the event of any repayment or prepayment of the Loan, accrued interest on the Principal Amount repaid or prepaid shall be payable on the date of such repayment or prepayment.
(c) All interest hereunder shall be computed on the basis of a year of 360 days, and shall be payable for the actual number of days elapsed. The Borrower acknowledges that such calculation method will result in a higher yield to the Lender than a method based on a year of 365 or 366 days.
SECTION 2.06. Overdue Interest. Any overdue unpaid Principal Amount or interest payment by more than five (5) Business Days shall bear interest for each day that such amounts are overdue, commencing from the sixth Business Day, at a rate equal to eighteen percent (18%) per annum. The payment of any such interest shall not cure any Event of Default or justify any delay in payment of any amount due to the Lender hereunder or under any Loan Document upon its due date.
SECTION 2.07. Prepayment of Loan.
(a) The unpaid principal amount of the Loan may, at any time and from time to time, be voluntarily paid or prepaid in whole or in part, without penalty, provided that, with respect to any voluntary prepayment, (i) each such prepayment shall be in the minimum amount of US$ 100,000 (one hundred thousand Dollars), and (ii) the Lender shall have received written notice of any prepayment by 12:00 noon, New York local time one (1) Business Day before the date of such prepayment, which notice shall be irrevocable and identify the date and amount of the prepayment, and (iii) any prepayment shall be accompanied by a prepayment equal to the entire amount of interest accrued up to (and including) the date of such prepayment. The Lender shall not be obligated to accept any prepayment unless it is accompanied by such payment of interest. The Borrower shall not be entitled to re-borrow from the Lender any amount repaid or prepaid by the Borrower on account of the Loan and/or the Note. In addition, the Borrower must make prepayments to the Lender as required under SECTION 6.04.
(b) In the event that the outstanding Principal Amount of the Loan, any accrued and unpaid interest thereon, and any other amounts owed by the Borrower to the Lender under this Agreement and the other Loan Documents have been paid in full within fifteen (15) days following the Closing Date, the unpaid Principal Amount shall be reduced by an amount equal to US$155,882.33 (one hundred fifty five thousand eight hundred eighty two Dollars and thirty three cents), without affecting any interest or other payments made by the Borrower to the Lender under the Loan prior to such repayment; and (ii) as set forth in the Warrants, the number of Initial Warrant Shares shall be reduced by 50%.
(c) In the event that the outstanding Principal Amount of the Loan, any accrued and unpaid interest thereon, and any other amounts owed by the Borrower to the Lender under this Agreement and the other Loan Documents have been paid in full within thirty (30) days following the Closing Date, (i) the unpaid Principal Amount shall be reduced by an amount equal to US$ 93,529.40 (ninety three thousand five hundred twenty nine Dollars and forty cents), without affecting any interest or other payments made by the Borrower to the Lender under the Loan prior to such repayment; and (ii) as set forth in the Warrants, the number of Initial Warrant Shares shall be reduced by 30%.
(d) In the event that the outstanding Principal Amount of the Loan, any accrued and unpaid interest thereon, and any other amounts owed by the Borrower to the Lender under this Agreement and the other Loan Documents have been paid in full within sixty (60) days following the Closing Date, as set forth in the Warrants, the number of Initial Warrant Shares shall be reduced by 15%.
SECTION 2.08. Funds; Manner of Payment. Unless otherwise specified herein, each payment and prepayment of principal of and interest on the Note and/or on account of the Loan shall be made not later than noon (New York City time) on the date on which it is payable and shall be made in U.S. Dollars in immediately available funds. Any payment made after noon (New York City time) of a certain Business Day shall be deemed to be made on the proceeding Business Day. Any payment received by the Lender shall be applied as follows: (a) first, to the payment of any and all reasonable costs, fees and expenses incurred by or payable to the Lender in connection with the Loan, the collection of amounts payable to the Lender or the enforcement of the Lender’s rights; (b) second, to the payment of default interest accrued pursuant to SECTION 2.06 and/or SECTION 7.03; (c) third, to the payment of all accrued and unpaid interest hereunder; and (d) fourth, to the payment of the unpaid principal balance of the Loan, or in any other manner which the Lender may, in its sole discretion, elect from time to time.
SECTION 2.09. Use of Proceeds; Restrictions on Certain Payments. The Borrower shall use the net proceeds from the sale of the Note hereunder only to: (a) pay the fees and expenses related to the sale of the Note, (b) to repay Indebtedness as permitted pursuant to this Agreement, and (c) for general working capital purposes. Until all obligations owed to the Lender under the Note shall have been paid in full, the Borrower may not use such proceeds: (i) for the satisfaction of any other portion of the Borrower’s Indebtedness (other than (x) payment to of accrued interest on Permitted Indebtedness, (y) the payment of the weekly installments to the Lender under the Note, or (z) the payment of trade payables in the ordinary course of the Borrower’s business and prior practices); (ii) for the redemption of any Ordinary Shares or Ordinary Shares Equivalents; (iii) in violation of FCPA or OFAC regulations; or (iv) to lend, give credit or make advances to any officers, directors, employees or Affiliates of the Borrower.
SECTION 2.10. Priority. The repayment of the Loan (including the interest accrued on the Principal Amount and any other amounts owed by the Borrower to the Lender under the Loan Documents) by Borrower shall be prior to any payments or other distributions in any form by Borrower to its shareholders with respect to such shareholders’ equity interests in Borrower or shareholder loans and prior to any payments of bonuses, management fees, salaries, loans, or other amounts to Borrower’s directors and officers (other than payment to the Borrower’s directors and officers as set forth in the latest SEC filing reports of the Borrower or otherwise pursuant to their respective contractual engagement or employment terms as in effect as of January 1, 2025 and for officers hired thereafter pursuant to the terms approved by the Borrower’s compensation committee and board of directors thereafter).
SECTION 2.11. Taxes. (a) With respect to any payments to Lender under this Agreement which are subject to VAT payment under applicable law, the Borrower shall bear any VAT required by applicable law, and the amount of the payment due from the Borrower to the Lender shall equal to the payment which would have been due if no VAT payment had been required; (b) All payments made by the Borrower to the Lender under this Agreement shall be made in full, without set-off or counterclaim and free and clear of, and without any deduction or withholding; and (c) notwithstanding subsection (b) above, Borrower shall be entitled to withhold tax with respect to the cash interest payment under the Loan Agreement as required by applicable Israeli law in accordance with the Convention between the Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income.
ARTICLE III. CLOSING
SECTION 3.01. Closing.
(a) On the Closing Date, upon the terms and subject to the conditions set forth herein and in the other Loan Documents to be executed and delivered by the parties hereto and thereto, the Borrower will issue to the Lender the Note and the Lender agrees to accept from the Borrower the Note.
(b) At the Closing, the Lender shall deliver to the Borrower, via wire transfer, of immediately available funds, an amount equal to the Funding Amount, less the amount of the Lender’s expenses set forth in SECTION 3.05..
(c) On the Closing Date, the Borrower will issue to each Initial Warrant Holder a Warrant to purchase a portion of the Initial Warrant Shares as set forth opposite the name of that Initial Warrant Holder in Lender’s Warrant Notice.
(d) The Borrower shall deliver to the Lender the Note and other Loan Documents to be delivered as of the Closing Date, on behalf of the Borrower and its Subsidiaries, and the Lender shall deliver the other items set forth in SECTION 3.02. at the Closing.
(e) Upon satisfaction of the conditions set forth SECTION 3.02 and SECTION 3.03, the Closing shall occur at the offices of the Lender’s counsel, or such other location as the parties shall mutually agree or may be closed remotely by electronic delivery of documents.
(f) As requested by the Lender, the Warrants shall be issued to members of the Lenders as shall be instructed by the Lender in writing prior to the Closing (the “Initial Warrant Holders”) (in lieu of the Lender) with each Warrant entitling an Initial Warrant Holder to purchase a portion of the Initial Warrant Shares as set forth opposite the name of that Initial Warrant Holder in such Lender’s written notice (“Lender’s Warrant Notice”) (as such number may be increased or decreased in accordance with the terms of this Agreement and/or the Warrant (including, among others, to reflect the Additional Warrant Shares (if any) and such adjustments as result of stock dividends, splits, reclassification and other events).
SECTION 3.02. Closing Deliverables.
(a) By Lender. On or prior to the Closing Date, the Lender shall deliver or cause to be delivered to the Borrower the following:
(i) this Agreement duly executed by the Lender;
(ii) Registration Rights Agreement in the form of Exhibit F attached hereto, duly executed by the Lender (the “Registration Rights Agreement”);
(iii) the Funding Amount, less the amount of the Lender’s expenses set forth in SECTION 3.05, by wire transfer to the Borrower, pursuant to the wiring instructions set forth in the Flow of Funds Agreement;
(iv) the Flow of Funds Agreement duly executed by the Lender;
(v) Transfer Agent Instructions confirmed by Lender and in the form of Exhibit G attached hereto (the “Transfer Agent Instructions”); and
(vi) a letter to the Borrower containing representations and warranties similar to those of the Lender in Article V, executed by each Initial Warrant Holder, in the form of Exhibit H attached hereto.
(b) By the Borrower. On or prior to the Closing Date, the Borrower shall deliver or cause to be delivered to the Lender (or to the Initial Warrant Holders regarding clause (v) below):
(i) this Agreement, duly executed by an authorized officer of behalf of the Borrower;
(ii) the Note, registered in the name of the Lender, duly executed by an authorized officer on behalf of the Borrower;
(iii) the Subsidiary Guarantee, the form of which is attached hereto as Exhibit C, duly executed by an authorized officer on behalf of the Borrower and each applicable Subsidiary;
(iv) the Security Agreement, the form of which is attached hereto as Exhibit B, duly executed by an authorized officer on behalf of the Borrower and each Subsidiary;
(v) the Warrants, duly executed by an authorized officer on behalf of the Borrower and registered in the name of the respective Initial Warrant Holders;
(vi) the Registration Rights Agreement duly executed by the Borrower;
(vii) The Transfer Agent Instructions duly executed by the Borrower and the Transfer Agent;
(viii) the Flow of Funds Agreement duly executed by the Borrower; and
(ix) an officer’s certificate of the Borrower (to which the following documents are attached) certifying Borrower’s: (A) Memorandum of Association; (B) Articles of Association; (C) certificate of existence in its country of incorporation; (D) resolutions of Board of Directors (i) approving and authorizing the execution, delivery and performance of the Loan Documents to which the Borrower is (or is to be) a party and all transactions contemplated by the Loan Documents; and (ii) approving that all necessary actions and approvals on the part of the Borrower with respect the execution, delivery and performance of the Loan Documents to which the Borrower is (or is to be) a party and all transactions contemplated by the Loan Documents (including, among others, the Loan, the Note, the grant of the Warrants and the issuance of the Warrant Shares) have been duly obtained and no further action is required by the Borrower, or the Board of Directors or the shareholders of the Borrower in connection therewith; and (E) resolutions of board of directors of the applicable Subsidiaries approving and authorizing the execution, delivery and performance of the Loan Documents to which that Subsidiary is (or is to be) a party, including, among others, the guarantee provided by that Subsidiary to the Lender pursuant to the Subsidiary Guarantee.
SECTION 3.03. Closing Conditions.
(a) The obligations of the Borrower hereunder in connection with the Closing are subject to the following conditions being met (it being understood that the Borrower may waive any of the conditions for any Closing hereafter by writing notice to the Lender):
(i) the accuracy in all material respects on the Closing Date of the Lender’s representations and warranties contained herein;
(ii) all obligations, covenants and agreements of the Lender required to be performed at or prior to the Closing Date shall have been performed; and
(iii) the delivery by the Lender of the items set forth in SECTION 3.02. (a) of this Agreement.
(b) The obligations of the Lender hereunder in connection with the Closing are subject to the following conditions being met (it being understood that the Lender may waive any of the conditions for any Closing hereafter by writing notice to the Borrower):
(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Borrower contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of the Borrower and its Subsidiaries required to be performed at or prior to the Closing Date shall have been performed;
(iii) the delivery by the Borrower, on behalf of the Borrower and its Subsidiaries, of the items set forth in SECTION 3.02.(b) of this Agreement;
(iv) there shall have been no Material Adverse Effect with respect to the Borrower or any Subsidiary of the Borrower since the date hereof; and
(v) no Event of Default shall have occurred and be continuing, and no Event of Default shall be reasonably expected to occur based on concrete evidence.
(c) On a date which shall be not later than the sixtieth (60th) following the Closing Date, the Company shall either (i) repay the Senior Lender’s loan to the Borrower (including any accrued and unpaid interest and any other secured obligations toward the Senior Lender) in full and deliver to the Lender the written confirmation of the Senior Lender of such repayment or (ii) obtain the consent of the Senior Lender to create and register the pledges pursuant to the Security Agreement (the “Senior Lender Consent”).
(d) The wiring instructions for the Borrower shall be as set forth in the Flow of Funds Agreement.
SECTION 3.04. Perfection of Collateral.
(a) On a date which shall be not later than ten (10) days following the earlier to occur of the repayment of the Senior Lender’s Indebtedness, as contemplated by Section 3.03(c), or the receipt of the Senior Lender Consent (the “Perfection Deadline”), the Borrower shall, at its own expense, file with the Israeli Registrar of Companies, a pledge registration document (“Tofes 10”) for the registration of a second-priority pledge for the benefit of the Lender on the shares of all the Subsidiaries held directly or indirectly by the Borrower, other than the Qpoint Subsidiaries, Comsec and its subsidiaries and BlackSwan Technologies, Inc. and its subsidiaries (the “Collateral”), and register and record (or cause to be filed, registered, and recorded) the Security Agreement and the Collateral and all other documents necessary to create, perfect, and maintain the security interest granted therein to the Lender with the Israeli Companies Registrar and any and all other relevant Governmental Authorities and registries as required by applicable law to ensure the validity, enforceability, and priority of the Lender’s security interest in the pledged shares under the Security Agreement. The Borrower shall provide the Lender with satisfactory evidence of all such filings, registrations, and recordings, including copies of all relevant documents and confirmation of acceptance or registration from the Governmental Authorities and registries, including, the Israeli Companies Registrar, no later than five (5) Business Days following the Perfection Deadline.
(b) Within one (1) Business Day after the date on which the Senior Lender’s loan to the Borrower (including any accrued and unpaid interest and any other secured obligations toward the Senior Lender) has been paid in full, the pledge on the Collateral shall be automatically upgraded to a first-priority pledge for the benefit of the Lender in the Collateral (“Upgraded Pledge” and the “Pledge Upgrade Date”, respectively). Within five (5) Business Days of the Pledge Upgrade Date, the Borrower shall, at its own expense, file with the Israeli Registrar of Companies, a pledge registration document (“Tofes 10”) for the registration of the Upgraded Pledge, and register and record (or cause to be filed, registered, and recorded) the updated Security Agreement and the Upgraded Pledge and all other documents necessary to create, perfect, and maintain the security interest granted therein to the Lender with the Israeli Companies Registrar and any and all other relevant Governmental Authorities and registries as required by applicable law to ensure the validity, enforceability, and priority of the Lender’s security interest in the Collateral under the updated Security Agreement and the Upgraded Pledge. The Borrower shall provide the Lender with satisfactory evidence of all such filings, registrations, and recordings, including copies of all relevant documents and confirmation of acceptance or registration from the Governmental Authorities and registries, including, the Israeli Companies Registrar, no later than eight (8) Business Days following the Pledge Upgrade Date.
(c) If the Borrower fails to complete the required filings, registrations, and recordings by the Perfection Deadline or within five Business Days of the Pledge Upgrade Date, as the case may be, such failure shall constitute an Event of Default under this Agreement.
SECTION 3.05. Fees and Expenses. At the Closing, the Borrower shall reimburse the Lender for all reasonable and documented out-of-pocket fees and expenses of the Lender in connection with the with the negotiation, preparation, execution, delivery and performance of the Loan Documents and the transactions contemplated thereby, including fees and expenses of the Lender’s legal counsels in Israel and the United States, up to an aggregate amount of $100,000 plus value added tax, if applicable.
SECTION 3.06. Termination. This Agreement may be terminated by the Lender by written notice to the Borrower if the Closing has not been consummated on or before 5th Business Day after the date of the execution and delivery of this Agreement by both parties, and all rights and obligations of the parties under any Loan Document shall terminate and no party hereto shall have any liability to the other party hereto.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower represents and warrants to the Lender that:
SECTION 4.01. The names of all Existing Subsidiaries of the Borrower (including all United States and foreign Subsidiaries), their jurisdictions of formation, and the executive officers of each Subsidiary are set forth in Section 4.01 of the Borrower Disclosure Schedule.
SECTION 4.02. Organization and Qualification. The Borrower is duly incorporated or otherwise organized, validly existing and in good standing (to the extent such term applies) under the laws of Israel and each of its Existing Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing (to the extent such term applies) under the laws of their respective states of incorporation or countries of formation, each with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Borrower nor any of its Subsidiaries is in material violation or default of any of the provisions of its organizational or charter documents, each, as amended and in effect. A complete and correct copy of the memorandum and articles of association of the Borrower, each as amended and in effect on the date of this Agreement and as they will be in effect on the Closing Date, is attached to the officer’s certificate referenced in SECTION 3.02. (b)(ix). There are no other organizational or charter documents of the Borrower. The Borrower and each of its Existing Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect, and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
SECTION 4.03. Authorization; Enforcement. The Borrower and each of its Existing Subsidiaries have the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Loan Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Loan Documents by the Borrower and the consummation by it of the transactions contemplated hereby and thereby, including, among others, the Loan, the Note, the grant of the Warrants and the issuance of the Warrant Shares, the Subsidiary Guarantee and the Security Agreement, have been duly authorized by all necessary action on the part of the Borrower and its applicable Subsidiaries and no further action is required by the Borrower or any of its Subsidiaries, or by the Board of Directors or the shareholders of the Borrower or the board of directors or shareholders of any Subsidiary in connection therewith (other than the Required Approvals, as applicable). Each Loan Document to which the Borrower or a Subsidiary is a party has been (or upon delivery will have been) duly executed by the Borrower or that applicable Subsidiary, as the case may be, and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Borrower or that Subsidiary enforceable against the Borrower and that Subsidiary in accordance with their respective terms.
SECTION 4.04. No Conflicts. The execution, delivery and performance by the Borrower or a Subsidiary of the Loan Documents to which it is a party and the consummation by the Borrower and its Subsidiaries of the other transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Borrower’s or a Subsidiary’s certificate of organizational or charter documents; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Borrower or a Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, agreement or other instrument (evidencing Indebtedness of the Borrower or any Subsidiary, or otherwise) or other understanding to which the Borrower or any of its Subsidiaries is a party or by which any property or asset of the Borrower or any of its Subsidiaries is bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Borrower or any of its Subsidiaries is subject (including federal and State Securities Laws and regulations), or by which any property or asset of the Borrower or any of its Subsidiaries is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
SECTION 4.05. Filings, Consents and Approvals. The Borrower and the Subsidiaries are not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with their execution, delivery and performance of the Loan Documents, other than: (i) such consents, waivers, or authorizations as have been obtained before the Closing, including, among others the consents required under the Subsidiary Guarantee; (ii) the filing of Form D with the SEC, a Notice of Listing of Additional Shares with the Nasdaq Stock Market LLC and such filings as are required to be made under applicable federal and state securities laws all of which shall be made prior to Closing; and (iii) the Senior Lender Consent to create and register the pledge under the Security Agreement (collectively, the “Required Approvals”). The Borrower is not aware of any facts or circumstances that might prevent the Borrower from obtaining or effecting any of the registration, application or filings contemplated by the Loan Documents.
SECTION 4.06. Capitalization. The capitalization of the Borrower is as set forth in Section 4.06 of the Borrower Disclosure Schedule. Except as set forth in Section 4.06 of the Borrower Disclosure Schedule, since the date of the most recently filed SEC Report, the Borrower has not issued any Ordinary Shares, Ordinary Shares Equivalents or other equity interests (other than Exempt Issuances) or (without duplication) pursuant to the conversion and/or exercise of Ordinary Shares Equivalents outstanding as of the date hereof. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Loan Documents. Except as set forth in in the applicable Section of the Borrower Disclosure Schedule, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Ordinary Shares or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Borrower or any Subsidiary is or may become bound to issue additional Ordinary Shares or Ordinary Shares Equivalents or capital stock of any Subsidiary. The issuance and sale of the Note and/or the Warrants will not obligate the Borrower or any Subsidiary to issue any securities to any Person (other than the Lender) and will not result in a right of any holder of Borrower securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding Ordinary Shares of the Borrower are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except for the Required Approvals, no further approval or authorization of any stockholder, Board of Directors or other Person(s) is required for the issuance and sale of the Note and/or the Warrants hereunder. The issuance of the Warrant Shares, upon issuance in accordance with the terms of the Loan Documents, will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, Liens, charges and other encumbrances with respect to the issue thereof. Upon issuance in accordance with the terms of the Loan Documents, the Initial Warrant Holders will have good and marketable title to the Warrant Shares.
SECTION 4.07. SEC Reports; Financial Statements. The Borrower has filed all reports, schedules, forms, statements and other documents required to be filed by the Borrower under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Borrower was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Borrower included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with International Financial Reporting Standards applied on a consistent basis during the periods involved (“IFRS”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by IFRS, and fairly present in all material respects the financial position of the Borrower and its consolidated Existing Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments.
SECTION 4.08. Undisclosed Liabilities. The Borrower has no material liability, indebtedness, obligation, expense, claim, deficiency or guaranty of any type, whether accrued, absolute, contingent, matured, unmatured or otherwise, required to be reflected in financial statements in accordance with IFRS, which individually or in the aggregate: (a) has not been reflected in the latest balance sheet included in the financial statements referenced hereinabove; or (b) has not arisen: (i) in the ordinary course of business, consistent with past practices, since the date of the latest balance sheet included in such financial statements in an amount that does not exceed $1,000,000 in any one case or $2,000,000 in the aggregate, (ii) pursuant to or in connection with this Agreement or other Loan Documents, or (c) are executory performance obligations to be performed after the date hereof in the ordinary course of business pursuant to agreement(s) entered into in the ordinary course of business, consistent with past practices.
SECTION 4.09. Material Changes. Since the date of the latest financial statements made available to Lender (or included in the SEC Reports) prior to the date hereof: (a) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect; (b) the Borrower has not incurred any material liabilities (contingent or otherwise) other than (i) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, (ii) liabilities not required to be reflected in the Borrower’s financial statements pursuant to IFRS, and (iii) except as provided in Section 4.09 of the Borrower Disclosure Schedule; (c) the Borrower has not altered their method of accounting; (d) the Borrower has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock; and (e) except as provided in Section 4.06 of the Borrower Disclosure Schedule, the Borrower has not issued any equity securities except in favor of an officer, director or consultant pursuant to an existing Borrower equity incentive plans.
SECTION 4.10. Litigation. Section 4.10 of the Borrower Disclosure Schedule, together with the SEC reports, sets forth all actions, suits, inquiries, notices of violation, proceedings or investigations pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower, any of its Existing Subsidiaries or any of their respective properties or assets before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (each an “Action” or collectively, “Actions”) which: (i) adversely affects or challenges the legality, validity or enforceability of any of the Loan Documents; or (ii) except as provided in Section 4.10 of the Borrower Disclosure Schedule, could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. None of the Borrower or any director or officer thereof, is or has been the subject of any Action involving: (x) a claim of violation of or liability under the Securities Act, the Exchange Act, the Israeli Securities Act, FINRA rules or any state securities laws; (y) breach of fiduciary duty; or (z) fraud (statutory or common law), embezzlement, misappropriation or conversion of property or rights, or any other crime involving deceit.
SECTION 4.11. Labor Relations. No collective labor dispute exists or, to the knowledge of the Borrower, is imminent with respect to any of the employees of the Borrower or any of its Existing Subsidiaries which could reasonably be expected to result in a Material Adverse Effect. Other than as required by law in various foreign jurisdictions, none of the Borrower’s or any of its Existing Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Borrower or its Subsidiary, and the Borrower and each of its Existing Subsidiaries is not a party to any collective bargaining agreement, other than as required by law in various jurisdictions. The Borrower believes that its relationships with its employees are good. No executive officer, to the knowledge of the Borrower, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non- competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Borrower to any liability with respect to any of the foregoing matters. To the best of the Borrower’s knowledge, it is in compliance with all Israeli laws, U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate with each of its Existing Subsidiaries aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 4.12. Compliance. Except as disclosed set forth in Section 4.12 of the Borrower Disclosure Schedule and in the SEC Reports, the Borrower and each of its Existing Subsidiaries: (a) is neither in default under nor in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Borrower or its Subsidiary under), nor has the Borrower or any of its Existing Subsidiaries received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived); (b) is not in violation of any order of any court, arbitrator or Governmental Authority; and (c) is not and has not been in material violation of any statute, law, rule or regulation of any Governmental Authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment.
SECTION 4.13. Regulatory Permits. The Borrower and each of its Existing Subsidiaries possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct its business, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Borrower has not received any notice of proceedings relating to the revocation or modification of any Material Permit.
SECTION 4.14. Title to Assets. The Borrower and its Existing Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title in all personal property owned by it that, in each case, is material to the business of the Borrower and its Existing Subsidiaries, in each case free and clear of all Liens, except for Liens disclosed in Section 4.14 of the Borrower Disclosure Schedule that do not materially and adversely (a) affect the value of such property or (b) interfere with the use made and proposed to be made of such property by the Borrower and its Existing Subsidiaries. Any real property and facilities held under lease by the Borrower or a Subsidiary is held by it under valid, subsisting and enforceable leases with which the Borrower or such Subsidiary (as applicable) are in compliance.
SECTION 4.15. Patents and Trademarks. (a) The Borrower or a Subsidiary thereof has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as necessary or material for use in connection with its business and which the failure to so have could reasonably be expected to have a Material Adverse Effect (collectively, the “Intellectual Property Rights”); (b) the Borrower has not received a notice (written or otherwise) that any of the Intellectual Property Rights violates or infringes upon the intellectual property rights of any other Person; (c) all Intellectual Property Rights are enforceable by the Borrower or its Subsidiary, and, to the Borrower’s knowledge, there is no existing infringement by any other Person of any of the Intellectual Property Rights except where the failure to be so enforceable or for such infringements as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (d) the Borrower has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its Intellectual Property Rights except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 4.16. Transactions with Officers, Directors and Employees. None of the officers or directors of the Borrower or any of its Existing Subsidiaries and, to the knowledge of the Borrower, none of the employees of the Borrower or any of its Existing Subsidiaries, is presently a party to any transaction with the Borrower (other than for services as employees, officers and directors and related party notes as identified in the SEC Reports and Section 4.16 of the Borrower Disclosure Schedule), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from, any such officer, director or employee or, to the knowledge of the Borrower, any entity in which any such officer, director or employee has a substantial interest or is an officer, director, trustee, member or partner, in each case other than for: (x) payment of salary or fees for services rendered; (y) reimbursement for expenses incurred on behalf of the Borrower; and (z) other employee benefits, including stock option agreements under any stock option plan of the Borrower.
SECTION 4.17. Indebtedness. All outstanding Indebtedness owed by the Borrower to other Persons, including all Senior Indebtedness, is listed in Section 4.17 to the Borrower Disclosure Schedules.
SECTION 4.18. Private Placement. Assuming the accuracy of the Lender’s representations and warranties set forth in ARTICLE V, no registration under the Securities Act is required for the offer and sale of the Note, the Warrant and the Warrant Shares by the Borrower to the Lender as contemplated hereby.
SECTION 4.19. Investment Borrower. The Borrower is not, and is not an Affiliate of, and immediately after receipt of payment for the Note will not be or be an Affiliate of, an ‘investment Company’ within the meaning of the Investment Company Act of 1940, as amended. The Borrower shall conduct its business in a manner so that it will not be an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
SECTION 4.20. Registration Rights. Other than as described in the SEC Reports or as disclosed in Section 4.20 of the Borrower Disclosure Schedule, no Person has any right to demand the Borrower to file a registration statement under the Securities Act covering the sale of any securities of the Borrower.
SECTION 4.21. Disclosure. Except with respect to: (a) the material terms and conditions of the transactions contemplated by the Loan Documents; and (b) information given to the Lender, if any, which the Borrower hereby confirms will not constitute material non-public information, the Borrower confirms that neither it nor any other Person acting on its behalf has provided any of the Lender or their agents or counsel with any information that it believes constitutes or might constitute material, nonpublic information. The Borrower understands and confirms that the Lender will rely on the foregoing representation in effecting transactions in securities of the Borrower. All disclosure furnished by or on behalf of the Borrower to the Lender regarding the Borrower, its business and the transactions contemplated hereby, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
SECTION 4.22. No Integrated Offering. Assuming the accuracy of the Lender’s representations and warranties set forth in ARTICLE V, neither the Borrower , nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Note, the Warrant and the Warrant Shares to be integrated with prior offerings by the Borrower for purposes of the Securities Act which would require the registration of any such securities under the Securities Act.
SECTION 4.23. Solvency. Based on the consolidated financial condition of the Borrower as of the Closing Date after giving effect to the receipt by the Borrower of the Loan hereunder: (a) the fair saleable value of the Borrower’s assets exceeds the amount that will be required to be paid on or in respect of the Borrower’s existing debts and other liabilities (including known contingent liabilities) as they mature; (b) the Borrower’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Borrower , and projected capital requirements and capital availability thereof; and (c) the current cash flow of the Borrower, together with the proceeds the Borrower, would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Borrower will not, after the Closing Date, incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). Except as disclosed in Section 4.23 of the Borrower Disclosure Schedule, the Borrower has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.
SECTION 4.24. Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Borrower has filed all federal, state and foreign income and franchise tax returns and have paid or accrued all taxes shown as due thereon, and the Borrower has no knowledge of a tax deficiency which has been asserted or threatened against the Borrower.
SECTION 4.25. No General Solicitation. Neither the Borrower nor any Person acting on behalf of the Borrower has offered or sold any of the Note, the Warrant and/or the Warrant Shares by any form of general solicitation or general advertising. The Borrower has offered the Note and/or the Warrant and/or any Ordinary Shares issued thereunder by the Borrower to the Lender as contemplated hereby for sale only to the Lender and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.
SECTION 4.26. Insurance. The Borrower and each of its Existing Subsidiaries is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Borrower reasonably believes to be prudent and customary in the businesses in which the Borrower is engaged. The Borrower has never been refused any insurance coverage sought or applied for, and the Borrower has no reason to believe that it will not be able to renew all existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers.
SECTION 4.27. Acknowledgment Regarding Lender’s Purchase. The Borrower acknowledges and agrees that the Lender is acting solely in the capacity of an arm’s length purchaser with respect to the Loan Documents and the transactions contemplated thereby. The Borrower further acknowledges that Lender is not acting as a financial advisor or fiduciary of the Borrower (or in any similar capacity) with respect to the Loan Documents and the transactions contemplated thereby and any advice given by Lender or any of its respective representatives or agents in connection with the Loan Documents and the transactions contemplated thereby is merely incidental to the Lender’s purchase of the Note and/or the Warrant and/or any Warrant Shares. The Borrower further represents to the Lender that the Borrower’s decision to enter into this Agreement and the other Loan Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Borrower and its representatives.
SECTION 4.28. No Disqualification Events. With respect to the Note and/or the Warrant and/or any Warrant Shares to be offered and sold hereunder in reliance on Rule 506(b) under the Securities Act (“Regulation D Securities”), none of the Borrower, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Borrower participating in the offering hereunder, any beneficial owner of twenty percent (20%) or more of the Borrower’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Borrower in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the ‘Bad Actor’ disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Borrower has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Borrower has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished the Lender a copy of any disclosures provided thereunder.
SECTION 4.29. Other Covered Persons. The Borrower is not aware of any person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Regulation D Securities.
SECTION 4.30. Notice of Disqualification Events. The Borrower will notify the Lender in writing, prior to the Closing Date of: (a) any Disqualification Event relating to any Issuer Covered Person; and (b) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.
SECTION 4.31. Foreign Corrupt Practices. Neither the Borrower nor, to the knowledge of the Borrower , no agent or other person acting on behalf of the Borrower , has: (a) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity; (b) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (c) failed to disclose fully any contribution made by the Borrower (or made by any person acting on its behalf of which the Borrower is aware) which is in violation of law; or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act.
SECTION 4.32. Office of Foreign Assets Control. Neither the Borrower nor, to the Borrower’s knowledge, any director, officer, agent, employee or Affiliate of the Borrower , is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
SECTION 4.33. Bank Holding Company Act. Neither the Borrower nor any of its Affiliates is subject to the Bank Holding Company Act of 1956, as amended (“BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve”). Neither the Borrower nor any of its Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Borrower nor any of its Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
SECTION 4.34. Money Laundering. The operations of the Borrower are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Borrower with respect to the Money Laundering Laws is pending or, to the knowledge of the Borrower, threatened.
SECTION 4.35. Agreements. The Borrower is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which the Borrower is a party in any manner which would result in a Material Adverse Effect.
SECTION 4.36. Nasdaq Rules. As a foreign private issuer, the Borrower is not required to comply with certain provisions of the Nasdaq Rule 5600 series, as set forth in Nasdaq Rule 5615(a)(3), and has complied with all related Nasdaq requirements in connection with the exemption from such rules, including, without limitation, making required disclosures in the Borrower’s annual SEC filings, and submission to Nasdaq of a written statement from an independent counsel in Israel certifying that the Borrower’s home country practices are not prohibited by the laws of the State of Israel.
SECTION 4.37. No Default. Except as disclosed in Section 4.37 of the Borrower Disclosure Schedule, no event has occurred, and no event is continuing which with the giving of notice or the lapse of time or both would constitute an Event of Default.
SECTION 4.38. No Other Default. The Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument material to its business to which it is a party or to which its assets or activities are subject.
SECTION 4.39. Application of Takeover Protections; Rights Agreement. The Borrower and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested shareholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement), shareholder rights plan or other similar anti-takeover provision under the Articles of Association or other organizational documents of the Borrower or any of its Affiliates or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to the Lender and/or any Initial Warrant Holder as a result of the transactions contemplated by this Agreement, including, without limitation, the Borrower’s issuance of the Warrant Shares. The Borrower and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Ordinary Shares or a change in control of the Borrower or any of its Affiliates.
SECTION 4.40. Representations. The representations and warranties of the Borrower contained in this Agreement and/or the other Loan Documents, and the certificate(s) furnished or to be furnished to the Lender at the Closing, when taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. The Borrower acknowledges and agrees that the representations contained in ARTICLE V shall not modify, amend or affect Lender’s right to rely on the Borrower’s representations and warranties contained in this ARTICLE IV or elsewhere in this Agreement or any representations and warranties contained in any other Loan Document, or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby.
SECTION 4.41. Continuation. All representations, warranties and confirmations made or given or repeated by the Borrower shall be true and accurate in all material respects, and shall continue until the Loan is fully repaid to the satisfaction of the Lender.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE LENDER
The Lender represents and warrants to the Borrower as of the date hereof and as of the Closing Date that:
SECTION 5.01. Authority; Organization. The Lender has full power and authority to enter into this Agreement and to perform all obligations required to be performed by it hereunder. If an entity, the Lender is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Loan Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Loan Documents and performance by the Lender of the transactions contemplated by the Loan Documents have been duly authorized by all necessary corporate or similar action on the part of the Lender. Each Loan Document to which it is a party has been duly executed by the Lender, and when delivered by the Lender in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Lender, enforceable against it in accordance with its terms.
SECTION 5.02. Own Account. The Lender understands that the Note, the Warrant and the Warrant Shares are “restricted securities” and have not been registered under the Securities Act or any applicable State Securities Law and is acquiring the Note, the Warrant and the Warrant Shares as principal for its own account and not with a view to or for distributing or reselling such the Note, Warrant or Warrant Shares or any part thereof in violation of the Securities Act or any applicable State Securities Law, has no present intention of distributing any of the Note, Warrant or Warrant Shares in violation of the Securities Act or any applicable State Securities Law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of the Note, Warrant or Warrant Shares (this representation and warranty not limiting the Lender’s right to sell the Note, Warrant or Warrant Shares in compliance with applicable federal and State Securities Laws) in violation of the Securities Act or any applicable State Securities Law, all except for the issuance of the Warrants to the Initial Warrant Holders as contemplated by this Agreement.
SECTION 5.03. Lender Status. The Lender is an “accredited investor” as defined in Rule 501(a) under Regulation D of the Securities Act. The undersigned agrees to furnish any additional information requested by the Borrower to assure compliance with applicable U.S. federal and state securities laws in connection with the purchase and sale of the Note and the Warrant. Any information that has been furnished or that will be furnished by the undersigned to evidence its status as an accredited investor is accurate and complete, and does not contain any misrepresentation or material omission.
SECTION 5.04. Experience of The Lender. The Lender, either alone or together with its representatives, has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Note, and has so evaluated the merits and risks of such investment. The Lender is able to bear the economic risk of an investment in the Note and, at the present time, is able to afford a complete loss of such investment.
SECTION 5.05. No Trading Market. The Lender acknowledges that there is currently no trading market for the Note or the Warrants and that none is expected to develop for the Note or the Warrants.
SECTION 5.06. General Solicitation. The Lender acknowledges that neither the Borrower nor any other person offered to sell the Note, Warrant or Warrant Shares to it by means of any form of general solicitation or advertising, including, but not limited to: (a) any advertisement, article, notice, or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (b) any seminar or meeting whose attendees were invited by any general solicitation or general advertising.
SECTION 5.07. Speculative Nature of Investment; Risk Factors. THE LENDER UNDERSTANDS THAT AN INVESTMENT IN THE NOTE, THE WARRANT AND THE WARRANTS SHARES INVOLVES A HIGH DEGREE OF RISK. The Lender acknowledges that: (a) any projections, forecasts or estimates as may have been provided to the Lender are purely speculative and cannot be relied upon to indicate actual results that may be obtained through this investment; any such projections, forecasts and estimates are based upon assumptions which are subject to change and which are beyond the control of the Borrower or its management, and (b) the Lender has been advised to consult with its own advisor regarding legal matters and tax consequences involving this investment. The Note, Warrant and Warrant Shares offered hereby are highly speculative and involve a high degree of risk and Lender should only purchase these securities if Lender can afford to lose their entire investment.
SECTION 5.08. Money Laundering. If an entity, the operations of the Lender are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder, and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Lender with respect to the Money Laundering Laws is pending or, to the knowledge of the Lender, threatened.
SECTION 5.09. The Lender acknowledges and agrees that the representations contained in ARTICLE IV shall not modify, amend or affect the Borrower’s right to rely on the Lender’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Loan Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.
ARTICLE VI. BORROWER’S ADDITIONAL UNDERTAKINGS
SECTION 6.01. Registration Undertaking. The Borrower shall file all required Registration Statements in compliance with the Registration Rights Agreement and the deadlines set forth therein (the “Registration Undertakings”). Without derogating from any other right or remedy of the Lender under any of the Loan Documents and/or the law, in case of breach of this SECTION 6.01, the Borrower shall pay the Lender, an amount in cash, as partial liquidated damages and not as a penalty, as calculated pursuant to Section 2(c) of the Registration Rights Agreement.
SECTION 6.02. Affirmative and Negative Covenants. Each of the Loan Parties hereby covenants and agrees that until all obligations owed to the Lender shall have been paid in full, without the prior written approval of the Lender, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:
(a) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Lender or holders of the Note;
(b) incur, repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than Permitted Indebtedness, provided that, except for Senior Indebtedness, such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exists;
(c) pay any Indebtedness to any shareholders of the Borrower or any of its Subsidiaries or an entity Controlled by such shareholder or to any other related party of the Borrower or of any of its Subsidiaries or to any Borrower’s or Subsidiary’s directors and officers;
(d) permit any Person to have a Lien of any of the assets of any of the Loan Parties, except for Permitted Liens;
(e) pay any bonuses, management fees, salaries, loans or other amounts to Borrower’s directors and officers (other than payment to the Borrower’s directors and officers as set forth in the latest SEC filing reports of the Borrower or otherwise pursuant to their respective engagement or employment contracts as in effect as of January 1, 2025 and for officers hired thereafter pursuant to the terms approved by the Borrower’s compensation committee and board of directors thereafter).
(f) repay, repurchase or offer to repay, repurchase or otherwise acquire Ordinary Shares or Ordinary Shares Equivalents;
(g) pay cash dividends or distributions on any equity securities of the Borrower;
(h) fail to comply with the Registration Undertaking or fail to or delay the request for acceleration of the effective date of such Registration Statement once the SEC has advised the Borrower or its counsel that it has no further comments thereon or otherwise not complied with the Registration Rights Agreement;
(i) absent manifest error in the exercise notice to the Borrower, in any manner interfere with, dispute or countermand the instructions given by the Lender to the Borrower’s transfer agent as contemplated by the Transfer Agent Instructions;
(j) enter into any material transaction with any Affiliate of the Borrower or any Subsidiary, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Borrower (even if less than a quorum otherwise required for board approval) or the Borrower’s audit committee; or
(k) inter into any agreement or commitment with respect to any of the foregoing.
In addition, each of the Loan Parties hereby covenants and agrees that until all obligations owed to the Lender shall have been paid in full, the Loan Parties shall timely comply with all of the additional affirmative and negative covenants set forth in this Agreement, the Note and the other Loan Documents.
SECTION 6.03. The Borrower shall not register for resale (including by way of an existing registration statement or any amendment thereto) any securities of the Borrower prior to the Registration Undertaking having been completed and the applicable Registration Statement with respect to the sale of all the Registrable Securities (as such term is defined in the Registration Rights Agreement) (the “Registrable Securities”) having been declared effective by the SEC under the Securities Act, without the prior written consent of the Lender. The Borrower shall have the right to include in such registration statement securities of the Borrower other than the Registrable Securities (the “Other Securities”), provided that the inclusion of such Other Securities does not adversely affect the registration of the Registrable Securities or diminish the rights or priority of the holders thereof with respect to the registration of the Registrable Securities.
SECTION 6.04. Mandatory Prepayment.
(a) For purpose of this SECTION 6.04:
(i) “Prepayment Transaction” shall mean any of the following: (1) issuance or sale of Ordinary Shares or Ordinary Shares Equivalents; (2) issuance or sale of any shares or securities of a Subsidiary, including convertible securities, warrants, options, or other rights to subscribe for or purchase shares or securities; (3) any loan obtained by the Borrower or any of its Subsidiaries; (4) the sale of all or substantially all of the assets or a grant of an exclusive worldwide license to all or substantially all of the intellectual property of the Borrower or any of its Subsidiaries, or the sale of any other asset of the Borrower or a Subsidiary outside the ordinary course of business; (5) the consolidation or merger of the Borrower and/or a Subsidiary with or into any other entity; and (6) any combination of the foregoing;
(ii) “Transaction Proceeds” shall mean the gross amount of any payments payable to the Borrower or any of its Subsidiaries from or in connection with a Prepayment Transaction;
(iii) “Net Proceeds” of a Prepayment Transaction, shall mean the Transaction Proceeds of that Prepayment Transaction less: (1) any applicable taxes incurred by the Borrower or that applicable Subsidiary with respect to those Transaction Proceeds and the distribution thereof from a Subsidiary; and (2) any transaction costs incurred by the Borrower or that applicable Subsidiary for receiving those Transaction Proceeds.
(b) In any event that either (each, a “Trigger Event”) (i) the Transaction Proceeds of a single Prepayment Transaction are equal to or exceeding US$5,000,000 (five million Dollars) or (ii) the aggregate Transaction Proceeds of all Prepayment Transactions are equal to or exceeding US$7,000,000 (seven million Dollars), the Borrower shall be obligated to use the Net Proceeds of the Prepayment Transactions to prepay 100% of the then outstanding Principal Amount, all accrued and unpaid interest, and all other amounts due under the Loan Documents, within five (5) Business Days of the date of consummation of the Prepayment Transaction triggering that Trigger Event.
(c) The Borrower undertakes that each Subsidiary promptly distributes any Net Proceeds obtained by such Subsidiary in connection with a Prepayment Transaction to the Borrower in order to enable the Borrower to comply with this SECTION 6.04.
(d) Notwithstanding the foregoing, any payment under this SECTION 6.04 shall be in priority over any repayment of other Indebtedness of the Borrower, except, for (i) Indebtedness existing on the date hereof whose holders have rights to repayment from such Prepayment Transactions as set forth in Schedule 6.04 of the Borrower Disclosure Schedule, and (ii) if the Prepayment Transaction is with respect to sale of shares or assets of a Qpoint Subsidiary, in which case the priority will be as set forth in Schedule 6.04 of the Borrower Disclosure Schedule and solely to the extent of the amount set forth in that Schedule 6.04 of the Borrower Disclosure Schedule without derogating from the occurrence of a Trigger Event and the obligation to repay the entire amount to the Lender.
(e) For the avoidance of any doubt, the Borrower shall have to pay 100% of the then outstanding Principal Amount, all accrued and unpaid interest, and all other amounts due under the Loan Documents, within five (5) Business Days of the date of consummation of the Prepayment Transaction triggering that Trigger Event even in the event that any entity listed on Schedule 6.04 of the Borrower Disclosure Schedule have any priority over payment to the Lender pursuant to this Section 6.04.
(f) The prepayment to the Lender shall be applied in accordance with the order set forth in SECTION 2.08. Any prepayment made pursuant to this SECTION 6.04 shall be in accordance with SECTION 2.06.
(g) The Borrower shall promptly notify the Lender in writing of any Prepayment Transaction, specifying the Transaction Proceeds and the Net Proceeds, and upon receipt of any proceeds that trigger the prepayment obligation under this Section.
SECTION 6.05. MFN. In each and any event that the Borrower issues or sells any shares of its capital stock, or any securities convertible into or exercisable for shares of its capital stock (“Issuance”), at a price per share (or with a conversion or exercise price per share) that is less than the exercise price of either the Warrant Shares or the Additional Warrant Shares, as applicable, at the time of such Issuance (the “MFN Price”), the Borrower shall promptly notify the Lender in writing of such Issuance. Upon such issuance, (a) if the exercise price of the Warrant Shares is above the MFN Price, then the exercise price of the Warrant Shares shall be reduced to the MFN Price; and (b) if the exercise price of the Additional Warrant Shares is above the MFN Price, then the exercise price of the Additional Warrant Shares shall be reduced to the MFN Price; and (c) the Borrower shall take all necessary actions to adjust the terms of the Warrants such that the exercise price thereof shall be reduced accordingly to the MFN Price. The adjustments under this SECTION 6.05 and issuance of additional shares to the Lender shall be made without any additional consideration to be paid by the Lender to the Borrower. The Borrower shall provide written notice to the Lender within five (5) Business Days of any issuance that triggers this MFN provision, detailing the terms of the adjustments to be made. The Borrower shall implement the necessary adjustments within fourteen (14) days of such issuance. The adjustments for Warrant Shares and Additional Warrant Shares shall be calculated and applied separately, recognizing that they may have different initial exercise prices. For the avoidance of doubt, if the exercise price of either the Warrant Shares or the Additional Warrant Shares is already equal to or below the MFN Price at the time of the Issuance, no adjustment shall be made to that particular exercise price or number of shares. This MFN provision shall continue to apply for each and any Issuance for the duration of the Warrant and survive the repayment of the Loan.
SECTION 6.06. Restrictions on Certain Payments. Until all obligations owed to the Lender under the Note and other Loan Documents shall have been paid in full, the Borrower may not use the Loan’s proceeds: (i) for satisfaction of any portion of the Borrower’s Indebtedness; (ii) for redemption of any Ordinary Shares or Ordinary Shares Equivalents; (iii); in violation of FCPA or OFAC regulations; or (iv) to lend, give credit or make advances to any officers, directors, employees or Affiliates of the Borrower.
SECTION 6.07. Integration. The Borrower shall not sell, offer for sale, or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Note to the Lender in a manner that would require the registration under the Securities Act of the sale of the Note to the Lender
SECTION 6.08. The Borrower covenants and agrees with the Lender that, so long as this Agreement shall remain in effect or any of the principal of or interest on the Note and/or on account of the Loan or any fees incurred hereunder, or any other expense or amounts payable under this Agreement or under any of the other Loan Documents, shall be unpaid, the Borrower shall:
(a) Compliance, etc. Comply in all material respects with all contractual obligations applicable to it (in addition to those obligations contemplated by other portions of this Article VI).
(b) not conduct the business of the Borrower and its Subsidiaries in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.
(c) Payment of Taxes, etc. Pay and discharge or cause to be paid and discharged promptly all taxes, assessments and governmental charges or levies imposed upon its income and profits, or upon any of its property, real, personal or mixed, or upon any part thereof, before the same shall become delinquent;
(d) Reports, etc. Furnish, or cause to be furnished, to the Lender the following, within fourteen (14) days after the Lender’s request therefor, such information regarding the operations, business affairs and financial condition of the Borrower and of any Affiliate of the Borrower as the Lender may reasonably request from time to time.
(e) Access to Premises and Records. Maintain financial records in accordance with IFRS and permit internal consultants of the Lender or similar representatives of the Lender to have reasonable access to the financial records and other records of the Borrower and his properties during business hours, and permit such consultants or representatives to make such excerpts from such records and to conduct such audits of their books and records as such representatives reasonably deem necessary at the reasonable and documented cost of the Borrower.
(f) Notice of Default. Furnish to the Lender a written statement upon the occurrence of any Event of Default or the occurrence of any event which, upon notice or lapse of time or both, would constitute an Event of Default.
SECTION 6.09. Further Assurances. Within five (5) Business Days after the Lender’s request therefor, execute and deliver to the Lender such documents and take such actions as are necessary, or as the Lender may in good faith request from time to time (including the execution and delivery of further security agreements, financing statements and other documents and the filing or recording of any of the foregoing), in order to further assure the Lender of the Borrower’s compliance with the terms and conditions of any of the Loan Documents.
SECTION 6.10. Change of Address. The Borrower shall notify the Lender of any intention of the Borrower to change, permanently or temporarily, its address.
SECTION 6.11. Publicity. The Borrower and the Lender shall consult with each other in issuing any other press releases and SEC Reports with respect to the transactions contemplated hereby, and neither the Borrower nor the Lender shall issue any such press release or SEC Report nor otherwise make any such public statement without the prior consent of the Borrower with respect to any press release of the Lender, or without the prior consent of the Lender with respect to any press release or SEC Report of the Borrower mentioning the Lender, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement, SEC Report or communication. Without the prior written consent of the Lender, the Borrower shall not (and shall cause each of its Affiliates to not) disclose the name of any Initial Warrant Holder in any filing (other than as required by applicable law or rules and regulations), announcement, release or otherwise, it being understood that to register the resale of the Warrant Shares of any Warrant holder, the name of such Warrant holder is required to be disclosed in the registration statement.
SECTION 6.12. Indemnification of Lender.
(a) The Borrower shall indemnify, reimburse and hold harmless the Lender and its partners, members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar functions) (collectively, “Indemnitees”) from and against any and all losses, claims, liabilities, damages, penalties, suits, charges, costs and expenses of any kind or nature, (including reasonable fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from: (a) any breach of any of the representations, warranties, covenants or agreements made by the Borrower or any Subsidiary in this Agreement or in the other Loan Documents, and/or (b) the execution or delivery of this Agreement, any other Loan Document, or any other agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, or the consummation of any transactions contemplated hereby or thereby, and/or (c) the Loan or the use of the proceeds thereof, and/or (d) any action instituted against such Indemnitee in any capacity, or any of them or their respective Affiliates, by any stockholder of the Borrower or a Subsidiary who is not an Affiliate of such Indemnitee, with respect to any of the transactions contemplated by the Loan Documents (unless such action is based upon a breach of such Indemnitee’s representations, warranties or covenants under the Loan Documents or any agreements or understandings such Indemnitee may have with any such stockholder or any violations by such Indemnitee of state or federal securities laws or any conduct by such Indemnitee which results from the gross negligence or willful misconduct of the Indemnitee as determined by a final, non-appealable decision of a court of competent jurisdiction). All amounts due under this Section shall be payable promptly after written demand therefor.
(b) To the extent permitted by applicable law, the Borrower and its Subsidiaries shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any other Loan Document or the transactions contemplated hereby or thereby or any Loan or the use of the proceeds thereof.
SECTION 6.13. Reservation of Warrant Shares. At all times, the Borrower shall maintain a reserve from its duly authorized shares of Ordinary Shares for issuance pursuant to the Warrants that number of Ordinary Shares as may then be required to fulfill its obligations in full under the Warrants. If, on any date, the number of authorized but unissued (and otherwise unreserved) Ordinary Shares is less than the number shares required to fulfill the Borrower’s obligations under the Warrants, then the Board of Directors of the Borrower shall use commercially reasonable efforts to amend the Borrower’s certificate or articles of incorporation to increase the number of authorized but unissued number of Ordinary Shares to at least the number of Ordinary Shares then issuable pursuant to the Warrants, as soon as possible and in any event not later than the 60th day after such date.
ARTICLE VII. EVENTS OF DEFAULT
SECTION 7.01. Events of Default. Except as set forth in Section 7.01(1) of the Borrower Disclosure Schedules, each of the following events and/or circumstances is an Event of Default, whether or not in the control of the Borrower or any other Loan Party or Affiliate thereof (and each shall be defined herein as an “Event of Default”):
(a) any default in the payment or prepayment of any Principal Amount or Interest payment or any other payment due under the Loan Documents as and when the same shall become due and payable (whether on an Interest Payment Date, the Maturity Date, by mandatory prepayment, acceleration or otherwise) which default is not cured within five (5) Business Days;
(b) the Borrower shall for any reason, or no reason fail to comply with the Registration Undertaking or fail to or delay the request for acceleration of the effective date of Registration Statement once the SEC has advised the Borrower or its counsel that it has no further comments thereon or otherwise not complied with the Registration Rights Agreement;
(c) the Borrower shall fail to observe or perform any other covenant or agreement contained in any of the Loan Documents; which failure is not cured, if capable of cure, within the earlier to occur of (i) two (2) Business Days after notice of such failure sent by the Lender or by any other holder of Note to the Borrower and (ii) five (5) Business Days after the Borrower has become or should have become aware of such failure;
(d) a breach, default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument if longer than five (5) Business Days) by any of the Loan Parties shall occur under any of the Loan Documents, which is not cured within five (5) Business Days;
(e) any material representation or warranty made in any Loan Documents, or certificate made or delivered to the Lender pursuant to any Loan Document shall be untrue or incorrect in any material respect as of the date when made;
(f) the Borrower shall fail to meet the Minimum Market Capitalization and Volume Trading Requirement, and shall be unable to cure such failure within five (5) Business Days;
(g) the Borrower or any Subsidiary shall be subject to a Bankruptcy Event;
(h) any of the Loan Documents shall not be in full force and effect at any time;
(i) the Borrower shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, capital lease, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (i) involves an obligation greater than $500,000 (five hundred thousand), whether such Indebtedness now exists or shall hereafter be created, and (ii) results in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;
(j) the Borrower shall be a party to any Change of Control Transaction or shall agree to sell or dispose of all or in excess of 25% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
(k) a judgment by any competent court for the payment of money in an amount of at least $500,000 (five hundred thousand) is rendered against the Borrower, and the same remains undischarged and unpaid for a period of thirty (30) days during which execution of such judgment is not effectively stayed;
(l) the Borrower shall be delinquent in the filing of any of its annual financial reports or Form 6-K Reports required to be filed with the SEC under the Exchange Act (beyond any period of grace granted by the SEC with respect thereto);
(m) the Ordinary Shares shall have ceased to be listed or traded on the Principal Market;
(n) a Loan Party shall (i) become named on any list of Persons who are or may be engaged in or who have been or may have been engaged in possible criminal activity or other wrongdoing, which list is promulgated under the Patriot Act, or (ii) be indicted, arraigned or custodially detained on charges involving money laundering or any predicate crime to money laundering;
(o) a Loan Party ceases any material portion of its business operations as presently conducted;
(p) evidence is received by the Lender that reasonably leads it to believe a Loan Party may have directly or indirectly been engaged in any type of activity which is or would be reasonably likely to result in the forfeiture of any material property of such Loan Party or would otherwise have a material adverse effect on such Loan Party being able to comply with its obligations and undertaking under the Loan Documents;
(q) a Loan Party conceals, removes or permits to be concealed or removed any part of such Loan Party’s property with intent to hinder, delay or defraud any of its creditors;
(r) a Loan Party makes or suffers to exist a transfer of any property which is fraudulent under the law of any applicable jurisdiction;
(s) the Borrower shall have failed to meet a specific business milestone as set forth in Section 7.01(2) of the Borrower Disclosure Schedules; and/or
(t) in the event that the Security Agreement has not entered into effect duly creating the pledges pursuant thereto within 60 days following the Closing Date, or in the event such pledges have not been registered by the Perfection Deadline.
SECTION 7.02. Rights and Remedies upon Event of Default. (i) upon an Event of Default, other than under subsection SECTION 7.01(g) or SECTION 7.01(h) above, at the Lender’s option at any time thereafter, the Lender may, upon written notice to the Borrower, take any of or all of the following actions, at the same or different times: (a) declare the Loan and/or the Note and all fees accrued hereunder and all obligations of the Borrower, contingent or matured, to be forthwith due and payable, both as to principal and interest, without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything contained in this Agreement or in any of the other Loan Documents to the contrary notwithstanding, and/or (b) exercise any or all of the rights and remedies afforded to the Lender under any applicable law and/or under the Loan Documents, or otherwise possessed by the Lender (including, among others, the exercise or realization of any pledge (to the extent the condition set forth in Section 2.1 of the Security Agreement has been fulfilled) or guarantee granted to the Lender); and (ii) automatically upon an Event of Default under subsection SECTION 7.01(g) or SECTION 7.01(h) above, (i) the Loan and/or the Note and all fees accrued hereunder and all obligations of the Borrower, contingent or matured thereunder shall immediately and automatically become due and payable in full, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding; and/or (b) at the Lender’s option at any time thereafter, the Lender may, upon written notice to the Borrower exercise any or all of the rights and remedies afforded to the Lender under any applicable law and/or under the Loan Documents, or otherwise possessed by the Lender (including, among others, the exercise or realization of any pledge (to the extent the condition set forth in Section 2.1 of the Security Agreement has been fulfilled) or guarantee granted to the Lender).
SECTION 7.03. Default Interest. Upon the occurrence and during the continuance of an Event of Default, the outstanding principal amount of the Loan and any interest accrued thereon and any other amounts due under this Agreement shall bear interest at a rate per annum equal to eighteen percent (18%) (“Default Interest”). Default Interest shall be calculated on the basis of a 360-day year and actual days elapsed, and shall accrue daily on the outstanding principal balance and any other amounts due under this Agreement from the date of the Event of Default until such Event of Default is cured or waived in writing by the Lender. Default Interest shall be payable on demand and shall be in addition to any other rights and remedies available to the Lender under this Agreement and/or applicable law. The assessment or acceptance of Default Interest shall not constitute a waiver of any Event of Default or any rights or remedies of the Lender under this Agreement or applicable law.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.01. Fees and Expenses. The Borrower shall bear its own expenses incurred in connection with its negotiation, preparation, execution, delivery and performance of the Loan Documents, including, without limitation, placement agent’s fees, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, DTC fees or broker’s commissions, fees for stock quotation services, fees relating to any amendments or modifications of the Loan Documents or any consents or waivers of provisions in the Loan Documents, fees for the preparation of opinions of counsel, and costs of restructuring the transactions contemplated by the Loan Documents. When possible, the Borrower must pay these fees directly, including, but not limited to, any and all wire fees, otherwise the Borrower must make immediate payment for reimbursement to the Lender for all fees and expenses immediately upon written notice by the Lender or the submission of an invoice by the Lender.
SECTION 8.02. Entire Agreement. The Loan Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules, except for the confidentiality agreement previously entered into between the parties, which shall continue to be in effect.
SECTION 8.03. Notices. Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by email:
if to Lender:
Julestar LLC
80-02 Kew Gardens Road - Suite 307
Kew Gardens, NY 11415
Attn: Judah Schiff
Email: Julestarllc@gmail.com
with a copy to (which shall not constitute notice):
Lipa Meir & Co.
2 Weissman Street
Tel-Aviv, Israel
Attn: Ziv Preis, Adv.
Email: preis@lipameir.co.il
if to the Borrower:
HUB Cyber Security Ltd.
Attn: Noah Hershcoviz
2 Kaplan Street
Tel Aviv, Israel 6473403
Attn: Adv. Tuvia Grossman
Email: tuvia.grossman@hubsecurity.io
with a copy to (which shall not constitute notice):
Goldfarb Gross Seligman & Co.
Azrieli Center, Round Tower, 39th Floor
Tel Aviv, Israel
Attn: Adam M. Klein, Adv.
Emails: adam.klein@goldfarb.com
or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above.
SECTION 8.04. Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented, or amended except in a written instrument signed, in the case of an amendment, by the Borrower and the Lender or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
SECTION 8.05. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Borrower may not assign this Agreement or any rights or obligations hereunder, without the prior written consent of the Lender. Subject to the Borrower’s consent, which shall not be unreasonably withheld, conditioned or delayed, the Lender may assign any or all of its rights under this Agreement to any Person to whom the Lender assigns or transfers the Note, and/or participate any of such rights in connection with granting of any participation of the Note, provided that such transfer or participation complies with all applicable federal and state securities laws of the United States and Israel, and that any such transferee or participant agrees in writing by the provisions of the Loan Documents that apply to the Lender.
SECTION 8.06. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
SECTION 8.07. Governing Law. This Agreement and the Note shall be construed in accordance with and governed by the laws of the State of Israel, without regard to principles of conflict of laws as applied thereunder. Notwithstanding the foregoing, reference which is made herein to any statute or any other provision of law (including any US federal or state law) shall be construed and interpreted in accordance with the laws of the relevant jurisdiction.
SECTION 8.08. Survival of Agreement. All covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant to this Agreement shall survive the execution and delivery to the Lender of this Agreement and/or the other Loan Documents, and shall continue in full force and effect so long as this Agreement or the Note is outstanding or any amount due thereunder or hereunder or under any of the other Loan Document remains unpaid. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of the Borrower which are contained in this Agreement shall inure to the benefit of the respective successors and assigns of the Lender.
SECTION 8.09. Waiver of Rights by the Lender. Neither any failure nor any delay on the part of the Lender in exercising any right, power or privilege hereunder or under any of the other Loan Documents shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any other right, power or privilege.
SECTION 8.10. Adjustment of Payment Date. Except as otherwise expressly provided herein, whenever a payment to be made hereunder shall fall due and payable on any day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such adjustment of time shall be included in computing interest.
SECTION 8.11. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
SECTION 8.12. Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Loan Documents, whenever the Lender exercises a right, election, demand or option under a Loan Document and the Borrower does not timely perform its related obligations within the periods therein provided, then the Lender may rescind or withdraw, in its sole discretion from time to time upon written notice to the Borrower, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
SECTION 8.13. Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Lender and the Borrower will be entitled to seek specific performance under the Loan Documents. The parties hereto agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Loan Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
SECTION 8.14. Payment Set Aside. To the extent that the Borrower makes a payment or payments to the Lender pursuant to any Loan Document or the Lender enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Borrower, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
SECTION 8.15. Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Loan Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Loan Documents or any amendments hereto. In addition, each and every reference to share prices and numbers of Ordinary Shares in any Loan Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Ordinary Shares that occur after the date of this Agreement.
SECTION 8.16. Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
SECTION 8.17. Usury Saving Clause. All payment obligations arising under this Agreement, the Note and the other Loan Documents are subject to the express condition that at no time shall the Borrower be obligated or required to pay interest at a rate which could subject the Lender to either civil or criminal liability as a result of being in excess of the maximum rate which any of them is permitted by law to contract or agree to pay. If by the terms of this Agreement, the Note or any other Loan Document, the Borrower is at any time required or obligated to pay interest at a rate in excess of such maximum rate, the applicable rate of interest shall be deemed to be immediately reduced to such maximum rate, and interest thus payable shall be computed at such maximum rate, and the portion of all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of principal.
SECTION 8.18. Conflicts. Any conflict between any term, covenant, condition or provision of this Agreement, on the one hand, and any term, covenant, condition or provision of any other Loan Document, on the other, shall be resolved in favor of the term, covenant, condition or provision which is more likely for the benefit of the Lender or to enlarge the scope of the collateral or to enhance better the financial security provided to the Lender by the collateral.
SECTION 8.19. Remedies Cumulative. Each right, power and remedy of the Lender hereunder, under any other Loan Document or now or hereafter existing at law, shall be cumulative and concurrent, and the exercise or the initiation of the exercise of any one or more of them shall not preclude the simultaneous or later exercise by the Lender of any or all such other rights, powers and remedies. No failure or delay by the Lender to insist upon strict performance of any one or more provision of the Loan Documents or to exercise any right, power or remedy consequent upon a breach thereof or a default thereunder shall constitute a waiver thereof or preclude the Lender from exercising any such other rights, powers or remedies. By accepting full or partial payment after the due date thereof, the Lender shall not be deemed to have waived the right either to require prompt payment of all other amounts payable at such time, or to exercise any rights and remedies available to the Lender in order to collect all such other amounts payable to the Lender.
SECTION 8.20. Jurisdiction
(a) The Borrower and the Lender hereby irrevocably and unconditionally submit themselves and their property to the exclusive jurisdiction of the competent courts of the State of Israel sitting in the city of Tel Aviv Jaffa, and any appellate court for any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
(b) The Borrower and the Lender hereby irrevocably and unconditionally waive to the fullest extent they may legally effectively do so, any objection which they now or may hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (a) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(c) Nothing in this Agreement shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or any Subsidiary or any of the Borrower’s or its Subsidiaries’ properties in the courts of any other jurisdiction in which such entity is registered or operate or its property is located.
SECTION 8.21. Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.
[Remainder of Page Intentionally Blank]
IN WITNESS WHEREOF, the Borrower and the Lender have executed this Agreement by their duly authorized officers, all as of the day and year first above written.
| THE BORROWER: | ||
| HUB Cyber Security Ltd. | ||
| By: | ||
| Name: | ||
| Title: | ||
| THE LENDER: | ||
| Julestar LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
42
Exhibit 4.64
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made and entered into as of February 4, 2025 (the “Agreement Date”) by and between HUB Cyber Security Ltd., a company organized and existing under the laws of the State of Israel (the “Company”), and the persons named on Schedule 1 hereto (each an “Investor” and collectively the “Investors”) and each other person that becomes a party to this Agreement by executing a delivering a counterpart signature hereto.
This Agreement is made pursuant to the Loan Agreement, dated as of the date hereof, between the Company and Julestar LLC (the “Loan Agreement”) and the Warrant.
The Company and each Investor hereby agrees as follows:
| 1. | Definitions. |
Capitalized terms used and not otherwise defined herein that are defined in the Loan Agreement or the Warrant shall have the meanings given such terms in the Loan Agreement or Warrant, as applicable. As used in this Agreement, the following terms shall have the following meanings:
“Additional Warrant Shares” shall have the meaning set forth in the Loan Agreement.
“Agreement Date” means February 4, 2025.
“Commission Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.
“Effectiveness Date” means with respect to each Registration Statement referred to herein, a date which shall be not later than thirty (30) calendar days from the Filing Date and shall include, if applicable, an amendment to an existing Registration Statement or a new Registration Statement, to include therein and register for resale the Registrable Securities, and in the event of a new or further “review” by the Commission of any existing Registration Statement or such other Registration Statement, the 60th calendar day following the date such Registration Statement is required to be filed hereunder (the “Registration Statement Effective Date”); provided, however, that in the event the Company is notified by the Commission that the one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments (the “Notice of No Review Date”), the Effectiveness Date as to the Registration Statement shall be the third (3rd) calendar day following the Notice of No Review Date, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the first Trading Day following such third calandar day.
“Effectiveness Period” shall have the meaning set forth in Section 2(a).
“Exchange” means any one of the following: the Nasdaq Global Market, the Nasdaq Stock Exchange, the NYSE:Amex Exchange or the New York Stock Exchange.
“Filing Date” means,
(a) with respect to the Registration Statement to register for resale the Initial Warrant Shares, within 10 Business Days of the date that the Company files its annual report with the SEC, which shall be in no event later than ninety (90) calendar days from the Agreement Date; and
(b) with respect to the amendment to the Registration Statement to include therein and register for resale the Additional Warrant Shares (if any), the date which shall be not later than thirty (30) calendar days from (i) in the case of Additional Warrant Shares, the date on which the number of shares issuable upon exercise of the Warrant increased by such Additional Warrant Shares; and (ii) in the case of other Registrable Securities, the date on which the Holder is entitled to such Registrable Securities; and
(c) with respect to any other Registration Statement referred to herein, a date which shall be not later than thirty (30) calendar days from the date such Registration Statement is required to be filed or, if later, the earliest practical date on which the Company is permitted by Commission Guidance to file such additional Registration Statement related to the Registrable Securities.
“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.
“Indemnified Party” shall have the meaning set forth in Section 5(c).
“Indemnifying Party” shall have the meaning set forth in Section 5(c).
“Initial Warrant Shares” shall have the meaning set forth in the Warrant.
“Losses” shall have the meaning set forth in Section 5(a).
“Note” shall have the meaning set forth in the Loan Agreement.
“Ordinary Shares” means the Ordinary Shares, no par value per share, of the Company and any other class of securities into which such securities may hereafter be reclassified or changed.
“Plan of Distribution” shall have the meaning set forth in Section 2(a).
“Principal Market” means the Nasdaq Global Market, or any other United States securities exchange on which the Ordinary Shares may subsequently be listed for trading.
“Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
“Registrable Securities” means and includes, without duplication, as of any date of determination,
(a) the Ordinary Shares referred to as the Initial Warrant Shares and the Additional Warrant Shares (if issuable on such date), to be registered for resale in the name of the applicable Holder; and
(b) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (i) the Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, or (ii) such Registrable Securities have been previously sold in accordance with Rule 144 under the Securities Act (“Rule 144”).
“Registration Statement” means and includes the collective reference to each registration statement filed or required to be filed or amended hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(b) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any the Registration Statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any the Registration Statement. If the Company decides to amend its existing registration statement on Form F-1 (file no. 333-282109), which was initially filed on September 13, 2024, to add all of the Registrable Securities, then such registration statement shall be considered a Registration Statement for purposes of this Agreement.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Selling Stockholder Questionnaire” shall have the meaning set forth in Section 3(a).
“Warrant” shall mean the five (5) year warrant delivered in connection with the Loan Agreement.
“Warrant Shares” shall mean the Initial Warrant Shares, the Additional Warrant Shares and any other additional shares issued pursuant to the Warrant.
| 2. | Registration Statements. |
| (a) | Registration Statement. On or before the applicable Filing Date, the Company shall have filed the Registration Statement (or an amendment thereto) and shall have registered for resale all of the applicable Registrable Securities then in existence on such Registration Statement, all as provided in the Loan Agreement and the Warrant. Each Registration Statement filed hereunder shall be on Form F-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form F-3, in which case such registration shall be on Form F-1 or another appropriate form in accordance herewith) and shall contain information substantially in form of the “Plan of Distribution” attached hereto as Annex A and substantially in the form of the “Selling Securityholders” section attached hereto as Annex B; provided, however, that no Holder shall be required to be named as an “underwriter” without such Holder’s express prior written consent. Subject to the terms of this Agreement, the Company shall use its reasonable best efforts to cause any Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date, and shall use its reasonable best efforts to keep such Registration Statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such Registration Statement have been sold, thereunder or pursuant to Rule 144 (the “Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. (New York City time) on a Trading Day. The Company shall promptly notify the Holders via e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. (New York City time) on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424 and deliver a copy of such final Prospectus to each Holder on the date of such filing. |
| (b) | Notwithstanding the registration obligations set forth in Section 2, if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the operation of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form F-1 or on such other form available to register for resale the Registrable Securities as a secondary offering; with respect to filing on Form F-1 or on such other appropriate form, and subject to the provisions of Section 2(c) with respect to the payment of liquidated damages; provided, however, that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the Commission Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09. Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(c), if the Commission or any Commission Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced by reducing or eliminating any securities to be included other than Registrable Securities. In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment. In the event the Company amends the Registration Statement in accordance with the foregoing, the Company will use its reasonable best efforts to file with the Commission, as promptly as allowed by Commission or Commission Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form F-1 or on such other form available to register for resale those Registrable Securities that were not registered for resale on the Registration Statement, as amended. |
| (c) | If: (i) a Registration Statement is not filed on or prior to the Filing Date, or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of the Registration Statement within fifteen (15) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for the Registration Statement to be declared effective (unless such comments include a request for additional information concerning a Holder whose shares are registered for resale in the Registration Statement and the Holder fails to supply information in response to such comments(s) in sufficient time to enable the Company to respond within the prescribed time frame), or (iv) the Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Registration Statement, (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, subject to any Allowable Grace Period; or (vi) if the Registration Statement is not effective for any reason or the prospectus contained therein is not available for use for any reason (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i), (iv) and (vi), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded that such Holder is entitled to convert at such time, and for purpose of clause (iii) the date which such fifteen (15) calendar day period is exceeded being referred to as “Event Date”), then, in addition to any other rights or remedies the Holders may have hereunder or under applicable law, on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) (each such monthly anniversary date, a “Liquidated Payment Date”) until the earlier of (A) the applicable Event is cured and (B) the date on which Borrower have paid the Lender the fifth payment of Liquidated Damages Amount pursuant to this Section 2(c), the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the Liquidated Damages Amount. |
“Liquidated Damage Amount” with respect to a Liquidated Payment Date shall mean 2% (two percent) of the sum of:
| (i) | product of (x) the number of Registrable Securities issued under the Warrant that are not registered for resale under an effective Registration Statement as of the applicable Liquidated Payment Date; and (y) the average closing price of the Ordinary Shares on the Trading Market (as defined in the Warrant) over the 30 Trading Days (as defined in the Warrant) immediately preceding that Liquidated Payment Date, subject to a floor of $0.15 per share; and |
| (ii) | product of (x) the number of Registrable Securities issuable under the Warrant that are not registered for resale under an effective Registration Statement as of the applicable Liquidated Payment Date; and (y) the excess, if any, of (A) the average closing price of the Ordinary Shares on the Trading Market (as defined in the Warrant) over the 30 Trading Days (as defined in the Warrant) immediately preceding that Liquidated Payment Date, subject to a floor of $0.16 per share, above (b) the applicable Exercise Price (as defined the Warrant) of such Registrable Securities pursuant to the Warrant (or the weighted average Exercise Price thereof, if the Additional Warrant Shares shall have become issuable under the Warrant by the Event Date). |
If the Company fails to pay any Liquidated Damage Amount pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such Liquidated Damage Amount is due until such amount, plus all such interest thereon, is paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event. Notwithstanding the foregoing, if a Holder is entitled to exercise its Warrant on a cashless basis and immediately sell the underlying Registrable Securities pursuant to Rule 144 without any limitations (time, volume or others) and without any further requirements, or if Registrable Securities already issued under the Warrant may be sold immediately pursuant to Rule 144 without any limitations (time, volume or others) and without any further requirements (including, in each case, the availability of a legal opinion required by the Company’s transfer agent and the execution by the Holder of a customary back-up certificate in connection with such legal opinion), then liquidated damages shall not be payable in respect thereto.
| (d) | If Form F-3 or Form F-1 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form F-3 or Form F-1 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as the Registration Statement on Form F-3 or Form F-1 covering the Registrable Securities has been declared effective by the Commission. |
| (e) | Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name any Holder or affiliate of a Holder as an underwriter in any Registration Statement without the prior written consent of such Holder. |
| 3. | Registration Procedures. |
In connection with the Company’s registration obligations hereunder, the Company shall:
| (a) | Not less than three (3) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of at least 55% of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than two (2) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder that desires to have its Registrable Secuities included in a Registration Statement agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex C (a “Selling Stockholder Questionnaire”) on a date that is not less than two (2) Trading Days prior to the Filing Date of such Registration Statement or by the end of the second (2nd) Trading Day following the date on which such Holder receives draft materials in accordance with this Section. |
| (b) | (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by such Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented. |
| (c) | If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of Ordinary Shares then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities. |
| (d) | Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of clause (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus; provided, however, that in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries. |
| (e) | Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. |
| (f) | Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission, provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form. |
| (g) | Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d). |
| (h) | Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or “Blue Sky” laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction. |
| (i) | If requested by a Holder, cooperate with such Holder at the Company’s cost, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered by the Company’s transfer agent to a transferee (or to a bank, broker or other nominee in connection with a sale) pursuant to an effective Registration Statement, which certificates may be in electronic form and shall be free of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request and otherwise comply with the Company’s obligations under the Warrant. |
| (j) | Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its reasonable best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of a Registration Statement and Prospectus, for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period, provided, however, that if the purpose of such suspension is to delay sales of Registrable Securities, then the Company shall be subject to the payment of Liquidated Damage Amounts required pursuant to Section 2(c). |
| (k) | Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Holders are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder. |
| (l) | The Company shall maintain eligibility for use of Form F-3 or Form F-1 (or any successor form thereto) for the registration of the resale of Registrable Securities and shall use commercially reasonable efforts to maintain the listing of the Registrable Securities on the Principal Market. |
| (m) | The Company may require each selling Holder to furnish to the Company a certified statement as to the number of Ordinary Shares of the Company beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company. |
| (n) | Notwithstanding anything to the contrary contained herein (but subject to the last sentence of this Section 3(n)), at any time after the Effective Date of a particular Registration Statement, the Company may, upon written notice to the Holder’s, suspend the Holders’ use of any prospectus that is a part of any Registration Statement (in which event the Holders shall discontinue sales of the Registrable Securities pursuant to such Registration Statement contemplated by this Agreement, but shall settle any previously made sales of Registrable Securities) if the Company (x) is pursuing a probable acquisition, merger, tender offer, reorganization, disposition or other similar transaction and the Company determines in good faith that (A) the Company’s ability to pursue or consummate such a transaction would be materially adversely affected by any required disclosure of such transaction in such Registration Statement or other registration statement or (B) such transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause any Registration Statement (or such filings) to be used by Holder or to promptly amend or supplement any Registration Statement contemplated by this Agreement on a post effective basis, as applicable, or (y) has experienced some other material non-public event the disclosure of which at such time, in the good faith judgment of the Company, would materially adversely affect the Company (each, an “Allowable Grace Period”); provided, however, that in no event shall the Holders be suspended from selling Registrable Securities pursuant to any Registration Statement for a period that exceeds ten (10) consecutive Trading Days or an aggregate of thirty (30) Trading Days in any 365-day period; and provided, further, the Company shall not effect any such suspension during the first ten (10) consecutive Trading Days after the Effective Date of the particular Registration Statement. Upon disclosure of such information or the termination of the condition described above, the Company shall provide prompt notice, but in any event within one Business Day of such disclosure or termination, to the Holders and shall promptly terminate any suspension of sales it has put into effect and shall take such other reasonable actions to permit registered sales of Registrable Securities as contemplated in this Agreement. Notwithstanding anything to the contrary contained in this Section 3(n), the Company shall cause its transfer agent to deliver Ordinary Shares free of restrictive legends to a transferee of a Holder in connection with any sale of Registrable Securities with respect to which such Holder has entered into a contract for sale, and delivered a copy of the Prospectus included as part of the particular Registration Statement to the extent applicable, in each case prior to such Holder’s receipt of the notice of an Allowable Grace Period and for which the Holder has not yet settled. |
| 4. | Registration Expenses. |
All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Eligible Market on which Ordinary Shares of the Company are then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Loan Documents, any legal fees or other costs of the Holders.
| 5. | Indemnification. |
| (a) | Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Ordinary Shares of the Company), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)–(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of notice of an Allowable Grace Period. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 6(f). |
| (b) | Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in a Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s information provided in the Selling Stockholder Questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto. In no event shall the liability of a selling Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Holder upon the sale of the Registrable Securities included in a Registration Statement giving rise to such indemnification obligation. |
| (c) | Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof, provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party. |
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party, provided that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.
| (d) | Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. |
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. In no event shall the contribution obligation of a Holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.
The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
| 6. | Miscellaneous. |
| (a) | Remedies. In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate. |
| (b) | No Piggyback on Registrations; Prohibition on Filing Other Registration Statements. The Company shall not file any other registration statements until all Registrable Securities are registered pursuant to the Registration Statement that is declared effective by the Commission, provided that this Section 6(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this Agreement. |
| (c) | Piggy-Back Registrations. If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration tatement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, except on Form F-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen days after the date of the delivery of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 6(c) that are the subject of a then effective Registration Statement that is available for resales or other dispositions by such Holder. |
| (d) | Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of 55% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise or conversion of any security), provided that, if any amendment, modification or waiver disproportionately and adversely impacts a Holder (or group of Holders), the consent of such disproportionately impacted Holder (or group of Holders) shall be required. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(d). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement. |
| (e) | Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Warrant. |
| (f) | Successors and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 1 of Article III of the Warrant. |
| (g) | No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full. |
| (h) | Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a PDF format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or PDF signature page were an original thereof. |
| (i) | Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of New York. |
| (j) | Submission to Jurisdiction; Waiver of Jury Trial. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in the city of New York and County of New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. |
The Company and each Holder acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby.
| (k) | Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law. |
| (l) | Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. |
| (m) | Headings. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof. |
| (n) | Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders. |
********************
[Signature pages follow.]
IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | Noah Hershcoviz | |
| Title: | Chief Executive Officer | |
[Signature page of Holders follows.]
[Signature page of Holders to HUB Cyber Security Ltd.]
Name of Holder: [_______]
Signature of Authorized Signatory of Holder: __________________
Name of Authorized Signatory: [_______]
Title of Authorized Signatory: [_______]
[Signature pages continue.]
Schedule 1
Investors
| Name of Investor | Number of Initial Warrant Shares |
Annex A
Plan of Distribution
PLAN OF DISTRIBUTION
The Selling Securityholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling warrants, ordinary shares or interests in ordinary shares received after the date of this prospectus from a Selling Securityholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of ordinary shares or interests in ordinary shares on any stock exchange, market or trading facility on which our ordinary shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The Selling Securityholders may use any one or more of the following methods when disposing of the ordinary shares or their interests therein:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for their account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately negotiated transactions; |
| ● | short sales effected after the date the registration statement of which this prospectus is a part is declared effective by the SEC; |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| ● | broker-dealers may agree with the Selling Securityholders to sell a specified number of such shares at a stipulated price per share; |
| ● | a combination of any such methods of sale; and |
| ● | any other method permitted by applicable law. |
The Selling Securityholders may, from time to time, pledge or grant a security interest in some or all of their ordinary shares or other shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the ordinary shares, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of Selling Securityholders to include the pledgee, transferee or other successors in interest as Selling Securityholders under this prospectus. The Selling Securityholders also may transfer the ordinary shares in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
In addition, a Selling Securityholder that is an entity may elect to make a pro rata in-kind distribution of their securities to its members, partners or shareholders pursuant to the registration statement of which this prospectus is a part by delivering a prospectus with a plan of distribution. Such members, partners or shareholders would thereby receive freely tradeable securities pursuant to the distribution through a registration statement. To the extent a distributee is an affiliate of ours (or to the extent otherwise required by law), we may file a prospectus supplement in order to permit the distributees to use the prospectus to resell the securities acquired in the distribution.
Annex A -
In connection with the sale of our ordinary shares, the Selling Securityholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of our ordinary shares in the course of hedging the positions they assume. The Selling Securityholders may also sell our ordinary shares short and deliver these securities to close out their short positions, or loan or pledge the Warrants or ordinary shares to broker-dealers that in turn may sell these securities. The Selling Securityholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution or shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
Each of the Selling Securityholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of ordinary shares to be made directly or through agents. We will not receive any of the proceeds from this offering. Upon any exercise of the Warrants by payment of cash, however, we will receive the exercise price of the Warrants.
The Selling Securityholders and any underwriters, broker-dealers or agents that participate in the sale of the ordinary shares or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling securityholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
In addition, a Selling Securityholder that is an entity may elect to make a pro rata in-kind distribution of securities to its members, partners or stockholders pursuant to the registration statement of which this prospectus is a part by delivering a prospectus with a plan of distribution. Such members, partners or stockholders would thereby receive freely tradeable securities pursuant to the distribution through a registration statement.
To the extent required, the ordinary shares to be sold, the names of the Selling Securityholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable, the ordinary shares may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the ordinary shares may not be sold unless they have been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
We have advised the Selling Securityholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the Selling Securityholders and their affiliates. In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the Selling Securityholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The Selling Securityholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.
We have agreed to indemnify the Selling Securityholders against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the warrants or shares offered by this prospectus.
We have agreed with the Selling Securityholders to keep the registration statement of which this prospectus constitutes a part effective until all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement or the securities have been withdrawn.
In compliance with the guidelines of the Financial Industry Regulatory Authority (“FINRA”), the aggregate maximum discount, commission, fees or other items constituting underwriting compensation to be received by any FINRA member or independent broker-dealer will not exceed 8% of the gross proceeds of any offering pursuant to this prospectus and any applicable prospectus supplement.
Annex A -
Annex B
Selling Securityholders
SELLING SECURITYHOLDERS
This prospectus relates to the possible resale by the Selling Securityholders of up to _______ ordinary shares [and ______ Private Warrants] by the Selling Securityholders.
The Selling Securityholders may from time to time offer and sell any or all of the ordinary shares and warrants set forth below pursuant to this prospectus. In this prospectus, the term “Selling Securityholders” includes (i) the entities identified in the table below (as such table may be amended from time to time by means of an amendment to the registration statement of which this prospectus forms a part or by a supplement to this prospectus) and (ii) any donees, pledgees, transferees or other successors-in-interest that acquire any of the securities covered by this prospectus after the date of this prospectus from the named Selling Securityholders as a gift, pledge, partnership distribution or other non-sale related transfer.
The table below sets forth, as of the date of this prospectus, the name of the Selling Securityholders for which we are registering ordinary shares and warrants for resale to the public. The percentage of ownership in the table below is based on _______ ordinary shares outstanding as of __________, 2025. The table is prepared based on information supplied to us by the Selling Securityholders, and reflects their holdings as of _________, 2025, disregarding any limitations on conversion or exercises.
In accordance with SEC rules, individuals and entities below are shown as having beneficial ownership over shares they own or have the right to acquire within 60 days, as well as shares for which they have the right to vote or dispose of such shares. Also in accordance with SEC rules, for purposes of calculating percentages of beneficial ownership, shares which a person has the right to acquire within 60 days of ________, 2025 are included both in that person’s beneficial ownership as well as in the total number of shares issued and outstanding used to calculate that person’s percentage ownership but not for purposes of calculating the percentage for other persons. In some cases, the same ordinary shares are reflected more than once in the table below because more than one holder may be deemed the beneficial owner of the same ordinary shares.
We cannot advise you as to whether the Selling Securityholders will in fact sell any or all of such securities. In addition, the Selling Securityholders may sell, transfer or otherwise dispose of, at any time and from time to time, the ordinary shares or warrants in transactions exempt from the registration requirements of the Securities Act after the date of this prospectus, subject to applicable law.
Selling Securityholder information for each additional Selling Securityholder, if any, will be set forth by prospectus supplement to the extent required prior to the time of any offer or sale of such Selling Securityholder’s securities pursuant to this prospectus. Any prospectus supplement may add, update, substitute, or change the information contained in this prospectus, including the identity of each Selling Securityholder and the number of ordinary shares and warrants registered on its behalf. A Selling Securityholder may sell all, some or none of such securities in this offering. See “Plan of Distribution.”
The information in the table below is based upon information provided by the Selling Securityholders. The securities owned by the Selling Securityholders named below do not have voting rights different from the securities owned by other securityholders.
| Names and Addresses | Securities Beneficially Owned prior to this Offering |
Securities to be Offered in this Offering |
Securities Beneficially Owned after this |
Annex B -
Annex C
HUB CYBER SECURITY, LTD.
Selling Stockholder Notice and Questionnaire
The undersigned beneficial owner of Ordinary Shares of (the “Registrable Securities”) of HUB Cyber Security Ltd. (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) the Registration Statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling stockholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling stockholder in the Registration Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the “Selling Stockholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.
QUESTIONNAIRE
| 1. | Name. |
| (a) | Full Legal Name of Selling Stockholder: |
| (b) | Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held: | |
| (c) | Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire): | |
Annex C -
2. Address for Notices to Selling Stockholder:
| Telephone: _________ |
| Email: ________________________ |
| Contact Person: ______________ |
3. Broker-Dealer Status:
| (a) | Are you a broker-dealer? |
Yes ☐ No ☐
| (b) | If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company? |
Yes ☐ No ☐
| Note: | If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement. |
| (c) | Are you an affiliate of a broker-dealer? |
Yes ☐ No ☐
| (d) | If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities? |
Yes ☐ No ☐
| Note: | If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement. |
4. Beneficial Ownership of Securities of the Company Owned by the Selling Stockholder.
Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Warrant.
| (a) | Type and Amount of other securities beneficially owned by the Selling Stockholder: |
Annex C -
5. Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
The undersigned agrees to promptly notify the Company of any material inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective; provided, that the undersigned shall not be required to notify the Company of any changes to the number of securities held or owned by the undersigned or its affiliates.
By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus and any amendments or supplements thereto.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.
| Date: | Beneficial Owner: [Name] |
| Signature: | ||
| Name: | ||
| Title: |
PLEASE FAX A COPY (OR EMAIL A PDF COPY) OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO:
Annex C - 3
Exhibit 4.65
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
ORDINARY SHARE PURCHASE WARRANT
HUB CYBER SECURITY LTD.
Initial Warrant Shares: [ ]
Issue Date: February __, 2025 (the “Issue Date”)
THIS ORDINARY SHARE PURCHASE WARRANT (the “Warrant”) certifies that, for value received, [Insert the Holder’s name], a [__________] or its assignees or successors (each, the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the Issue Date, and on or prior to 5:00 p.m. (New York City time) on February __, 2030 (the “Termination Date”) but not thereafter, to subscribe for and purchase from HUB Cyber Security Ltd., an Israeli corporation (the “Company”), up to [_________] Ordinary Shares of the Company (the “Initial Warrant Shares”) (the Initial Warrant Shares, as subject to adjustment and supplements pursuant this Warrant, including, among others, by any grant of Additional Warrant Shares, the “Warrant Shares”). The purchase price of one share of Ordinary Shares under this Warrant shall be equal to the applicable Exercise Price, as defined in SECTION 2 of Article II.
ARTICLE I. DEFINITIONS
SECTION 1. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Loan Agreement (the “Loan Agreement”), dated February __, 2025, by and between the Company and Julestar LLC.
(a) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in the City of Tel Aviv, Israel are authorized or required by law to remain closed.
(b) “Trading Day” means a day on which the principal Trading Market is open for trading.
(c) “Trading Market” means any of the following markets or exchanges on which the Ordinary Shares is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTCQB or the OTCQX Market (or any successors to any of the foregoing).
(d) “Transfer Agent” means Equiniti Trust Company, LLC, the current transfer agent of the Company, with a mailing address of 1 United Lane, Teterboro, NJ, 07608, and any successor transfer agent of the Company.
ARTICLE II. EXERCISE.
SECTION 1. Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Issue Date and on or before the Termination Date by delivery to the Company of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto as Exhibit A (the “Notice of Exercise”). Within one (1) Trading Day following the date of exercise of this Warrant as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in SECTION 3 of Article II below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation as soon as reasonably practicable of the date on which the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of the remaining Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
SECTION 2. Exercise Price. The exercise price per share of Ordinary Shares under this Warrant for the Initial Warrant Shares shall be $0.50 (the “Initial Warrant Shares Exercise Price”) and the exercise price per share of Ordinary Shares under this Warrant for the Additional Warrant Shares shall be calculated in accordance with the Loan Agreement (the “Additional Warrant Shares Exercise Price”), and in each case the Initial Warrant Shares Exercise Price and the Additional Warrant Shares Exercise Price shall be subject to adjustment hereunder and/or under the Loan Agreement. The Initial Warrant Shares Exercise Price and the Additional Warrant Shares Exercise Price are referred to collectively herein as the “Exercise Price”.
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SECTION 3. Cashless Exercise. This Warrant may also be exercised, for up to 50% of the Warrant Shares (including Warrant Shares that are canceled pursuant to cashless exercises) (unless the Company, in its sole discretion, consents to a greater percentage of Warrant Shares), by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) multiplied by (X)] by (A), where:
| (A) | = | the VWAP on the full Trading Day immediately preceding the delivery of the applicable Notice of Exercise; |
| (B) | = | the applicable Exercise Price with respect to the Warrant Shares being purchased, as adjusted hereunder; and |
| (X) | = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act or Rule 144 promulgated thereunder, the holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any position contrary to this SECTION 3 of ARTICLE II.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Ordinary Shares are then listed or quoted on a Trading Market, the daily volume weighted average price of the Ordinary Shares for such date (or the nearest preceding date) on the Trading Market on which the Ordinary Shares is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the Ordinary Shares are not then listed or quoted for trading on a Trading Market, the prices for the Ordinary Shares are then reported on the Pink Open Market (“Pink Market”) operated by the OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Ordinary Shares so reported, or (c) in all other cases, the fair market value of a share of Ordinary Shares as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
SECTION 4. Mechanics of Exercise.
(a) Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise of the Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is one (1) Trading Day after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within one (1) Trading Day following delivery of the Notice of Exercise. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Ordinary Shares on the date of the applicable Notice of Exercise), $5 per Trading Day (increasing to $10 per Trading Day on the fifth Trading Day after the Warrant Share Delivery Date) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Ordinary Shares as in effect on the date of delivery of the Notice of Exercise.
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(b) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
(c) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to SECTION 4(a) of this Article II by three (3) Trading Days following the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
(d) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the applicable Exercise Price or round down to the next whole share.
(e) Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that, in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for electronic delivery of the Warrant Shares.
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(f) No Violation. The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without any rights of pre-emption in favor of any other person and without violation by the Company of any applicable law or governmental regulation or of any requirements of any domestic securities exchange upon which Ordinary Shares or other securities constituting Warrant Shares or into which such Warrant Shares may be converted or exchanged may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).
(g) Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
SECTION 5. Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to this ARTICLE II or otherwise, to the extent that at such time or after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder “holds” or would “hold” (as defined for purposes of the Israeli Companies Law, 1999) or “beneficially owns” or would “beneficially own” (as defined for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly, in excess of the Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Ordinary Shares held or beneficially owned, directly or indirectly, by the Holder shall include the number of shares of Ordinary Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Ordinary Shares which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant owned, directly or indirectly, by the Holder and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Ordinary Shares Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein owned, directly or indirectly, by the Holder. The determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, in each case subject to the Ownership Limitation, and the Company shall work, together with the Holder, to verify or confirm the accuracy of such determination. No prior inability to exercise or exchange this Warrant pursuant to this Section 5 shall have any effect on the applicability of the provisions of this Section 5 with respect to any subsequent determination of exercisability or exchangeability. For the purposes of this Section 6, all determinations and calculations (including, without limitation, with respect to calculations of percentage of holdings and beneficial ownership) shall be determined in accordance with the Israeli Companies Law, 1999 and with the Exchange Act, respectively, and the rules and regulations promulgated thereunder; in the event of a conflict between such two laws, the stricter one shall govern. For purposes of this SECTION 5, in determining the number of outstanding shares of Ordinary Shares, a Holder may rely on the number of outstanding shares of Ordinary Shares as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company setting forth the number of Ordinary Shares outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm in writing to the Holder the number of shares of Ordinary Shares then outstanding. In any case, the number of outstanding Ordinary Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder since the date as of which such number of outstanding shares of Ordinary Shares was reported. The “Ownership Limitation” shall be 4.99% of the number of shares of Ordinary Shares outstanding immediately after giving effect to the issuance of Ordinary Shares issuable upon exercise of this Warrant. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 5 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this SECTION 5 shall apply to a successor holder of this Warrant.
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SECTION 6. Additional Warrant Shares; Reduction in Warrant Shares.
(a) Upon the occurrence of Non-Early Payment (as such term is defined in the Loan Agreement), (i) the number of shares issuable upon exercise of this Warrant shall, automatically and without any further action by any person, be increased by the number of Additional Warrant Shares (as such term is defined in the Loan Agreement) and (ii) within five Business Days following the occurrence of Non-Early Payment, the Company shall deliver to the Holder, by email, a notice setting forth the aggregate number of Warrant Shares for which this Warrant is then exercisable, including the Additional Warrant Shares, and the then applicable Initial Warrant Shares Exercise Price and the then applicable Additional Warrant Shares Exercise Price and setting forth a brief statement of the calculation thereof.
(b) The number of Initial Warrant Shares shall be reduced in accordance with Section 2.07(b), 2.07(c) or 2.07(d) of the Loan Agreement if the condition to a reduction set forth in any such section shall have been satisfied.
(c) In the event of an adjustment pursuant to this Section 6, the Company shall issue to the Holder a new warrant showing, on the face of such Warrant, the aggregate number of Initial Warrant Shares and Additional Warrant Shares and the applicable Exercise Price with respect thereto and otherwise in compliance with Article II, Section 2 hereof. The new Warrant shall state the original Issue Date, as well as the amendment date, and shall be identical to this Warrant except as to the number of Warrant Shares (broken down between Initial Warrant Shares and Additional Warrant Shares, if applicable) issuable pursuant thereto and the applicable Exercise Price relating to each category of Warrant Shares, if applicable, to the extent this Section 5 has been fully complied with, the omission of this Section 5.
SECTION 7. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on its Ordinary Shares or any other equity or equity equivalent securities payable in Ordinary Shares (which, for avoidance of doubt, shall not include any Ordinary Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding Ordinary Shares into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding Ordinary Shares into a smaller number of shares, or (iv) issues by reclassification of the Ordinary Shares any shares of share capital of the Company, then in each case the applicable Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of Ordinary Shares (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of Ordinary Shares outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this SECTION 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
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(b) Subsequent Equity Sales. If the Company shall at any time or from time to time, while this Warrant is outstanding, issue any Ordinary Shares or Ordinary Shares Equivalent (whether or not such Ordinary Shares Equivalent, or the right to convert or exchange any Ordinary Shares issuable upon the exercise of such Ordinary Shares Equivalent are immediately exercisable), other than Excluded Securities, without consideration or for a consideration per issued Ordinary Share or issuable Ordinary Share upon conversion or exercise of such Ordinary Shares Equivalent, that is less than the applicable Exercise Price in effect immediately prior to the issuance of such Ordinary Shares (either the “Lower Per Share Price”), the applicable Exercise Price in effect immediately prior to such issuance shall forthwith be lowered to a price equal to such Lower Per Share Price, but not lower than $0.19. For purpose of this Agreement, “Excluded Securities” means the issuance of (i) Ordinary Shares or Ordinary Shares Equivalent issued or issuable to employees, consultants or directors of the Company or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Company in an amount not to exceed in the aggregate for all employees, consultants and directors of the Company and any of its subsidiaries 10% of the Company’s fully diluted capitalization, (ii) securities exercisable or exchangeable for or convertible into Ordinary Shares issued and outstanding on the Issue Date of this Warrant, provided that such securities have not been amended since the Issue Date of this Warrant to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (for purposes of clarity, any decrease in the exercise price, exchange price or conversion price of such securities shall be deemed an amendment thereto) and (iii) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to an entity (or to the equity holders of an entity) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. In addition, for the avoidance of doubt, “Excluded Securities” also include the filing of any registration statement of the Company registering securities of the Company, or the filing of any amendments or supplements thereto, provided that the determination of whether sales of any security under any such registration statement constitutes an Excluded Security will be determined based on the preceding clauses (i), (ii) and (iii) hereof.
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(c) Change in Terms of Ordinary Shares Equivalent. Without derogating from Section 7(b) above, upon any change in any of (A) the total amount received or receivable by the Company as consideration for the granting or sale of any Ordinary Shares Equivalent referred to in Section 7(b) of Article II; (B) the consideration, if any, payable to the Company upon the exercise of any Ordinary Shares Equivalent or upon the issuance, conversion or exchange of any Ordinary Shares referred to in Section 7(b) of Article II, (C) the rate at which Ordinary Shares Equivalent referred to in Section 7(b) of Article II are convertible into or exchangeable for Ordinary Shares (or equivalent securities), or (D) the maximum number of Ordinary Shares (or equivalent securities) issuable in connection with any Ordinary Shares Equivalent referred to in Section 7(b) of Article II or any Ordinary Shares Equivalent referred to in Section 7(b) of Article II (in each case, other than in connection with an Excluded Securities), then (whether or not the original issuance or sale of such Ordinary Shares Equivalent resulted in an adjustment to the Exercise Price pursuant to this Section 7), the applicable Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 7(c) had such Ordinary Shares Equivalent still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced. For the avoidance of any doubt, a floor price appearing in any Ordinary Share Equivalent shall not trigger an adjustment to this Warrant unless and until Ordinary Shares are actually issued at such price.
(d) Calculation of Consideration Received. If the Company shall, at any time or from time to time after the Issue Date, issue or sell, or pursuant to Section 7 of Article II be deemed to have issued or sold, any Ordinary Shares or Ordinary Shares Equivalent: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (B) for freely tradeable securities, the amount of consideration received therefor shall be deemed to be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for consideration other than cash or freely tradeable securities, the amount of consideration received therefor shall be deemed to be the fair value of such consideration; or (D) for no specifically allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of consideration received therefor shall be deemed to be to be the fair value of such portion of the aggregate consideration received by the Company in such transaction as is attributable to such Ordinary Shares or Ordinary Shares Equivalent, as the case may be, issued in such transaction;. The net amount of any cash consideration and the fair value of any consideration other than cash or freely tradeable securities shall be determined in good faith jointly by the Board of Directors of the Company and the Holder.
(e) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 8(a) of Article II, if at any time the Company grants, issues or sells any Ordinary Share Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Ordinary Shares (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Ordinary Shares acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the grant, issue or sale of such Purchase Rights.
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(f) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Ordinary Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of greater than 50% of the outstanding Ordinary Shares or greater than 50% of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Ordinary Shares or any compulsory share exchange pursuant to which the Ordinary Shares are effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires greater than 50% of the outstanding Ordinary Shares or greater than 50% of the voting power of the common equity of the Company (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 6 of Article II on the exercise of this Warrant), the number of Ordinary Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of Ordinary Shares for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 6 of Article II on the exercise of this Warrant). For purposes of any such exercise, the determination of the applicable Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one Ordinary Share in such Fundamental Transaction, and the Company shall apportion the applicable Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Ordinary Shares are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Loan Documents in accordance with the provisions of this Section 8(f) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the Ordinary Shares acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the Ordinary Shares pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Alternatively, at the option of the Holder, upon the occurrence of any such Fundamental Transaction, the Successor Entity shall be added to the term “Company” under this Warrant (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of this Warrant and the other Loan Documents referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall assume all of the obligations of the Company prior thereto under this Warrant and the other Loan Documents with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company herein. Nothing contained in this clause (e) shall be construed as amending or cancelling the requirement that any assignment of rights and obligations under any Loan Document by the Company shall be subject to the prior written consent of Julestar LLC or any assignee or successor thereof.
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(g) Certain Events. If any event of the type contemplated by the provisions of this SECTION 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features in each case, other than with respect to any Excluded Securities) occurs, then the Board of Directors of the Company shall make an appropriate adjustment in the applicable Exercise Price so as to protect the rights of the Holder in a manner consistent with the provisions of this SECTION 7; provided that (i) no such adjustment pursuant to this SECTION 7(e) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this SECTION 7 and (ii) for the avoidance of doubt, no adjustment pursuant to this SECTION 7(e) shall be made in connection with an issuance of Excluded Securities.
(h) Calculations. All calculations under this SECTION 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this SECTION 7, the number of Ordinary Shares deemed to be issued and outstanding as of a given date shall be the sum of the number of Ordinary Shares (excluding treasury shares, if any) issued and outstanding.
(i) Notice to Holder
i. Adjustment to Exercise Price. Whenever the Initial Warrant Shares Exercise Price or the Additional Warrant Shares Exercise Price is adjusted pursuant to any provision of this SECTION 7, the Company shall promptly deliver to the Holder by email a notice setting forth the applicable Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
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ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Ordinary Shares, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Ordinary Shares, (C) the Company shall authorize the granting to all holders of the Ordinary Shares rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Ordinary Shares, any consolidation or merger to which the Company (or any of its Subsidiaries) is a party, any sale or transfer of all or substantially all of its assets, or any compulsory share exchange whereby the Ordinary Shares is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by email to the Holder at its last email address as it shall appear upon the Warrant Register of the Company, at least five (5) Trading Days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Ordinary Shares of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Ordinary Shares of record shall be entitled to exchange their shares of the Ordinary Shares for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided pursuant to this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Report on Form 6-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
ARTICLE III. Transfer of Warrant.
SECTION 1. Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in the Loan Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes, if any, payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares, subject to the Ownership Limitation, without having a new Warrant issued.
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SECTION 2. New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 1 of Article III, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
SECTION 3. Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. Upon signing this Warrant, the Company shall provide the Holder with a copy of the Warrant Register containing the Warrants hereunder and the Holder as the absolute owner thereof, dated as of the date hereof and duly signed by an officer of the Company. Promptly upon request by the Holder, the Company shall provide the Holder with a copy of the Warrant Register in effect as of that date.
SECTION 4. Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, become a party to the Registration Rights Agreement (as defined in the Loan Agreement).
SECTION 5. Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
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ARTICLE IV. RULE 144
SECTION 1. With a view to making available to the Holder the benefits of Rule 144 promulgated by the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Act, as amended (“Rule 144”), and any other rule or regulation of the Commission that may at any time permit the Holder to sell securities of the Company to the public without registration or pursuant to a resale registration statement, the Company shall: (i) make and keep public information available, as those terms are understood and defined in Rule 144; (ii) use reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act; and (iii) furnish to the Holder, promptly upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Exchange Act, a copy of the most recent annual and quarterly reports of the Company, and such other reports and documents so filed or furnished by the Company as such holder may reasonably request in connection with the sale of Warrant Shares without registration.
SECTION 2. Legends. Notwithstanding anything to the contrary contained in this Warrant or the Registration Rights Agreement, neither this Warrant nor any certificates evidencing Warrant Shares shall contain any legend restricting the transfer thereof in any of the following circumstances: (A) following any sale of this Warrant or such Warrant Shares issued or delivered to the Holder under or in connection herewith pursuant to Rule 144, (B) in connection with a sale, if this Warrant or such Warrant Shares are eligible for sale under Rule 144, or (C) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission and including due to such securities being sold pursuant to an effective registration statement) (collectively, the “Unrestricted Conditions”). In such circumstances, the Company shall cause its counsel to issue a legal opinion to the Transfer Agent or Depositary, as applicable, if required by such Transfer Agent or Depositary, to effect the issuance of Warrant Shares, without a restrictive legend or removal of the legend hereunder. If the Unrestricted Conditions are met at the time of issuance of this Warrant, the Warrant Shares, or such other securities of the Company issuable in connection with this Warrant, then this Warrant, the Warrant Shares, or other securities, as the case may be, shall be issued free of all legends.
ARTICLE V. Miscellaneous.
SECTION 1. No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof. Without limiting any rights of a Holder to receive Warrant Shares on a “cashless exercise” pursuant to Section 3 of Article II, in no event shall the Company be required to net cash settle an exercise of this Warrant.
SECTION 2. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity reasonably requested by the Company, and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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SECTION 3. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
SECTION 4. Authorized Shares.
(a) The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Ordinary Shares a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Ordinary Shares may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
(b) Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
(c) Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in any applicable Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
SECTION 5. Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Loan Agreement.
SECTION 6. Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
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SECTION 7. Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Loan Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
SECTION 8. Notices. Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by or email to the Company at the address set forth in the Loan Agreement and to a Holder at the address set forth on the signature page hereto.
SECTION 9. Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Ordinary Shares or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
SECTION 10. Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
SECTION 11. Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
SECTION 12. Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
SECTION 13. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
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SECTION 14. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
SECTION 15. Currency. Unless otherwise indicated, all dollar amounts referred to in this Warrant are in United States Dollars (“US Dollars”). All amounts owing under this Warrant shall be paid in US Dollars. All amounts denominated in other currencies shall be converted in the US Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into US Dollars pursuant to this Warrant, the US Dollar exchange rate as published in the Wall Street Journal (NY edition) on the relevant date of calculation.
[Remainder of page is intentionally left blank]
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| The Holder: | The Company: | |||
| [Insert name of Lender] | HUB Cyber Security Ltd. | |||
| Signature: | Signature: | |||
| By: | [●] | By: | [●] | |
| Title: | [●] | Title: | [●] | |
Address for notices to the Holder:
Address: ___________________
Email: ____________________
Attention: _________________
EXHIBIT A
NOTICE OF EXERCISE
To: HUB CYBER SECURITY LTD.
| 1. | The undersigned hereby elects to purchase __________[Initial/Additional] Warrant Shares of the Company pursuant to the terms of the Warrant, and tenders herewith payment of the applicable exercise price in the amount of $______per share, together with all applicable transfer taxes, if any. |
| 2. | Payment shall take the form of (check applicable box): |
| ☐ | in lawful money of the United States; or |
| ☐ | if permitted, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 3 of Article II, to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 3 of Article II. |
| 3. | Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below: |
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
| 4. | Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended. |
| 5. | Number of Ordinary Shares “held” (as defined for purposes of the Israeli Companies Law, 1999, as amended) by the undersigned prior to this proposed exercise of the Warrant: _________________________ |
[SIGNATURE OF HOLDER]
Name of Holder: ________________
Signature of Authorized Signatory of Holder: ______________
Name of Authorized Signatory:_______________
Title of Authorized Signatory: _______________ FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to:
Date: ______________
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
Name:
Address:
Phone Number:
Email address:
Date:
Holder’s Name:
Holder’s signature:
Exhibit 4.66
Dated: February 4, 2025 (the “Issuance Date”)
Principal Amount: US$3,117,647
Final Maturity Date: December 4, 2025
HUB CYBER SECURITY LTD. PROMISSORY NOTE
FOR VALUE RECEIVED, HUB Cyber Security Ltd., a company organized under the laws of the State of Israel (“Borrower”), does hereby covenant and promise to pay, in lawful money of the United States of America, to the order of Julestar LLC, a Delaware limited liability company, or to any subsequent holder of this Promissory Note (the “Lender” or the “Holder”) (the “Note”), the principal sum of US$3,117,647 three million one hundred seventeen thousand six hundred forty seven Dollars) (together with all other amounts advanced by Lender to the Borrower under the documents evidencing and securing the obligations of Borrower under this Note, the “Principal Amount” or the “Loan”) pursuant to the terms of that certain Loan Agreement of even date herewith (the “Loan Agreement”) between Borrower and Lender, with interest on the unpaid principal sum owing thereunder accruing at the interest rate as set forth in Section 2 below and to be computed in accordance with the terms of this Note and the Loan Agreement. Capitalized terms used herein, but not specifically defined herein, shall have the meanings assigned to them in the Loan Agreement.
1. Repayment of the Loan. The Borrower shall repay the Loan to the Lender as follows: (i) on the date which is fourteen (14) days of the Issuance Date, an amount of US$ 155,882.35 (one hundred fifty five thousand eight hundred eighty two Dollars and thirty five cents); and (ii) on the date which is twenty eight (28) days of the Issuance Date, an amount of US$ 155,882.35 (one hundred fifty five thousand eight hundred eighty two Dollars and thirty five cents); and (iii) beginning on the fifth week anniversary following the Issuance Date, the remaining Principal Amount shall be repaid in 36 consecutive weekly installments, each in the amount of US$ 77,941.18 (seventy seven thousand nine hundred forty one Dollars and eighteen cents; provided, however, that if any such day is not a Business Day, such principal shall be payable on the next succeeding Business Day with additional accrued interest until paid. On the Maturity Date, the entire outstanding Principal Amount shall become immediately due and payable.
2. Interest Rate.
(a) Commencing on the Issuance Date, interest shall accrue daily on the Principal Amount at the per annum rate equal to 10% (ten percent), as such rate may be increased pursuant to the provisions of Section 3 and/or Section 9 hereof.
(b) Accrued interest on the Loan shall be payable in arrears on the last day of each Interest Period; provided that (i) Default interest accrued pursuant to Section 3 and/or Section 9 hereof shall be payable on demand, and (ii) in the event of any repayment or prepayment of the Loan, accrued interest on the Principal Amount repaid or prepaid shall be payable on the date of such repayment or prepayment.
(c) All interest hereunder shall be computed on the basis of a year of 360 days, and shall be payable for the actual number of days elapsed (including the first day and the last day of any Interest Period). Borrower acknowledges that such calculation method will result in a higher yield to the Holder than a method based on a year of 365 or 366 days.
3. Overdue Interest. Any overdue unpaid Principal Amount or interest payment by more than five (5) Business Days shall bear interest for each day that such amounts are overdue, commencing from the sixth Business Day, at a rate equal to eighteen percent (18%) per annum (the “Overdue Rate”). The payment of any such interest shall not cure any Event of Default or justify any delay in payment of any amount due to the Holder hereunder or under any Loan Document upon its due date.
4. Prepayment of Loan.
(a) The unpaid principal amount of the Loan may, at any time and from time to time, be voluntarily paid or prepaid in whole or in part except that, with respect to any voluntary prepayment, (a) each such prepayment shall be in the minimum amount of US$ 100,000 (one hundred thousand Dollars), (b) the Holder shall have received written notice of any prepayment by 12:00 noon, New York local time one (1) Business Day before the date of such prepayment, which notice shall be irrevocable and identify the date and amount of the prepayment, and (c) any prepayment shall be accompanied by a prepayment equal to the entire amount of interest accrued up to (and including) the date of such prepayment. The Holder shall not be obligated to accept any prepayment unless it is accompanied by such payment of interest. The Borrower shall not be entitled to re-borrow from the Holder any amount repaid or prepaid by the Borrower on account of the Loan and/or the Note. In addition, the Borrower must make prepayments to the Holder on account of the principal of the Loan as required under Section 6 below.
(b) In the event that the outstanding Principal Amount of this Note, any accrued and unpaid interest thereon, and any other amounts owed by the Borrower to the Lender under the Loan Agreement and the other Loan Documents have been paid in full within fifteen (15) days following the date hereof, the unpaid Principal Amount shall be reduced by an amount equal to US$ 155,882.33 (one hundred fifty five thousand eight hundred eighty two Dollars and thirty three cents), without affecting any interest or other payments made by the Borrower to the Lender under the Loan Agreement prior to such repayment.
(c) In the event that the outstanding Principal Amount of this Note, any accrued and unpaid interest thereon, and any other amounts owed by the Borrower to the Lender under the Loan Agreement and the other Loan Documents have been paid in full within thirty (30) days following the date hereof, the unpaid Principal Amount shall be reduced by an amount equal to US$ 93,529.40 (ninety three thousand five hundred twenty nine Dollars and forty cents), without affecting any interest or other payments made by the Borrower to the Lender under the Loan Agreement prior to such repayment.
5. Funds; Manner of Payment. Unless otherwise specified herein, each payment and prepayment of principal of and interest on the Note and/or on account of the Loan shall be made not later than noon (New York City time) on the date on which it is payable and shall be made in U.S. Dollars in immediately available funds. Any payment made after noon (New York City time) of a certain Business Day shall be deemed to be made on the proceeding Business Day. Any payment received by the Holder shall be applied as follows: (a) first, to the payment of any and all reasonable costs, fees and expenses incurred by or payable to the Holder in connection with the Loan, the collection of amounts payable to the Holder or the enforcement of the Holder’s rights; (b) second, to the payment of all default interest accrued pursuant to Section 3 and/or Section 9 (if any); (c) third, to the payment of all accrued and unpaid other interest hereunder; and (d) fourth, to the payment of the unpaid principal balance of the Loan (including any additional interest), or in any other manner which the Holder may, in its sole discretion, elect from time to time. All payments due hereunder shall be made without any counterclaim, setoff or deduction whatsoever, except as expressly permitted by Section 2.11(c) of the Loan Agreement. Payment shall be made, in any event, in lawful money of the United States of America by wire transfer according to the written wire instructions provided by the Holder to the Borrower.
6. Mandatory Prepayment. The Borrower shall make mandatory prepayment of this Note in full as required by Section 6.04 of the Loan Agreement.
7. Events of Default. This Note evidences the Loan which is made pursuant to the Loan Agreement which specifies various Events of Default, upon the happening of which all or portions of the sums owing under this Note may be declared immediately due and payable as more specifically provided therein. Each Event of Default under the Loan Agreement shall be an Event of Default hereunder.
8. Rights and Remedies upon Event of Default. (i) Upon an Event of Default, other than under subsection (g) or (h) of Section 7.01 of the Loan Agreement, at the Holder’s option at any time thereafter, the Holder may, upon written notice to the Borrower, take any of or all of the following actions, at the same or different times: (a) declare the Loan and/or the Note and all fees accrued hereunder and all obligations of the Borrower, contingent or matured, to be forthwith due and payable, both as to principal and interest, without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything contained in this Agreement or in any of the other Loan Documents to the contrary notwithstanding, and (b) exercise any or all of the rights and remedies afforded to the Holder under any applicable law and/or under the Loan Documents, or otherwise possessed by the Holder; and (ii) automatically upon an Event of Default under subsection (g) or (h) of Section 7.01 of the Loan Agreement, (i) the Loan and/or the Note and all fees accrued hereunder and all obligations of the Borrower, contingent or matured thereunder shall immediately and automatically become due and payable in full, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding (b) at the Holder’s option at any time thereafter, the Holder may, upon written notice to the Borrower exercise any or all of the rights and remedies afforded to the Holder under any applicable law and/or under the Loan Documents, or otherwise possessed by the Holder.
9. Default Interest. Upon the occurrence and during the continuance of an Event of Default, the outstanding principal amount of the Loan and any interest accrued thereon and any other amounts due under this Agreement shall bear interest at a rate per annum equal to eighteen percent (18%) (“Default Interest”). Default Interest shall be calculated on the basis of a 360-day year and actual days elapsed, and shall accrue daily on the outstanding principal balance and any other amounts due under this Agreement from the date of the Event of Default until such Event of Default is cured or waived in writing by the Lender. Default Interest shall compound monthly on the last day of each calendar month. Default Interest shall be payable on demand and shall be in addition to any other rights and remedies available to the Lender under this Agreement and/or applicable law. The assessment or acceptance of Default Interest shall not constitute a waiver of any Event of Default or any rights or remedies of the Lender under this Agreement or applicable law.
10. Borrower Representations and Warranties. The Borrower hereby represents and warrants as of the date of this Note, as follows:
(a) Existence. The Borrower is a company organized, validly existing and not a ‘breaching company’ under the laws of Israel.
(b) Power and Authority. The Borrower has the power and authority, and the legal right, to execute and deliver this Note and to perform its obligations hereunder and hereunder.
(c) Authorization; Execution; and Delivery. The execution and delivery of this Note by the Borrower and the performance of its obligations hereunder have been duly authorized by all necessary corporate action in accordance with all applicable laws. The Borrower has duly executed and delivered this Note.
(d) Enforceability. This Note is a valid, legal, and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(e) No Approvals. No consent or authorization of, filing with, notice to or other act by, or in respect of, any Governmental Authority or any other person is required in order for the Borrower to execute, deliver, or perform any of its obligations under this Note.
(f) No Violations. The execution and delivery of this and the consummation by the Borrower of the transactions contemplated hereby do not and will not (i) violate any provision of the Borrower’s organizational documents; (ii) violate any law or order applicable to the Borrower or by which any of its properties or assets may be bound; or (iii) constitute a default under any material agreement or contract by which the Borrower may be bound.
11. Costs of Collection. The Borrower agrees to pay all costs and expenses of collection incurred by Holder, in addition to principal, interest and late or delinquency charges (including, without limitation, reasonable attorneys’ fees and disbursements) and including all costs and expenses incurred in connection with the pursuit by Holder of any of its rights or remedies referred to herein or in the Loan Agreement.
12. Miscellaneous.
(a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered personally, by email attachment, or sent by a nationally recognized overnight courier service, addressed to the Borrower, at the address set forth on in the Loan Agreement, or such other, email address, or address as the Borrower may specify for such purposes by notice to the Holder delivered in accordance with this Section 6(a). Any and all notices or other communications or deliveries to be provided by the Borrower hereunder shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight courier service addressed to the Holder at the facsimile number, email address or address of the Holder appearing on the books of the Borrower, or if no such facsimile number or email attachment or address appears on the books of the Borrower, at the principal place of business of such Holder, as set forth in the Loan Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of: (i) the date of transmission, if such notice or communication is delivered via facsimile prior to 5:30 p.m. (Eastern time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile on a day that is not a Business Day or later than 5:30 p.m. (Eastern time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
(b) Absolute Obligation, Security and Ranking. No provision of this Note shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Borrower.
(c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Borrower shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the Principal Amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Borrower.
(d) Further Assurances. Borrower shall execute and acknowledge (or cause to be executed and acknowledged) and deliver to Holder all documents, and take all actions, required by Holder from time to time to confirm the rights created now or hereafter intended to be created under this Note and the Loan Agreement, to protect and further the validity, priority and enforceability of this Note and the Loan Agreement, or otherwise carry out the purposes of the Loan Agreement and the transactions contemplated thereunder.
(e) Governing Law. This Note shall be construed in accordance with and governed by the laws of the State of Israel, without regard to principles of conflict of laws as applied thereunder. Notwithstanding the foregoing, reference which is made herein to any statute or any other provision of law (including any US federal or state law) shall be construed and interpreted in accordance with the laws of the relevant jurisdiction.
(f) Jurisdiction. The Borrower and the Holder hereby irrevocably and unconditionally submit themselves and their property to the exclusive jurisdiction of the competent courts of the State of Israel sitting in the city of Tel Aviv Jaffa, and any appellate court for any thereof, in any action or proceeding arising out of or relating to this Note, or for recognition or enforcement of any judgment, and each of the parties hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Borrower and the Holder hereby irrevocably and unconditionally waive to the fullest extent they may legally effectively do so, any objection which they now or may hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Note in any court referred to in this clause (f) above. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Nothing in this Note shall affect any right that the Holder may otherwise have to bring any action or proceeding relating to this Note against the Borrower or any Subsidiary or any of the Borrower’s or its Subsidiaries’ properties in the courts of any other jurisdiction. In any event, THE HOLDER AND THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS.
(g) Waiver. Any waiver by the Borrower or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Borrower or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Borrower or the Holder must be in writing.
(h) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Borrower (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
(i) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Loan Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Borrower to comply with the terms of this Note. The Borrower covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Borrower (or the performance thereof). The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Borrower therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Borrower shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable the Holder to confirm the Borrower’s compliance with the terms and conditions of this Note.
(j) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
(k) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
(l) Amendments; Waivers. Any modifications, amendments or waivers of the provisions hereof shall be subject to Section 8.04 of the Loan Agreement.
(m) Usury. All payment obligations arising under this Note and the other Loan Documents are subject to the express condition that at no time shall the Borrower be obligated or required to pay interest at a rate which could subject the Holder to either civil or criminal liability as a result of being in excess of the maximum rate which any of them is permitted by law to contract or agree to pay. If by the terms of this Note or any other Loan Document, the Borrower is at any time required or obligated to pay interest at a rate in excess of such maximum rate, the applicable rate of interest shall be deemed to be immediately reduced to such maximum rate, and interest thus payable shall be computed at such maximum rate, and the portion of all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of principal. The Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by any Holder in order to enforce any right or remedy under this Note and/or any other Loan Document.
(n) Conflicts. Any conflict between any term, covenant, condition or provision of this Note, on the one hand, and any term, covenant, condition or provision of any other Loan Document, on the other, shall be resolved in favor of the term, covenant, condition or provision which is more likely for the benefit of the Holder or to enlarge the scope of the collateral or to enhance better the financial security provided to the Holder by the collateral.
(o) Execution. This Note may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.
[Remainder of Page Intentionally Blank]
IN WITNESS WHEREOF, the Borrower and the Holder have executed this Note by their duly authorized officers, all as of the day and year first above written.
|
THE BORROWER: |
||
| HUB Cyber Security Ltd. | ||
| By: | ||
| Name: | ||
| Title: | ||
| THE HOLDER: | ||
| JULESTAR LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
8
Exhibit 4.67
SUBSIDIARY GUARANTEE
THIS SUBSIDIARY GUARANTEE, dated as of February 4, 2025 (this “Guarantee”), made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, (individually, a “Guarantor” and collectively, the “Guarantors”), in favor of Julestar LLC, a Delaware limited liability company (together with its permitted assigns, the “Lender”), to that certain Loan Agreement, dated as of February 4, 2025, by and between HUB Cyber Security Ltd., an Israeli company (the “Company”), and the Lender (the “Loan Agreement”).
W I T N E S S E T H:
WHEREAS, pursuant to the Loan Agreement, the Lender has agreed to make a loan to the Company and the Company has agreed to issue to the Lender a promissory note in the Original Principal Amount of $3,117,647 (three million one hundred seventeen thousand six hundred forty seven Dollars), subject to the terms and conditions set forth therein (the “Loan” and the “Note”, respectively); and
WHEREAS, each Guarantor will directly benefit from the extension of the loan to the Company represented by the Loan Agreement and by the issuance of the Note;
NOW, THEREFORE, in consideration of the premises and to induce the Lender to enter into the Loan Agreement and to carry out the transactions contemplated thereby; each Guarantor hereby agrees with the Lender as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the Loan Agreement and the Note, when used herein, shall have the meanings given to them in the Loan Agreement and the Note. The words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and Section and Schedule references are to this Guarantee unless otherwise specified. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Loan Agreement. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. The following terms shall have the following meanings:
“Guarantee” means this Subsidiary Guarantee, as the same may be amended, supplemented or otherwise modified from time to time.
“Obligations” means, in addition to all other costs and expenses of collection incurred by Lender in enforcing any of the “Obligations” (as defined herein) and/or this Guarantee, all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of the Company or any Guarantor to the Lender under this Guarantee, the Note, the Loan Agreement and/or any other Loan Documents, instruments, agreements or other documents executed and/or delivered in connection herewith or therewith (the “Transaction Documents”), in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from the Lender as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal of, and interest on the Note and the Loan extended pursuant thereto, (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Company or any Guarantor from time to time under or in connection with this Guarantee, the Note, the other Transaction Documents and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, (iii) all covenants and agreements of the Company, the other Loan Parties and the Guarantors under the Transaction Documents, including the Warrant, and (iv) all amounts (including but not limited to post-petition interest and default interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company or any Guarantor.
2. Guarantee. Each Guarantor hereby agrees, severally and jointly, as follows:
| (a) | Guarantee. |
(i) Each Guarantor hereby, jointly and severally, unconditionally and irrevocably guarantees to the Lender and its successors, endorsees, transferees and assigns, the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations, subject to applicable law.
(ii) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Lender hereunder.
(iii) The guarantee contained in this Section 2 shall remain in full force and effect until all the Obligations and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by indefeasible payment in full.
(iv) No payment made by the Company, any of the Guarantors, any other guarantor or any other Person or received or collected by the Lender from the Company, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Obligations or any payment received or collected from such Guarantor in respect of the Obligations), remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations are indefeasibly paid in full.
(v) Notwithstanding anything to the contrary in this Guarantee, with respect to any defaulted non-monetary Obligations the specific performance of which by the Guarantors is not reasonably possible (e.g., the issuance of the Company’s Ordinary Shares), the Guarantors shall only be liable for making the Lender whole on a monetary basis for the Company’s failure to perform such Obligations in accordance with the Transaction Documents.
(b) Right of Contribution. Subject to Section 2(c) below, each Guarantor agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to the terms and conditions of Section 2(c) below. The provisions of this Section 2(b) shall in no respect limit the obligations and liabilities of any Guarantor to the Lender and each Guarantor shall remain liable to the Lender for the full amount guaranteed by such Guarantor hereunder until the indefeasible repayment in full of all amounts owed under the Loan Agreement, the Note and the other Transaction Documents.
(c) No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Lender against the Company or any other Guarantor or any collateral security or guarantee or right of offset held by the Lender for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Lender by the Company on account of the Obligations are indefeasibly paid in full. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Lender, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Lender in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Lender, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Lender may determine.
(d) Amendments, Etc. With Respect to the Obligations. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Lender may be rescinded by the Lender and any of the Obligations continued, and the Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Lender, and the Loan Agreement and the other Transaction Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Lender may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. The Lender shall have no obligation to protect, secure, perfect or insure any Lien at any time held by them as security for the Obligations or for the guarantee contained in this Section 2 or any property subject thereto.
(e) Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Lender upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between the Company and any of the Guarantors, on the one hand, and the Lender, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives, to the extent permitted by law, diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment and performance without regard to: (i) the validity or enforceability of the Loan Agreement or any other Transaction Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Lender, (ii) any defense, set-off or counterclaim (other than a defense of payment or performance or fraud by Lender) which may at any time be available to or be asserted by the Company or any other Person against the Lender, or (iii) any other circumstance whatsoever (with or without notice to or knowledge of the Company or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Company for the Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as they may have against the Company, any other Guarantor or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Lender against any Guarantor. For the purposes hereof, “demand” shall include the commencement and continuance of any legal proceedings.
(f) Reinstatement. The guarantee contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.
(g) Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Lender without set-off or counterclaim in U.S. dollars at the address set forth or referred to in Section 8.03 of the Loan Agreement or any other address provided in writing by the Lender to the Guarantor or the Company.
(h) Negative Covenants. From the date of this Agreement, each Guarantor hereby undertakes not to provide any guarantees to third parties, other than in the ordinary course of business of that Guarantor, and in any event not to provide any guarantees to creditors of the Company, except as permitted by clause (c) or (e) of the definition of Permitted Indebtedness, without the prior written consent of the Lender.
3. Representations and Warranties. Each Guarantor hereby jointly and severally makes the following representations and warranties to Lender as of the date hereof:
(a) Organization and Qualification. Such Guarantor is duly organized, validly existing and in good standing (to the extent such term is applicable) under the laws of the applicable jurisdiction set of its incorporation or other organization, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Such Guarantor has no subsidiaries other than those identified as such on the Company Disclosure Schedules to the Loan Agreement. Such Guarantor is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate, (x) adversely affect the legality, validity or enforceability of any of this Guaranty in any material respect, (y) have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Guarantor, or (z) adversely impair the Guarantor’s ability to perform fully on a timely basis its obligations under this Guaranty (a “Material Adverse Effect”).
(b) Authorization; Enforcement. Such Guarantor has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Guaranty, and otherwise to carry out its obligations hereunder. The execution and delivery of this Guaranty by the Guarantor and the consummation by it of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of such Guarantor. This Guaranty has been duly executed and delivered by such Guarantor and constitutes the valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms.
(c) No Conflicts. Except as disclosed in the Disclosure Schedules to the Loan Agreement, the execution, delivery and performance of this Guaranty by such Guarantor and the consummation by the Guarantor of the transactions contemplated thereby do not and will not: (i) conflict with or violate any provision of its Certificate of Incorporation or By-laws or (ii) conflict with, constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Guarantor is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Guarantor is subject (including federal and state securities laws and regulations), or by which any material property or asset of such Guarantor is bound or affected, except in the case of each of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as could not, individually or in the aggregate, have or result in a Material Adverse Effect.
(d) Consents and Approvals. The Guarantor is not required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local, foreign or other governmental authority or other person in connection with the execution, delivery and performance by the Guarantor of this Guaranty.
(e) Loan Agreement. The representations and warranties of the Company set forth in the Loan Agreement as they relate to such Guarantor, each of which is hereby incorporated herein by reference, are true and correct as of each time such representations are deemed to be made pursuant to such Loan Agreement, and the Lender shall be entitled to rely on each of them as if they were fully set forth herein, provided that each reference in each such representation and warranty to the Company’s knowledge shall, for the purposes of this Section 3, be deemed to be a reference to such Guarantor’s knowledge.
4. Covenants.
(a) Each Guarantor covenants and agrees with the Lender, severally and jointly, that, from and after the date of this Guarantee until the Obligations shall have been indefeasibly paid in full, such Guarantor shall take, and/or shall refrain from taking, as the case may be, each commercially reasonable action that is necessary to be taken or not taken, as the case may be, so that no Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor.
(b) So long as any of the Obligations are outstanding, unless the Lender shall otherwise consent in writing in advance, each Guarantor agrees, severally and jointly, that it will not directly or indirectly on or after the date of this Guarantee:
i. other than Permitted Indebtedness, enter into, create, incur, assume or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; ii.
other than Permitted Liens, enter into, create, incur, assume or suffer to exist any liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
iii. amend its certificate of incorporation, bylaws or other charter documents in any manner that materially and adversely affects any rights of the Lender or holders of Note, without the prior written consent of the Lender in the exercise of its sole discretion;
iv. repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its securities or debt obligations, except as expressly permitted in the Loan Agreement or the Note;
v. pay cash dividends on any equity securities of such Guarantor other than dividends paid to another Guarantor or to the Company;
vi. enter into any transaction with any Affiliate of the Guarantor which would be required to be disclosed in any public filing of the Company with the SEC, unless such transaction is made on an arm’s-length basis and expressly approved by the Lender and a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or
vii. enter into any agreement with respect to any of the foregoing.
5. Miscellaneous.
(a) Amendments in Writing. None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except in writing by the Lender holding a majority in principal amount of the outstanding Note.
(b) Notices. All notices, requests and demands to or upon the Lender or any Guarantor hereunder shall be effected in the manner provided for in the Loan Agreement, provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 5(b) or the Company.
(c) No Waiver By Course Of Conduct; Cumulative Remedies. The Lender shall not by any act (except by a written instrument pursuant to Section 6(a)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default under the Transaction Documents or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
(d) Enforcement Expenses; Indemnification.
(i) Each Guarantor agrees to pay, or reimburse the Lender for, all its costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Guarantee and the other Transaction Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of counsel to the Lender.
(ii) Each Guarantor agrees to pay, and to hold the Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable in connection with any of the transactions contemplated by this Guarantee.
(iii) Each Guarantor agrees to pay, and to hold the Lender harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Guarantee to the extent the Company would be required to do so pursuant to the Loan Agreement.
(iv) The agreements in this Section shall survive repayment of the Obligations and all other amounts payable under the Loan Agreement and the other Transaction Documents.
(e) Successor and Assigns. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of the Lender and its successors and assigns; provided that no Guarantor may assign, transfer or delegate any of its rights or obligations under this Guarantee without the prior written consent of the Lender.
(f) Set-Off. Each Guarantor hereby irrevocably authorizes the Lender at any time and from time to time while an Event of Default under any of the Transaction Documents shall have occurred and be continuing, without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits, credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Lender to or for the credit or the account of such Guarantor, or any part thereof in such amounts as the Lender may elect, against and on account of the obligations and liabilities of such Guarantor to the Lender hereunder and claims of every nature and description of the Lender against such Guarantor, in any currency, whether arising hereunder, under the Loan Agreement, any other Transaction Document or otherwise, as the Lender may elect, whether or not the Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Lender shall notify such Guarantor as soon as practicably reasonable of any such set-off and the application made by the Lender of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Lender may have.
(g) Counterparts. This Guarantee may be executed by one or more of the parties to this Guarantee on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.
(h) Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
(i) Section Headings. The Section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
(j) Integration. This Guarantee and the other Transaction Documents represent the agreement of the Guarantors and the Lender with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Lender relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Transaction Documents.
(k) Governing Laws. All questions concerning the construction, validity, enforcement and interpretation of this Guarantee shall be governed by and construed and enforced in accordance with the internal laws of the State of Israel, without regard to the principles of conflict of laws thereof. Each Guarantor irrevocably and unconditionally agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the competent courts sitting in the city of Tel Aviv – Jaffa and any appellate court for any thereof (the “Israeli Courts”). Each Guarantor hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the Israeli Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Guarantee), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Israeli Courts, or such Israeli Courts are improper or inconvenient venue for such proceeding. Each of Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each Guarantor hereby irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Guarantee and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Nothing in this Agreement shall affect any right that the Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Transaction Document against the Guarantor(s) or any of the Guarantor(s)’ properties in the courts of any other jurisdiction in which such entity is registered or operate or its property is located. If any party shall commence an action or proceeding to enforce any provisions of this Guarantee, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
(l) Acknowledgements. Each Guarantor hereby acknowledges that:
(i) it has been advised by counsel in the negotiation, execution and delivery of this Guarantee and the other Transaction Documents to which it is a party;
(ii) the Lender has no fiduciary relationship with or duty to any Guarantor arising out of or in connection with this Guarantee or any of the other Transaction Documents, and the relationship between the Guarantors, on the one hand, and the Lender, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(iii) no joint venture is created hereby or by the other Transaction Documents or otherwise exists by virtue of the transactions contemplated hereby among the Guarantors and the Lender.
(m) Additional Guarantors. The Company shall cause each of its subsidiaries formed or acquired on or subsequent to the date hereof to become a Guarantor for all purposes of this Guarantee by executing and delivering an Assumption Agreement in the form of Annex 1 hereto.
(n) Release of Guarantors. Each Guarantor will be released from all liability hereunder concurrently with the indefeasible repayment in full of all amounts owed under the Loan Agreement, the Note and the other Transaction Documents.
(o) Seniority. The Obligations of each of the Guarantors hereunder rank senior in priority to any other Indebtedness (as defined in the Loan Agreement) of such Guarantor.
(p) Completeness. By its execution of this Guarantee, the Company represents, warrants and covenants that the undersigned entities designated as Guarantors are all of the Subsidiaries of the Company, other than Comsec Ltd., the Qpoint Subsidiaries and the subsidiaries of BlackSwan Technologies, Inc.
*********************
(Signature Pages Follow)
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered as of the date first above written.
| GUARANTOR(S): | ||
| HUB Cyber Security, Inc. | ||
| a California corporation | ||
| By: | ||
| Name: | ||
| Title: | ||
| Mount Rainier Acquisition Corp. | ||
| a Delaware corporation | ||
| By: | ||
| Name: | ||
| Title: | ||
| HUB Cyber Security TLV Ltd. | ||
| an Israeli corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
| ALD Manpower Solutions Ltd, | ||
| an Israeli corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
| ALD Software Ltd., | ||
| an Israeli corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
| ALD College Ltd., | ||
| an Israeli corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
| Comsec Distribution, Ltd., | ||
| an Israeli corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
| Comsec International Information Security, Ltd., | ||
| an Israeli corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
| Comsec International Information Security B.V., | ||
| a Netherlands corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
| Comsec Consulting Limited UK, | ||
| a United Kingdom corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
| Hub Cyber Security GmbH, | ||
| a German corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
| BlackSwan Technologies, Inc., | ||
| a Delaware corporation, | ||
| By: | ||
| Name: | ||
| Title: | ||
Annex 1 to
SUBSIDIARY GUARANTEE
ASSUMPTION AGREEMENT, dated as of _____________, 202___ is made by ________________________, a________________ _________________ (the “Additional Guarantor”), in favor of the Lender pursuant to the Loan Agreement referred to below. All capitalized terms not defined herein shall have the meaning ascribed to them in such Loan Agreement.
W I T N E S S E T H :
WHEREAS, HUB Cyber Security Ltd., an Israeli company (the “Company”), and the Lender have entered into that certain Loan Agreement, dated as of February _, 2025 (as amended, supplemented or otherwise modified from time to time, the “Loan Agreement”);
WHEREAS, in connection with the Loan Agreement, certain Subsidiaries of the Company have entered into the Subsidiary Guarantee, dated as of February __, 2025 (as amended, supplemented or otherwise modified from time to time, the “Guarantee”) in favor of the Lender;
WHEREAS, the Loan Agreement requires the Additional Guarantor to become a party to the Guarantee; and
WHEREAS, the Additional Guarantor has agreed to execute and deliver this Assumption Agreement in order to become a party to the Guarantee;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee. By executing and delivering this Assumption Agreement, the Additional Guarantor, as provided in Section 5(m) of the Guarantee, hereby becomes a party to the Guarantee as a Guarantor thereunder with the same force and effect as if originally named therein as a Guarantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Guarantor thereunder. The Additional Guarantor hereby represents and warrants that each of the representations and warranties contained in Section 3 of the Guarantee is true and correct on and as the date hereof as to such Additional Guarantor (after giving effect to this Assumption Agreement) as if made on and as of such date.
2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ISRAEL, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written.
[SIGNATURE - ADDITIONAL GUARANTOR]
Exhibit 4.68
EXECUTION VERSION
NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of February 18, 2025 (the “Execution Date”), between HUB Cyber Security Ltd., an Israeli company (the ”Company”), and Claymore Capital Pty Ltd., an Australian company (the “Investor”).
RECITALS
A. The Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Regulation S (“Regulation S”) under the Securities Act of 1933, as amended (the “1933 Act”), as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.
B. The Investor wishes to purchase, and the Company wishes to sell, upon the terms and subject to the conditions stated in this Agreement, a convertible note in the form attached hereto as Exhibit A (the “Convertible Note”), convertible into Ordinary Shares (the “Conversion Shares”) pursuant to the terms set forth therein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
| 1. | PURCHASE AND SALE OF CONVERTIBLE NOTE. |
(a) Convertible Note. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company, on the Closing Date (as defined below), the Convertible Note in an aggregate principal amount of six million U.S. Dollars ($6,000,000).
(b) Closing. The aforementioned issuance and sale of the Convertible Note shall take place as soon as practicable following the date hereof, but no later than the Business Day following the satisfaction or waiver of all of the closing conditions set forth in Sections 6 and 7 (the “Closing” and such date of a Closing being, the “Closing Date”).
(c) Consideration. In consideration for the issuance and sale of the Convertible Note, the Investor shall undertake to make payments to Oppenheimer & Co. Inc. in the aggregate amount of three million U.S. Dollars ($3,000,000) pursuant to Sections 3(a) and 3(b) of the Confidential Settlement Agreement and General Release, dated on or about the date hereof, among Oppenheimer & Co. Inc., the Company and the Investor (the “Settlement Agreement”). In the event that Claymore fails to timely pay any amount required to be paid under the Settlement Agreement (the “Payment Default Amount”), then upon notice of the Company to the Investor, the principal amount of the Note shall be reduced by two times the Payment Default Amount, provided, however, that to the extent the outstanding Principal Amount under the Note at such time is less than two times the amount of the Payment Default Amount, then the Note shall be canceled and the balance shall be paid by the Investor to the Company in cash within ten Business Days.
(d) Taxes. The Company shall be entitled to withhold Israeli tax on any payment of interest or deemed interest, unless provided with an applicable exemption (or approval of reduced tax withholding rate) issued by the Israel Tax Authority.
| 2. | INVESTOR’S REPRESENTATIONS AND WARRANTIES. |
The Investor represents and warrants to the Company that:
(a) Organization; Authority. It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder.
(b) No Public Sale or Distribution. The Investor (i) is acquiring, or will acquire, the Convertible Note and (ii) upon conversion of its Convertible Note, will acquire the Conversion Shares issuable upon conversion thereof, in each case, for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by making the representations herein, the Investor does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. The Investor does not presently have any agreement or understanding, directly or indirectly, with any Person (as defined below) to distribute any of the Securities in violation of applicable securities laws.
(c) Investor Status. The Investor:
(i) (A) is not a “U.S. Person” (as defined in Rule 902 of Regulation S), (B) is acquiring the Securities outside the United States in an offshore transaction meeting the requirements of Regulation S; (C) is not acquiring, has not offered, and will not offer prior to the expiration of the applicable 40-day compliance period pursuant to Rule 903 of Regulation S, the Securities for the account or benefit of any U.S. Person; (D) did not become aware of the Company or the Securities through any form of “directed selling efforts” (as defined in Rule 902 of Regulation S), and no general solicitation or general advertising in violation of the 1933 Act has been or will be used nor will any offers by means of any directed selling efforts in the United States be made by the Investor or any of its representatives in connection with the offer and sale of any of the Securities; (E) was outside the United States at the time of the origination of contact concerning the transactions contemplated by this Agreement and on the date of execution and delivery of this Agreement by Investor; (F) is not acquiring the Securities in a transaction or part of series of transactions that, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the 1933 Act; (G) agrees that all offers and sales by the Investor of Securities shall be made pursuant to an effective registration statement under the Securities Act or pursuant to an exemption from, or a transaction not subject to the registration requirements of, the Securities Act, (H) is neither a U.S. Person nor a Distributor (as defined in Rule 902 of Regulation S) and (I) is the sole beneficial owner of the Securities specified on signature pages hereto and has not pre-arranged any sale with a purchaser in the United States; and
(ii) is a ‘sophisticated’ or ‘professional’ investor (as defined under section 708 of the Corporations Act 2001 (Cth) of Australia).
(d) Reliance on Exemptions. The Investor understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.
(e) Information. The Investor and its advisors, if any, acknowledge that they have been furnished with or provided access via EDGAR to the Company’s most recent Annual Report on Form 20-F, if any, and Reports of Foreign Private Issuers on Form 6-K as well as Registration Statements on Form F-1 or F-4 (including amendments thereto). The Investor and its advisors, if any, have been afforded the opportunity to ask questions of, and receive answers from, the Company concerning the offer and sale of the Securities and to obtain any additional information the Investor has requested which is necessary to verify the accuracy of the information furnished to the Investor concerning the Company and such offering. The Investor understands that its investment in the Securities involves a high degree of risk. The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. The Investor acknowledges that the Investor is basing its decision to invest in the Securities solely upon the information contained in the Transaction Documents, the Company’s most recent Annual Report on Form 20-F, if any, and Reports of Foreign Private Issuers on Form 6-K, if any, and its own due diligence and, except as specifically set forth in this Agreement, has not based its investment decision upon any representations made by any Person (as defined below).
(f) No Governmental Review. The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(g) Transfer or Resale. The Investor understands that: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Investor shall have delivered to the Company (if requested by the Company) an opinion of counsel to the Investor, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Investor provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule thereto) (“Rule 144”) or Regulation S promulgated under the 1933 Act; and (ii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.
(h) Validity; Enforcement. The execution and delivery of the Transaction Documents and the consummation by the Investor of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action on the part of the Investor and no further consent or authorization of the Investor or its members is required. Each Transaction Document has been duly executed by the Investor and when delivered in accordance with terms hereof and thereof, constitutes the legal, valid and binding obligations of the Investor enforceable against the Investor in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
(i) No Conflicts. The execution, delivery and performance by the Investor of this Agreement and the consummation by the Investor of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of the Investor, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Investor is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Investor, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the ability of the Investor to perform its obligations hereunder.
(j) Experience of Investor. The Investor has such knowledge, sophistication and experience in business and financial matter so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Investor is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(k) Foreign Corrupt Practices. Neither the Investor nor any of its subsidiaries or affiliates, nor, to the knowledge of the Investor, any director, officer, agent, employee, member or other Person acting on behalf of the Investor or any its subsidiaries or affiliates has, in the course of its actions for, or on behalf of, the Investor or any of its subsidiaries or affiliates (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any foreign or domestic government official or employee.
(l) General Solicitation. The Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or advertisement.
(m) Patriot Act Representations.
(i) The Investor represents that all evidence of identity provided is genuine and all related information furnished is accurate.
(ii) The Investor hereby acknowledges that the Company seeks to comply with all applicable anti-money laundering laws and regulations. In furtherance of such efforts, the Investor hereby represents and agrees that: (A) no part of the funds used by the Investor to acquire the Securities have been, or shall be, directly or indirectly derived from, or related to, any activity that may contravene federal, state, or international laws and regulations, including anti-money laundering laws and regulations; and (B) no payment to the Company by the Investor shall cause the Company to be in violation of any applicable anti-money laundering laws and regulations including without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Executive Order 13224 (2001) (the “Patriot Act”) issued by the President of the United States and the U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) regulations.
(iii) The Investor represents and warrants that the amounts to be paid by the Investor to the Company will not be directly or indirectly derived from activities that may contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. The Investor represents and warrants that, to the best of its knowledge, none of: (A) the Investor; (B) any Person controlling or controlled by the Investor; or (C) any Person having a beneficial interest in the Investor is (I) a country, territory, individual or entity named on a list maintained by OFAC, (II) a Person prohibited under the OFAC Programs, (III) a senior foreign political figure,1 or any immediate family member2 or close associate3 of a senior foreign political figure as such terms are defined in the footNote below or (IV) a “foreign shell bank” within the meaning of the U.S. Bank Secrecy Act (31 U.S.C. §5311 et seq.), as amended (the “Bank Secrecy Act”) and the regulations promulgated thereunder by the U.S. Department of the Treasury.
(iv) The Investor further represents and warrants that the Investor: (A) has conducted thorough due diligence with respect to all of its beneficial owners, (B) has established the identities of all beneficial owners and the source of each of the beneficial owner’s funds and (C) will retain evidence of any such identities, any such source of funds and any such due diligence.
| 1 | A “senior foreign political figure” is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a “senior foreign political figure” includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure. |
| 2 | “Immediate family” of a senior foreign political figure typically includes the figure’s parents, siblings, spouse, children and in-laws. |
| 3 | A “close associate” of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure. |
(v) Neither the Investor nor any Person directly or indirectly controlling, controlled by or under common control with the Investor is a person identified as a terrorist organization on any relevant lists maintained by governmental authorities.
(vi) The Investor agrees to provide the Company all information that may be reasonably requested to comply with applicable laws and regulations of any applicable jurisdiction, or to respond to requests for information concerning the identity of the Investor from any governmental authority, self-regulatory organization or financial institution in connection with its anti-money laundering compliance procedures, or to update such information. The Investor agrees to notify the Company promptly if there is any change with respect to the representations and warranties provided herein. The Investor consents to the disclosure to regulators and law enforcement authorities by the Company and its affiliates and agents of any information about the Investor or its constituents as the Company reasonably deems necessary or appropriate to comply with applicable anti-money laundering, anti-terrorist and asset control laws, regulations, rules and orders.
| 3. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY. |
The Company represents and warrants to the Investor the matters set forth in this Section 3, except as set forth in the SEC Documents. These representations and warranties are current as of this Agreement, except to the extent that a representation or warranty expressly states that such representation or warranty is current only as of an earlier date. If any information is so reflected as of an earlier date, there have been no material changes since such date to the date hereof.
(a) Organization and Qualification. Each of the Company and each of its subsidiaries are (i) entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed (to the extent such concept exists in the applicable jurisdiction), and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and (ii) is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction (to the extent such concept exists in the applicable jurisdiction) in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.
(b) Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Convertible Note and the reservation for issuance of the Conversion Shares upon conversion of the Convertible Note) have been (i) duly authorized by the Company’s board of directors and (ii) no further filing, consent or authorization is required by the Company, its board of directors or its shareholders or other governing body of the Company (other than the filing of required notices and/or applications to the Principal Market for the issuance and sale of the Securities or the filings required by Section 4(g) of this Agreement). This Agreement has been, and the other Transaction Documents will be prior to the Closing, duly executed and delivered by the Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law.
(c) Issuance of Securities. The issuance of the Securities is duly authorized and, upon issuance in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, Liens, charges and other encumbrances with respect to the issue thereof. As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than the maximum number of Conversion Shares issuable upon conversion of the Convertible Note (without taking into account any limitations on the conversion of the Convertible Note set forth therein) and (ii) the maximum number of Warrant Shares issuable upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth therein), subject to shareholder approval of the proposed increase in authorized share capital as aforesaid. Subject to the accuracy of the representations and warranties of the Investor in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act. Upon issuance in accordance with the terms of the Transaction Documents, Investor will have good and marketable title to the Securities.
(d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Convertible Note, the Conversion Shares, the Warrants and the Warrant Shares and the reservation for issuance of the Conversion Shares and the Warrant Shares) will not (i) result in a violation of the Articles of Association of the Company or other organizational documents of the Company or any of its subsidiaries, any capital stock of the Company, subject to shareholder approval of the proposed increase in the Company’s authorized share capital as aforesaid, or any of its subsidiaries or bylaws or operating agreements of the Company or any of its subsidiaries, (ii) result in a violation of any law, rule, regulation, order, judgment or decree, except, in the case of this clause (ii), to the extent such violations that could not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any material contract or agreement, lease, license or commitment to which the Company is a party or by which it is bound.
(e) Consents. Neither the Company nor any subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with any court, governmental agency or any regulatory or self-regulatory agency or any other Person (other than the filing of required notices and/or applications to the Principal Market for the issuance and sale of the Securities or the filings required by Section 4(g) of this Agreement), in order for it to execute, deliver or perform any of its respective obligations under, or contemplated by, the Transaction Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations that the Company is required to obtain at or prior to the Closing have been obtained or effected on or prior to the Closing Date, and the Company is not aware of any facts or circumstances that might prevent the Company from obtaining or effecting any of the registration, application or filings contemplated by the Transaction Documents.
(f) Acknowledgment Regarding Investor’ Purchase of Securities. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that the Investor is not (i) an officer or director of the Company, (ii) an affiliate (as defined in Rule 405 of the 1933 Act) of the Company (an “Affiliate”) or (iii) to its knowledge, a “beneficial owner” (as defined for purposes of Rule 13d-3 of the 1934 Act) of more than 10% of the Ordinary Shares. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company or any of its subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by the Investor or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor’s purchase of the Securities. The Company further represents to the Investor that the Company’s decision to enter into the Transaction Documents to which it is a party has been based solely on the independent evaluation by the Company and its representatives.
(g) Directed Selling Efforts; Placement Agent’s Fees. Neither the Company nor any of its affiliates (as defined in Regulation 501 under the 1933 Act) nor any person acting on its or their behalf has engaged or will engage in any form of directed selling efforts (within the meaning of Regulation S) in the United States in connection with the offering of the Securities and it and they have complied and will comply with the offering restrictions requirement of applicable law. The Company shall be responsible for the payment of any of its placement agent’s fees, financial advisory fees, or brokers’ commissions, relating to or arising out of the transactions contemplated hereby.
(h) No Integrated Offering. None of the Company, any of its Affiliates, or, to the knowledge of the Company, any Person acting on the behalf of the Company or any of its Affiliates has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Securities under the 1933 Act, whether through integration with prior offerings or otherwise, or cause this offering of the Securities to require approval of shareholders of the Company under any applicable shareholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated for quotation. None of the Company, any of its Affiliates, or, to the knowledge of the Company, any Person acting on the behalf of the Company or any of its Affiliates will take any action or steps that would require registration of the issuance of any of the Securities under the 1933 Act or cause the offering of any of the Securities to be integrated with other offerings of securities of the Company.
(i) Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested shareholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement), shareholder rights plan or other similar anti-takeover provision under the Articles of Association or other organizational documents of the Company or any of its Affiliates or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to the Investor as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and the Investor’s ownership of the Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Ordinary Shares or a change in control of the Company or any of its Affiliates.
(j) SEC Documents; Financial Statements. As of their respective dates, all reports, schedules, forms, statements and other documents required to be filed by the Company with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing, as well as all registration statements under the 1933 Act, filed prior to the date hereof and all exhibits and appendices included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”) complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of its dates, the financial statements of the Company included in the SEC Documents complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the Note thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude the footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). No other information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or were made.
(k) Absence of Certain Changes. Since the date of the Company’s most recent audited financial statements contained in a Form 20-F (or Form F-1 if filed more recently), except as disclosed in the SEC Documents filed subsequent to such Form 20-F (or Form F-1, as applicable), there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), or condition (financial or otherwise) of the Company and its subsidiaries. Since the date of the Company’s most recent audited financial statements contained in a Form 20-F (or Form F-1, as applicable), neither the Company nor any of its subsidiaries has (i) declared or paid any dividends, (ii) sold any material assets outside of the ordinary course of business or (iii) made any material capital expenditures, individually or in the aggregate, outside of the ordinary course of business.
(l) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as disclosed in the SEC Documents, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to occur or exist with respect to the Company or any of its subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise) that would have a Material Adverse Effect on the Company.
(m) Conduct of Business; Regulatory Permits. Neither the Company nor any of its subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its subsidiaries, and the Company will not conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. Since February 28, 2023, (i) the Ordinary Shares have been designated for quotation on the Nasdaq Stock Market, (ii) trading in the Ordinary Shares has not been suspended by the SEC or the Nasdaq Stock Market and (iii) except as disclosed in the SEC Documents, the Company has received no communication, written or oral, from the SEC or the Nasdaq Stock Market regarding the suspension of the Ordinary Shares from the Nasdaq Stock Market. The Company and each of its subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.
(n) Foreign Corrupt Practices. Neither the Company nor any of its subsidiaries nor to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company or any of its subsidiaries (as applicable) has, in the course of its actions for, or on behalf of, the Company or any of its subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
(o) Sarbanes-Oxley Act. Except as set forth in the SEC Documents, the Company and each of its subsidiaries is in material compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 and all applicable rules and regulations promulgated by the SEC thereunder.
(p) Transactions With Affiliates. Except as disclosed in the SEC Documents, none of the officers, directors, employees or Affiliates of the Company is presently a party to any transaction with the Company (other than for ordinary course services as employees, officers or directors and immaterial transactions), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director, employee or Affiliate or, to the knowledge of the Company, any corporation, partnership, trust or other Person in which any such officer, director, employee or Affiliate has a substantial interest or is an employee, officer, director, trustee or partner.
(q) Equity Capitalization. All of the Company’s outstanding Ordinary Shares are duly authorized and have been, or upon issuance will be, validly issued, fully paid and non-assessable. Except as disclosed in the SEC Documents: (i) to the Company’s knowledge, no Person owns 10% or more of the Company’s issued and outstanding Ordinary Shares; (ii) the Company’s capital stock and the capital stock of its subsidiaries are not subject to preemptive rights or any other similar rights or any Liens; (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional capital stock or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its subsidiaries, respectively (other than as may be issued from time to time under any equity incentive plan maintained); (iv) except for the Convertible Note, there are no outstanding debt securities, convertible Note, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its subsidiaries or by which the Company or any of its subsidiaries is or may become bound. The SEC Documents contain true, correct and complete copies of the Company’s Articles of Association, as amended and as in effect on the date (except for the amendment to increase of the authorized share capital to 1.0 billion Ordinary Shares on December 30, 2024), and the terms of all securities convertible into, or exercisable or exchangeable for, Ordinary Shares and the material rights of the holders thereof.
(r) Indebtedness and Other Contracts. Except as disclosed in the SEC Documents, each of the Company and its subsidiaries (i) does not have any material outstanding Indebtedness, Indebtedness secured by any Lien on any assets of the Company or any of its subsidiaries or other material debt obligations, except for the Convertible Note, (ii) is not a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, (iii) is not in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, and (iv) is not a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. The Company has no current intention or expectation to file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction.
(s) Litigation. Except as disclosed in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries, the Ordinary Shares or any of the Company’s or its subsidiaries’ executive officers or directors which would be reasonably likely to adversely affect the transactions contemplated by this Agreement or would require disclosure in the SEC Documents.
(t) Insurance. The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
(u) Employee Relations. Neither the Company nor any of its subsidiaries is a party to any collective bargaining agreement nor does it employ any member of a union. To the knowledge of the Company, no executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) of the Company is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters.
(v) Title. The Company and its subsidiaries have good and marketable title to (i) all real property owned by it and (ii) all personal property, owned by them which is material to the business of the Company and its subsidiaries, in each case, free and clear of all Liens, encumbrances and defects except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its subsidiaries. Any real property and facilities held under lease by the Company and any of its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any of its subsidiaries.
(w) Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted. Except as disclosed in the SEC Documents, none of the Company’s or its subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected to expire, terminate or be abandoned, within three years from the date of this Agreement, which could reasonably be expected to result in a Material Adverse Effect.
(x) Tax Status. Each of the Company and its subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply and except in each case where the failure to file, pay or set aside could not be reasonably expected to have a Material Adverse Effect. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
(y) Internal Accounting and Disclosure Controls. Except as disclosed in the SEC Documents, the Company and each of its subsidiaries maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. Except as disclosed in the SEC Documents, the Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure.
(z) Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
(aa) U.S. Real Property Holding Corporation. Neither the Company nor any of its subsidiaries is or has ever been, and so long as any of the Securities are held by the Investor, shall not become, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company and each subsidiary shall so certify upon the Investor’s request.
(bb) No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.
(cc) Shell Company Status. The Company is not a shell company, as defined in SEC Rule 144(i), but it has been recently notified by the SEC that it is considered a former shell company by virtue of its merger with a SPAC.
(dd) Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor any of its subsidiaries nor, to the best of the Company’s knowledge (after reasonable inquiry of its executive officers and directors), any of the officers, directors, employees, agents or other representatives of the Company or any of its subsidiaries or any other business entity or enterprise with which the Company or any of its subsidiaries is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any Person or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its subsidiaries.
(ee) Money Laundering. The Company and its subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, without limitation, (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.
(ff) Disclosure. All disclosure provided to the Investor regarding the Company, its subsidiaries, their respective businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company or any of its subsidiaries is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.
| 4. | COVENANTS. |
(a) Use of Proceeds. The Company will not receive any proceeds from the transaction contemplated by this Agreement.
(b) Financial Information. Until the date on which the Investor shall have sold all of the Registrable Securities (the “Reporting Period”), the Company agrees to send the following to the Investor, unless the following are filed with the SEC through EDGAR and are available to the public through the EDGAR system, (i) within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 20-F and Reports of Foreign Private Issuers on Form 6-K, any interim reports or any consolidated balance sheets, income statements, shareholders’ equity statements and/or cash flow statements for any period other than annual, any Reports of Foreign Private Issuers on Form 6-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile copies of all press releases issued by the Company and (iii) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders.
(c) Listing. The Company shall secure the listing or designation for quotation (as the case may be) of all of the Conversion Shares on the Principal Market so that all such Conversion Shares may be traded on the foregoing, subject to official notice of issuance, and shall maintain such listing or designation for quotation (as the case may be) of all Conversion Shares from time to time issuable under the terms of the Convertible Note on the Principal Market. The Company shall use commercially reasonable efforts to maintain the Ordinary Shares’ listing or designation for quotation (as the case may be) on the Nasdaq Stock Market, the New York Stock Exchange or the NYSE Amex (each, an “Eligible Market”). The Company shall not take any action which could be reasonably expected to result in the delisting or suspension of the Ordinary Shares on an Eligible Market.
(d) Fees. The Company shall be responsible for the payment of any of its placement agent’s fees, financial advisory fees, transfer agent fees, DTC fees or broker’s commissions, relating to or arising out of the transactions contemplated hereby. The Company shall not be responsible for paying any fees or expenses of the Investor in connection with this Agreement and the transactions contemplated thereby.
(e) Pledge of Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that the Securities may be pledged by the Investor in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and the Investor effecting a pledge of Securities shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. At the Investor’s expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by the Investor provided that the Company shall be under no obligation to deliver any legal opinion required in connection therewith unless required by the Company’s transfer agent to be issued by the Company’s legal counsel.
(f) Disclosure of Transactions and Other Material Information. The Company shall not, and the Company shall cause each of its officers, directors, employees and agents not to, provide the Investor with any material, non-public information regarding the Company from and after the Execution Date without the express prior written consent of the Investor. Subject to the foregoing, neither the Company nor the Investor shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of the Investor, to make any press release or other public disclosure with respect to such transactions as is required by applicable law and regulations (provided that the Investor shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of the Investor, the Company shall not (and shall cause each of its affiliates to not) disclose the name of the Investor in any filing (other than as required by applicable law or rules and regulations), announcement, release or otherwise. Notwithstanding anything contained in this Agreement to the contrary and without implication that the contrary would otherwise be true, the Company expressly acknowledges and agrees that the Investor has not had, and the Investor shall not have (unless expressly agreed to by the Investor after the date hereof in a written definitive and binding agreement executed by the Company and the Investor), any duty of confidentiality with respect to, or a duty not to trade on the basis of, any information regarding the Company or any of its subsidiaries (as applicable) that the Investor receives from the Company, any of its subsidiaries or any of its or its officers, directors, employees, shareholders or agents.
(g) Reservation of Shares. As long as any of the Convertible Note remains outstanding, the Company shall take all action necessary to at all times have authorized and reserved for the purpose of issuance, no less than the number of Ordinary Shares issuable upon conversion of the Convertible Note.
(h) Conduct of Business. The business of the Company shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.
(i) Passive Foreign Investment Company. The Company shall conduct its business in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
| 5. | TRANSFER AGENT INSTRUCTIONS; LEGEND. |
(a) Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent in a form acceptable to the Investor to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of the Investor or its respective nominee(s), for the Conversion Shares in such amounts as specified from time to time by the Investor to the Company, and confirmed by the Company, upon the conversion of the Convertible Note. The Company represents and warrants that no instruction other than such irrevocable transfer agent instructions referred to in this Section 5(a), and stop transfer instructions to give effect to Section 2(g) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction Documents. If the Investor effects a sale, assignment or transfer of the Securities in accordance with Section 2(g), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by the Investor to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Conversion Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144 or another exemption from registration, the transfer agent shall issue such shares to the Investor, assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 5(c) below. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Investor. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(a) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(a), that the Investor shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.
(b) Legends. The Investor understands that the Securities have not been registered under the 1933 Act, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Rule 144 or pursuant to another exemption from the registration requirements of the 1933 Act, and except as set forth below, the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
(c) Removal of Legends. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(b) above or any other legend (i) in connection with a sale pursuant to an effective registration statement covering the resale of such Securities under the 1933 Act (provided that the Investor provides the Company with any certificates from the Investor or its broker reasonably required by the Company’s transfer agent), (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company) or a registration statement, (iii) in connection with a sale, assignment or other transfer under Rule 144 (provided that the Investor provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144, which shall not include an opinion of counsel, but which may include any certificates from the Investor or its broker reasonably required by the Company’s transfer agent), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that the Investor provides the Company with an opinion of counsel to the Investor from reputable counsel to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than five (5) Trading Days following the delivery by the Investor to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from the Investor as may be required above in this Section 5(c), as directed by the Investor, credit the aggregate number of Ordinary Shares to which the Investor shall be entitled to the Investor’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system.
(d) Manner of Sale. The Investor, severally and not jointly with the other Investor, agrees with the Company that the Investor will sell any Securities pursuant to either the registration requirements of the 1933 Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 5 is predicated upon the Company’s reliance upon this understanding.
| 6. | CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. |
(a) The obligation of the Company hereunder to issue and sell the Convertible Note to the Investor at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing the Investor with prior written notice thereof:
(i) The Investor shall have executed the Settlement Agreement and each of the Transaction Documents to which it is a party and delivered the same to the Company.
(ii) The representations and warranties of the Investor shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date), and the Investor shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Investor at or prior to the Closing Date.
| 7. | CONDITIONS TO INVESTOR’ OBLIGATION TO PURCHASE. |
(a) The obligation of the Investor hereunder to purchase its Convertible Note and Warrants at the Closing is subject to the satisfaction, at or before each applicable Closing Date and in respect of each such Closing Date, of each of the following conditions, provided that these conditions are for the Investor’s sole benefit and may be waived by the Investor at any time in its sole discretion by providing the Company with prior written notice thereof:
(i) The Company shall have duly executed and delivered to the Investor the Settlement Agreement and each of the Transaction Documents to which the Company is a party and the Company shall have complied in all material respects with all obligations under this Agreement and the other Transaction Documents, including, without limitation, the Convertible Note.
(ii) Each and every representation and warranty of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date.
(iii) The Ordinary Shares (A) shall be designated for quotation on an Eligible Market; and (B) shall not have been suspended, as of the Closing Date, from trading thereon.
(iv) The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities.
(v) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents, and no actions, suits or proceedings shall be pending by any governmental authority that seeks to enjoin, prohibit or otherwise adversely affect any of the transactions contemplated by the Transaction Documents.
(vi) Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect and the Company has not filed for nor has it become subject to any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Company.
| 8. | TERMINATION. |
In the event that the Closing shall not have occurred within ten (10) days after the date hereof (the “Expiration Date”), then this Agreement shall terminate with respect to the applicable Investor on the close of business on the Expiration Date without liability to any other party; provided, however, that the right to terminate this Agreement under this Section 8 shall not be available to the Investor if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of the Investor’s breach of this Agreement. Notwithstanding anything to the contrary above, nothing contained in this Section 8 shall be deemed to release any party hereto from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party hereto to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.
| 9. | CERTAIN DEFINITIONS |
(a) 1934 Act. The “1934 Act” means the Securities Exchange Act of 1934, as amended.
(b) Business Day. “Business Day” means any day other than a Friday, Saturday, Sunday or other day on which commercial banks in New York, New York or Israel are authorized or required by law to remain closed.
(c) Indebtedness. “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the purchase price of property or assets, including indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), other than trade payables entered into in the ordinary course of business, (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by Note, bonds, debentures or similar instruments, (E) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, and (F) all indebtedness referred to in clauses (A) through (E) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any material property or assets (including accounts and contract rights) owned by such Person, even though the Person has not assumed or become liable for the payment of such indebtedness.
(d) Lien. “Lien” means any lien, mortgage, pledge, encumbrance, charge, security interest, adverse claim, liability, interest, charge, preference, priority, proxy, transfer restriction (other than restrictions under the 1933 Act and state securities laws), encroachment, tax, order, community property interest, equitable interest, option, warrant, right of first refusal, easement, profit, license, servitude, right of way, covenant or zoning restriction.
(e) Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries, taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company or any of its subsidiaries to perform any of its respective obligations under any of the Transaction Documents (as defined below).
(f) Ordinary Shares. “Ordinary Shares” means the ordinary shares, no par value per share, of the Company and any other shares issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Ordinary Shares).
(g) Person. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
(h) Principal Market. “Principal Market” means the Nasdaq Stock Market; provided however, that in the event the Ordinary Shares are ever listed or traded on the New York Stock Exchange, the NYSE American or the OTC Markets, then the “Principal Market” shall mean such other market or exchange on which the Ordinary Shares is then listed or traded.
(i) Registrable Securities. “Registrable Securities” means (i) the Conversion Shares, (ii) the Warrant Shares and (iii) any capital stock of the Company issued or issuable with respect to such Conversion Shares and the Warrant Shares, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the Ordinary Shares is converted or exchanged, in each case, without regard to any limitations on exercise or exchange of the Warrants. As to any Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a registration statement with respect to the sale of such securities shall have become effective under the 1933 Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such registration statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent public distribution of them shall not require registration under the 1933 Act; or (c) such securities are freely saleable under Rule 144.
(j) Securities. “Securities” means the Convertible Note and the Conversion Shares.
(k) Subsidiaries. “Subsidiary” or “subsidiary” means with respect to a Person, any Person in which that other Person, directly or indirectly, (I) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (II) controls or operates all or any part of the business, operations or administration of such Person; provided, that a Person shall not be deemed a subsidiary pursuant to clauses (I) or (II) unless the Person, directly or indirectly, owns at least 51% of any of the outstanding capital stock or holds at least 51% of any equity or similar interest of such Person.
(l) Trading Day. “Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Ordinary Shares, any day on which the Ordinary Shares is traded on the principal securities exchange or securities market on which the Ordinary Shares is then traded, provided that “Trading Day” shall not include any day on which the Ordinary Shares is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Ordinary Shares is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Ordinary Shares, any day on which The Nasdaq Stock Market (or any successor thereto) is open for trading of securities.
(m) Transaction Documents. “Transaction Documents” means, collectively, this Agreement, the Convertible Note, the Warrants, and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time.
| 10. | MISCELLANEOUS. |
(a) Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of Israel, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Israel or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Israel. Each of the parties hereby irrevocably submits to the exclusive jurisdiction of the courts of Tel Aviv, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The form of heter iska that appears in the Sefer Netivot Shalom written by Harav Shalom Yosef Gelber shall apply to the transactions contemplated by this Agreement.
(b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
(c) Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.
(d) Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties hereto as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties hereto or the practical realization of the benefits that would otherwise be conferred upon the parties hereto. The parties hereto will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
(e) Entire Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Investor, the Company, its affiliates and Persons acting on its behalf solely with respect to the matters contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties hereto solely with respect to the matters covered herein and therein. Except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. The Company has not, directly or indirectly, made any agreements with the Investor relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, the Investor has not made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise. As a material inducement for the Investor to enter into this Agreement, the Company expressly acknowledges and agrees that no due diligence or other investigation or inquiry conducted by the Investor, any of its advisors or any of its representatives shall affect the Investor’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document.
(f) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server that such e-mail could not be delivered to such recipient) and (iii) if sent by overnight courier service, one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses and e-mail addresses for such communications shall be:
If to the Company:
HUB Cyber Security Ltd.
2 Kaplan Street
Tel Aviv 6721117, Israel
Tel: +972-3-791-3200
Email Address: Noah Hershcoviz, Chief Executive Officer
Attention: noah.hershcoviz@hubsecurity.io
With a copy (for informational purposes only) to:
Goldfarb, Gross, Seligman & Co.
One Azrieli Center, Round Building
Tel-Aviv 67021, Israel
Attention: Adam M. Klein; Daniel P. Kahn
Email: adam.klein@goldfarb.com; daniel.kahn@goldfarb.com
If to the Investor:
See Investor’s signature page hereto
or to such other address or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication or (B) provided by an overnight courier service shall be rebuttable evidence of personal service or receipt from an overnight courier service in accordance with clause (i) or (iii) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e-mail address shall be rebuttable evidence of receipt by e-mail in accordance with clause (ii) above.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and its successors and assigns, including, as contemplated below, any assignee of any of the Securities. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor, including, without limitation, by way of a Fundamental Transaction (as defined in the Warrants) (unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the applicable Warrants).
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and its permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than the Indemnitees referred to in Section 10(k).
(i) Survival. The representations, warranties, agreements and covenants shall survive the Closing until the applicable statute of limitations. The Investor shall be responsible only for its representations, warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(k) Indemnification.
(i) In consideration of the Investor’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Investor and each holder of any Securities and all of their shareholders, partners, members, officers, directors, employees and direct or indirect Investor and any of the foregoing Persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable and documented expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to any material (A) misrepresentation or breach of any representation or warranty made by the Company in any of the Transaction Documents, (B) breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents or (C) cause of action, suit, proceeding or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company, but other than by an affiliate of the Investor) or which otherwise involves such Indemnitee that arises out of or results from (I) the execution, delivery, performance or enforcement of any of the Transaction Documents, (II) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (III) any disclosure properly made by the Investor pursuant to Section 4(g), or (IV) the status of the Investor or holder of the Securities either as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents or as a party to this Agreement, unless such action is based upon a breach of the Investor’s representations, warranties, or covenants under the Transaction Documents, or any agreements or understandings the Investor may have with any such third party, or any violations by the Investor of state or federal securities laws or any conduct by the Investor which constitutes fraud, gross negligence or willful misconduct.
(ii) Promptly after receipt by an Indemnitee under this Section 10(k) of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Section 10(k), deliver to the Company a written notice of the commencement thereof, and the Company shall have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Company and the Indemnitee; provided, however, that an Indemnitee shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Company if: (i) the Company has agreed in writing to pay such fees and expenses; or (ii) the Company shall have failed promptly to assume the defense of such Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability. The Indemnitee shall reasonably cooperate with the Company in connection with any negotiation or defense of any such action or Indemnified Liability by the Company and shall furnish to the Company all information reasonably available to the Indemnitee which relates to such action or Indemnified Liability. The Company shall keep the Indemnitee reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. The Company shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the Company shall not unreasonably withhold, delay or condition its consent. Following indemnification as provided for hereunder, the Company shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made.
(iii) The indemnification required by this Section 10(k) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.
(iv) Notwithstanding any provision in this Agreement or any other Transaction Documents, except for fraud or willful breach of any of its representations, warranties, covenants or agreements set forth in this Agreement, the aggregate indemnification obligations of the Company pursuant to this Section 10(k) shall not exceed 100% of the aggregate Purchase Price actually paid by the Investor.
(v) The sole and exclusive remedy for any breach of any representation, warranty, covenant or agreement hereunder shall be the indemnification provided by this Section 10(k), and the Investor expressly waives any other rights or remedies it may have; provided however, that equitable relief, including remedies of specific performance and injunction, shall be available with respect to any matter where money damages would not be sufficient to compensate the Investor or to preserve the rights of the Investor pending resolution of a dispute, and this Section 10(k) shall not relieve the Company from liability for willful misconduct, gross negligence, bad faith, fraud or willful breach of any of its representations, warranties, covenants or agreements set forth in this Agreement.
(l) Construction. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices, Ordinary Shares and any other numbers in this Agreement that relate to the Ordinary Shares shall be automatically adjusted for stock dividends, stock splits, stock combinations and other similar transactions that occur with respect to the Ordinary Shares after the date of this Agreement.
(m) Remedies. The Investor and each holder of any Securities shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security, to the extent permitted by law), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Investor. The Company therefore agrees that the Investor shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.
(n) Exercise of Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever the Investor exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Investor may continue to exercise it other rights, elections, demands and options hereunder and under any other Transaction Document from time to time as if such original right, election, demand or option had not been exercised without prejudice to its future actions and rights and remedies.
(o) Payment Set Aside; Currency. To the extent that the Company makes a payment or payments to the Investor hereunder or pursuant to any other Transaction Document or the Investor enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.
[signature pages follow]
IN WITNESS WHEREOF, the Investor and the Company has caused its signature page to this Agreement to be duly executed as of the date first written above.
| HUB CYBER SECURITY LTD. | |||
| By: | /s/ Noah Hershcoviz | ||
| Name: | Noah Hershcoviz | ||
| Title: | CEO | ||
| By: | /s/ Lior Davidsohn | ||
| Name: | Lior Davidsohn | ||
| Title: | CFO (Interim) | ||
| CLAYMORE CAPITAL PTY LTD. | |||
| By: | /s/ Anton Rosenberg | ||
| Name: | Anton Rosenberg | ||
| Title: | Managing Director | ||
Address for Notice to Investor:
Claymore Capital Pty Ltd.
Level 27 25 Bligh Street
Sydney NSW 2000 Australia
Attn: Anton Rosenberg, Managing Director
Email: antonr@claymorecapital.com.au
Exhibit 4.69
Execution Version
NEITHER THE ISSUANCE AND SALE OF THIS CONVERTIBLE NOTE NOR THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE I44A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 2(C)(IV) AND 8 HEREOF. THE LOAN AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 2(C)(IV) OF THIS NOTE.
HUB Cyber Security Ltd.
Convertible Note
| Issuance Date: February 18, 2025 | Original Principal Amount: U.S. $6,000,000 |
FOR VALUE RECEIVED, HUB Cyber Security Ltd., an Israeli company (the “Company”), hereby promises to pay to the order of Claymore Capital Pty Ltd., an Australian company, or its registered assigns (“Holder”), the principal sum set forth above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to conversion, redemption or otherwise, the “Loan Amount”) from the date set out above as the Issuance Date. This Convertible Note (with all notes issued in exchange, transfer or replacement hereof, this “Note”) is issued pursuant to that certain Note Purchase Agreement, dated as of February 18, 2025, by and between the Company and the Holder (the “Note Purchase Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Note Purchase Agreement.
1. Payments of Loan Amount. The Loan Amount under this Note shall be payable as follows:
(a) The outstanding Loan Amount shall not accrue interest.
(b) Unless earlier converted into Ordinary Shares or repaid by the Company, the outstanding Principal Amount will be due and payable by the Company on February 18, 2030. Unless an Event of Default has occurred and is continuing, the Company shall have the right to repay the outstanding Principal Amount in Ordinary Shares at the Conversion Price as of the date of such repayment. The Company shall not repay in cash without the prior written consent of the Holder.
(c) Following the repayment in full of the Company’s note issued to J.J. Astor & Co. on December 30, 2024, the Company shall take the requsite steps to grant in favor of the Holder the liens that were granted to J.J. Astor & Co., unless this Note is previously converted or repaid in full or the Holder otherwise consents in writing. Until such time, the Company shall not grant subordinated liens on the collateral securing the debt of J.J. Astor, without the prior written consent of the Holder, except for the subordinated liens previously promised to Julestar LLC or to investors introduced to the Company by the Holder. The grant of liens on encumbered collateral shall be subject to the consent of the applicable lien holders. The Company shall seek to obtain the consent of Julestar LLC within 60 days following the date hereof.
(d) All payments made under this Note will be made in lawful money of the United States of America at the principal office of the Company, or at such other place as the Holder may from time to time designate in writing to the Company.
(e) With the prior written consent of the Holder, the Company may prepay the Loan Amount, in whole or in part, from time to time, without penalty.
(f) The Principal Amount shall be subject to reduction pursuant to Section 1(c) of the Note Purchase Agreement.
2. Conversion. This Note shall be convertible into validly issued, fully paid and non-assessable Ordinary Shares on the terms and conditions set forth in this Section 2.
(a) Conversion. Subject to the provisions of Section 2(e), at any time or from time to time, to the extent that this Note has not been repaid, the Holder shall be entitled to convert any portion or the entirety of the outstanding Loan Amount into validly issued, fully paid and non-assessable Ordinary Shares (“Conversion Shares”) in accordance with Section 2(c). Any such portion of the outstanding Loan Amount to be converted in accordance with this Section 2 is referred to herein as the “Conversion Amount.”
(b) Conversion Shares. The number of Conversion Shares issuable upon conversion of the Conversion Amount shall be determined according to the following formula:
Conversion Amount
Conversion Price
No fractional Ordinary Shares are to be issued upon the conversion of this Note. If the issuance would result in the issuance of a fraction of a share, the Company shall round such fraction of a share up to the nearest whole share.
(c) Mechanics of Conversion. The conversion shall be conducted in the following manner:
(i) Holder’s Conversion. To convert all or a portion of this Note into Conversion Shares on any date (a “Conversion Date”), a Holder shall deliver to the Company (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “Conversion Notice”).
(ii) Company’s Response. Not later than the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by email an acknowledgment of confirmation, in the form attached hereto as Exhibit B, of receipt of such Conversion Notice to such Holder and the Company’s transfer agent (the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date of receipt by the Company of such Conversion Notice, the Company shall (i) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (which the Company shall cause the Transfer Agent to do at Holder’s request) and provided the legends would be eligible to be removed from such Ordinary Shares pursuant to Section 5(c) of the Note Purchase Agreement, upon the request of the Holder, credit such aggregate number of Conversion Shares to which the Holder is entitled pursuant to such conversion to the Holder’s or its designee’s balance account with DTC through its Deposit/ Withdrawal at Custodian system, or (ii) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or the legends would not be eligible to be removed from such Ordinary Shares pursuant to Section 5(c) of the Note Purchase Agreement, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Conversion Notice, the Holder’s agent or designee, in each case, sent to the address as specified in the applicable Conversion Notice, a certificate or book entry position, in the name of the Holder or its designee (as indicated in the applicable Conversion Notice), for the number of Conversion Shares to which the Holder is entitled pursuant to such conversion. Upon delivery of a Conversion Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Conversion Shares with respect to which such Conversion Notice was issued, irrespective of the date such Conversion Shares are credited to the Holder’s DTC account or the date of delivery of the certificates or book entry positions evidencing such Conversion Shares (as the case may be).
(iii) Disputes. In the case of a dispute as to the determination of the Conversion Price or the arithmetic calculation of the number of Conversion Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Conversion Shares that are not disputed, provided that following such issuance to Holder such dispute shall be resolved in accordance with Section 19.
(iv) Book-Entry. Notwithstanding anything to the contrary set forth in this Section 2, upon conversion of any portion of this Note in accordance with the terms hereof, no Holder thereof shall be required to physically surrender this Note to the Company. If this Note is surrendered as provided by Section 7, then, provided that there remains any outstanding Loan Amount under this Note at the time of surrender, the Company shall, as soon as practicable and in no event later than three (3) Trading Days after receipt of this Note and at its own expense, issue and deliver to such Holder (or its designee) a new Note (in accordance with Section 7(d)) representing the outstanding Loan Amount (if any) under this Note. Each Holder and the Company shall maintain records showing the portion of the Note so converted by such Holder and the dates of such conversions or shall use such other method, reasonably satisfactory to such Holder and the Company, so as not to require physical surrender of the Note upon each such conversion. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any portion of the Note, the outstanding Loan Amount represented by such Note may be less than stated on the face thereof. Each Note shall bear the following legend:
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 2(C)(IV) AND 7(A) HEREOF. THE LOAN AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 2(C)(IV) OF THIS NOTE.
(d) Taxes. The Company shall be entitled to withhold Israeli tax on any payment of interest or deemed interest, unless provided with an applicable exemption (or approval of reduced tax withholding rate) issued by the Israel Tax Authority.
(e) Limitation on Beneficial Ownership. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible or exchangeable by the Holder hereof to the extent (but only to the extent), after giving effect to the issuance of Ordinary Shares issuable upon such conversion, the Holder “holds” or would “hold” (as defined for purposes of the Israeli Companies Law, 1999, as amended) or “beneficially owns” or would “beneficially own” (as defined for purposes of Section 13(d) of the 1934 Act), directly or indirectly, in excess of 4.99% of the number of Ordinary Shares then outstanding (the “Maximum Percentage”). To the extent the above limitation applies, the determination of whether this Note shall be convertible or exchangeable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert or exchange this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility or exchangeability. For the purposes of this paragraph, holdings and beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act the Israeli Companies Law, 1999, as amended, and with and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Note. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm in writing to the Holder the number of Ordinary Shares then outstanding, including by virtue of any prior conversion or exercise or exchange of convertible or exercisable or exchangeable securities into Ordinary Shares, including, without limitation, pursuant to this Note or securities issued pursuant to the Note Purchase Agreement.
(f) Reservation of Shares; Insufficient Authorized Shares. The Company shall initially reserve out of its authorized and unissued Ordinary Shares a number of Ordinary Shares equal to the maximum number of Conversion Shares issuable to satisfy the Company’s obligations to issue Ordinary Shares hereunder, and the Company shall at all times keep reserved for issuance under this Note a number of Ordinary Shares equal to the maximum number of Conversion Shares issuable to satisfy the Company’s obligation to issue Ordinary Shares hereunder.
3. Rights upon Event of Default; Acceleration.
(a) Event of Default. Each of the following events shall constitute an “Event of Default”:
(i) the Company’s failure to maintain sufficient reserves of its authorized and unissued Ordinary Shares to redeem the maximum number of Conversion Shares issuable upon conversion of all the Convertible Notes then outstanding;
(ii) the Company’s (A) failure to timely deliver the required number of Ordinary Shares upon conversion of this Note and any such failure remains uncured for a period of five (5) Business Days, or (B) notice, written or oral, to the Holder, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of the Convertible Note into Ordinary Shares that is requested in accordance with the provisions of the Convertible Note, in each case, other than pursuant to Section 2(e);
(iii) the Company fails to remove any restrictive legend on any certificate or any Ordinary Shares issued to the Holder upon conversion or exercise (as the case may be) of the Note as and when required by the Note Purchase Agreement, unless otherwise then prohibited by applicable federal securities laws, and any such failure remains uncured for a period of five (5) Business Days;
(iv) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, which have not been dismissed within sixty (60) days of their initiation;
(v) the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a UCC foreclosure sale or any other similar action under federal, state or foreign law;
(vi) the entry by a court of (A) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (B) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (C) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of sixty (60) consecutive days;
(vii) other than as specifically set forth in another clause of this Section 3(a), the Company or any Subsidiary materially breaches any representation or warranty when made, or any covenant or other term or condition of this Note or any other Transaction Document, and, only, in the case of a material breach of a covenant or other term or condition that is curable, if such breach remains uncured for a period of twenty (20) consecutive Trading Days after the delivery by Holder of written notice thereof;
(viii) any provision of this Note or any other Transaction Document (shall at any time for any reason (other than pursuant to the express terms thereof)) cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company or any Subsidiary shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document; or
(ix) the Ordinary Shares are no longer listed on an Eligible Market.
(b) Remedies. Upon the occurrence of an Event of Default and at any time thereafter, Holder may at its option: (a) declare the entire Loan Amount immediately due and payable; and (b) exercise any or all of its rights, powers, or remedies under the Transaction Documents or applicable law or available in equity.
4. Adjustment of Conversion Price and Number of Conversion Shares. Until the Note has been paid in full or converted in full, the Conversion Price and number of Conversion Shares issuable upon conversion of this Note are subject to adjustment from time to time as set forth in this Section 4.
(a) Stock Dividends and Splits. Without limiting any provision of Section 6, if the Company, at any time on or after the date of the Note Purchase Agreement, (i) pays a stock dividend on one or more classes of its then outstanding Ordinary Shares or otherwise makes a distribution on any class of capital stock that is payable in Ordinary Shares, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding Ordinary Shares into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding Ordinary Shares into a smaller number of shares, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of Ordinary Shares outstanding immediately before such event and of which the denominator shall be the number of Ordinary Shares outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.
(b) Calculations. All calculations under this Section 4 shall be made by rounding to the nearest 1/10000th of cent and the nearest 1/100th of a share, as applicable. The number of Ordinary Shares outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Ordinary Shares.
(c) Other Events. In the event that the Company shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Conversion Price and the number of Conversion Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 4(c) will increase the Conversion Price or decrease the number of Conversion Shares as otherwise determined pursuant to this Section 4, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company.
5. [Reserved]
6. Purchase Rights; Fundamental Transaction.
(a) Purchase Rights. In addition to any adjustments pursuant to Section 5 herein, if at any time after the issuance of this Note and until this Note has been paid in full or converted in full the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Ordinary Shares (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Ordinary Shares acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Ordinary Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).
(b) Fundamental Transactions. At any time after the issuance of this Note and until this Note has been paid in full or converted in full, upon the consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder, in lieu of the Ordinary Shares (or other securities, cash, assets or other property (except such items still issuable under Sections 5 and 6 above, which shall continue to be receivable thereafter)) issuable upon the conversion of this Note prior to the applicable Fundamental Transaction, such Ordinary Shares (or its equivalent) of the Successor Entity (including its Parent Entity), or other securities, cash, assets or other property, which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Note been converted immediately prior to the applicable Fundamental Transaction; provided, however, that such amount of reserved Ordinary Shares shall be limited by the Maximum Percentage of Ordinary Shares.
7. Reissuance of Note.
(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 7(d)), registered as the Holder may request, representing the outstanding Loan Amount being transferred by the Holder and, if less than the entire outstanding Loan Amount is being transferred, a new Note (in accordance with Section 7(d)) to the Holder representing the outstanding Loan Amount not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 2(c)(iv) following conversion or redemption of any portion of this Note, the outstanding Loan Amount represented by this Note may be less than the Loan Amount stated on the face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 7(d)) representing the outstanding Loan Amount.
(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 7(d) and in Loan Amounts of at least $10,000) representing in the aggregate the outstanding Loan Amount of this Note, and each such new Note will represent such portion of such outstanding Loan Amount as is designated by the Holder at the time of such surrender.
(d) Issuance of New Note. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Loan Amount remaining outstanding (or in the case of a new Note being issued pursuant to Section 7(a) or Section 7(c), the Loan Amount designated by the Holder which, when added to the Loan Amount represented by the other new Notes issued in connection with such issuance, does not exceed the Loan Amount remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Execution Date of this Note, and (iv) shall have the same rights and conditions as this Note.
8. Voting Rights. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to applicable corporate law of the State of Israel, and as expressly provided in this Note.
9. Covenants. Until this Note has been entirely converted, redeemed or otherwise satisfied in accordance with its terms:
(a) Restriction on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or pay any cash dividend or distribution on any of its capital stock (other than dividends by wholly-owned Subsidiaries to the Company).
(b) Change in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by the Company and each of its Subsidiaries on the Issuance Date or any business substantially related or incidental thereto. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure or purpose.
(c) Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
(d) Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.
(e) Maintenance of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.
10. No Short Sales. The Holder covenants that through and including the first Trading Day following the full conversion or full repayment of this Note, none of the Holder any of its officers, or any entity managed or controlled by the Holder (each of the foregoing, a “Restricted Person”) shall, directly or indirectly, (i) engage in any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the 1934 Act) of the Ordinary Shares or (ii) engage in any hedging transaction, which establishes a net short position with respect to any securities of the Company (including the Ordinary Shares), with respect to each of clauses (i) and (ii) hereof, either for its own principal account or for the principal account of any other Restricted Person.
11. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversions and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Note shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note (including, without limitation, compliance with Section 4 hereof). The issuance of Ordinary Shares and certificates for Ordinary Shares as contemplated hereby upon the conversion of this Note shall be made without charge to the Holder or such Ordinary Shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
12. Payment of Collection, Enforcement and Other Costs. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company or any of its Subsidiaries shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.
13. Non-circumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its articles of association or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Ordinary Shares upon the conversion of this Note, and (ii) shall, so long as any of the Loan Amount under this Note remains outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Ordinary Shares, solely for the purpose of effecting the conversion of this Note, the maximum number of Ordinary Shares as shall from time to time be necessary to effect the conversion of this Note.
14. Failure or Indulgence Not Waiver. No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.
15. Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 10(f) of the Note Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) as soon as practicable upon each adjustment of the Conversion Price and the number of Conversion Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Ordinary Shares, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities, indebtedness, or other property pro rata to holders of Ordinary Shares or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information (to the extent it constitutes, or contains, material, non-public information regarding the Company shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction. It is expressly understood and agreed that the time of execution specified by the Holder in each Conversion Notice shall be definitive and may not be disputed or challenged by the Company.
16. Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by wire transfer of immediately available funds by providing the Company with prior written notice setting out the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day.
17. Transferability of Note. The Holder may not transfer all or a portion of this Note without the prior written consent of the Company. Any such transfer, and the transfer of any Conversion Shares, shall be subject to the limitations of Section 2(g) of the Note Purchase Agreement.
18. Amendment. Except as otherwise provided herein, the provisions of this Note may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.
19. Governing Law. This Note shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Israel, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Israel or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Israel. The Company hereby irrevocably submits to the exclusive jurisdiction of the courts of Tel Aviv, Israel, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder or to enforce a judgment or other court ruling in favor of the Holder.
20. Certain Defined Terms. For purposes of this Note, the following terms shall have the following meanings:
“1934 Act” means the Securities Exchange Act of 1934, as amended.
“Conversion Price” means 25% below the lower of (i) the closing price per share of the Ordinary Shares on the Principal Market on the Trading Day immediately preceding the delivery of the Conversion Notice and (ii) the VWAP of the Ordinary Shares on the Principal Market over the five Trading Days immediately preceding the delivery of the Conversion Notice; provided, however, that in no event shall the Conversion Price be higher than $1.50 or lower than $0.174.
“Execution Date” shall have the meaning set forth in the Note Purchase Agreement.
“Fundamental Transaction” means that (i) the Company shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company is the surviving entity) any other Person unless the shareholders of the Company immediately prior to such consolidation or merger continue to hold more than 50% of the outstanding shares of Voting Stock after such consolidation or merger, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets to any other Person, in connection with which the Company is dissolved, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
“Lien” means any lien, mortgage, pledge, encumbrance, charge, security interest, adverse claim, liability, interest, charge, preference, priority, proxy, transfer restriction (other than restrictions under the federal and state securities laws), encroachment, tax, order, community property interest, equitable interest, option, warrant, right of first refusal, easement, profit, license, servitude, right of way, covenant or zoning restriction.
“Options” means any rights, warrants or options to subscribe for or purchase Ordinary Shares or Convertible Securities.
“Ordinary Shares” means the ordinary shares, no par value per share, of the Company and any other shares issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Ordinary Shares).
“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
“SEC” means the Securities and Exchange Commission or the successor thereto.
“Note Purchase Agreement” means that certain note purchase agreement by and among the Company and the Holder, dated as of the Execution Date, as may be amended from time to time in accordance with the terms thereof.
“Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
“Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Ordinary Shares, any day on which the Ordinary Shares is traded on the principal securities exchange or securities market on which the Ordinary Shares is then traded, provided that “Trading Day” shall not include any day on which the Ordinary Shares is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Ordinary Shares is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Ordinary Shares, any day on which The Nasdaq Stock Market (or any successor thereto) is open for trading of securities.
“Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
“VWAP” means, as of any date, the price determined by the first of the following clauses that applies: (a) if the Ordinary Shares are then listed or quoted on a stock exchange, the daily volume weighted average price per share of the Ordinary Share trading in the ordinary course of business on the applicable stock exchange for such date as reported by Bloomberg; (b) if the Ordinary Shares are not then listed on a stock exchange and if the Ordinary Shares are traded in the over-the-counter market, as reported by OTC Markets, the volume weighted average price per share of the Ordinary Shares for such date on the applicable OTC Market, as reported by Bloomberg; or (c) in all other cases, the fair market value of one Ordinary Share as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company (in each case rounded to four decimal places).
[Signature Page Follows]
IN WITNESS WHEREOF, Holder and the Company have caused their respective signature page to this Convertible Note to be duly executed as of the date first written above.
| COMPANY | |||
| HUB CYBER SECURITY LTD. | |||
| By: | |||
| Name: | |||
| Title: | |||
| HOLDER | |||
CLAYMORE CAPITAL PTY LTD. |
|||
| By: | |||
| Name: | |||
| Title: | |||
* * * * *
EXHIBIT A
HUB CYBER SECURITY LTD.
CONVERSION NOTICE
Reference is made to that certain Convertible Note (the “Note”) issued by HUB Cyber Security Ltd., an Israeli company (the “Company”), to the undersigned Holder on __________________. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Note.
The undersigned holder hereby exercises the right to convert the portion of the Note indicated below into Ordinary Shares as of the date specified below.
| Conversion Date: | _____________________________ | ||
| Loan Amount to be Converted: | _____________________________ | ||
| Applicable Conversion Price: | _____________________________ | ||
| Number of Ordinary Shares to be issued: | _____________________________ | ||
| Number of Ordinary Shares “held” (as defined in the Israeli Companies Law, 1999, as amended) | _____________________________ |
Please issue the Ordinary Shares into which the Note is being converted in the following name and to the following address:
| Issue to: | ____________________________________ | ||
| Address: | ____________________________________ |
| Holder: | ________________________________ | |
| By: | ________________________________ | |
| Title: | ________________________________ |
EXHIBIT B
ACKNOWLEDGMENT
HUB Cyber Security Ltd., an Israeli company (the “Company”), hereby acknowledges its receipt of the enclosed Conversion Notice and hereby directs its transfer agent to issue the above indicated number of Ordinary Shares.
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 4.70
CONFIDENTIAL SETTLEMENT AGREEMENT AND GENERAL RELEASE
This Confidential Settlement Agreement and General Release (the “Settlement Agreement”) is entered into and only effective as of the date when both 1) all signatures set forth below between Oppenheimer & Co. Inc., with its principal place of business located at 85 Broad St., New York, NY 10004 (“Oppenheimer”), HUB Cyber Security Ltd. (f/k/a HUB Cyber Security (Israel) Ltd.), an Israeli corporation with its principal place of business located at 2 Kaplan Street, Tel Aviv 6473403, Israel (“HUB”), and Claymore Capital Pty Ltd., an Australian corporation with its principal place of business located at Level 27, 25 Bligh Street, Sydney NSW 2000 Australia](“Claymore”) are executed, and 2) the First Settlement Payment is received, as set forth in Paragraph 3, infra (the “Effective Date”). Oppenheimer, HUB, and Claymore shall be referred to herein each individually as a “Party”, and collectively as the “Parties.”
RECITALS
WHEREAS, on or about December 24, 2021, Oppenheimer and HUB entered into a certain letter agreement (the “Letter Agreement”) wherein Oppenheimer agreed to act as financial advisor to HUB for the purpose of completing a business combination transaction involving a merger or acquisition of HUB (the “Transaction”) in exchange for a fee of 1% of the Transaction Value (as defined therein), and reimbursement of costs, including legal fees, incurred by Oppenheimer in connection with the Transaction; and
WHEREAS, following the closing of a Transaction, as defined by the Letter Agreement, which occurred on or about March 1, 2023, involving a merger of HUB with non-party Mount Rainier Acquisition Corp., Oppenheimer made demand to HUB for payment of a fee in the amount of $12,062,751.14 plus 1% of the debt component of the Transaction, and its costs associated with the Transaction, pursuant to the terms of the Letter Agreement; and
WHEREAS, on February 27, 2023, Oppenheimer and HUB entered into a second letter agreement (the “Second Letter Agreement”) wherein Oppenheimer, without waiver of its rights, purportedly agreed to accept four payments totaling $6,000,000.00 as payment in full for its services provided to HUB with regard to the Transaction and HUB’s obligations under the Letter Agreement, and retained its right to seek the full amount of the fees and costs set forth in the Letter Agreement in the event HUB breached the terms of the Second Letter Agreement; and
WHEREAS, HUB has not paid Oppenheimer any portion of the fee or costs purportedly set forth in the Letter Agreement or the Second Letter Agreement with regard to the Transaction, despite due demand; and
WHEREAS, Oppenheimer commenced an action to recover the entire fee and its costs purportedly owed with regard to the Transaction, pursuant to the terms of the Letter Agreement, by filing a Complaint in the United States District Court for the Southern District of New York, asserting various claims against HUB in the action captioned Oppenheimer & Co, Inc. v. HUB Cyber Security (Israel) Ltd., a/k/a HUB Cyber Security Israel Ltd.. et al., Case No. 1:23-cv-08395-HG-VMS, (the “Action”); and
WHEREAS, HUB filed an Answer disputing the amount of the fees and costs claimed by Oppenheimer, and asserting certain affirmative defenses to the Action; and
WHEREAS, the Parties, without admission of liability and, seeking to avoid the cost and uncertainty of litigation, desire to fully and finally resolve all disputes and claims between them arising from the Action, the Transaction, the Letter Agreement, and the Second Letter Agreement.
NOW, THEREFORE, in reliance on these Recitals and in consideration of the mutual agreements contained herein, the sufficiency of which is hereby acknowledged, the Parties agree as follows:
AGREEMENT
1. Incorporation of Recitals.
The Recitals set forth above are expressly incorporated and made part of this Settlement Agreement.
2. No Admission.
This Settlement Agreement is made as a compromise of disputed claims between Oppenheimer and HUB, and is not intended, and should not be deemed or interpreted as, an admission of liability by either Party nor any other admission against such Party’s interest.
3. Payment to Oppenheimer.
(a) In full and complete settlement of all claims arising from or related to the Letter Agreement, the Second Letter Agreement, and the Action, HUB and Claymore unconditionally agree to remit payments to Oppenheimer totaling THREE MILLION U.S. DOLLARS AND ZERO CENTS ($3,000,000.00 USD) as provided for herein.
On the Effective Date of this Settlement Agreement, Claymore shall make payment to Oppenheimer in the sum of ONE MILLION ONE HUNDRED THOUSAND U.S. DOLLARS AND ZERO CENTS ($1,100,000 USD) (the “First Settlement Payment”). In the event the First Settlement Payment is not received by Oppenheimer on the Effective Date, this Settlement Agreement shall be null and void.
(b) Thereafter, HUB and/or Claymore shall make one additional settlement payment of ONE HUNDRED THOUSAND U.S. DOLLARS AND ZERO CENTS ($100,000 USD), followed by nine consecutive monthly payments of TWO HUNDRED THOUSAND U.S. DOLLARS AND ZERO CENTS ($200,000.00 USD) each to Oppenheimer (each of the ten subsequent payments set forth below, a “Monthly Settlement Payment”), pursuant to the following schedule:
| 1. | March 17, 2025 | $ | 100,000.00 | |||
| 2. | April 15, 2025 | $ | 200,000.00 | |||
| 3. | May 15, 2025 | $ | 200,000.00 | |||
| 4. | June 16, 2025 | $ | 200,000.00 | |||
| 5. | July 15, 2025 | $ | 200,000.00 | |||
| 6. | August 15, 2025 | $ | 200,000.00 | |||
| 7. | September 15, 2025 | $ | 200,000.00 | |||
| 8. | October 15, 2025 | $ | 200,000.00 | |||
| 9. | November 17, 2025 | $ | 200,000.00 | |||
| 10. | December 15, 2025 | $ | 200,000.00 |
The First Settlement Payment and the Monthly Payments (collectively, the “Settlement Payments”) shall be made by wire transfer pursuant to the wiring instructions identified within Exhibit A hereto.
(c) Upon the Effective Date of this Settlement Agreement and Oppenheimer’s confirmation of receipt of the First Settlement Payment, the Parties shall execute the Stipulation of Discontinuance with Prejudice of the Action annexed hereto as Exhibit B.
(d) HUB and Claymore each materially represent, warrant, and covenant that:
(i) they are not the subject of an “Insolvency Event”, meaning the occurrence of any of the following events:
(1) the liquidation, provisional liquidation or any other procedure which is equivalent or analogous in any jurisdiction of the Party;
(2) the appointment of an provisional liquidator, liquidator, administrator, deed administrator, restructuring practitioner or any other like person (however described) holding or appointed to an analogous office or acting or purporting to act in an analogous capacity in respect of the whole or part of that Party’s affairs, including its assets, operations or business; or
(3) any composition, compromise, or arrangement with creditors, assignment for the benefit of creditors, by or adversely affecting a Party and any procedure which is equivalent or analogous in any jurisdiction.
(ii) that they have no defenses, counterclaims, charges, or offsets of any kind with respect to any action brought to enforce the payment terms of this Settlement Agreement, other than any defense based on the allegation that HUB and/or Claymore in fact made a Settlement Payment which Oppenheimer has asserted was not made. HUB and Claymore further agree that, to the extent such defenses, counterclaims, charges, or offsets exist, they are hereby intentionally and irrevocably waived as of the Effective Date of this Settlement Agreement. HUB and Claymore further expressly and irrevocably waive the right to appeal any judgment entered in favor of Oppenheimer arising from a material breach of this Settlement Agreement.
4. Bankruptcy or Insolvency
(a) Notwithstanding the terms of this Settlement Agreement, including but not limited to paragraph 5 below, in the event that: (i) HUB shall file for bankruptcy, liquidation, insolvency or dissolution proceeding under any court of competent jurisdiction prior to payment of the full Settlement Payment; and/or (ii) any payment made by HUB or Claymore pursuant to this Settlement Agreement, or any portion thereof, is found to be subject to preference, recoupment, return, forfeiture or disgorgement of any kind as a result of any bankruptcy, liquidation, insolvency or dissolution proceeding, whether the proceeding is voluntary or involuntary, Oppenheimer shall be entitled to submit a claim in any such proceeding in the amount of $12,062,751.14 USD plus 1% of the debt component of the Transaction, and its costs associated with the Transaction, less any payments made by HUB or Claymore pursuant to this Settlement Agreement.
(b) Notwithstanding the terms of this Settlement Agreement, including but not limited to paragraph 5 below, in the event that: (i) Claymore becomes the subject of an Insolvency Event; and/or (ii) any payment made by HUB or Claymore pursuant to this Settlement Agreement, or any portion thereof, is found to be subject to preference, recoupment, return, forfeiture or disgorgement of any kind as a result of any bankruptcy, liquidation, insolvency or dissolution proceeding, whether the proceeding is voluntary or involuntary, Oppenheimer shall be entitled to submit a claim in any such proceeding in the amount of $3,000,000 USD, less any payments made by HUB or Claymore pursuant to this Settlement Agreement.
5. Event of Default
(a) In the event that Hub and/or Claymore shall fail to make any Monthly Settlement Payment by the deadline provided for within Paragraph 3(b) herein (a “Default”) Oppenheimer shall provide written notice of the Default to HUB and Claymore pursuant to Paragraph 17 herein (a “Notice of Default”).
(b) In the event that HUB or Claymore shall fail to cure any Default within five (5) business days of the date that a Notice of Default is transmitted:
| (i) | Oppenheimer shall be entitled to immediately and without further notice enter judgment against HUB in the United Stated District Court for the Southern District of New York in the amount of $6,000,000, without credit for the First Settlement Payment in the amount of $1,100,000 set forth in Paragraph 3(a) supra; and |
| (ii) | For the avoidance of doubt, Oppenheimer’s right to enter judgment in the amount of $6,000,000 set forth in this Section 5(b) shall be reduced pro rata by the amount of the additional Monthly Settlement Payments set forth in Section 3(b). For example, if HUB or Claymore makes the First Settlement Payment of $1,100,000 and thereafter makes an additional $300,000 of additional monthly payments prior to an uncured default, Oppenheimer’s maximum judgment sought shall be $5,700,000 (i.e., $6,000,000 - $300,000) |
| (iii) | Oppenheimer shall be entitled to commence legal proceedings against Claymore for breach of this Settlement Agreement (a “Claymore Breach Claim”). In connection with any Claymore Breach Claim, Claymore’s liability (exclusive of costs and reasonable attorneys’ fees) shall not exceed the sum of $3,000,000.00, less any payments made by HUB or Claymore pursuant to this Settlement Agreement. Claymore expressly consents to the jurisdiction of the state and federal courts of New York County, New York with regard to any Claymore Breach Action. Claymore expressly consents to service of process as provided within Paragraph 17 herein with regard to any Claymore Breach Action. |
6. Releases.
(a) In exchange for and in consideration of the full and timely payment of the Settlement Payments, including the Settlement Payments not being subject to a claw back as set forth in Paragraph 4 herein, and for other good and valuable consideration contained herein, Oppenheimer, together with its past, present, and future members, principals, directors, officers, employees, agents, representatives, attorneys, parent corporations, parent limited liability companies, subsidiaries, affiliates, predecessors, successors, and assigns (collectively the “Oppenheimer Releasing Parties”) hereby releases and forever discharges HUB, together with its past, present, and future members, principals, directors, officers, employees, agents, representatives, attorneys, parent corporations, parent limited liability companies, subsidiaries, affiliates, predecessors, successors, and assigns (collectively, the “HUB Released Parties”), from any and all claims, causes of action, suits, debts, judgments, demands, controversies, disputes, liabilities, costs and expenses, and all damages including, but not limited to, compensatory, consequential, liquidated, and punitive damages, whether known or unknown, whether matured or unmatured, at law or in equity, liquidated or unliquidated, arising from the Transaction, the Letter Agreement, the Second Letter Agreement and the Action. Expressly excluded from the release contained in this Paragraph are: (i) any claims to enforce the terms of this Settlement Agreement; and (ii) Oppenheimer’s right to submit a claim in any bankruptcy, liquidation, insolvency or dissolution proceeding as provided for within Paragraph 4 herein.
(b) In exchange for and in consideration of the release contained within this Paragraph and for good and valuable consideration contained herein, the receipt and sufficiency of which is acknowledged herein, HUB, together with its past, present, and future members, principals, directors, officers, employees, agents, representatives, attorneys, parent corporations, parent limited liability companies, subsidiaries, affiliates, predecessors, successors, and assigns (collectively, the “HUB Releasing Parties”), hereby releases and forever discharges Oppenheimer, together with its past, present, and future members, principals, directors, officers, employees, agents, representatives, attorneys, parent corporations, parent limited liability companies, subsidiaries, affiliates, predecessors, successors, and assigns (collectively the “Oppenheimer Released Parties”), from any and all claims, causes of action, suits, debts, judgments, demands, controversies, disputes, liabilities, costs and expenses, and all damages including, but not limited to, compensatory, consequential, liquidated, and punitive damages, whether known or unknown, whether matured or unmatured, at law or in equity, liquidated or unliquidated, arising from or related to the Transaction, the Letter Agreement, the Second Letter Agreement and the Action.
(c) HUB represents and warrants that, as of the Effective Date, it has not filed any action, arbitration, or other legal proceeding of any kind against the Oppenheimer Released Parties.
(d) Oppenheimer represents and warrants that it has made no assignment, transfer, or conveyance of any of the claims released pursuant to this Paragraph, including, but not limited to, any assignment, transfer, or conveyance of claims arising from the Transaction, the Letter Agreement, the Second Letter Agreement, or the Action.
(e) This Settlement Agreement constitutes a full and final release of all claims of any kind arising from the Transaction, the Letter Agreement, the Second Letter Agreement, and the Action. The Parties acknowledge that following the execution of this Settlement Agreement they may discover facts in addition to or different from those that they know or believe to be true as of the Effective Date. The Parties unconditionally and irrevocably agree to fully, and finally, settle and release all claims covered by the releases contained within this Paragraph, notwithstanding the discovery or existence of any such additional or different facts or changed future circumstances.
(f) The Parties acknowledge and agree that any claims to enforce the terms of this Settlement Agreement are expressly excluded from all releases granted herein.
7. Confidentiality.
The Parties agree to keep the terms of this Settlement Agreement confidential. The Parties shall not disclose to any person or entity the fact of settlement or the specific terms and conditions of this Settlement Agreement, except: (a) in connection with any action between the Parties to enforce this Settlement Agreement; (b) as required by law, regulation, stock exchange rule, or court order; or (c) as necessary in the ordinary course of business to a Party’s affiliates (including parent and subsidiary companies) and its respective employees and agents, and to a Party’s auditors, insurers, accountants, tax consultants or attorneys, as applicable.
8. Representations and Warranties.
Each Party represents that the individual who executes this Settlement Agreement is fully authorized to do so on behalf of the Party upon which that individual has executed this Settlement Agreement. Each Party represents that, in the negotiation and execution of this Settlement Agreement, it had the opportunity to consult with and has in fact consulted with counsel of its choice.
9. No Inference Against the Drafter of this Settlement Agreement.
The Parties agree that each Party has participated in the negotiation and drafting of this Settlement Agreement, has had the opportunity to review this Settlement Agreement independently with their respective counsel, and that no legal rule interpreting any alleged ambiguities in this Settlement Agreement against the drafter shall not apply.
10. Governing Law and Jurisdiction.
The Parties agree that this Settlement Agreement shall be governed by and construed in accordance with the laws of the State of New York excluding its conflict of law rules. Any dispute related to or arising out of this Settlement Agreement, including, but not limited to, any dispute brought pursuant to Paragraph 5 herein, shall be subject to the exclusive jurisdiction of the federal and state courts located in New York County, New York. Each of HUB, Claymore, and Oppenheimer irrevocably consents to the exercise of personal jurisdiction over it by, and venue in, the federal and state courts located in New York County, New York. Each of HUB, Claymore, and Oppenheimer expressly waive and defenses of forum non conveniens with regard to any action to enforce the terms of this Settlement Agreement. Notwithstanding the foregoing, Oppenheimer shall be entitled, in its sole discretion, to bring an action in a court of competent jurisdiction in the Tel Aviv District in Israel, or in any Superior Court of Australia, for any claims arising from this Settlement Agreement.
11. Attorney’s Fees and Interest.
In the event Oppenheimer prevails in any action to enforce the terms of this Settlement Agreement against HUB and/or Claymore, Oppenheimer shall be entitled to recover its costs incurred in connection with said litigation, including reasonable attorney’s fees and New York State statutory interest, from the date of this Settlement Agreement is determined to have been breached, at 9% per annum.
12. Entire Agreement.
This Settlement Agreement reflects the entire agreement and understanding between the Parties with respect to the settlement contemplated in resolution of this Action, and supersedes all prior agreements, arrangements, understandings, communications, representations or warranties, both oral and written, related to the Letter Agreement, the Second Letter Agreement and the Action. It is further understood and agreed that all prior agreements, arrangements, understandings, communications, writings, representations or warranties, both oral and written, between the Parties hereto are merged into this Settlement Agreement, and the Parties have not relied upon any statement or representation not embodied herein.
13. Severable Provisions.
Except as provided for in Paragraph 3(b) and Paragraph 5 herein, if one or more of the provisions of this Settlement Agreement, or the application of such provision to any person, entity, or set of circumstances, shall be determined to be invalid, unlawful, or unenforceable to any extent at any time, the remainder of this Settlement Agreement shall not be affected, and shall continue to be enforceable to the fullest extent permitted by law.
14. Modification.
This Settlement Agreement may not be modified, altered, changed or amended except by an instrument in writing that is signed by all of the Parties.
15. Execution in Counterparts.
This Settlement Agreement may be executed in counterparts, including scanned PDF counterparts, each of which will be considered an original, but all of which together shall constitute one and the same instrument.
16. No Waiver.
No failure or delay by any Party in exercising any right, power, or privilege under this Settlement Agreement, including but not limited to, the failure to provide Notice of Default pursuant to Paragraph 17, will operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise of any right, power or privilege.
17. Notice and Service of Process.
In connection with any dispute, Default, Notice of Default, or action to enforce the terms of this Settlement Agreement, related to or arising out of this Settlement Agreement, each Party expressly consents to service of process by certified mail and/or Federal Express and email, addressed to: (i) Walter A. Saurack, Esq. 230 Park Avenue, Suite 1130, New York, N.Y. 10169 (wasaurack@duanemorris.com) on behalf of Oppenheimer; (ii) Ari M. Berman, Esq. 31 W. 52nd St. New York, NY 10019 (ari.berman@pillsburylaw.com) on behalf of HUB; and (iii) Anton Rosenberg, Level 27 25 Bligh St Sydney NSW 2000 Australia, antonr@claymorecapital.com.au, on behalf of Claymore.
[Signature Page Follows]
IN WITNESS WHEREOF, the Parties have entered into this Settlement Agreement as of the Effective Date.
| On behalf of Oppenheimer & Co., Inc.: | On behalf of HUB Cyber Security (Israel) Ltd., a/k/a HUB Cyber Security Ltd.: | |||
| Signature: | /s/ John T. Mcguire | Signature: | /s/ Noah Hershoviz /s/ Lior Davidsohn | |
| Printed Name: | John T. Mcguire | Printed Names: | Noah Hershoviz and Lior Davidsohn | |
| Title: | Deputy General Counsel | Titles: | CEO and CFO | |
| Date: | 2/18/25 | Date: | February 18, 2025 | |
| On behalf of Claymore Capital Pty Ltd.: | ||
| Signature: | /s/ Anton Rosenberg | |
| Printed Name: | Anton Rosenberg | |
| Title: | Managing Director | |
| Date: | _____________ | |
Exhibit 4.71
EXECUTION VERSION
NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of February 20, 2025 (the “Execution Date”), between HUB Cyber Security Ltd., an Israeli company (the ”Company”), and Claymore Capital Pty Ltd., an Australian company (the “Investor”).
RECITALS
A. On or about the date hereof, the Company is entering into a Forbearance and Settlement Agreement with Dominion Capital LLC (“Dominion”) in respect of a debt to Dominion in the approximate amount of $4,500,000 under a promissory note dated February 28, 2023 (the “Dominion Note”), pursuant to which the Company shall agree to pay such debt in multiple installments;
B. The Investor has agreed to make said installment payments to Dominion in exchange for assignments of corresponding amounts of the Dominion Note pursuant to the Assignment Agreement, dated on or about the date hereof, between Dominion and the Investor (the “Assignment Agreement”);
C. In consideration for the foregoing, the Company wishes to issue to the Investor, upon the terms and subject to the conditions stated in this Agreement, a convertible note in the form attached hereto as Exhibit A (the “Convertible Note”), convertible into Ordinary Shares (the “Conversion Shares”) pursuant to the terms set forth therein.
D. The Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Regulation S (“Regulation S”) under the Securities Act of 1933, as amended (the “1933 Act”), as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
| 1. | PURCHASE AND SALE OF CONVERTIBLE NOTE. |
(a) Convertible Note. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue to the Investor, and the Investor shall acquire from the Company, on the Closing Date (as defined below), the Convertible Note in an aggregate principal amount of seven million five hundred thousand U.S. Dollars ($7,500,000).
(b) Closing. The aforementioned issuance and sale of the Convertible Note shall take place as soon as practicable following the date hereof, but no later than the Business Day following the satisfaction or waiver of all of the closing conditions set forth in Sections 6 and 7 (the “Closing” and such date of a Closing being, the “Closing Date”).
(c) Payment Default. In the event that the Investor fails to timely pay any amount required to be paid under the Assignment Agreement (the “Payment Default Amount”), then upon notice of the Company to the Investor, the principal amount of the Note shall be reduced by 1.667 times the Payment Default Amount, provided, however, that to the extent the outstanding Principal Amount under the Note at such time is less than 1.667 times the amount of the Payment Default Amount, then the Note shall be canceled and the balance shall be paid by the Investor to the Company in cash within ten Business Days.
(d) Cancellation of Dominion Note. Automatically upon the assignment of any portion of the Dominion Note to the Investor pursuant to the Assignment Agreement or otherwise, such portion of the Dominion Note shall be cancelled and become null and void.
(e) Taxes. The Company shall be entitled to withhold Israeli tax on any payment of interest or deemed interest, unless provided with an applicable exemption (or approval of reduced tax withholding rate) issued by the Israel Tax Authority.
| 2. | INVESTOR’S REPRESENTATIONS AND WARRANTIES. |
The Investor represents and warrants to the Company that:
(a) Organization; Authority. It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder.
(b) No Public Sale or Distribution. The Investor (i) is acquiring, or will acquire, the Convertible Note and (ii) upon conversion of its Convertible Note, will acquire the Conversion Shares issuable upon conversion thereof, in each case, for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation of applicable securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by making the representations herein, the Investor does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. The Investor does not presently have any agreement or understanding, directly or indirectly, with any Person (as defined below) to distribute any of the Securities in violation of applicable securities laws.
(c) Investor Status. The Investor:
(i) (A) is not a “U.S. Person” (as defined in Rule 902 of Regulation S), (B) is acquiring the Securities outside the United States in an offshore transaction meeting the requirements of Regulation S; (C) is not acquiring, has not offered, and will not offer prior to the expiration of the applicable 40-day compliance period pursuant to Rule 903 of Regulation S, the Securities for the account or benefit of any U.S. Person; (D) did not become aware of the Company or the Securities through any form of “directed selling efforts” (as defined in Rule 902 of Regulation S), and no general solicitation or general advertising in violation of the 1933 Act has been or will be used nor will any offers by means of any directed selling efforts in the United States be made by the Investor or any of its representatives in connection with the offer and sale of any of the Securities; (E) was outside the United States at the time of the origination of contact concerning the transactions contemplated by this Agreement and on the date of execution and delivery of this Agreement by Investor; (F) is not acquiring the Securities in a transaction or part of series of transactions that, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the 1933 Act; (G) agrees that all offers and sales by the Investor of Securities shall be made pursuant to an effective registration statement under the Securities Act or pursuant to an exemption from, or a transaction not subject to the registration requirements of, the Securities Act, (H) is neither a U.S. Person nor a Distributor (as defined in Rule 902 of Regulation S) and (I) is the sole beneficial owner of the Securities specified on signature pages hereto and has not pre-arranged any sale with a purchaser in the United States; and
(ii) is a ‘sophisticated’ or ‘professional’ investor (as defined under section 708 of the Corporations Act 2001 (Cth) of Australia).
(d) Reliance on Exemptions. The Investor understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.
(e) Information. The Investor and its advisors, if any, acknowledge that they have been furnished with or provided access via EDGAR to the Company’s most recent Annual Report on Form 20-F, if any, and Reports of Foreign Pri,vate Issuers on Form 6-K as well as Registration Statements on Form F-1 or F-4 (including amendments thereto). The Investor and its advisors, if any, have been afforded the opportunity to ask questions of, and receive answers from, the Company concerning the offer and sale of the Securities and to obtain any additional information the Investor has requested which is necessary to verify the accuracy of the information furnished to the Investor concerning the Company and such offering. The Investor understands that its investment in the Securities involves a high degree of risk. The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. The Investor acknowledges that the Investor is basing its decision to invest in the Securities solely upon the information contained in the Transaction Documents, the Company’s most recent Annual Report on Form 20-F, if any, and Reports of Foreign Private Issuers on Form 6-K, if any, and its own due diligence and, except as specifically set forth in this Agreement, has not based its investment decision upon any representations made by any Person (as defined below).
(f) No Governmental Review. The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(g) Transfer or Resale. The Investor understands that: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Investor shall have delivered to the Company (if requested by the Company) an opinion of counsel to the Investor, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Investor provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule thereto) (“Rule 144”) or Regulation S promulgated under the 1933 Act; and (ii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.
(h) Validity; Enforcement. The execution and delivery of the Transaction Documents and the consummation by the Investor of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action on the part of the Investor and no further consent or authorization of the Investor or its members is required. Each Transaction Document has been duly executed by the Investor and when delivered in accordance with terms hereof and thereof, constitutes the legal, valid and binding obligations of the Investor enforceable against the Investor in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
(i) No Conflicts. The execution, delivery and performance by the Investor of this Agreement and the consummation by the Investor of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of the Investor, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Investor is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Investor, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the ability of the Investor to perform its obligations hereunder.
(j) Experience of Investor. The Investor has such knowledge, sophistication and experience in business and financial matter so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Investor is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(k) Foreign Corrupt Practices. Neither the Investor nor any of its subsidiaries or affiliates, nor, to the knowledge of the Investor, any director, officer, agent, employee, member or other Person acting on behalf of the Investor or any its subsidiaries or affiliates has, in the course of its actions for, or on behalf of, the Investor or any of its subsidiaries or affiliates (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any foreign or domestic government official or employee.
(l) General Solicitation. The Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or advertisement.
(m) Patriot Act Representations.
(i) The Investor represents that all evidence of identity provided is genuine and all related information furnished is accurate.
(ii) The Investor hereby acknowledges that the Company seeks to comply with all applicable anti-money laundering laws and regulations. In furtherance of such efforts, the Investor hereby represents and agrees that: (A) no part of the funds used by the Investor to acquire the Securities have been, or shall be, directly or indirectly derived from, or related to, any activity that may contravene federal, state, or international laws and regulations, including anti-money laundering laws and regulations; and (B) no payment to the Company by the Investor shall cause the Company to be in violation of any applicable anti-money laundering laws and regulations including without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Executive Order 13224 (2001) (the “Patriot Act”) issued by the President of the United States and the U.S. Department of the Treasury Office of Foreign Assets Control (“OFAC”) regulations.
(iii) The Investor represents and warrants that the amounts to be paid by the Investor to the Company will not be directly or indirectly derived from activities that may contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. The Investor represents and warrants that, to the best of its knowledge, none of: (A) the Investor; (B) any Person controlling or controlled by the Investor; or (C) any Person having a beneficial interest in the Investor is (I) a country, territory, individual or entity named on a list maintained by OFAC, (II) a Person prohibited under the OFAC Programs, (III) a senior foreign political figure,1 or any immediate family member2 or close associate3 of a senior foreign political figure as such terms are defined in the footnote below or (IV) a “foreign shell bank” within the meaning of the U.S. Bank Secrecy Act (31 U.S.C. §5311 et seq.), as amended (the “Bank Secrecy Act”) and the regulations promulgated thereunder by the U.S. Department of the Treasury.
| 1 | A “senior foreign political figure” is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a “senior foreign political figure” includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure. |
| 2 | “Immediate family” of a senior foreign political figure typically includes the figure’s parents, siblings, spouse, children and in-laws. |
| 3 | A “close associate” of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure. |
(iv) The Investor further represents and warrants that the Investor: (A) has conducted thorough due diligence with respect to all of its beneficial owners, (B) has established the identities of all beneficial owners and the source of each of the beneficial owner’s funds and (C) will retain evidence of any such identities, any such source of funds and any such due diligence.
(v) Neither the Investor nor any Person directly or indirectly controlling, controlled by or under common control with the Investor is a person identified as a terrorist organization on any relevant lists maintained by governmental authorities.
(vi) The Investor agrees to provide the Company all information that may be reasonably requested to comply with applicable laws and regulations of any applicable jurisdiction, or to respond to requests for information concerning the identity of the Investor from any governmental authority, self-regulatory organization or financial institution in connection with its anti-money laundering compliance procedures, or to update such information. The Investor agrees to notify the Company promptly if there is any change with respect to the representations and warranties provided herein. The Investor consents to the disclosure to regulators and law enforcement authorities by the Company and its affiliates and agents of any information about the Investor or its constituents as the Company reasonably deems necessary or appropriate to comply with applicable anti-money laundering, anti-terrorist and asset control laws, regulations, rules and orders.
| 3. | REPRESENTATIONS AND WARRANTIES OF THE COMPANY. |
The Company represents and warrants to the Investor the matters set forth in this Section 3, except as set forth in the SEC Documents. These representations and warranties are current as of this Agreement, except to the extent that a representation or warranty expressly states that such representation or warranty is current only as of an earlier date. If any information is so reflected as of an earlier date, there have been no material changes since such date to the date hereof.
(a) Organization and Qualification. Each of the Company and each of its subsidiaries are (i) entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed (to the extent such concept exists in the applicable jurisdiction), and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and (ii) is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction (to the extent such concept exists in the applicable jurisdiction) in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.
(b) Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Securities in accordance with the terms hereof and thereof. The execution and delivery of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Convertible Note and the reservation for issuance of the Conversion Shares upon conversion of the Convertible Note) have been (i) duly authorized by the Company’s board of directors and (ii) no further filing, consent or authorization is required by the Company, its board of directors or its shareholders or other governing body of the Company (other than the filing of required notices and/or applications to the Principal Market for the issuance and sale of the Securities or the filings required by Section 4(c) of this Agreement). This Agreement has been, and the other Transaction Documents will be prior to the Closing, duly executed and delivered by the Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law.
(c) Issuance of Securities. The issuance of the Securities is duly authorized and, upon issuance in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, Liens, charges and other encumbrances with respect to the issue thereof. As of the Closing, the Company shall have reserved from its duly authorized capital stock not less than the maximum number of Conversion Shares issuable upon conversion of the Convertible Note (without taking into account any limitations on the conversion of the Convertible Note set forth therein) and (ii) the maximum number of Warrant Shares issuable upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth therein), subject to shareholder approval of the proposed increase in authorized share capital as aforesaid. Subject to the accuracy of the representations and warranties of the Investor in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act. Upon issuance in accordance with the terms of the Transaction Documents, Investor will have good and marketable title to the Securities.
(d) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Convertible Note, the Conversion Shares, the Warrants and the Warrant Shares and the reservation for issuance of the Conversion Shares and the Warrant Shares) will not (i) result in a violation of the Articles of Association of the Company or other organizational documents of the Company or any of its subsidiaries, any capital stock of the Company, subject to shareholder approval of the proposed increase in the Company’s authorized share capital as aforesaid, or any of its subsidiaries or bylaws or operating agreements of the Company or any of its subsidiaries, (ii) result in a violation of any law, rule, regulation, order, judgment or decree, except, in the case of this clause (ii), to the extent such violations that could not reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of any material contract or agreement, lease, license or commitment to which the Company is a party or by which it is bound.
(e) Consents. Neither the Company nor any subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with any court, governmental agency or any regulatory or self-regulatory agency or any other Person (other than the filing of required notices and/or applications to the Principal Market for the issuance and sale of the Securities or the filings required by Section 4(c) of this Agreement), in order for it to execute, deliver or perform any of its respective obligations under, or contemplated by, the Transaction Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations that the Company is required to obtain at or prior to the Closing have been obtained or effected on or prior to the Closing Date, and the Company is not aware of any facts or circumstances that might prevent the Company from obtaining or effecting any of the registration, application or filings contemplated by the Transaction Documents.
(f) Acknowledgment Regarding Investor’ Purchase of Securities. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby and that the Investor is not (i) an officer or director of the Company, (ii) an affiliate (as defined in Rule 405 of the 1933 Act) of the Company (an “Affiliate”) or (iii) to its knowledge, a “beneficial owner” (as defined for purposes of Rule 13d-3 of the 1934 Act) of more than 10% of the Ordinary Shares. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company or any of its subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by the Investor or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor’s purchase of the Securities. The Company further represents to the Investor that the Company’s decision to enter into the Transaction Documents to which it is a party has been based solely on the independent evaluation by the Company and its representatives.
(g) Directed Selling Efforts; Placement Agent’s Fees. Neither the Company nor any of its affiliates (as defined in Regulation 501 under the 1933 Act) nor any person acting on its or their behalf has engaged or will engage in any form of directed selling efforts (within the meaning of Regulation S) in the United States in connection with the offering of the Securities and it and they have complied and will comply with the offering restrictions requirement of applicable law. The Company shall be responsible for the payment of any of its placement agent’s fees, financial advisory fees, or brokers’ commissions, relating to or arising out of the transactions contemplated hereby.
(h) No Integrated Offering. None of the Company, any of its Affiliates, or, to the knowledge of the Company, any Person acting on the behalf of the Company or any of its Affiliates has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Securities under the 1933 Act, whether through integration with prior offerings or otherwise, or cause this offering of the Securities to require approval of shareholders of the Company under any applicable shareholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated for quotation. None of the Company, any of its Affiliates, or, to the knowledge of the Company, any Person acting on the behalf of the Company or any of its Affiliates will take any action or steps that would require registration of the issuance of any of the Securities under the 1933 Act or cause the offering of any of the Securities to be integrated with other offerings of securities of the Company.
(i) Application of Takeover Protections; Rights Agreement. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, interested shareholder, business combination, poison pill (including, without limitation, any distribution under a rights agreement), shareholder rights plan or other similar anti-takeover provision under the Articles of Association or other organizational documents of the Company or any of its Affiliates or the laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to the Investor as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and the Investor’s ownership of the Securities. The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Ordinary Shares or a change in control of the Company or any of its Affiliates.
(j) SEC Documents; Financial Statements. As of their respective dates, all reports, schedules, forms, statements and other documents required to be filed by the Company with the SEC pursuant to the reporting requirements of the 1934 Act (all of the foregoing, as well as all registration statements under the 1933 Act, filed prior to the date hereof and all exhibits and appendices included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC Documents”) complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of its dates, the financial statements of the Company included in the SEC Documents complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the Note thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude the footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate). No other information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance under which they are or were made.
(k) Absence of Certain Changes. Since the date of the Company’s most recent audited financial statements contained in a Form 20-F (or Form F-1 if filed more recently), except as disclosed in the SEC Documents filed subsequent to such Form 20-F (or Form F-1, as applicable), there has been no material adverse change and no material adverse development in the business, assets, liabilities, properties, operations (including results thereof), or condition (financial or otherwise) of the Company and its subsidiaries. Since the date of the Company’s most recent audited financial statements contained in a Form 20-F (or Form F-1, as applicable), neither the Company nor any of its subsidiaries has (i) declared or paid any dividends, (ii) sold any material assets outside of the ordinary course of business or (iii) made any material capital expenditures, individually or in the aggregate, outside of the ordinary course of business.
(l) No Undisclosed Events, Liabilities, Developments or Circumstances. Except as disclosed in the SEC Documents, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to occur or exist with respect to the Company or any of its subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise) that would have a Material Adverse Effect on the Company.
(m) Conduct of Business; Regulatory Permits. Neither the Company nor any of its subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or any of its subsidiaries, and the Company will not conduct its business in violation of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a Material Adverse Effect. Since February 28, 2023, (i) the Ordinary Shares have been designated for quotation on the Nasdaq Stock Market, (ii) trading in the Ordinary Shares has not been suspended by the SEC or the Nasdaq Stock Market and (iii) except as disclosed in the SEC Documents, the Company has received no communication, written or oral, from the SEC or the Nasdaq Stock Market regarding the suspension of the Ordinary Shares from the Nasdaq Stock Market. The Company and each of its subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.
(n) Foreign Corrupt Practices. Neither the Company nor any of its subsidiaries nor to the knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the Company or any of its subsidiaries (as applicable) has, in the course of its actions for, or on behalf of, the Company or any of its subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
(o) Sarbanes-Oxley Act. Except as set forth in the SEC Documents, the Company and each of its subsidiaries is in material compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 and all applicable rules and regulations promulgated by the SEC thereunder.
(p) Transactions With Affiliates. Except as disclosed in the SEC Documents, none of the officers, directors, employees or Affiliates of the Company is presently a party to any transaction with the Company (other than for ordinary course services as employees, officers or directors and immaterial transactions), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director, employee or Affiliate or, to the knowledge of the Company, any corporation, partnership, trust or other Person in which any such officer, director, employee or Affiliate has a substantial interest or is an employee, officer, director, trustee or partner.
(q) Equity Capitalization. All of the Company’s outstanding Ordinary Shares are duly authorized and have been, or upon issuance will be, validly issued, fully paid and non-assessable. Except as disclosed in the SEC Documents: (i) to the Company’s knowledge, no Person owns 10% or more of the Company’s issued and outstanding Ordinary Shares; (ii) the Company’s capital stock and the capital stock of its subsidiaries are not subject to preemptive rights or any other similar rights or any Liens; (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional capital stock or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its subsidiaries, respectively (other than as may be issued from time to time under any equity incentive plan maintained); (iv) except for the Convertible Note, there are no outstanding debt securities, convertible Note, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its subsidiaries or by which the Company or any of its subsidiaries is or may become bound. The SEC Documents contain true, correct and complete copies of the Company’s Articles of Association, as amended and as in effect on the date (except for the amendment to increase of the authorized share capital to 1.0 billion Ordinary Shares on December 30, 2024), and the terms of all securities convertible into, or exercisable or exchangeable for, Ordinary Shares and the material rights of the holders thereof.
(r) Indebtedness and Other Contracts. Except as disclosed in the SEC Documents, each of the Company and its subsidiaries (i) does not have any material outstanding Indebtedness, Indebtedness secured by any Lien on any assets of the Company or any of its subsidiaries or other material debt obligations, except for the Convertible Note, (ii) is not a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, (iii) is not in violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, and (iv) is not a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. The Company has no current intention or expectation to file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction.
(s) Litigation. Except as disclosed in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by the Principal Market, any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries, the Ordinary Shares or any of the Company’s or its subsidiaries’ executive officers or directors which would be reasonably likely to adversely affect the transactions contemplated by this Agreement or would require disclosure in the SEC Documents.
(t) Insurance. The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any such subsidiary has been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
(u) Employee Relations. Neither the Company nor any of its subsidiaries is a party to any collective bargaining agreement nor does it employ any member of a union. To the knowledge of the Company, no executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) of the Company is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters.
(v) Title. The Company and its subsidiaries have good and marketable title to (i) all real property owned by it and (ii) all personal property, owned by them which is material to the business of the Company and its subsidiaries, in each case, free and clear of all Liens, encumbrances and defects except such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its subsidiaries. Any real property and facilities held under lease by the Company and any of its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company or any of its subsidiaries.
(w) Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted. Except as disclosed in the SEC Documents, none of the Company’s or its subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected to expire, terminate or be abandoned, within three years from the date of this Agreement, which could reasonably be expected to result in a Material Adverse Effect.
(x) Tax Status. Each of the Company and its subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply and except in each case where the failure to file, pay or set aside could not be reasonably expected to have a Material Adverse Effect. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
(y) Internal Accounting and Disclosure Controls. Except as disclosed in the SEC Documents, the Company and each of its subsidiaries maintains internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, including that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference. Except as disclosed in the SEC Documents, the Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure.
(z) Investment Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
(aa) U.S. Real Property Holding Corporation. Neither the Company nor any of its subsidiaries is or has ever been, and so long as any of the Securities are held by the Investor, shall not become, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company and each subsidiary shall so certify upon the Investor’s request.
(bb) No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.
(cc) Shell Company Status. The Company is not a shell company, as defined in SEC Rule 144(i), but it has been recently notified by the SEC that it is considered a former shell company by virtue of its merger with a SPAC.
(dd) Illegal or Unauthorized Payments; Political Contributions. Neither the Company nor any of its subsidiaries nor, to the best of the Company’s knowledge (after reasonable inquiry of its executive officers and directors), any of the officers, directors, employees, agents or other representatives of the Company or any of its subsidiaries or any other business entity or enterprise with which the Company or any of its subsidiaries is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution or gift of money, property, or services, whether or not in contravention of applicable law, (i) as a kickback or bribe to any Person or (ii) to any political organization, or the holder of or any aspirant to any elective or appointive public office except for personal political contributions not involving the direct or indirect use of funds of the Company or any of its subsidiaries.
(ee) Money Laundering. The Company and its subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, without limitation, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, without limitation, (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.
(ff) Disclosure. All disclosure provided to the Investor regarding the Company, its subsidiaries, their respective businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf of the Company or any of its subsidiaries is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.
| 4. | COVENANTS. |
(a) Use of Proceeds. The Company will not receive any proceeds from the transaction contemplated by this Agreement.
(b) Financial Information. Until the date on which the Investor shall have sold all of the Registrable Securities (the “Reporting Period”), the Company agrees to send the following to the Investor, unless the following are filed with the SEC through EDGAR and are available to the public through the EDGAR system, (i) within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 20-F and Reports of Foreign Private Issuers on Form 6-K, any interim reports or any consolidated balance sheets, income statements, shareholders’ equity statements and/or cash flow statements for any period other than annual, any Reports of Foreign Private Issuers on Form 6-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile copies of all press releases issued by the Company and (iii) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders.
(c) Listing. The Company shall secure the listing or designation for quotation (as the case may be) of all of the Conversion Shares on the Principal Market so that all such Conversion Shares may be traded on the foregoing, subject to official notice of issuance, and shall maintain such listing or designation for quotation (as the case may be) of all Conversion Shares from time to time issuable under the terms of the Convertible Note on the Principal Market. The Company shall use commercially reasonable efforts to maintain the Ordinary Shares’ listing or designation for quotation (as the case may be) on the Nasdaq Stock Market, the New York Stock Exchange or the NYSE Amex (each, an “Eligible Market”). The Company shall not take any action which could be reasonably expected to result in the delisting or suspension of the Ordinary Shares on an Eligible Market.
(d) Fees. The Company shall be responsible for the payment of any of its placement agent’s fees, financial advisory fees, transfer agent fees, DTC fees or broker’s commissions, relating to or arising out of the transactions contemplated hereby. The Company shall not be responsible for paying any fees or expenses of the Investor in connection with this Agreement and the transactions contemplated thereby.
(e) Pledge of Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that the Securities may be pledged by the Investor in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and the Investor effecting a pledge of Securities shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. At the Investor’s expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by the Investor provided that the Company shall be under no obligation to deliver any legal opinion required in connection therewith unless required by the Company’s transfer agent to be issued by the Company’s legal counsel.
(f) Disclosure of Transactions and Other Material Information. The Company shall not, and the Company shall cause each of its officers, directors, employees and agents not to, provide the Investor with any material, non-public information regarding the Company from and after the Execution Date without the express prior written consent of the Investor. Subject to the foregoing, neither the Company nor the Investor shall issue any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be entitled, without the prior approval of the Investor, to make any press release or other public disclosure with respect to such transactions as is required by applicable law and regulations (provided that the Investor shall be consulted by the Company in connection with any such press release or other public disclosure prior to its release). Without the prior written consent of the Investor, the Company shall not (and shall cause each of its affiliates to not) disclose the name of the Investor in any filing (other than as required by applicable law or rules and regulations), announcement, release or otherwise. Notwithstanding anything contained in this Agreement to the contrary and without implication that the contrary would otherwise be true, the Company expressly acknowledges and agrees that the Investor has not had, and the Investor shall not have (unless expressly agreed to by the Investor after the date hereof in a written definitive and binding agreement executed by the Company and the Investor), any duty of confidentiality with respect to, or a duty not to trade on the basis of, any information regarding the Company or any of its subsidiaries (as applicable) that the Investor receives from the Company, any of its subsidiaries or any of its or its officers, directors, employees, shareholders or agents.
(g) Reservation of Shares. As long as any of the Convertible Note remains outstanding, the Company shall take all action necessary to at all times have authorized and reserved for the purpose of issuance, no less than the number of Ordinary Shares issuable upon conversion of the Convertible Note.
(h) Conduct of Business. The business of the Company shall not be conducted in violation of any law, ordinance or regulation of any governmental entity, except where such violations would not result, either individually or in the aggregate, in a Material Adverse Effect.
(i) Passive Foreign Investment Company. The Company shall conduct its business in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
| 5. | TRANSFER AGENT INSTRUCTIONS; LEGEND. |
(a) Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer agent in a form acceptable to the Investor to issue certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”), registered in the name of the Investor or its respective nominee(s), for the Conversion Shares in such amounts as specified from time to time by the Investor to the Company, and confirmed by the Company, upon the conversion of the Convertible Note. The Company represents and warrants that no instruction other than such irrevocable transfer agent instructions referred to in this Section 5(a), and stop transfer instructions to give effect to Section 2(g) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent provided in this Agreement and the other Transaction Documents. If the Investor effects a sale, assignment or transfer of the Securities in accordance with Section 2(g), the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by the Investor to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Conversion Shares sold, assigned or transferred pursuant to an effective registration statement or in compliance with Rule 144 or another exemption from registration, the transfer agent shall issue such shares to the Investor, assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 5(c) below. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Investor. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(a) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 5(a), that the Investor shall be entitled, in addition to all other available remedies, to an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required. Any fees (with respect to the transfer agent, counsel to the Company or otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne by the Company.
(b) Legends. The Investor understands that the Securities have not been registered under the 1933 Act, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Rule 144 or pursuant to another exemption from the registration requirements of the 1933 Act, and except as set forth below, the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
(c) Removal of Legends. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(b) above or any other legend (i) in connection with a sale pursuant to an effective registration statement covering the resale of such Securities under the 1933 Act (provided that the Investor provides the Company with any certificates from the Investor or its broker reasonably required by the Company’s transfer agent), (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of the Company) or a registration statement, (iii) in connection with a sale, assignment or other transfer under Rule 144 (provided that the Investor provides the Company with reasonable assurances that such Securities are eligible for sale, assignment or transfer under Rule 144, which shall not include an opinion of counsel, but which may include any certificates from the Investor or its broker reasonably required by the Company’s transfer agent), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that the Investor provides the Company with an opinion of counsel to the Investor from reputable counsel to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933 Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is not required pursuant to the foregoing, the Company shall no later than five (5) Trading Days following the delivery by the Investor to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from the Investor as may be required above in this Section 5(c), as directed by the Investor, credit the aggregate number of Ordinary Shares to which the Investor shall be entitled to the Investor’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system.
(d) Manner of Sale. The Investor, severally and not jointly with the other Investor, agrees with the Company that the Investor will sell any Securities pursuant to either the registration requirements of the 1933 Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 5 is predicated upon the Company’s reliance upon this understanding.
| 6. | CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. |
(a) The obligation of the Company hereunder to issue and sell the Convertible Note to the Investor at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing the Investor with prior written notice thereof:
(i) The Investor shall have executed the Settlement Agreement and each of the Transaction Documents to which it is a party and delivered the same to the Company.
(ii) The representations and warranties of the Investor shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such date), and the Investor shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Investor at or prior to the Closing Date.
| 7. | CONDITIONS TO INVESTOR’ OBLIGATION TO PURCHASE. |
(a) The obligation of the Investor hereunder to purchase its Convertible Note and Warrants at the Closing is subject to the satisfaction, at or before each applicable Closing Date and in respect of each such Closing Date, of each of the following conditions, provided that these conditions are for the Investor’s sole benefit and may be waived by the Investor at any time in its sole discretion by providing the Company with prior written notice thereof:
(i) The Company shall have duly executed and delivered to the Investor the Settlement Agreement and each of the Transaction Documents to which the Company is a party and the Company shall have complied in all material respects with all obligations under this Agreement and the other Transaction Documents, including, without limitation, the Convertible Note.
(ii) Each and every representation and warranty of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing Date.
(iii) The Ordinary Shares (A) shall be designated for quotation on an Eligible Market; and (B) shall not have been suspended, as of the Closing Date, from trading thereon.
(iv) The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities.
(v) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents, and no actions, suits or proceedings shall be pending by any governmental authority that seeks to enjoin, prohibit or otherwise adversely affect any of the transactions contemplated by the Transaction Documents.
(vi) Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result in a Material Adverse Effect and the Company has not filed for nor has it become subject to any bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors instituted by or against the Company.
| 8. | TERMINATION. |
In the event that the Closing shall not have occurred within ten (10) days after the date hereof (the “Expiration Date”), then this Agreement shall terminate with respect to the applicable Investor on the close of business on the Expiration Date without liability to any other party; provided, however, that the right to terminate this Agreement under this Section 8 shall not be available to the Investor if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of the Investor’s breach of this Agreement. Notwithstanding anything to the contrary above, nothing contained in this Section 8 shall be deemed to release any party hereto from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party hereto to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.
| 9. | CERTAIN DEFINITIONS |
(a) 1934 Act. The “1934 Act” means the Securities Exchange Act of 1934, as amended.
(b) Business Day. “Business Day” means any day other than a Friday, Saturday, Sunday or other day on which commercial banks in New York, New York or Israel are authorized or required by law to remain closed.
(c) Indebtedness. “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the purchase price of property or assets, including indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), other than trade payables entered into in the ordinary course of business, (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by Note, bonds, debentures or similar instruments, (E) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, and (F) all indebtedness referred to in clauses (A) through (E) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in any material property or assets (including accounts and contract rights) owned by such Person, even though the Person has not assumed or become liable for the payment of such indebtedness.
(d) Lien. “Lien” means any lien, mortgage, pledge, encumbrance, charge, security interest, adverse claim, liability, interest, charge, preference, priority, proxy, transfer restriction (other than restrictions under the 1933 Act and state securities laws), encroachment, tax, order, community property interest, equitable interest, option, warrant, right of first refusal, easement, profit, license, servitude, right of way, covenant or zoning restriction.
(e) Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company and its subsidiaries, taken as a whole, (ii) the transactions contemplated hereby or in any of the other Transaction Documents or (iii) the authority or ability of the Company or any of its subsidiaries to perform any of its respective obligations under any of the Transaction Documents (as defined below).
(f) Ordinary Shares. “Ordinary Shares” means the ordinary shares, no par value per share, of the Company and any other shares issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Ordinary Shares).
(g) Person. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
(h) Principal Market. “Principal Market” means the Nasdaq Stock Market; provided however, that in the event the Ordinary Shares are ever listed or traded on the New York Stock Exchange, the NYSE American or the OTC Markets, then the “Principal Market” shall mean such other market or exchange on which the Ordinary Shares is then listed or traded.
(i) Registrable Securities. “Registrable Securities” means (i) the Conversion Shares, (ii) the Warrant Shares and (iii) any capital stock of the Company issued or issuable with respect to such Conversion Shares and the Warrant Shares, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the Ordinary Shares is converted or exchanged, in each case, without regard to any limitations on exercise or exchange of the Warrants. As to any Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a registration statement with respect to the sale of such securities shall have become effective under the 1933 Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such registration statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company, and subsequent public distribution of them shall not require registration under the 1933 Act; or (c) such securities are freely saleable under Rule 144.
(j) Securities. “Securities” means the Convertible Note and the Conversion Shares.
(k) Subsidiaries. “Subsidiary” or “subsidiary” means with respect to a Person, any Person in which that other Person, directly or indirectly, (I) owns any of the outstanding capital stock or holds any equity or similar interest of such Person or (II) controls or operates all or any part of the business, operations or administration of such Person; provided, that a Person shall not be deemed a subsidiary pursuant to clauses (I) or (II) unless the Person, directly or indirectly, owns at least 51% of any of the outstanding capital stock or holds at least 51% of any equity or similar interest of such Person.
(l) Trading Day. “Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Ordinary Shares, any day on which the Ordinary Shares is traded on the principal securities exchange or securities market on which the Ordinary Shares is then traded, provided that “Trading Day” shall not include any day on which the Ordinary Shares is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Ordinary Shares is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Ordinary Shares, any day on which The Nasdaq Stock Market (or any successor thereto) is open for trading of securities.
(m) Transaction Documents. “Transaction Documents” means, collectively, this Agreement, the Convertible Note, the Warrants, and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time.
| 10. | MISCELLANEOUS. |
(a) Governing Law; Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of Israel, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Israel or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Israel. Each of the parties hereby irrevocably submits to the exclusive jurisdiction of the courts of Tel Aviv, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. The form of heter iska that appears in the Sefer Netivot Shalom written by Harav Shalom Yosef Gelber shall apply to the transactions contemplated by this Agreement.
(b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.
(c) Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.
(d) Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties hereto as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties hereto or the practical realization of the benefits that would otherwise be conferred upon the parties hereto. The parties hereto will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
(e) Entire Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Investor, the Company, its affiliates and Persons acting on its behalf solely with respect to the matters contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties hereto solely with respect to the matters covered herein and therein. Except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. The Company has not, directly or indirectly, made any agreements with the Investor relating to the terms or conditions of the transactions contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms that, except as set forth in this Agreement, the Investor has not made any commitment or promise or has any other obligation to provide any financing to the Company or otherwise. As a material inducement for the Investor to enter into this Agreement, the Company expressly acknowledges and agrees that no due diligence or other investigation or inquiry conducted by the Investor, any of its advisors or any of its representatives shall affect the Investor’s right to rely on, or shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or any other Transaction Document.
(f) Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server that such e-mail could not be delivered to such recipient) and (iii) if sent by overnight courier service, one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses and e-mail addresses for such communications shall be:
If to the Company:
HUB Cyber Security Ltd.
2 Kaplan Street
Tel Aviv 6721117, Israel
Tel: +972-3-791-3200
Email Address: Noah Hershcoviz, Chief Executive Officer
Attention: noah.hershcoviz@hubsecurity.io
With a copy (for informational purposes only) to:
Goldfarb, Gross, Seligman & Co.
One Azrieli Center, Round Building
Tel-Aviv 67021, Israel
Attention: Adam M. Klein; Daniel P. Kahn
Email: adam.klein@goldfarb.com; daniel.kahn@goldfarb.com
If to the Investor:
See Investor’s signature page hereto
or to such other address or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication or (B) provided by an overnight courier service shall be rebuttable evidence of personal service or receipt from an overnight courier service in accordance with clause (i) or (iii) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e-mail address shall be rebuttable evidence of receipt by e-mail in accordance with clause (ii) above.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and its successors and assigns, including, as contemplated below, any assignee of any of the Securities. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor, including, without limitation, by way of a Fundamental Transaction (as defined in the Warrants) (unless the Company is in compliance with the applicable provisions governing Fundamental Transactions set forth in the applicable Warrants).
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and its permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than the Indemnitees referred to in Section 10(k).
(i) Survival. The representations, warranties, agreements and covenants shall survive the Closing until the applicable statute of limitations. The Investor shall be responsible only for its representations, warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(k) Indemnification.
(i) In consideration of the Investor’s execution and delivery of the Transaction Documents and acquiring the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Investor and each holder of any Securities and all of their shareholders, partners, members, officers, directors, employees and direct or indirect Investor and any of the foregoing Persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable and documented expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to any material (A) misrepresentation or breach of any representation or warranty made by the Company in any of the Transaction Documents, (B) breach of any covenant, agreement or obligation of the Company contained in any of the Transaction Documents or (C) cause of action, suit, proceeding or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company, but other than by an affiliate of the Investor) or which otherwise involves such Indemnitee that arises out of or results from (I) the execution, delivery, performance or enforcement of any of the Transaction Documents, (II) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (III) any disclosure properly made by the Investor pursuant to Section 4(c), or (IV) the status of the Investor or holder of the Securities either as an investor in the Company pursuant to the transactions contemplated by the Transaction Documents or as a party to this Agreement, unless such action is based upon a breach of the Investor’s representations, warranties, or covenants under the Transaction Documents, or any agreements or understandings the Investor may have with any such third party, or any violations by the Investor of state or federal securities laws or any conduct by the Investor which constitutes fraud, gross negligence or willful misconduct.
(ii) Promptly after receipt by an Indemnitee under this Section 10(k) of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is to be made against the Company under this Section 10(k), deliver to the Company a written notice of the commencement thereof, and the Company shall have the right to participate in, and, to the extent the Company so desires, to assume control of the defense thereof with counsel mutually satisfactory to the Company and the Indemnitee; provided, however, that an Indemnitee shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the Company if: (i) the Company has agreed in writing to pay such fees and expenses; or (ii) the Company shall have failed promptly to assume the defense of such Indemnified Liability and to employ counsel reasonably satisfactory to such Indemnitee in any such Indemnified Liability. The Indemnitee shall reasonably cooperate with the Company in connection with any negotiation or defense of any such action or Indemnified Liability by the Company and shall furnish to the Company all information reasonably available to the Indemnitee which relates to such action or Indemnified Liability. The Company shall keep the Indemnitee reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. The Company shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the Company shall not unreasonably withhold, delay or condition its consent. Following indemnification as provided for hereunder, the Company shall be subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made.
(iii) The indemnification required by this Section 10(k) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Liabilities are incurred.
(iv) Notwithstanding any provision in this Agreement or any other Transaction Documents, except for fraud or willful breach of any of its representations, warranties, covenants or agreements set forth in this Agreement, the aggregate indemnification obligations of the Company pursuant to this Section 10(k) shall not exceed 100% of the aggregate Purchase Price actually paid by the Investor.
(v) The sole and exclusive remedy for any breach of any representation, warranty, covenant or agreement hereunder shall be the indemnification provided by this Section 10(k), and the Investor expressly waives any other rights or remedies it may have; provided however, that equitable relief, including remedies of specific performance and injunction, shall be available with respect to any matter where money damages would not be sufficient to compensate the Investor or to preserve the rights of the Investor pending resolution of a dispute, and this Section 10(k) shall not relieve the Company from liability for willful misconduct, gross negligence, bad faith, fraud or willful breach of any of its representations, warranties, covenants or agreements set forth in this Agreement.
(l) Construction. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices, Ordinary Shares and any other numbers in this Agreement that relate to the Ordinary Shares shall be automatically adjusted for stock dividends, stock splits, stock combinations and other similar transactions that occur with respect to the Ordinary Shares after the date of this Agreement.
(m) Remedies. The Investor and each holder of any Securities shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security, to the extent permitted by law), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Investor. The Company therefore agrees that the Investor shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.
(n) Exercise of Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever the Investor exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Investor may continue to exercise it other rights, elections, demands and options hereunder and under any other Transaction Document from time to time as if such original right, election, demand or option had not been exercised without prejudice to its future actions and rights and remedies.
(o) Payment Set Aside; Currency. To the extent that the Company makes a payment or payments to the Investor hereunder or pursuant to any other Transaction Document or the Investor enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.
[signature pages follow]
IN WITNESS WHEREOF, the Investor and the Company has caused its signature page to this Agreement to be duly executed as of the date first written above.
| HUB CYBER SECURITY LTD. | |||
| By: | /s/ Noah Hershcoviz | ||
| Name: | Noah Hershcoviz | ||
| Title: | CEO | ||
| By: | /s/ Lior Davidsohn | ||
| Name: | Lior Davidsohn | ||
| Title: | CFO (Interim) | ||
| CLAYMORE CAPITAL PTY LTD. | |||
| By: | /s/ Anton Rosenberg | ||
| Name: | Anton Rosenberg | ||
| Title: | Managing Director | ||
Address for Notice to Investor:
Claymore Capital Pty Ltd.
Level 27 25 Bligh Street
Sydney NSW 2000 Australia
Attn: Anton Rosenberg, Managing Director
Email: antonr@claymorecapital.com.au
28
Exhibit 4.72
Execution Version
NEITHER THE ISSUANCE AND SALE OF THIS CONVERTIBLE NOTE NOR THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”), AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE I44A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 2(C)(IV) AND 8 HEREOF. THE LOAN AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 2(C)(IV) OF THIS NOTE.
HUB Cyber Security Ltd.
Convertible Note
| Issuance Date: February 20, 2025 | Original Principal Amount: U.S. $7,500,000 |
FOR VALUE RECEIVED, HUB Cyber Security Ltd., an Israeli company (the “Company”), hereby promises to pay to the order of Claymore Capital Pty Ltd., an Australian company, or its registered assigns (“Holder”), the principal sum set forth above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to conversion, redemption or otherwise, the “Loan Amount”) from the date set out above as the Issuance Date. This Convertible Note (with all notes issued in exchange, transfer or replacement hereof, this “Note”) is issued pursuant to that certain Note Purchase Agreement, dated as of February 20, 2025, by and between the Company and the Holder (the “Note Purchase Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Note Purchase Agreement.
1. Payments of Loan Amount. The Loan Amount under this Note shall be payable as follows:
(a) The outstanding Loan Amount shall not accrue interest.
(b) Unless earlier converted into Ordinary Shares or repaid by the Company, the outstanding Principal Amount will be due and payable by the Company on February 20, 2030. Unless an Event of Default has occurred and is continuing, the Company shall have the right to repay the outstanding Principal Amount in Ordinary Shares at the Conversion Price as of the date of such repayment. The Company shall not repay in cash without the prior written consent of the Holder.
(c) If the Company is not granted by the Nasdaq Stock Market the opportunity to come into compliance with its listing conditions by no earlier than March 31, 2025 or if within six months of the date hereof an Insolvency Event occurs and is continuing, the Company shall take the requsite steps to grant in favor of the Holder a first-priority pledge on the Company’s shares in BlackSwan Technologies, Inc. and on incoming revenues of the Company in the amount of $6,000,000, unless this Note is previously converted or repaid in full or the Holder otherwise consents in writing. The Holder hereby consents to the Company granting a subordinated lien on such collateral.
(d) All payments made under this Note will be made in lawful money of the United States of America at the principal office of the Company, or at such other place as the Holder may from time to time designate in writing to the Company.
(e) With the prior written consent of the Holder, the Company may prepay the Loan Amount, in whole or in part, from time to time, without penalty.
(f) The Principal Amount shall be subject to reduction pursuant to Section 1(c) of the Note Purchase Agreement.
2. Conversion. This Note shall be convertible into validly issued, fully paid and non-assessable Ordinary Shares on the terms and conditions set forth in this Section 2.
(a) Conversion. Subject to the provisions of Section 2(e), at any time or from time to time, to the extent that this Note has not been repaid, the Holder shall be entitled to convert any portion or the entirety of the outstanding Loan Amount into validly issued, fully paid and non-assessable Ordinary Shares (“Conversion Shares”) in accordance with Section 2(c). Any such portion of the outstanding Loan Amount to be converted in accordance with this Section 2 is referred to herein as the “Conversion Amount.”
(b) Conversion Shares. The number of Conversion Shares issuable upon conversion of the Conversion Amount shall be determined according to the following formula:
Conversion Amount
Conversion Price
No fractional Ordinary Shares are to be issued upon the conversion of this Note. If the issuance would result in the issuance of a fraction of a share, the Company shall round such fraction of a share up to the nearest whole share.
(c) Mechanics of Conversion. The conversion shall be conducted in the following manner:
(i) Holder’s Conversion. To convert all or a portion of this Note into Conversion Shares on any date (a “Conversion Date”), a Holder shall deliver to the Company (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “Conversion Notice”).
(ii) Company’s Response. Not later than the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by email an acknowledgment of confirmation, in the form attached hereto as Exhibit B, of receipt of such Conversion Notice to such Holder and the Company’s transfer agent (the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the date of receipt by the Company of such Conversion Notice, the Company shall (i) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program (which the Company shall cause the Transfer Agent to do at Holder’s request) and provided the legends would be eligible to be removed from such Ordinary Shares pursuant to Section 5(c) of the Note Purchase Agreement, upon the request of the Holder, credit such aggregate number of Conversion Shares to which the Holder is entitled pursuant to such conversion to the Holder’s or its designee’s balance account with DTC through its Deposit/ Withdrawal at Custodian system, or (ii) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or the legends would not be eligible to be removed from such Ordinary Shares pursuant to Section 5(c) of the Note Purchase Agreement, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Conversion Notice, the Holder’s agent or designee, in each case, sent to the address as specified in the applicable Conversion Notice, a certificate or book entry position, in the name of the Holder or its designee (as indicated in the applicable Conversion Notice), for the number of Conversion Shares to which the Holder is entitled pursuant to such conversion. Upon delivery of a Conversion Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Conversion Shares with respect to which such Conversion Notice was issued, irrespective of the date such Conversion Shares are credited to the Holder’s DTC account or the date of delivery of the certificates or book entry positions evidencing such Conversion Shares (as the case may be).
(iii) Disputes. In the case of a dispute as to the determination of the Conversion Price or the arithmetic calculation of the number of Conversion Shares to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Conversion Shares that are not disputed, provided that following such issuance to Holder such dispute shall be resolved in accordance with Section 19.
(iv) Book-Entry. Notwithstanding anything to the contrary set forth in this Section 2, upon conversion of any portion of this Note in accordance with the terms hereof, no Holder thereof shall be required to physically surrender this Note to the Company. If this Note is surrendered as provided by Section 7, then, provided that there remains any outstanding Loan Amount under this Note at the time of surrender, the Company shall, as soon as practicable and in no event later than three (3) Trading Days after receipt of this Note and at its own expense, issue and deliver to such Holder (or its designee) a new Note (in accordance with Section 7(d)) representing the outstanding Loan Amount (if any) under this Note. Each Holder and the Company shall maintain records showing the portion of the Note so converted by such Holder and the dates of such conversions or shall use such other method, reasonably satisfactory to such Holder and the Company, so as not to require physical surrender of the Note upon each such conversion. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any portion of the Note, the outstanding Loan Amount represented by such Note may be less than stated on the face thereof. Each Note shall bear the following legend:
ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 2(C)(IV) AND 7(A) HEREOF. THE LOAN AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 2(C)(IV) OF THIS NOTE.
(d) Taxes. The Company shall be entitled to withhold Israeli tax on any payment of interest or deemed interest, unless provided with an applicable exemption (or approval of reduced tax withholding rate) issued by the Israel Tax Authority.
(e) Limitation on Beneficial Ownership. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible or exchangeable by the Holder hereof to the extent (but only to the extent), after giving effect to the issuance of Ordinary Shares issuable upon such conversion, the Holder “holds” or would “hold” (as defined for purposes of the Israeli Companies Law, 1999, as amended) or “beneficially owns” or would “beneficially own” (as defined for purposes of Section 13(d) of the 1934 Act), directly or indirectly, in excess of 4.99% of the number of Ordinary Shares then outstanding (the “Maximum Percentage”). To the extent the above limitation applies, the determination of whether this Note shall be convertible or exchangeable (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by the Holder) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert or exchange this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility or exchangeability. For the purposes of this paragraph, holdings and beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the 1934 Act the Israeli Companies Law, 1999, as amended, and with and the rules and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Note. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm in writing to the Holder the number of Ordinary Shares then outstanding, including by virtue of any prior conversion or exercise or exchange of convertible or exercisable or exchangeable securities into Ordinary Shares, including, without limitation, pursuant to this Note or securities issued pursuant to the Note Purchase Agreement.
(f) Reservation of Shares; Insufficient Authorized Shares. The Company shall initially reserve out of its authorized and unissued Ordinary Shares a number of Ordinary Shares equal to the maximum number of Conversion Shares issuable to satisfy the Company's obligations to issue Ordinary Shares hereunder, and the Company shall at all times keep reserved for issuance under this Note a number of Ordinary Shares equal to the maximum number of Conversion Shares issuable to satisfy the Company’s obligation to issue Ordinary Shares hereunder.
3. Rights upon Event of Default; Acceleration.
(a) Event of Default. Each of the following events shall constitute an “Event of Default”:
(i) the Company’s failure to maintain sufficient reserves of its authorized and unissued Ordinary Shares to redeem the maximum number of Conversion Shares issuable upon conversion of all the Convertible Notes then outstanding;
(ii) the Company’s (A) failure to timely deliver the required number of Ordinary Shares upon conversion of this Note and any such failure remains uncured for a period of five (5) Business Days, or (B) notice, written or oral, to the Holder, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of the Convertible Note into Ordinary Shares that is requested in accordance with the provisions of the Convertible Note, in each case, other than pursuant to Section 2(e);
(iii) the Company fails to remove any restrictive legend on any certificate or any Ordinary Shares issued to the Holder upon conversion or exercise (as the case may be) of the Note as and when required by the Note Purchase Agreement, unless otherwise then prohibited by applicable federal securities laws, and any such failure remains uncured for a period of five (5) Business Days;
(iv) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, which have not been dismissed within sixty (60) days of their initiation;
(v) the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a UCC foreclosure sale or any other similar action under federal, state or foreign law;
(vi) the entry by a court of (A) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (B) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (C) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of sixty (60) consecutive days;
(vii) other than as specifically set forth in another clause of this Section 3(a), the Company or any Subsidiary materially breaches any representation or warranty when made, or any covenant or other term or condition of this Note or any other Transaction Document, and, only, in the case of a material breach of a covenant or other term or condition that is curable, if such breach remains uncured for a period of twenty (20) consecutive Trading Days after the delivery by Holder of written notice thereof;
(viii) any provision of this Note or any other Transaction Document (shall at any time for any reason (other than pursuant to the express terms thereof)) cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company or any Subsidiary shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document; or
(ix) the Ordinary Shares are no longer listed on an Eligible Market.
(b) Remedies. Upon the occurrence of an Event of Default and at any time thereafter, Holder may at its option: (a) declare the entire Loan Amount immediately due and payable; and (b) exercise any or all of its rights, powers, or remedies under the Transaction Documents or applicable law or available in equity.
4. Adjustment of Conversion Price and Number of Conversion Shares. Until the Note has been paid in full or converted in full, the Conversion Price and number of Conversion Shares issuable upon conversion of this Note are subject to adjustment from time to time as set forth in this Section 4.
(a) Stock Dividends and Splits. Without limiting any provision of Section 6, if the Company, at any time on or after the date of the Note Purchase Agreement, (i) pays a stock dividend on one or more classes of its then outstanding Ordinary Shares or otherwise makes a distribution on any class of capital stock that is payable in Ordinary Shares, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding Ordinary Shares into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding Ordinary Shares into a smaller number of shares, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of Ordinary Shares outstanding immediately before such event and of which the denominator shall be the number of Ordinary Shares outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.
(b) Calculations. All calculations under this Section 4 shall be made by rounding to the nearest 1/10000th of cent and the nearest 1/100th of a share, as applicable. The number of Ordinary Shares outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Ordinary Shares.
(c) Other Events. In the event that the Company shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors shall in good faith determine and implement an appropriate adjustment in the Conversion Price and the number of Conversion Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 4(c) will increase the Conversion Price or decrease the number of Conversion Shares as otherwise determined pursuant to this Section 4, provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company.
5. [Reserved]
6. Purchase Rights; Fundamental Transaction.
(a) Purchase Rights. In addition to any adjustments pursuant to Section 5 herein, if at any time after the issuance of this Note and until this Note has been paid in full or converted in full the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Ordinary Shares (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of Ordinary Shares acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Ordinary Shares are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Ordinary Shares as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage).
(b) Fundamental Transactions. At any time after the issuance of this Note and until this Note has been paid in full or converted in full, upon the consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder, in lieu of the Ordinary Shares (or other securities, cash, assets or other property (except such items still issuable under Sections 5 and 6 above, which shall continue to be receivable thereafter)) issuable upon the conversion of this Note prior to the applicable Fundamental Transaction, such Ordinary Shares (or its equivalent) of the Successor Entity (including its Parent Entity), or other securities, cash, assets or other property, which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Note been converted immediately prior to the applicable Fundamental Transaction; provided, however, that such amount of reserved Ordinary Shares shall be limited by the Maximum Percentage of Ordinary Shares.
7. Reissuance of Note.
(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 7(d)), registered as the Holder may request, representing the outstanding Loan Amount being transferred by the Holder and, if less than the entire outstanding Loan Amount is being transferred, a new Note (in accordance with Section 7(d)) to the Holder representing the outstanding Loan Amount not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 2(c)(iv) following conversion or redemption of any portion of this Note, the outstanding Loan Amount represented by this Note may be less than the Loan Amount stated on the face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 7(d)) representing the outstanding Loan Amount.
(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 7(d) and in Loan Amounts of at least $10,000) representing in the aggregate the outstanding Loan Amount of this Note, and each such new Note will represent such portion of such outstanding Loan Amount as is designated by the Holder at the time of such surrender.
(d) Issuance of New Note. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Loan Amount remaining outstanding (or in the case of a new Note being issued pursuant to Section 7(a) or Section 7(c), the Loan Amount designated by the Holder which, when added to the Loan Amount represented by the other new Notes issued in connection with such issuance, does not exceed the Loan Amount remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Execution Date of this Note, and (iv) shall have the same rights and conditions as this Note.
8. Voting Rights. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited to applicable corporate law of the State of Israel, and as expressly provided in this Note.
9. Covenants. Until this Note has been entirely converted, redeemed or otherwise satisfied in accordance with its terms:
(a) Restriction on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or pay any cash dividend or distribution on any of its capital stock (other than dividends by wholly-owned Subsidiaries to the Company).
(b) Change in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by the Company and each of its Subsidiaries on the Issuance Date or any business substantially related or incidental thereto. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure or purpose.
(c) Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.
(d) Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.
(e) Maintenance of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.
10. No Short Sales. The Holder covenants that through and including the first Trading Day following the full conversion or full repayment of this Note, none of the Holder any of its officers, or any entity managed or controlled by the Holder (each of the foregoing, a “Restricted Person”) shall, directly or indirectly, (i) engage in any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the 1934 Act) of the Ordinary Shares or (ii) engage in any hedging transaction, which establishes a net short position with respect to any securities of the Company (including the Ordinary Shares), with respect to each of clauses (i) and (ii) hereof, either for its own principal account or for the principal account of any other Restricted Person.
11. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversions and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Note shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note (including, without limitation, compliance with Section 4 hereof). The issuance of Ordinary Shares and certificates for Ordinary Shares as contemplated hereby upon the conversion of this Note shall be made without charge to the Holder or such Ordinary Shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
12. Payment of Collection, Enforcement and Other Costs. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company or any of its Subsidiaries shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.
13. Non-circumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its articles of association or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all the provisions of this Note and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Ordinary Shares upon the conversion of this Note, and (ii) shall, so long as any of the Loan Amount under this Note remains outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Ordinary Shares, solely for the purpose of effecting the conversion of this Note, the maximum number of Ordinary Shares as shall from time to time be necessary to effect the conversion of this Note.
14. Failure or Indulgence Not Waiver. No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.
15. Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 10(f) of the Note Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) as soon as practicable upon each adjustment of the Conversion Price and the number of Conversion Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Ordinary Shares, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities, indebtedness, or other property pro rata to holders of Ordinary Shares or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information (to the extent it constitutes, or contains, material, non-public information regarding the Company shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Trading Days prior to the consummation of any Fundamental Transaction. It is expressly understood and agreed that the time of execution specified by the Holder in each Conversion Notice shall be definitive and may not be disputed or challenged by the Company.
16. Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by wire transfer of immediately available funds by providing the Company with prior written notice setting out the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day.
17. Transferability of Note. The Holder may not transfer all or a portion of this Note without the prior written consent of the Company. Any such transfer, and the transfer of any Conversion Shares, shall be subject to the limitations of Section 2(g) of the Note Purchase Agreement.
18. Amendment. Except as otherwise provided herein, the provisions of this Note may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.
19. Governing Law. This Note shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Israel, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Israel or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Israel. The Company hereby irrevocably submits to the exclusive jurisdiction of the courts of Tel Aviv, Israel, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder or to enforce a judgment or other court ruling in favor of the Holder.
20. Certain Defined Terms. For purposes of this Note, the following terms shall have the following meanings:
“1934 Act” means the Securities Exchange Act of 1934, as amended.
“Conversion Price” means 25% below the lower of (i) the closing price per share of the Ordinary Shares on the Principal Market on the Trading Day immediately preceding the delivery of the Conversion Notice and (ii) the VWAP of the Ordinary Shares on the Principal Market over the five Trading Days immediately preceding the delivery of the Conversion Notice; provided, however, that in no event shall the Conversion Price be higher than $1.50 or lower than $0.167.
“Execution Date” shall have the meaning set forth in the Note Purchase Agreement.
“Fundamental Transaction” means that (i) the Company shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company is the surviving entity) any other Person unless the shareholders of the Company immediately prior to such consolidation or merger continue to hold more than 50% of the outstanding shares of Voting Stock after such consolidation or merger, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its properties or assets to any other Person, in connection with which the Company is dissolved, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
“Insolvency Event” shall mean any of the following events: (i) the Company commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, stay proceeding, insolvency or liquidation or similar law of any jurisdiction (including, among others, Insolvency and Financial Rehabilitation Law 5778-2018) relating to the Company, (ii) there is commenced against the Company of any such case or proceeding that is not dismissed within 60 days after commencement, (iii) the Company is adjudicated insolvent or bankrupt or in stay proceeding or order to commence proceeding (צו פתיחת הליכים) or any similar order of relief or other order approving any such case or proceeding is entered, (iv) any appointment of any custodian, trustee, receiver, administrator, settlement manager or the like (whether in a temporary position or other position) for Company that is not discharged or stayed within 60 calendar days after such appointment, (v) the Company thereof makes a general assignment for the benefit of creditors or (vi) the Company thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts.
“Lien” means any lien, mortgage, pledge, encumbrance, charge, security interest, adverse claim, liability, interest, charge, preference, priority, proxy, transfer restriction (other than restrictions under the federal and state securities laws), encroachment, tax, order, community property interest, equitable interest, option, warrant, right of first refusal, easement, profit, license, servitude, right of way, covenant or zoning restriction.
“Options” means any rights, warrants or options to subscribe for or purchase Ordinary Shares or Convertible Securities.
“Ordinary Shares” means the ordinary shares, no par value per share, of the Company and any other shares issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event with respect to the Ordinary Shares).
“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
“SEC” means the Securities and Exchange Commission or the successor thereto.
“Note Purchase Agreement” means that certain note purchase agreement by and among the Company and the Holder, dated as of the Execution Date, as may be amended from time to time in accordance with the terms thereof.
“Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
“Trading Day” means, as applicable, (x) with respect to all price determinations relating to the Ordinary Shares, any day on which the Ordinary Shares is traded on the principal securities exchange or securities market on which the Ordinary Shares is then traded, provided that “Trading Day” shall not include any day on which the Ordinary Shares is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Ordinary Shares is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder or (y) with respect to all determinations other than price determinations relating to the Ordinary Shares, any day on which The Nasdaq Stock Market (or any successor thereto) is open for trading of securities.
“Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
“VWAP” means, as of any date, the price determined by the first of the following clauses that applies: (a) if the Ordinary Shares are then listed or quoted on a stock exchange, the daily volume weighted average price per share of the Ordinary Share trading in the ordinary course of business on the applicable stock exchange for such date as reported by Bloomberg; (b) if the Ordinary Shares are not then listed on a stock exchange and if the Ordinary Shares are traded in the over-the-counter market, as reported by OTC Markets, the volume weighted average price per share of the Ordinary Shares for such date on the applicable OTC Market, as reported by Bloomberg; or (c) in all other cases, the fair market value of one Ordinary Share as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company (in each case rounded to four decimal places).
[Signature Page Follows]
IN WITNESS WHEREOF, Holder and the Company have caused their respective signature page to this Convertible Note to be duly executed as of the date first written above.
| COMPANY | |||
| HUB CYBER SECURITY LTD. | |||
| By: | |||
| Name: | |||
| Title: | |||
| HOLDER | |||
| CLAYMORE CAPITAL PTY LTD. | |||
| By: | |||
| Name: | |||
| Title: | |||
* * * * *
EXHIBIT A
HUB CYBER SECURITY LTD.
CONVERSION NOTICE
Reference is made to that certain Convertible Note (the “Note”) issued by HUB Cyber Security Ltd., an Israeli company (the “Company”), to the undersigned Holder on __________________. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Note.
The undersigned holder hereby exercises the right to convert the portion of the Note indicated below into Ordinary Shares as of the date specified below.
| Conversion Date: | _________________________ | ||
| Loan Amount to be Converted: | _________________________ | ||
| Applicable Conversion Price: | _________________________ | ||
| Number of Ordinary Shares to be issued: | _________________________ | ||
| Number of Ordinary Shares “held” (as defined in the Israeli Companies Law, 1999, as amended) | _________________________ |
||
Please issue the Ordinary Shares into which the Note is being converted in the following name and to the following address:
| Issue to: | _______________________________________ | ||
| Address: | _______________________________________ |
| Holder: | |||
| _______________________________________ | |||
| By: | _______________________________________ | ||
| Title: | _______________________________________ | ||
EXHIBIT B
ACKNOWLEDGMENT
HUB Cyber Security Ltd., an Israeli company (the “Company”), hereby acknowledges its receipt of the enclosed Conversion Notice and hereby directs its transfer agent to issue the above indicated number of Ordinary Shares.
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
18
Exhibit 4.74
THE ISSUANCE AND SALE OF THE SECURITY REPRESENTED BY THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (i) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM GENERALLY ACCEPTABLE TO THE COMPANY’S LEGAL COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (ii) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
DEMAND PROMISSORY NOTE
| Issue Date: [ ] | Principal Amount: | $[ ] |
| New York, New York | Purchase Price: | $[ ] |
| Original Issue Discount: | $[ ] |
FOR VALUE RECEIVED on the Issue Date to the bank account set forth on Exhibit A, HUB Cyber Security Ltd., an Israeli company (the “Maker” or the “Company”), hereby promises to pay to the order of [_______________], [a [____] limited liability company,] or its assigns (“Holder”), the principal amount of $[ ] (the “Principal Amount”) due and payable in accordance with the terms hereof.
In lieu of the accrual of interest on the outstanding principal amount hereof on any date prior to the Maturity Date, this Note carries an original issue discount of $[ ] (the “OID”); thus, the purchase price of this Note shall be $[ ], computed as follows: $[ ] initial principal balance less the OID. This demand promissory note (the “Note”) is one of three such demand promissory notes that are being issued by the Maker on the date hereof (collectively, the “March Notes”), and the only Note being issued to the Holder, it being understood that this Note shall rank pari passu with the other Note that is issued by the Maker such that each Note shall rank equally and no payment will be made under any Note unless a pro rata payment is simultaneously made under each Note. It is further understood that the March Notes shall rank junior to the existing senior debt obligations of the Company and the security obligations herein shall be subordinate to the existing senior debt obligations (the “Senior Debt”). To the extent Israeli withholding tax shall apply on any payment or issuance of shares the repayment or conversion of this Note, Maker shall be entitled to withhold such tax in accordance with the applicable law unless provided with an applicable exemption (or approval of reduced tax withholding rate) issued by the Israel Tax Authority.
1) Payment on Demand.
a) The entire unpaid Principal Amount and OID of this Note, shall be due and payable on [ ]. The Maker will pay to the Holder of this Note on demand such further amount as shall be sufficient to cover all costs and expenses of such Holder incurred in the enforcement or collection of this Note, including, without limitation, reasonable attorneys’ fees, expenses and disbursements in connection with such enforcement or collection. The purchase price of this Note was $[ ].
b) Upon the first offering pursuant to which the Maker sells its ordinary shares, directly or indirectly, no par value each (“Ordinary Shares”), for cash consideration, indebtedness or a combination thereof pursuant to which the Maker receives proceeds of at least $5 million after the date hereof (a “Subsequent Equity Financing”), the Holder shall have the option to convert the Principal Amount into the number of fully paid and non-assessable Ordinary Shares issued in the Subsequent Equity Financing (“Conversion Securities”) equal to the product of unpaid Principal Amount, divided by the price per share paid by the investors for the Conversion Securities. At least two (2) business days prior to the closing of the Subsequent Equity Financing, the Maker shall deliver to the Holder a written notice of its intention to effect a Subsequent Equity Financing (“Pre-Notice”), which Pre-Notice shall ask the Holder if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of the Holder, and only upon a request by the Holder, for a Subsequent Financing Notice, the Maker shall promptly, but no later than one (1) business day after such request, deliver a Subsequent Financing Notice to the Holder. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Equity Financing, the amount of proceeds intended to be raised thereunder and the person or persons through or with whom such Subsequent Equity Financing is proposed to be effected. If the Holder desires to participate in such Subsequent Equity Financing, it must provide written notice to the Maker by not later than 5:30 p.m. (New York City time) on the second (2nd) business day after receipt of the Pre-Notice that the Holder is willing to participate in the Subsequent Equity Financing. If the Maker receives no such notice from the Holder as of such second (2nd) business day, the Holder shall be deemed to have notified the Maker that it does not elect to participate. The Holder, by acceptance of this Note, agrees with the Maker that, if this Note is converted pursuant to this Section 1(b), then, as a condition to the issuance of the Conversion Securities, the Holder shall deliver the original of this Note to the Maker with appropriate endorsements at the closing of such Subsequent Equity Financing and shall execute and deliver to the Maker the applicable definitive agreements for the subsequent Equity Financing; provided, however, this Note shall for all purposes be deemed paid and cancelled regardless of whether the Holder delivers the original of this Note or approves or executes the such financing agreements.
2) Optional Prepayment. Prepayment by Maker of the Principal Amount plus the OID, may be made at any time after the date hereof without notice, at a premium of 125%.
3) Mandatory Prepayment. Notwithstanding anything herein to the contrary, so long as any amounts remain outstanding hereunder,
| (a) | all cash proceeds received by the Maker on or after the date hereof from any sales of any securities including any debt financing or similar debt-like instruments of the Maker after the date hereof pursuant to which the Maker receives proceeds of at least $10 million (each, a “Subsequent Offering”, and each such cash amount, the “Subsequent Offering Proceeds” thereof) (or such lower portion as mutually agreed upon by the Maker and the Holder prior to such Subsequent Offering), shall be used to repay this Note (such portion of any given Subsequent Offering Proceeds required to be mandatorily paid to the Holder hereunder, each a “Subsequent Offering Payment”). Any Subsequent Offering Payment received by the Maker shall be paid to the Holder at least two (2) business days following such receipt. The Maker shall deliver written notice of any transactions with respect to the applicable Subsequent Offering at least one (1) business days prior to the contemplated consummation of such Subsequent Offering. |
| (b) | 33% of the cash proceeds received by the Maker on or after the date hereof from any sales of securities pursuant to that certain Ordinary Share Purchase Agreement by and between the Company and Keystone Capital Partners, LLC dated as of March 11 2025, shall be used to repay the March Notes. |
4) Beneficial Ownership Limitation. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible or exchangeable by the Holder hereof to the extent that the issuance of Ordinary Shares issuable upon such conversion, when aggregated with all other Ordinary Shares then beneficially owned by the Holder and its Affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in the beneficial ownership by the Holder of more than 4.99% of the outstanding Ordinary Shares (the “Beneficial Ownership Limitation”). Upon the written or oral request of the Holder, the Maker shall promptly (but not later than the next business day on which the Company’s transfer agent is open for business) confirm orally or in writing to the Holder the number of Ordinary Shares outstanding as of the most recent date for which the Company’s transfer agent has such information. The Holder and the Maker shall each cooperate in good faith in the determinations required under this Section 4 and the application of this Section 4. The Holder’s written certification to the Maker of the applicability of the Beneficial Ownership Limitation, and the resulting effect thereof hereunder at any time, shall be conclusive with respect to the applicability thereof and such result absent manifest error. The provisions of this Section 4 shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4 to the extent necessary to properly give effect to the limitations contained in this Section 4.
5) Representations and Warranties of Maker. Maker represents and warrants as follows as of the date hereof: (a) it is duly organized and validly existing under the laws of the State of Israel; (b) the execution, delivery and performance by Maker of this Note (i) are within Maker’s powers, (ii) have been duly authorized by all necessary actions, (iii) do not contravene its governing agreements, certificates or other organization documents, (iv) do not contravene any law or any contractual restriction binding on or affecting Maker, and (v) do not require any consent or approval under, violate, conflict with, result in any breach of or any loss of any benefit under, or constitute a default under, result in the acceleration of any obligation under, or result in termination or give to others any right of termination, vesting, amendment or acceleration of any material benefit under, in each case, with or without notice, the lapse of time or both, any contract to which the Maker or any subsidiary of the Maker is a party, or by which they or any of their respective properties or assets are bound; (c) no authorization or approval or other action by, and no notice to or filing with any governmental authority or regulatory body is required for the due execution, delivery and performance by Maker of this Note; (d) this Note constitutes the legal, valid and binding obligation of Maker party thereto, enforceable against Maker in accordance with its terms, except to the extent enforceability is limited by bankruptcy, insolvency, fraudulent conveyance, moratorium and other laws for the protection of creditors generally and by general equitable principles; and (e) there is no pending or, to Maker’s knowledge, threatened action or proceeding affecting Maker before any governmental agency or arbitrator with respect to the transactions contemplated by this Note or which may materially adversely affect the property, assets or condition (financial or otherwise) of Maker; in each of the foregoing events, except to the extent that the failure for such representation and warranty to be accurate would not have a material adverse effect on the Maker.
6) Late Charges. Any amount of the Principal Amount or other amounts due hereunder which is not paid within 7 business days of when due shall result in a late charge being incurred and payable by the Maker at the rate of fifteen percent (15%) per annum of such amount from the date such amount was due until the same is paid in full (the “Late Charges”).
7) Subordination. Notwithstanding anything to the contrary set forth herein, the indebtedness evidenced by this Note, and the payment of the Principal Amount, is wholly subordinated, junior and subject in right of payment, to the extent and in the manner hereinafter provided, to the prior payment of all Senior Debt. The provisions of this Section 7 are, and are intended solely, for the purposes of defining the relative rights of the Holder and the holders of Senior Debt and nothing in this Section 7 shall impair, as between the Maker and the Holder, the obligations of the Maker set forth in this Note, nor shall anything herein prevent the Holder from exercising all remedies otherwise permitted by applicable law or hereunder upon default, subject to the rights set forth in this Section 7 of holders of Senior Debt to receive cash, property or securities otherwise payable or deliverable to the Holder.
8) Indemnification; Expenses. Maker hereby indemnifies and holds harmless Holder, each of its affiliates and correspondents and each of their respective directors, officers, employees, agents and advisors (each an “Indemnified Party”) from and against any and all actions, claims, damages, losses, liabilities, fines, penalties, costs and expenses of any kind (including, without limitation, counsel fees and disbursements in connection with any subpoena, investigative, administrative or judicial proceeding, whether or not the Indemnified Party shall be designated a party thereto) which may be incurred by the Indemnified Party or which may be claimed against the Indemnified Party by any person by reason of or in connection with the execution, delivery or performance of this Note, or action taken or omitted to be taken by Holder under, this Note. Notwithstanding any provision in this Agreement or any other Transaction Documents, except for fraud or willful breach of any of its representations, warranties, covenants or agreements set forth in this Agreement, the aggregate indemnification obligations of the Company pursuant to this Section 8 shall not exceed 100% of the Principal Amount. Nothing in this paragraph is intended to limit Maker’s obligations contained elsewhere in this Note. Without prejudice to the survival of any other obligation of Maker hereunder, the indemnities and obligations of Maker contained in this paragraph shall survive the payment in full of all obligations hereunder. The Company shall reimburse any Indemnified Party promptly upon demand (with accompanying presentation of documentary evidence) for all legal and other costs and expenses reasonably incurred by such Indemnified Party in connection with (i) any action, suit, claim or proceeding, whether at law or in equity, to enforce compliance by the Company with any provision of this Note or (ii) any other any action, suit, claim or proceeding, whether at law or in equity, with respect to which it is entitled to indemnification under this Section 8; provided that such Indemnified Party shall promptly reimburse the Company for all such legal and other costs and expenses to the extent a court of competent jurisdiction determines that any such Indemnified Party was not entitled to such reimbursement.
9) Miscellaneous.
a) All amounts to be paid in cash hereunder shall be paid when due by wire transfer in United States dollars and immediately available funds in accordance with the wire instructions delivered to such party entitled to receive such payment prior to such date.
b) If any cash payment on this Note shall become due on a Friday, Saturday, Sunday or a bank or legal holiday in the respective jurisdictions of the Holder or the Maker, such payment shall be made on the next succeeding business day.
c) No course of dealing and no delay on the part of the Holder of this Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such Holder’s rights, powers or remedies. No right, power or remedy conferred by this Note upon the Holder hereof shall be exclusive of any other right, power or remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.
d) Maker hereby waives presentment, protest and demand, notice of protest, demand and dishonor and nonpayment of this Note.
e) If Late Charges or other amounts payable under this Note is in excess of the maximum permitted by law, the Late Charges or other amounts chargeable hereunder shall be reduced to the maximum amount permitted by law and any excess over the maximum amount permitted by law shall be credited to the Principal Amount of this Note and applied to the same and not to the payment of Late Charges or such other amounts, as applicable.
f) Maker hereby (i) irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City, New York in any action or proceeding arising out of or relating to this Note, (ii) waive any defense based on doctrines of venue or forum non conveniens, or similar rules or doctrines and (iii) irrevocably agree that all claims in respect of such an action or proceeding may be heard and determined in such New York State or Federal court. This Note shall be governed by, and construed in accordance with, the laws of the State of Delaware. MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS NOTE.
g) This Note shall be binding upon and inure to the benefit of Maker and Holder and their respective successors, assigns, heirs and legal representations, except that Maker may not assign any rights or obligations hereunder without the prior written consent of Holder. Holder may assign to other affiliated entities all or a portion of its rights under this Note.
h) Maker acknowledges that the transaction of which this Note is a part is a commercial transaction and hereby waives its right to any notice and hearing as may be allowed by any state or federal law with respect to any prejudgment remedy which any Holder or its successors or assigns may use.
i) The Holder of this Note may proceed to protect and enforce the rights of such Holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.
j) If this Note is lost or destroyed, Maker shall, at Holder’s request and upon receipt of a lost note affidavit, in a customary form, from the Holder, execute and return to Holder a replacement promissory note identical to this Note. No replacement of this Note shall result in a novation of Maker’s obligations under this Note. Maker acknowledges the need to act promptly upon its receipt of the documentation evidencing any request by Holder that the Note be replaced pursuant to this paragraph and agrees that Maker will meet the reasonable deadlines of Holder provided that Maker has received the applicable documents at least ten (10) business days prior to such deadline. Furthermore, Maker agrees to reasonably cooperate with Holder to effectuate the obtainment of such title policy endorsements, or new title evidence and other assurances and documents as Holder shall reasonably require.
[The remainder of the page is intentionally left blank]
IN WITNESS WHEREOF, this Note has been executed as of the date first written above.
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit A
Bank Account Details
Exhibit 4.75
ORDINARY SHARE PURCHASE AGREEMENT
This ORDINARY SHARE PURCHASE AGREEMENT is made and entered into as of March 11, 2025 (this “Agreement"), by and among Keystone Capital Partners, LLC, a Delaware limited liability company (the “Investor"), Hub Cyber Security Ltd., a company incorporated under the laws of the State of Israel (the “Company").
RECITALS
WHEREAS, the parties desire that, upon the terms and subject to the conditions and limitations set forth herein, the Company may issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company, up to $50,000,000 of the Company’s Ordinary Shares, no par value (the “Ordinary Shares");
WHEREAS, in consideration for the Investor’s execution and delivery of this Agreement, the Company shall issue to the Investor the Commitment Note in accordance with the terms and subject to the conditions of this Agreement; and
WHEREAS, the parties hereto are concurrently entering into a Registration Rights Agreement in the form attached as Exhibit A hereto (the “Registration Rights Agreement"), pursuant to which the Company shall provide Investor with certain registration rights related to the shares issued under this Agreement, upon the terms and subject to the conditions set forth therein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ORDINARY SHARES
Section 1.1. Purchase and Sale of Stock. Upon the terms and subject to the conditions of this Agreement, during the Investment Period, the Company, in its sole discretion, shall have the right, but not the obligation, to issue and sell to the Investor, and the Investor shall purchase from the Company, up to $50,000,000 of the Company’s Ordinary Shares (the “Total Purchase Commitment”), to the extent applicable under Section 2.4, by the delivery to the Investor of Fixed Purchase Notices, VWAP Purchase Notices, or Additional VWAP Purchase Notices, as provided in Article II.
Section 1.2. Closing Date; Settlement Dates. This Agreement shall become effective and binding (the “Closing”) upon (a) the issuance by the Company of the Commitment Note to the Investor or its designees as provided in Section 2.6, (b) the delivery of counterpart signature pages of this Agreement and the Registration Rights Agreement executed by each of the parties hereto and thereto, and (c) the delivery of all other documents, instruments and writings required to be delivered at the Closing, in each case as provided in Section 6.1, electronically on the Closing Date, or such other time and place as the parties hereto shall agree. In consideration of, and in express reliance upon, the representations, warranties and covenants contained in, and upon the terms and subject to the conditions of, this Agreement, during the Investment Period the Company, at its sole option and discretion, may issue and sell to the Investor, and, if the Company elects to so issue and sell, the Investor shall purchase from the Company, the Shares in respect of each Fixed Purchase, VWAP Purchase and Additional VWAP Purchase (each, a “Settlement”). The payment for the Shares in respect of each Fixed Purchase, VWAP Purchase and Additional VWAP Purchase shall occur (i) on the third (3rd) Trading Day following delivery of the Shares by the Company, and (ii) in accordance with Article II hereof; provided, that all of the conditions precedent in Article VII shall have been fulfilled at the applicable times set forth in Article VII.
Section 1.3. Initial Public Announcements and Required Filings. The Company shall, within the time period required under the Exchange Act, file with the Commission a Report on Form 6-K describing the material terms of the transactions contemplated by the Transaction Documents, including, without limitation, the issuance of the Commitment Note to the Investor, and attaching as exhibits thereto copies of each of this Agreement, the Registration Rights Agreement, the Commitment Note and, if applicable, any press release issued by the Company disclosing the execution of this Agreement by the Company (including all exhibits thereto, the “Current Report”). The Company shall provide the Investor a reasonable opportunity to comment on a draft of the Current Report prior to filing the Current Report with the Commission and shall give due consideration to all such comments. From and after the filing of the Current Report with the Commission, the Company shall have publicly disclosed all material, nonpublic information delivered to the Investor (or the Investor’s representatives or agents) by the Company, any of its Subsidiaries, or any of their respective officers, directors, employees, agents or representatives (if any) in connection with the transactions contemplated by the Transaction Documents. The Investor covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company as described in this Section 1.3, the Investor shall maintain the confidentiality of all disclosures made to it in connection with the transactions contemplated by the Transaction Documents (including the existence and terms of the transactions), except that the Investor may disclose the terms of such transactions to its financial, accounting, legal and other advisors (provided that the Investor directs such Persons to maintain the confidentiality of such information). The Company shall use its commercially reasonable efforts to prepare and, as soon as practicable, but in no event later than the applicable Filing Deadline, file with the Commission the Initial Registration Statement and any New Registration Statement covering only the resale by the Investor of the Registrable Securities in accordance with the Securities Act and the Registration Rights Agreement. At or before 8:30 a.m. (New York City time) on the Trading Day immediately following the Effective Date of the Initial Registration Statement and any New Registration Statement (or any post-effective amendment thereto), the Company shall use its commercially reasonable efforts to file with the Commission in accordance with Rule 424(b) under the Securities Act the final Prospectus to be used in connection with sales pursuant to such Registration Statement (or post-effective amendment thereto).
ARTICLE II
PURCHASE TERMS
Subject to the satisfaction or (to the extent permitted by applicable law) waiver of the conditions set forth in this Agreement, the parties agree (unless otherwise mutually agreed upon by the parties in writing) as follows:
Section 2.1. Fixed Purchases. Upon the initial satisfaction of all of the conditions set forth in set forth in Section 6.2, (the “Commencement” and the date of initial satisfaction of all of such conditions, the “Commencement Date”) and from time to time thereafter, subject to the satisfaction of all of the conditions set forth in Section 6.3, and on any Business Day selected by the Company where the Closing Sale Price on the applicable national market, or quotation service, is equal to or greater than $0.05, the Company shall have the right, but not the obligation, to direct the Investor, by its delivery to the Investor of a Fixed Purchase Notice, to purchase a Fixed Purchase Share Amount, not to exceed the applicable Fixed Purchase Maximum Amount (calculated as of the applicable Fixed Purchase Date), at the applicable Fixed Purchase Price therefor on the applicable Fixed Purchase Date in accordance with this Agreement (each such purchase a “Fixed Purchase”); provided, however, that the Investor’s committed obligation under any single Fixed Purchase shall not exceed $50,000 (provided that all Ordinary Shares in respect of all prior Fixed Purchases, VWAP Purchases and Additional VWAP Purchases shall have been delivered to the Investor via Deposit/Withdrawal at Custodian (“DWAC”)). If the Company delivers any Fixed Purchase Notice directing the Investor to purchase a Fixed Purchase Share Amount in excess of the applicable Fixed Purchase Maximum Amount (calculated as of the applicable Fixed Purchase Date), such Fixed Purchase Notice shall be void ab initio to the extent of the amount by which the Fixed Purchase Share Amount set forth in such Fixed Purchase Notice exceeds such applicable Fixed Purchase Maximum Amount, and the Investor shall have no obligation to purchase such excess Shares in respect of such Fixed Purchase Notice; provided, however, that the Investor shall remain obligated to purchase the applicable Fixed Purchase Maximum Amount in such Fixed Purchase. The Company may deliver a Fixed Purchase Notice, in the Form attached hereto as Annex 2.1, to the Investor as often as every Trading Day, so long as (i) the Closing Sale Price of the Ordinary Shares on such Trading Day is not less than $0.05 and (ii) all Shares subject to all prior Fixed Purchase Notices, VWAP Purchase Notices and Additional VWAP Purchase Notices (as applicable) have theretofore been received by the Investor as DWAC Shares. Since delivery of a Fixed Purchase Notice is made by the Company after market close on the applicable Fixed Purchase Date, the Fixed Purchase Price is determined and fixed at the time the Company delivers the Fixed Purchase Notice to the Investor.
Section 2.2. VWAP Purchases. Upon the initial satisfaction of all of the conditions set forth in set forth in Section 6.2, on the Commencement Date and from time to time thereafter, and on any Business Day selected by the Company where the Closing Sale Price on the applicable national market, or quotation service is equal to or greater than $0.05, subject to the satisfaction of all of the conditions set forth in Section 6.3, in addition to purchases of Shares as described in Section 2.1, the Company shall also have the right, but not the obligation, to direct the Investor, by its delivery to the Investor of a VWAP Purchase Notice, to purchase the applicable VWAP Purchase Share Amount, not to exceed the applicable VWAP Purchase Maximum Amount, at the applicable VWAP Purchase Price therefor on the applicable VWAP Purchase Date in accordance with this Agreement (each such purchase, a “VWAP Purchase”); for the avoidance of doubt, the Company may deliver to the Investor multiple VWAP Purchase Notices for a single Trading Day, provided, however, that the Investor’s aggregate committed obligation under a VWAP Purchase for a particular VWAP Purchase Date and all Additional VWAP Purchases, the applicable Additional VWAP Purchase Date therefor is the same Trading Day as the applicable VWAP Purchase Date for such VWAP Purchase shall not exceed $1,000,000 in the aggregate for such VWAP Purchase and all such Additional VWAP Purchases, collectively. The Company may deliver VWAP Purchase Notice, in the Form attached hereto as Annex 2.2, to the Investor only (i) on a Trading Day on which the Company also properly submitted a Fixed Purchase Notice providing for a Fixed Purchase of an amount of Shares not less than the applicable Fixed Purchase Maximum Amount (calculated as of the applicable Fixed Purchase Date) and (ii) if all Shares subject to all prior Fixed Purchase Notices, VWAP Purchase Notices, and Additional VWAP Purchase Notices (as applicable) have theretofore been received by the Investor as DWAC Shares. The Investor is obligated to accept each VWAP Purchase Notice prepared and delivered by the Company in accordance with the terms of and subject to the satisfaction of the conditions contained in this Agreement. If the Company delivers any VWAP Purchase Notice directing the Investor to purchase a VWAP Purchase Share Amount in excess of the applicable VWAP Purchase Maximum Amount that the Company is then permitted to include in such VWAP Purchase Notice, such VWAP Purchase Notice shall be void ab initio to the extent of the amount by which the VWAP Purchase Share Amount set forth in such VWAP Purchase Notice exceeds such applicable VWAP Purchase Maximum Amount, and the Investor shall have no obligation to purchase such excess Shares in respect of such VWAP Purchase Notice; provided, however, that the Investor shall remain obligated to purchase the applicable VWAP Purchase Maximum Amount in such VWAP Purchase. At or prior to 9:30 a.m., New York City time, on the Trading Day immediately following the VWAP Purchase Date for each VWAP Purchase, the Investor shall provide to the Company a written confirmation of such VWAP Purchase setting forth the applicable VWAP Purchase Share Amount and VWAP Purchase Price for such VWAP Purchase (each, a “VWAP Purchase Confirmation”).
Section 2.3. Additional VWAP Purchases. Upon the initial satisfaction of all of the conditions set forth in set forth in Section 6.3 on the Commencement Date and from time to time thereafter, subject to the satisfaction of all of the conditions set forth in Section 6.3, in addition to purchases of Shares as described in Section 2.1 and Section 2.2, the Company shall also have the right, but not the obligation, to direct the Investor, by its delivery to the Investor of an Additional VWAP Purchase Notice, to purchase the applicable Additional VWAP Purchase Share Amount, not to exceed the applicable Additional VWAP Purchase Maximum Amount, at the applicable Additional VWAP Purchase Price therefor on the applicable Additional VWAP Purchase Date in accordance with this Agreement (each such purchase, an “Additional VWAP Purchase”); for the avoidance of doubt, the Company may deliver to the Investor multiple Additional VWAP Purchase Notices for a single Trading Day, provided, however, that the Investor’s aggregate committed obligation under a VWAP Purchase for a particular VWAP Purchase Date and all Additional VWAP Purchases, the applicable Additional VWAP Purchase Date therefor is the same Trading Day as the applicable VWAP Purchase Date for such VWAP Purchase, shall not exceed $1,000,000 in the aggregate for such VWAP Purchase and all such Additional VWAP Purchases, collectively. The Company may deliver an Additional VWAP Purchase Notice, in the Form attached hereto as Annex 2.3, to the Investor only (i) on a Trading Day that is also the VWAP Purchase Date for a VWAP Purchase with respect to which the Company properly submitted to the Investor a VWAP Purchase Notice in accordance with this Agreement on the applicable Fixed Purchase Date for a Fixed Purchase of an amount of Shares not less than the applicable Fixed Purchase Maximum Amount (calculated as of the applicable Fixed Purchase Date) and (ii) if all Shares subject to all prior Fixed Purchase Notices, VWAP Purchase Notices, and Additional VWAP Purchase Notices, including, without limitation, all prior VWAP Purchases and Additional VWAP Purchases effected on the same Trading Day as the Additional VWAP Purchase Date on which the applicable Additional VWAP Purchase is to be effected, as applicable, have theretofore been received by the Investor as DWAC Shares. The Investor is obligated to accept each Additional VWAP Purchase Notice prepared and delivered by the Company in accordance with the terms of and subject to the satisfaction of the conditions contained in this Agreement. If the Company delivers any Additional VWAP Purchase Notice directing the Investor to purchase an Additional VWAP Purchase Share Amount in excess of the applicable Additional VWAP Purchase Maximum Amount that the Company is then permitted to include in such Additional VWAP Purchase Notice, such Additional VWAP Purchase Notice shall be void ab initio to the extent of the amount by which the Additional VWAP Purchase Share Amount set forth in such Additional VWAP Purchase Notice exceeds such applicable Additional VWAP Purchase Maximum Amount, and the Investor shall have no obligation to purchase such excess Shares in respect of such Additional VWAP Purchase Notice; provided, however, that the Investor shall remain obligated to purchase the applicable Additional VWAP Purchase Maximum Amount in such Additional VWAP Purchase at or prior to 9:30 a.m., New York City time, on the Trading Day immediately following the Additional VWAP Purchase Date for each Additional VWAP Purchase, the Investor shall provide to the Company a written confirmation of such Additional VWAP Purchase setting forth the applicable Additional VWAP Purchase Share Amount and Additional VWAP Purchase Price for such Additional VWAP Purchase (each, an “Additional VWAP Purchase Confirmation”).
Section 2.4. Compliance with Rules of Trading Market.
(a) Reserved.
(b) General. The Company shall not issue or sell any Ordinary Shares pursuant to this Agreement if such issuance or sale would reasonably be expected to result in (A) a violation of the Securities Act or (B) a breach of the rules of the Trading Market. The provisions of this Section 2.4 shall be implemented in a manner otherwise than in strict conformity with the terms of this Section 2.4 only if necessary to ensure compliance with the Securities Act and the applicable rules of the Trading Market.
Section 2.5. Beneficial Ownership Limitation. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not issue or sell, and the Investor shall not purchase or acquire, any Ordinary Shares under this Agreement which, when aggregated with all other Ordinary Shares then beneficially owned by the Investor and its Affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in the beneficial ownership by the Investor of more than 4.99% of the outstanding Ordinary Shares (the “Beneficial Ownership Limitation”). Upon the written or oral request of the Investor, the Company shall promptly (but not later than the next Business Day on which the Transfer Agent is open for business) confirm orally or in writing to the Investor the number of Ordinary Shares outstanding as of the most recent date for which the Transfer Agent has such information. The Investor and the Company shall each cooperate in good faith in the determinations required under this Section 2.5 and the application of this Section 2.5. The Investor’s written certification to the Company of the applicability of the Beneficial Ownership Limitation, and the resulting effect thereof hereunder at any time, shall be conclusive with respect to the applicability thereof and such result absent manifest error. The provisions of this Section 2.5 shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2.5 to the extent necessary to properly give effect to the limitations contained in this Section 2.5.
Section 2.6. Commitment Note. In consideration for the Investor’s execution and delivery of this Agreement and the Registration Rights Agreement, the Company shall deliver to the Investor, concurrently with the execution of this Agreement, a convertible promissory note, in substantially the form attached as Exhibit D (the “Commitment Note”), which note shall be convertible into Ordinary Shares (such Ordinary Shares, the “Conversion Shares”) on the terms and subject to the conditions set forth therein. For the avoidance of doubt, the Commitment Note shall be fully earned as of the Closing Date (and the Conversion Shares, when converted in accordance with the terms of the Commitment Note, shall be fully earned as of such conversion date), regardless of whether any Fixed Purchases, VWAP Purchases, or Additional VWAP Purchases are effected hereunder and regardless of any subsequent termination of this Agreement.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTOR
The Investor hereby makes the following representations, warranties and covenants to the Company:
Section 3.1. Organization and Standing of the Investor. The Investor is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.
Section 3.2. Authorization and Power. The Investor has the requisite limited liability company power and authority to enter into and perform its obligations under this Agreement and the Registration Rights Agreement and to purchase or acquire the Securities in accordance with the terms hereof. The execution, delivery and performance by the Investor of this Agreement and the Registration Rights Agreement and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary limited liability company action, and no further consent or authorization of the Investor, its Board of Directors or its members is required. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by the Investor and constitutes a valid and binding obligation of the Investor enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership, or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application (including any limitation of equitable remedies).
Section 3.3. No Conflicts. The execution, delivery and performance by the Investor of this Agreement and the Registration Rights Agreement and the consummation by the Investor of the transactions contemplated hereby and thereby do not and shall not (i) result in a violation of such Investor’s certificate of formation, limited liability company agreement or other applicable organizational instruments, (ii) conflict with, constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give rise to any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Investor is a party or is bound, (iii) create or impose any lien, charge or encumbrance on any property of the Investor under any agreement or any commitment to which the Investor is party or under which the Investor is bound or under which any of its properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to the Investor or by which any of its properties or assets are bound or affected, except, in the case of clauses (ii), (iii) and (iv), for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, prohibit or otherwise interfere with, in any material respect, the ability of the Investor to enter into and perform its obligations under this Agreement and the Registration Rights Agreement. The Investor is not required under any applicable federal, state, local or foreign law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement and the Registration Rights Agreement or to purchase or acquire the Securities in accordance with the terms hereof; provided, however, that for purposes of the representation made in this sentence, the Investor is assuming and relying upon the accuracy of the relevant representations and warranties and the compliance with the relevant covenants and agreements of the Company in the Transaction Documents to which it is a party.
Section 3.4. Investment Purpose. The Investor is acquiring the Securities for its own account, for investment purposes and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under or exempt from the registration requirements of the Securities Act; provided, however, that by making the representations herein, the Investor does not agree, or make any representation or warranty, to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with, or pursuant to, a registration statement filed pursuant to the Registration Rights Agreement or an applicable exemption under the Securities Act. The Investor does not presently have any agreement or understanding, directly or indirectly, with any Person to sell or distribute any of the Securities.
Section 3.5. Accredited Investor Status. The Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.
Section 3.6. Reliance on Exemptions. The Investor understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of U.S. federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.
Section 3.7. Information. All materials relating to the business, financial condition, management and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Investor have been furnished or otherwise made available to the Investor or its advisors, including, without limitation, the Commission Documents. The Investor understands that its investment in the Securities involves a high degree of risk. The Investor is able to bear the economic risk of an investment in the Securities and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of a proposed investment in the Securities. The Investor and its advisors have been afforded the opportunity to ask questions of and receive answers from representatives of the Company concerning the financial condition and business of the Company and other matters relating to an investment in the Securities. Neither such inquiries nor any other due diligence investigations conducted by the Investor or its advisors, if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in this Agreement or in any other Transaction Document to which the Company is a party or the Investor’s right to rely on any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby (including, without limitation, the opinions of the Company’s counsel delivered pursuant to Section 6.2(xvi)). The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. The Investor understands that it (and not the Company) shall be responsible for its own tax liabilities that may arise as a result of this investment or the transactions contemplated by this Agreement.
Section 3.8. No Governmental Review. The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
Section 3.9. No General Solicitation. The Investor is not purchasing or acquiring the Securities as a result of any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Securities.
Section 3.10. Not an Affiliate. The Investor is not an officer, director or an Affiliate of the Company. As of the date of this Agreement, the Investor does not beneficially own any Ordinary Shares or securities exercisable for or convertible into Ordinary Shares, and during the Restricted Period, Investor will not acquire beneficial ownership of any shares of the Company’s capital stock (including Ordinary Shares or securities exercisable for or convertible into Ordinary Shares) other than pursuant to this Agreement; provided, however, that nothing in this Agreement shall prohibit or be deemed to prohibit the Investor from purchasing, in an open market transaction or otherwise, Ordinary Shares necessary to make delivery by the Investor in satisfaction of a sale by the Investor of Shares that the Investor anticipated receiving from the Company in connection with the settlement of a Fixed Purchase, VWAP Purchase or Additional VWAP Purchase, as applicable, if the Company or the Transfer Agent shall have failed for any reason to electronically transfer all of the Shares subject to such Fixed Purchase, VWAP Purchase or Additional VWAP Purchase, as applicable, to the Investor by crediting the Investor’s or its designated Broker-Dealer’s account at DTC through its DWAC delivery system, at or prior to the applicable time required by and otherwise in compliance with Section 2.4 of this Agreement.
Section 3.11. No Prior Short Sales. At no time prior to the date of this Agreement has any of the Investor, its agents, representatives or Affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any (i) “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Ordinary Shares or (ii) hedging transaction, which establishes a net short position with respect to the Ordinary Shares.
Section 3.12. Statutory Underwriter Status. The Investor acknowledges that it will be disclosed as an “underwriter” and a “selling shareholder” in the Initial Registration Statement and any New Registration Statement and in any Prospectus contained therein to the extent required by applicable law.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company to the Investor (which is hereby incorporated by reference in, and constitutes an integral part of, this Agreement) (the “Disclosure Schedule”), the Company hereby makes the following representations, warranties and covenants to the Investor:
Section 4.1. Organization, Good Standing and Power. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing (to the extent such concept exists in the relevant jurisdiction) under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
Section 4.2. Authorization, Enforcement. Each of the Company and its Subsidiaries has the requisite corporate or other power and authority to enter into and perform its obligations under each of the Transaction Documents to which it is a party and, in the case of the Company, to issue the Securities in accordance with the terms hereof and thereof. Except for approvals of the Company’s Board of Directors or a committee thereof as may be required in connection with any issuance and sale of Shares to the Investor hereunder (which approvals shall be obtained prior to the delivery of any Fixed Purchase Notice, any VWAP Purchase Notice and any Additional VWAP Purchase Notice), the execution, delivery and performance by the Company of each of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate or other action (as applicable) on the part of the Company, and no further consent or authorization of the Company or its Board of Directors or its shareholders, or any other Person is required in order for the Company to execute, deliver and perform its respective obligations under the Transaction Documents to which it is a party. Each of the Transaction Documents to which the Company is a party has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application (including any limitation of equitable remedies).
Section 4.3. Capitalization. All the outstanding shares of capital stock of the Company and each of its Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable, and, except as otherwise set forth in the Commission Documents, all outstanding shares of capital stock or membership interests of the Subsidiaries are owned by the Company either directly or through wholly owned Subsidiaries and are free and clear of any perfected security interest or any other security interests, claims, liens or encumbrances. Except as set forth in the Commission Documents and this Agreement, there are no agreements or arrangements under which the Company is obligated to register the sale of any securities under the Securities Act. Except as set forth in the Commission Documents, no shares of capital stock of the Company are entitled to preemptive rights and there are no outstanding debt securities and no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, any shares of capital stock of the Company other than those issued or granted in the ordinary course of business pursuant to the Company’s equity incentive and/or compensatory plans or arrangements. Except for customary transfer restrictions contained in agreements entered into by the Company to sell restricted securities or as set forth in the Commission Documents, the Company is not a party to, and it has no Knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company. Except as set forth in the Commission Documents, there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by this Agreement or any of the other Transaction Documents or the consummation of the transactions described herein or therein. The Company has made available via EDGAR true and correct copies of the Company’s Articles of Association as in effect on the Commencement Date (the “Charter”).
Section 4.4. Issuance of Securities. The Conversion Note has been, and the Conversion Shares to be issued pursuant to this Agreement have been, and the Shares to be issued under this Agreement have been, or with respect to Shares to be purchased by the Investor pursuant to a particular Fixed Purchase Notice, a particular VWAP Purchase Notice or a particular Additional VWAP Purchase Notice, will be, prior to the delivery to the Investor hereunder of such Fixed Purchase Notice, VWAP Purchase Notice, Additional VWAP Purchase Notice, respectively, duly authorized by all necessary corporate action on the part of the Company. The Commitment Note and Conversion Shares, when issued to the Investor in accordance with this Agreement, and the Shares, when issued and sold against payment therefor in accordance with this Agreement, shall be validly issued and outstanding, fully paid and non-assessable and free from all liens, charges, taxes, security interests, encumbrances, rights of first refusal, preemptive or similar rights and other encumbrances with respect to the issue thereof, and the Investor shall be entitled to all rights accorded to a holder of Ordinary Shares. As of the date of this Agreement, Ordinary Shares have been duly authorized and reserved by the Company for issuance and sale by the Company to the Investor as Shares under this Agreement, and Ordinary Shares have been duly authorized and reserved by the Company for issuance by the Company to the Investor as Conversion Shares under the Commitment Note.
Section 4.5. No Conflicts. The execution, delivery and performance by the Company of each of the Transaction Documents to which it is a party and the consummation by the Company of the transactions contemplated hereby and thereby do not and shall not (i) result in a violation of any provision of the Company’s Charter, (ii) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give rise to any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company or of the Company’s Subsidiaries is a party or is bound, (iii) create or impose a lien, charge or encumbrance on any property or assets of the Company or of the Company’s Subsidiaries under any agreement or any commitment to which the Company or of the Company’s Subsidiaries is a party or by which the Company or of the Company’s Subsidiaries is bound or to which any of their respective properties or assets is subject, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree applicable to the Company or of the Company’s Subsidiaries or by which any property or asset of the Company or of the Company’s Subsidiaries are bound or affected (including federal and state securities laws and regulations and the rules and regulations of the Trading Market), except, in the case of clauses (ii), (iii) and (iv), for such conflicts, defaults, terminations, amendments, acceleration, cancellations, liens, charges, encumbrances and violations as would not, individually or in the aggregate, have a Material Adverse Effect. Except as specifically contemplated by this Agreement or the Registration Rights Agreement and as required under the Securities Act and any applicable state securities laws, the Company is not required under any federal, state, local or foreign law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency (including, without limitation, the Trading Market) in order for it to execute, deliver or perform any of its respective obligations under the Transaction Documents to which it is a party, or to issue the Securities to the Investor in accordance with the terms hereof and thereof (other than such consents, authorizations, orders, filings or registrations as have been obtained or made prior to the Closing Date); provided, however, that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the representations and warranties of the Investor in this Agreement and the compliance by it with its covenants and agreements contained in this Agreement and the Registration Rights Agreement.
Section 4.6. Commission Documents, Financial Statements; Disclosure Controls and Procedures; Internal Controls Over Financial Reporting; Accountants.
(a) Except as set forth in the Commission Documents, the Company has timely filed (giving effect to permissible extensions in accordance with Rule 12b-25 under the Exchange Act) all Commission Documents for the twelve months preceding the date of this Agreement (the “Filed Commission Documents”). The Company has delivered or made available to the Investor via EDGAR or otherwise true and complete copies of the Filed Commission Documents (including, without limitation, the 2023 Form 20-F) prior to the Closing Date. As of its filing date, each Commission Document (including, without limitation, the 2023 Form 20-F) complied in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and other federal, state and local laws, rules and regulations applicable to it, and, as of its filing date (or, if amended or superseded by a filing prior to the Closing Date, on the date of such amended or superseded filing). Each Registration Statement, on the date it is filed with the Commission, on the date it is declared effective by the Commission, on each Fixed Purchase Date, each VWAP Purchase Date and each Additional VWAP Purchase Date, shall comply in all material respects with the requirements of the Securities Act (including, without limitation, Rule 415 under the Securities Act) and shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, except that this representation and warranty shall not apply to statements in or omissions from such Registration Statement made in reliance upon and in conformity with information relating to the Investor furnished to the Company in writing by or on behalf of the Investor expressly for use therein. The Prospectus and each Prospectus Supplement required to be filed pursuant to this Agreement or the Registration Rights Agreement after the Closing Date, when taken together, on its date, on each Fixed Purchase Date, each VWAP Purchase Date and each Additional VWAP Purchase Date, shall comply in all material respects with the requirements of the Securities Act (including, without limitation, Rule 424(b) under the Securities Act) and shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that this representation and warranty shall not apply to statements in or omissions from the Prospectus or any Prospectus Supplement made in reliance upon and in conformity with information relating to the Investor furnished to the Company in writing by or on behalf of the Investor expressly for use therein. Each Commission Document (other than the Initial Registration Statement or any New Registration Statement, or the Prospectus included therein or any Prospectus Supplement thereto) to be filed with or furnished to the Commission after the Closing Date and filed as part of or incorporated by reference in the Initial Registration Statement or any New Registration Statement, or the Prospectus included therein or any Prospectus Supplement thereto required to be filed pursuant to this Agreement or the Registration Rights Agreement (including, without limitation, the Current Report), when such document is filed with or furnished to the Commission and, if applicable, when such document becomes effective, as the case may be, shall comply in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and other federal, state and local laws, rules and regulations applicable to it. There are no outstanding or unresolved comments or undertakings in such comment letters received by the Company from the Commission. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Securities Act or the Exchange Act. To the Company’s Knowledge, the Commission has not commenced any enforcement proceedings against the Company or any of its Subsidiaries.
(b) The financial statements and schedules of the Company and its consolidated Subsidiaries to be filed as part of or incorporated by reference in the Initial Registration Statement or any New Registration Statement, or the Prospectus included therein or any Prospectus Supplement thereto, present fairly in all material respects the financial condition, results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates and for the periods indicated, comply as to form with the applicable accounting requirements of Regulation S-X, and have been prepared in conformity with International Financial Reporting Standards (“GAAP”) applied on a consistent basis throughout the periods involved (except as otherwise noted therein). The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Commission Documents, the Initial Registration Statement or any New Registration Statement fairly present the information called for in all material respects and have been prepared in accordance with the Commission’s rules and guidelines applicable thereto. The statistical and market-related data included or incorporated by reference in the Commission Documents, the Initial Registration Statement or any New Registration Statement are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate and, to the extent required, the Company has obtained the written consent to the use of such data from such source.
(c) The Company and the Subsidiaries have established and maintain disclosure controls and procedures (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act). Except as disclosed in Commission Documents, such disclosure controls and procedures are designed to ensure that material information relating to the Company and its Subsidiaries is made known to the Company’s Chief Executive Officer and its Chief Financial Officer by others within those entities, and such disclosure controls and procedures are effective to perform the functions for which they were established. The Company and the Subsidiaries have established and maintain internal control over financial reporting (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act). Except as disclosed in Commission Documents, such internal control over financial reporting is designed to provide reasonable assurance that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (E) the interactive data in eXtensible Business Reporting Language in the Commission Documents fairly presents the information called for in all material respects and are prepared in accordance with the Commission’s rules and guidelines applicable thereto. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) any significant deficiencies and material weaknesses in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize, and report financial data; and (ii) any fraud, whether or not material, that involves management or other employees who have a role in the Company’s internal controls. Since the date of the most recent evaluation of such disclosure controls and procedures, except as disclosed in Commission Documents, there have been (A) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (B) no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies.
(d) The Company is in compliance with all provisions of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, which are applicable to it as of the date hereof.
(e) The Company’s accountants are set forth in the Commission Documents and, to the Knowledge of the Company, such accountants are an independent registered public accounting firm as required by the Securities Act.
Section 4.7. Subsidiaries. The 2023 Form 20-F sets forth each subsidiary, of the Company as of the Commencement Date, other than those that may be omitted pursuant to Item 601 of Regulation S-K, showing its jurisdiction of incorporation or organization, and the Company does not have any other subsidiaries as of the Commencement Date other than BlackSwan Technologies, Inc., Cognitive Systems Ltd.,,Blackswan Technologies AI LTD., Blackswan Technologies Sp. Z.o.o., BlackSwan Technologies GmbH and Blackswan Technologies (PVT) LTD. No Subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s property or assets to the Company or any other Subsidiary of the Company, except as described or incorporate by reference in, or contemplated by, the Registration Statement and the Prospectus, or as would not reasonably be expected to have a Material Adverse Effect.
Section 4.8. No Material Adverse Effect or Material Adverse Change, No Undisclosed Liabilities. Except as otherwise disclosed in any Commission Document, since the end of the Company’s most recent audited fiscal year: (i) the Company has not experienced or suffered any Material Adverse Effect, and, to the Company’s Knowledge, there exists no current state of facts, condition or event which would have a Material Adverse Effect; (ii) there has not occurred any material adverse change, or any development that would reasonably be expected to result in a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company from that set forth in the Commission Documents, including, without limitation, as a result of the outbreak of COVID-19, or as a result of any measures intended to contain the outbreak of COVID-19 imposed by any federal, state, local or foreign government or government agency in any country or region in which the Company, or any of its agents, consultants, advisors or vendors, has assets or properties or conducts business, including, without limitation, any limitations, curtailments, suspensions or closures of businesses, business offices or establishments, schools, properties and other public areas due to quarantines, curfews, travel restrictions, workplace controls, “stay-at-home” orders, social distancing requirements or guidelines or other public gathering restrictions or limitations; (iii) neither the Company nor any of its Subsidiaries has incurred any material liability or obligation, direct or contingent, nor entered into any material transaction; (iv) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (v) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company.
Neither the Company nor any of its Subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) that would be required to be disclosed on a balance sheet of the Company or any Subsidiary (including the notes thereto) in conformity with GAAP and are not disclosed in the Commission Documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries respective businesses since December 31, 2023 and which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
Section 4.9. No Undisclosed Events or Circumstances. No event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof) or condition (financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws in the Registration Statement or the Prospectus, which has not been disclosed or incorporated by reference in the Registration Statement and the Prospectus, or (ii) would reasonably be expected to have a Material Adverse Effect.
Section 4.10. Indebtedness. The Company’s annual report on Form 20-F for the year ended December 31, 2023 sets forth, as of December 31, 2023, all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments through such date. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements, indemnities and other contingent obligations in respect of Indebtedness of others in excess of $100,000, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $100,000 due under leases required to be capitalized in accordance with GAAP. There is no existing or continuing default or event of default in respect of any Indebtedness of the Company or any of its Subsidiaries, except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to Title 11 of the United States Code or any similar federal or state bankruptcy law or law for the relief of debtors, nor does the Company have any Knowledge that its creditors intend to initiate involuntary bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under Title 11 of the United States Code or any other federal or state bankruptcy law or any law for the relief of debtors. The Company is financially solvent and is generally able to pay its debts as they become due.
Section 4.11. Title to Assets. The Company and each of its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company, in each case free and clear of all liens, encumbrances and defects except such as are described or incorporated by reference in the Registration Statement and the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries; and any real property and buildings held under lease by the Company and its Subsidiaries are held by it under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere in any material respect with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries, in each case except as described or incorporated by reference in the Registration Statement and the Prospectus
Section 4.12. Actions Pending. Except as disclosed in Commission Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of the Subsidiaries, or any of their respective officers or directors in their capacities as such, which would reasonably be expected to have a Material Adverse Effect.
Section 4.13. Compliance With Laws. During the 12-month period immediately preceding the date hereof, except as described in the Filed Commission Documents, the Company and each of its Subsidiaries is and at all times has been in material compliance with all applicable U.S. and foreign statutes, rules, or regulations applicable to Company and its Subsidiaries (“Applicable Laws”), except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 4.14. Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company or of the Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Investor shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 4.14 incurred by the Company or of the Subsidiaries that may be due or payable in connection with the transactions contemplated by the Transaction Documents.
Section 4.15. Operation of Business. The Company and the Subsidiaries possess or have obtained, all licenses, certificates, consents, orders, approvals, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental entity that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as currently conducted, as described or incorporated by reference in the Registration Statement and the Prospectus (the “Permits”), except where the failure to possess, obtain or make the same would not, individually or in the aggregate, have a Material Adverse Effect. Neither the Company nor any Subsidiary has received written notice of any proceeding relating to revocation or modification of any such Permit or has any reason to believe that such Permit will not be renewed in the ordinary course, except where the failure to obtain any such renewal would not, individually or in the aggregate, have a Material Adverse Effect. This Section 4.15 does not relate to environmental matters, such items being the subject of Section 4.16.
Section 4.16. Environmental Compliance. To the Knowledge of the Company, the Company and its Subsidiaries are not in violation of any statute, any rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances (collectively, “Environmental Laws”), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim. Other than as set forth or incorporated by reference in the Registration Statement and the Prospectus, there is no judgment, decree, injunction, rule, writ or order of any governmental entity under any Environmental Laws outstanding against the Company and its Subsidiaries which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 4.17. Material Agreements. Except as set forth in the Commission Documents, neither the Company nor any Subsidiary of the Company is a party to any written or oral contract, instrument, agreement commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an exhibit to an annual report on Form 20-F (collectively, “Material Agreements”). Each of the Material Agreements described in the Commission Documents conform in all material respects to the descriptions thereof contained or incorporated by reference therein. Except as set forth in the Commission Documents, the Company and each of its Subsidiaries have performed in all material respects all the obligations then required to be performed by them under the Material Agreements, have received no notice of default or an event of default by the Company or any of its Subsidiaries thereunder and are not aware of any basis for the assertion thereof, and neither the Company or any of its Subsidiaries nor, to the Knowledge of the Company, any other contracting party thereto are in default under any Material Agreement now in effect, the result of which would have a Material Adverse Effect. Except as set forth in the Commission Documents, each of the Material Agreements is in full force and effect, and constitutes a legal, valid and binding obligation enforceable in accordance with its terms against the Company and/or any of its Subsidiaries and, to the Knowledge of the Company, each other contracting party thereto, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.
Section 4.18. Transactions With Affiliates. Except as disclosed in the Commission Documents, none of the Company’s, officers or directors, or to the Company’s Knowledge, none of the Company’s shareholders or any family member or Affiliate of any of the foregoing, has either directly or indirectly an interest in, or is a party to, any transaction that would be required to be disclosed as a related party transaction pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.
Section 4.19. Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted, except as would not reasonably be expected to have a Material Adverse Effect. None of the Company’s material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or, by the terms and conditions thereof, will expire or terminate within two years from the date of this Agreement, except as would not reasonably be expected to have a Material Adverse Effect. The Company has no Knowledge of any infringement by the Company or the Subsidiaries of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others, and there is no claim, action or proceeding being made or brought against, or to the Company’s Knowledge, being threatened against, the Company or the Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which would reasonably be expected to have a Material Adverse Effect.
Section 4.20. Use of Proceeds. The proceeds from the sale of the Shares by the Company to the Investor shall be used by the Company in the manner as will be set forth in the Prospectus included in any Registration Statement (and any post-effective amendment thereto) and any Prospectus Supplement thereto filed pursuant to the Registration Rights Agreement.
Section 4.21. Investment Company Act Status. The Company is not required to be registered as, and immediately after receipt of payment for the Shares will not be required to be registered as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
Section 4.22. Benefit Plans; Labor Matters. Each benefit and compensation plan, agreement, policy and arrangement that is maintained, administered or contributed to by the Company for current or former employees or directors of, or independent contractors with respect to, the Company has been maintained in material compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, and the Company has complied in all material respects with all applicable statutes, orders, rules and regulations in regard to such plans, agreements, policies and arrangements. Each stock option granted under any equity incentive plan of the Company (each, a “Stock Plan”) was granted with a per share exercise price no less than the market price per share on the grant date of such option in accordance with the rules of the Trading Market, and no such grant involved any “back-dating,” “forward-dating” or similar practice with respect to the effective date of such grant; each such option (i) was granted in compliance in all material respects with Applicable Laws and with the applicable Stock Plan(s), (ii) was duly approved by the Company’s Board of Directors, and (iii) has been properly accounted for in the Company’s financial statements and disclosed, to the extent required, in the Company’s filings or submissions with the Commission, and the Trading Market. Neither the Company nor any Subsidiary is in violation of or has received written notice of any violation with respect to any federal or state law, regulation or rule relating to discrimination in the hiring, termination, promotion, employment or pay of employees, nor any applicable federal or state wages and hours law, nor any state law, regulation or rule precluding the denial of credit due to the neighborhood in which a property is situated, the violation of any of which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. There are no existing or, to the Knowledge of the Company, threatened labor disputes with the employees of the Company or any of the Subsidiaries that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 4.23. Taxes. Each of the Company and the Subsidiaries has filed on a timely basis (including in accordance with any applicable extensions) all material necessary federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof or have properly requested extensions thereof, and have paid all taxes shown as due thereon, and if due and payable, any related or similar assessment, fine or penalty levied against the Company or of the Subsidiaries. Except as disclosed in the Commission Documents, no material tax deficiency has been asserted against any such entity, and the Company has no Knowledge of any tax deficiency that is likely to be asserted against any such entity that, individually or in the aggregate, if determined adversely to any such entity, would reasonably be expected to have a Material Adverse Effect. All material tax liabilities are adequately provided for on the respective books of the Company and the Subsidiaries.
Section 4.24. Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged, including, but not limited to, insurance covering real and personal property owned or leased by the Company and the Subsidiaries against theft, damage, destruction, environmental liabilities, acts of vandalism, terrorism, earthquakes, flood and all other risks customarily insured against, all of which insurance is in full force and effect. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Material Adverse Effect.
Section 4.25. Dilutive Effect. The Company is aware and acknowledges that issuance of the Securities could cause dilution to existing shareholders and could significantly increase the outstanding number of Ordinary Shares. The Company further acknowledges that its obligation to issue the Commitment Note and to issue the Shares pursuant to the terms of a Fixed Purchase, VWAP Purchase or Additional VWAP Purchase in accordance with this Agreement is, in each case, unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
Section 4.26. Manipulation of Price. The Company has not, and to its Knowledge no Person acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company. Neither the Company nor any of its officers, directors or Affiliates will during the term of this Agreement, and, to the Knowledge of the Company, no Person acting on their behalf will during the term of this Agreement, take any of the actions referred to in the immediately preceding sentence.
Section 4.27. Securities Act. Except as set forth in the Disclosure Schedule, the Company has complied and shall comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Securities hereunder, including, without limitation, the applicable requirements of the Securities Act. Each Registration Statement, upon filing with the Commission and at the time it is declared effective by the Commission, shall satisfy all of the requirements of the Securities Act to register the resale of the Registrable Securities included therein by the Investor in accordance with the Registration Rights Agreement on a delayed or continuous basis under Rule 415 under the Securities Act at then-prevailing market prices, and not fixed prices.
Section 4.28. Listing and Maintenance Requirements; DTC Eligibility. The Ordinary Shares are registered pursuant to Section 12(b) of the Exchange Act, and the Company has taken no action designed to, or which to its Knowledge is likely to have the effect of, terminating the registration of the Ordinary Shares pursuant to the Exchange Act nor has the Company received any notification that the Commission is currently contemplating terminating such registration. Except as disclosed in the Filed Commission Documents, the Company has not, in the twelve (12) months preceding the date hereof, received any written notice from any Person to the effect that the Company is not in compliance with the listing or maintenance requirements of the Trading Market. Except as disclosed in the Commission Documents, the Company is in compliance with all such listing and maintenance requirements of the Trading Market. The Ordinary Shares are eligible for participation in the DTC book entry system and has shares on deposit at DTC for transferred electronically to third parties via DTC through its DWAC delivery system. The Company has not received notice from DTC to the effect that a suspension of, or restriction on, accepting additional deposits of the Ordinary Shares, electronic trading or book-entry services by DTC with respect to the Ordinary Shares is being imposed or is contemplated.
Section 4.29. Application of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Charter or the laws of the State of Israel that is or could become applicable to the Investor as a result of the Investor and the Company fulfilling their respective obligations or exercising their respective rights under the Transaction Documents (as applicable), including, without limitation, as a result of the Company’s issuance of the Securities and the Investor’s ownership of the Securities.
Section 4.30. Foreign Corrupt Practices. Neither the Company or Subsidiary, nor to the Knowledge of the Company, any agent or other Person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any Person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”).
Section 4.31. Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the Knowledge of the Company, threatened.
Section 4.32. OFAC. Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any director, officer, agent, employee or Affiliate of the Company or any of its Subsidiaries (i) is currently subject to any sanctions administered by the U.S. government, including the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”) or the U.S. Department of State, the United Nations Security Council, the European Union, or the United Kingdom (including sanctions administered or controlled by Her Majesty’s Treasury) (collectively, “Sanctions” and such persons, “Sanctioned Persons”) or other relevant sanctions authority, and (ii) will use the proceeds of this offering, directly or indirectly, to fund or facilitate the activities of any Sanctioned Persons or entity or any country, region or territory that is, at the time of such funding or facilitation, subject to Sanctions or any person or entity located in a country, region or territory subject to Sanctions (including any administered or enforced by OFAC or the U.S. Department of State), the United Nations Security Council, the European Union, or the United Kingdom (including sanctions administered or controlled by Her Majesty’s Treasury). Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any director, officer, agent, employee or Affiliate of the Company or any of its Subsidiaries, is a Person that is, or is 50% or more owned or otherwise controlled by a Person that is: (i) the subject of any Sanctions; or (ii) located, organized or resident in a country, region or territory that is, or whose government is, the subject of Sanctions that broadly prohibit dealings with that country, region or territory (including at the time of this agreement, Cuba, Iran, North Korea, Syria and Crimea) (collectively, “Sanctioned Countries” and each, a “Sanctioned Country”). The Company and its Subsidiaries have not engaged in any dealings or transactions with or for the benefit of Sanctioned Persons, or with or in a Sanctioned Country, in the preceding 3 years, nor does the Company or any of its Subsidiaries have any plans to deal or transact with Sanctioned Persons, or with or in Sanctioned Countries.
Section 4.33. Information Technology; Compliance with Data Privacy Laws. To the best of the Company’s knowledge and as previously disclosed under Commission Documents, (i) there have been no material breaches or violations of (or unauthorized access to) the Company, or the Subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications and databases (collectively, the “IT Systems”) or any personal, personally identifiable, sensitive, confidential or regulated data (collectively, “Personal Data”) processed or stored by or on behalf of the Company or the Subsidiaries, except for those that have been remedied without material cost or liability or the duty to notify any regulator, nor are there any pending internal investigations of the Company or the Subsidiaries relating to the same and (ii) the Company and the Subsidiaries are presently in compliance in all material respects with all Applicable Laws, statutes and regulations and contractual obligations relating to the privacy and security of IT Systems and Personal Data.
Section 4.34. No Disqualification Events. None of the Company, any of their predecessors, any affiliated issuer, any director, general partner executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company have exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.
Section 4.35. ERISA. Except for the Company’s 401(k) plan for participation by the Company’s employees or as set forth or incorporated by reference in the Registration Statement and the Prospectus, the Company is not a party to an “employee benefit plan,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), which: (i) is subject to Title IV of ERISA and (ii) is or was at any time maintained, administered or contributed to by the Company or any of its ERISA Affiliates (as defined hereafter). These plans are referred to collectively herein as the “Employee Plans.” An “ERISA Affiliate” of any person or entity means any other person or entity which, together with that Person or entity, could be treated as a single employer under Section 414(b), (c), (m) or (o) of the Code. Each Employee Plan has been maintained in material compliance with its terms and the requirements of Applicable Law. Except as set forth or incorporated by reference in the Registration Statement and the Prospectus, there is no liability in respect of post-retirement health and medical benefits for retired employees of the Company or any of its ERISA Affiliates, other than medical benefits required to be continued under Applicable Law. No “prohibited transaction” (as defined in either Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to any Employee Plan; and each Employee Plan that is intended to be qualified under Section 401(a) of the Code is so qualified, and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.
Section 4.36. No Other Similar Agreement. Except as disclosed in the Commission Documents, other than the Transaction Documents to which it is a party, the Company is not a party to any agreement that is (or that contains any term, obligation or restriction that is) in effect on the date hereof with any Person, other than the Investor, relating to any “at the market offering,” “equity line of credit” or any other similar continuous offering in which the Company may offer, issue or sell Ordinary Shares or Ordinary Shares Equivalents at a future determined price.
Section 4.37. Acknowledgement Regarding Investor’s Acquisition of Securities. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s-length purchaser with respect to this Agreement and the transactions contemplated by the Transaction Documents. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated by the Transaction Documents, and any advice given by the Investor or any of its representatives or agents in connection therewith is merely incidental to the Investor’s acquisition of the Securities. The Company further represents to the Investor that the Company’s decision to enter into the Transaction Documents to which it is a party has been based solely on the independent evaluation of the transactions contemplated thereby by the Company, respectively, and their respective representatives. The Company acknowledges and agrees that the Investor has not made and does not make any representations or warranties with respect to the transactions contemplated by the Transaction Documents other than those specifically set forth in Article IV.
ARTICLE V
ADDITIONAL COVENANTS
The Company covenants with the Investor, and the Investor covenants with the Company, as follows, which covenants of one party are for the benefit of the other party during the Investment Period (and with respect to the Company for the period following the termination of this Agreement specified in Section 8.3 pursuant to and in accordance with Section 8.3):
Section 5.1. Securities Compliance. The Company shall notify the Commission and the Trading Market, if and as applicable, in accordance with their respective rules and regulations, of the transactions contemplated by the Transaction Documents, and shall take all necessary action, undertake all proceedings and obtain all registrations, permits, consents and approvals for the legal and valid issuance of the Securities to the Investor in accordance with the terms of the Transaction Documents, as applicable.
Section 5.2. Reservation of Ordinary Shares. The Company has available and the Company shall reserve and keep available at all times, free of preemptive and other similar rights of shareholders, shares of authorized but unissued Ordinary Shares to enable the Company to time effect the issuance, sale and delivery of all Shares pursuant to this Agreement. As of the date of this Agreement the Company has reserved, and as of the Commencement Date shall have continued to reserve, out of its authorized and unissued Ordinary Shares, Ordinary Shares solely for the purpose of effecting Fixed Purchases, VWAP Purchases and Additional VWAP Purchases under this Agreement, and Ordinary Shares solely for the purpose of issuing the Conversion Shares pursuant to the Commitment Note. The number of Ordinary Shares so reserved for the purpose of issuing Conversion Shares, and effecting Fixed Purchases, VWAP Purchases and Additional VWAP Purchases under this Agreement may be increased from time to time by the Company from and after the Commencement Date, and such number of reserved shares may be reduced from and after the Commencement Date only by the number of Shares actually issued, sold and delivered to the Investor pursuant to any Fixed Purchase, VWAP Purchase and Additional VWAP Purchase effected from and after the Commencement Date pursuant to this Agreement.
Section 5.3. Registration and Listing. The Company shall use its commercially reasonable efforts to cause the Ordinary Shares to continue to be registered as a class of securities under Sections 12(b) of the Exchange Act, and to comply with its reporting and filing obligations under the Exchange Act, and shall not take any action or file any document (whether or not permitted by the Securities Act or the Exchange Act) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein. The Company shall use its commercially reasonable efforts to continue the listing and trading of its Ordinary Shares and the listing of the Securities purchased by the Investor hereunder on the Trading Market and to comply with the Company’s reporting, filing and other obligations under the b rules and regulations of the Trading Market. The Company shall not take any action which could be reasonably expected to result in the delisting or suspension of the Ordinary Shares on the Trading Market. If the Company receives any final and non-appealable notice that the listing or quotation of the Ordinary Shares on the Trading Market shall be terminated on a date certain, the Company shall promptly (and in any case within 24 hours) notify the Investor of such fact in writing and shall use its commercially reasonable efforts to cause the Ordinary Shares to be listed or quoted on another Eligible Market.
Section 5.4. Compliance with Laws.
(i) During the Investment Period, (a) the Company shall comply, and the Company shall cause each Subsidiary to comply, with all laws, rules, regulations and orders applicable to the business and operations of the Company and the Subsidiaries, except as would not have a Material Adverse Effect, and (b) the Company shall comply with all applicable provisions of the Securities Act and the Exchange Act, including Regulation M thereunder, applicable state securities or “Blue Sky” laws, and applicable listing rules of the Trading Market or Eligible Market, except as would not, individually or in the aggregate, prohibit or otherwise interfere with the ability of the Company to enter into and perform its obligations under this Agreement in any material respect or for Investor to conduct resales of Securities under the Registration Statement in any material respect. Without limiting the foregoing, none of the Company, or any of the Subsidiaries, nor to the Knowledge of the Company, any of their respective directors, officers, agents, employees or any other Persons acting on their behalf shall, in connection with the operation of the respective businesses of the Company and the Subsidiaries, (1) use any corporate funds for unlawful contributions, payments, gifts or entertainment or to make any unlawful expenditures relating to political activity to government officials, candidates or members of political parties or organizations, (2) pay, accept or receive any unlawful contributions, payments, expenditures or gifts, or (3) violate or operate in noncompliance with any export restrictions, anti-boycott regulations, embargo regulations or other applicable domestic or foreign laws and regulations, including, without limitation, the FCPA and the Money Laundering Laws.
(ii) The Investor shall comply with all laws, rules, regulations and orders applicable to the performance by it of its obligations under this Agreement and its investment in the Securities, except as would not, individually or in the aggregate, prohibit or otherwise interfere with the ability of the Investor to enter into and perform its obligations under this Agreement in any material respect. Without limiting the foregoing, the Investor shall comply with all applicable provisions of the Securities Act and the Exchange Act, including Regulation M thereunder, and all applicable state securities or “Blue Sky” laws.
Section 5.5. Keeping of Records and Books of Account; Due Diligence.
(i) The Investor and the Company shall each maintain records showing the remaining Total Purchase Commitment and the dates and Fixed Purchase Share Amount, VWAP Purchase Share Amount and Additional VWAP Purchase Share Amount for each Fixed Purchase, each VWAP Purchase and each Additional VWAP Purchase, respectively.
(ii) The Investor shall have the right, from time to time as the Investor may reasonably deem appropriate, and upon reasonable advance notice to the Company, to perform reasonable due diligence on the Company during normal business hours; provided, however, that after the Closing Date, the Investor’s continued due diligence of the Company shall not be a condition precedent to, or otherwise impair, delay or modify in any respect, the Company’s right to deliver to the Investor any Fixed Purchase Notice, any VWAP Purchase Notice and any Additional VWAP Purchase Notice, or the Investor’s obligation to purchase the Shares subject thereto, pursuant to this Agreement. The Company and its officers and employees shall provide information on a reasonably timely basis and otherwise reasonably cooperate with the Investor in connection with any reasonable request by the Investor related to the Investor’s due diligence of the Company.
Section 5.6. No Frustration; Prohibition of Certain Issuances Before Settlement of Purchases; Equity Line of Credit.
(i) No Frustration. The Company shall not enter into, announce or recommend to the Company’s shareholders any agreement, plan, arrangement or transaction in or of which the terms thereof would restrict, materially delay, conflict with or impair the ability or right of the Company to perform its obligations under the Transaction Documents to which it is a party, including, without limitation, the obligation of the Company to deliver (i) the Commitment Note to the Investor not later than 4:00 p.m. (New York time) on the Trading Day immediately following the Closing Date in accordance with Section 9(ii) of this Agreement, (ii) the Shares to the Investor in respect of a Fixed Purchase as DWAC Shares not later than 10:00 a.m., New York City time, on the Trading Day immediately following the applicable Fixed Purchase Date for such Fixed Purchase in accordance with Section 2.1 of this Agreement, (iii) the Shares to the Investor in respect of a VWAP Purchase as DWAC Shares not later than 10:00 a.m., New York City time, on the Trading Day immediately following the applicable VWAP Purchase Date for such VWAP Purchase in accordance with Section 2.2 of this Agreement, and (iv) Shares to the Investor in respect of an Additional VWAP Purchase as DWAC Shares not later than 10:00 a.m., New York City time, on the Trading Day immediately following the applicable Additional VWAP Purchase Date for such Additional VWAP Purchase in accordance with Section 2.3 of this Agreement. For the avoidance of doubt, nothing in this Section 5.6(i) shall in any way limit the Company’s right to terminate this Agreement in accordance with Section 7.2 (subject in all cases to Section 7.3).
(ii) No Dilutive Issuances During Reference Periods. Neither the Company nor or any Subsidiary shall issue, sell or grant any right, option or warrant to purchase, or issue, sell or grant any right to reprice (or reset the purchase price therefor), or otherwise dispose of for cash (or enter into any agreement, plan or arrangement contemplating any of the foregoing, or seek to utilize any existing agreement, plan or arrangement to effect any of the foregoing), or announce any offer, issuance, sale or grant of any option or warrant to purchase or other disposition for cash (or any agreement, plan or arrangement therefor), at any time during the following periods: (i) with respect to each Fixed Purchase for which the Company has delivered to the Investor a Fixed Purchase Notice, the period beginning on the applicable Fixed Purchase Date for such Fixed Purchase and ending on the third (3rd) Trading Day next following the Trading Day on which the Investor has delivered to the Company the applicable total purchase price for all of the Shares to be purchased by the Investor in such Fixed Purchase pursuant to Section 2.1, and (ii) with respect to each VWAP Purchase and Additional VWAP Purchase under this Agreement for which the Company has delivered to the Investor a VWAP Purchase Notice and (if applicable) an Additional VWAP Purchase Notice, respectively, the period beginning on the applicable VWAP Purchase Date for such VWAP Purchase (and, with respect to each Additional VWAP Purchase effected on the same Trading Day as such VWAP Purchase Date, the applicable Additional VWAP Purchase Date, if any, for such Additional VWAP Purchase) and ending on the third (3rd) Trading Day next following the Trading Day on which the Investor has delivered to the Company the applicable total purchase price for all of the Shares to be purchased by the Investor in such VWAP Purchase, and the applicable total purchase price of all of the Shares to be purchased by the Investor in such Additional VWAP Purchase(s), as applicable, pursuant to Section 2.2 and Section 2.3 (each such period referred to in clause (i) and (ii) above, a “Reference Period”), any Ordinary Shares or Ordinary Shares Equivalents, at an effective price per share of Ordinary Shares less than the applicable Fixed Purchase Price, VWAP Purchase Price or Additional VWAP Purchase Price (as applicable) per Share (such price, the “Reference Price”) to be sold to the Investor in the applicable Fixed Purchase, VWAP Purchase and Additional VWAP Purchase (as applicable) to which such Reference Period relates (each such issuance, a “Dilutive Issuance”), other than an Exempt Issuance (it being understood and agreed that if the holder of the Ordinary Shares or Ordinary Shares Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive Ordinary Shares at an effective price per share of Ordinary Shares that is less than the applicable Reference Price, such issuance shall be deemed to have occurred for less than the applicable Reference Price on such date of the Dilutive Issuance at such effective price) and the applicable Fixed Purchase Price, VWAP Purchase Price or Additional VWAP Purchase Price (as applicable) shall be reduced to equal the Reference Price. If the Company enters into a Variable Rate Transaction, the Company shall be deemed to have issued Ordinary Shares or Ordinary Shares Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised. The Investor shall be entitled to seek injunctive relief against the Company and the Subsidiaries to preclude any such Dilutive Issuance that does not constitute an Exempt Issuance, which remedy shall be in addition to any right to collect damages, without the necessity of showing economic loss and without any bond or other security being required.
(iii) Reserved.
Section 5.7. Corporate Existence. The Company shall take all steps necessary to preserve and continue the corporate existence of the Company; provided, however, that, except as provided in Section 5.8, nothing in this Agreement shall be deemed to prohibit the Company from engaging in any Fundamental Transaction with another Person. For the avoidance of doubt, nothing in this Section 5.7 shall in any way limit the Company’s right to terminate this Agreement in accordance with Section 7.2 (subject in all cases to Section 7.3).
Section 5.8. Fundamental Transaction. If a Fixed Purchase Notice, a VWAP Purchase Notice or an Additional VWAP Purchase Notice has been delivered by the Company to the Investor under Article II and the applicable Fixed Purchase, VWAP Purchase and Additional VWAP Purchase, respectively, has or have not yet been fully settled in accordance with this Agreement (including, without limitation, the delivery by the Investor to the Company of the applicable total purchase price for all of the Shares to be purchased by the Investor in such Fixed Purchase, VWAP Purchase and Additional VWAP Purchase, respectively, as contemplated by Article II), the Company shall not effect any Fundamental Transaction until the expiration of three (3) Trading Days following the Trading Day on which the Investor has delivered to the Company the applicable total purchase price for all of the Shares to be purchased by the Investor in such Fixed Purchase, VWAP Purchase and Additional VWAP Purchase, respectively.
Section 5.9. Selling Restrictions.
(i) Except as expressly set forth below, the Investor covenants that from and after the Closing Date through and including the Trading Day next following the expiration or termination of this Agreement (the “Restricted Period”), neither the Investor nor any of its Affiliates nor any entity managed or controlled by the Investor (collectively, the “Restricted Persons” and each of the foregoing is referred to herein as a “Restricted Person”) shall, directly or indirectly, (x) engage in any Short Sales involving the Company’s securities or (y) grant any option to purchase, or acquire any right to dispose of or otherwise dispose for value of, any Ordinary Shares or any securities convertible into or exercisable or exchangeable for any Ordinary Shares, or enter into any swap, hedge or other similar agreement that transfers, in whole or in part, the economic risk of ownership of the Ordinary Shares. Notwithstanding the foregoing, it is expressly understood and agreed that nothing contained herein shall (without implication that the contrary would otherwise be true) prohibit any Restricted Person during the Restricted Period from: (1) selling “long” (as defined under Rule 200 promulgated under Regulation SHO) the Securities; or (2) selling a number of Ordinary Shares equal to the number of Shares that such Restricted Person is or may be obligated to purchase under a pending Fixed Purchase Notice, a pending VWAP Purchase Notice or a pending Additional VWAP Purchase Notice but has not yet taken possession of so long as such Restricted Person (or the Broker-Dealer, as applicable) delivers the Shares purchased pursuant to such Fixed Purchase Notice, such VWAP Purchase Notice or such Additional VWAP Purchase Notice (as applicable) to the purchaser thereof or the applicable Broker-Dealer upon such Restricted Person’s receipt of such Ordinary Shares from the Company pursuant to this Agreement.
(ii) In addition to the foregoing, in connection with any sale of Securities (including any sale permitted by paragraph (i) above), the Investor shall comply in all respects with all applicable laws, rules, regulations and orders, including, without limitation, the requirements of the Securities Act and the Exchange Act.
Section 5.10. Effective Registration Statement. During the Investment Period, the Company shall use its commercially reasonable efforts to maintain the continuous effectiveness of the Initial Registration Statement and each New Registration Statement filed with the Commission under the Securities Act for the applicable Registration Period pursuant to and in accordance with the Registration Rights Agreement.
Section 5.11. Blue Sky. The Company shall take such action, if any, as is necessary by the Company in order to obtain an exemption for or to qualify the Securities for sale by the Company to the Investor pursuant to the Transaction Documents, and at the request of the Investor, the subsequent resale of Registrable Securities by the Investor, in each case, under applicable state securities or “Blue Sky” laws and shall provide evidence of any such action so taken to the Investor from time to time following the Closing Date; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 5.11, (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction.
Section 5.12. Non-Public Information. None of the Company or of the Subsidiaries, nor any of their respective directors, officers, employees or agents shall disclose any material non-public information about the Company or the Subsidiaries to the Investor, unless a simultaneous public announcement thereof is made by the Company in the manner contemplated by Regulation FD. In the event of a breach of the foregoing covenant by the Company or of the Subsidiaries, or any of their respective directors, officers, employees and agents (as determined in the reasonable good faith judgment of the Investor), (i) the Investor shall promptly provide written notice of such breach to the Company and (ii) after such notice has been provided to the Company and, provided that the Company shall have failed to publicly disclose such material, non-public information within 24 hours following demand therefor by the Investor, in addition to any other remedy provided herein or in the other Transaction Documents, the Investor shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, non-public information without the prior approval by the Company, any of the Subsidiaries, or any of their respective directors, officers, employees or agents. The Investor shall not have any liability to the Company, any of the Subsidiaries, or any of their respective directors, officers, employees, shareholders or agents, for any such disclosure.
Section 5.13. Broker/Dealer. The Investor shall use one or more broker-dealers to effectuate all sales, if any, of the Shares that it may purchase or otherwise acquire from the Company pursuant to the Transaction Documents, as applicable, which (or whom) shall be unaffiliated with the Investor and not then currently engaged or used by the Company, and a DTC participant (collectively, the “Broker-Dealer”). The Investor shall, from time to time, provide the Company and the Transfer Agent with all information regarding the Broker-Dealer reasonably requested by the Company. The Investor shall be solely responsible for all fees and commissions of the Broker-Dealer, which shall not exceed customary brokerage fees and commissions and shall be responsible for designating only a DTC participant eligible to receive DWAC Shares.
Section 5.14. Disclosure Schedules.
(i) The Company may, from time to time, update the Disclosure Schedules as may be required to satisfy the conditions set forth in Section 6.2(i) and Section 6.3 (to the extent such condition set forth in Section 6.3 relates to the condition in Section 6.2(i) as of a specific Notice Delivery Time). For purposes of this Section 5.14, any disclosure made in a schedule to the Compliance Certificate shall be deemed to be an update of the Disclosure Schedule. Notwithstanding anything in this Agreement to the contrary, no update to the Disclosure Schedule pursuant to this Section 5.14 shall cure any breach of a representation or warranty of the Company contained in this Agreement and made prior to the update and shall not affect any of the Investor’s rights or remedies with respect thereto.
(ii) Notwithstanding anything to the contrary contained in the Disclosure Schedule or in this Agreement, the information and disclosure contained in any Schedule of the Disclosure Schedule shall be deemed to be disclosed and incorporated by reference in any other Schedule of the Disclosure Schedule as though fully set forth in such Schedule for which applicability of such information and disclosure is reasonably apparent. The fact that any item of information is disclosed in the Disclosure Schedule shall not be construed to mean that such information is required to be disclosed by this Agreement. Except as expressly set forth in this Agreement, such information and the thresholds (whether based on quantity, qualitative characterization, dollar amounts or otherwise) set forth herein shall not be used as a basis for interpreting the terms “material” or “Material Adverse Effect” or other similar terms in this Agreement.
Section 5.15. Delivery of Bring Down Opinions and Compliance Certificates Upon Occurrence of Certain Events. Within three (3) Trading Days immediately following the (i) filing of (A) a post-effective amendment to the Initial Registration Statement required to be filed by the Company with the Commission pursuant to the Registration Rights Agreement, (B) a New Registration Statement required to be filed by the Company with the Commission pursuant to Section 2(c) of the Registration Rights Agreement, or (C) a post-effective amendment to a New Registration Statement required to be filed by the Company with the Commission pursuant to Section 2(c) of the Registration Rights Agreement, in each case with respect to a fiscal year ending after the Commencement Date, to register the resale of Securities by the Investor under the Securities Act pursuant to this Agreement and the Registration Rights Agreement, and (ii) the date the Company files with the Commission (A) a Prospectus Supplement to the Prospectus contained in the Initial Registration Statement or any New Registration Statement under the Securities Act, (B) an annual report on Form 20-F under the Exchange Act with respect to a fiscal year ending after the Commencement Date, (C) an amendment on Form 20-F/A to an annual report on Form 20-F under the Exchange Act with respect to a fiscal year ending after the Commencement Date, which contains amended material financial information (or a restatement of material financial information) or an amendment to other material information contained in a previously filed Form 20-F, and (D) a Commission Document under the Exchange Act (other than those referred to in clauses (ii)(A) and (ii)(B) of this Section 5.15), which contains amended material financial information (or a restatement of material financial information) or an amendment to other material information contained or incorporated by reference in the Initial Registration Statement, any New Registration Statement, or the Prospectus or any Prospectus Supplement contained in the Initial Registration Statement or any New Registration Statement (it being hereby acknowledged and agreed that the filing by the Company with the Commission of a periodic financial report that includes only updated financial information as of the end of such period shall not, in and of itself, constitute an “amendment” or “restatement” for purposes of clause (ii) of this Section 5.15), in each case of this clause (ii) if the Company is not also then required under the Securities Act to file a post-effective amendment to the Initial Registration Statement, any New Registration Statement or a post-effective amendment to any New Registration Statement, in each case with respect to a fiscal year ending after the Commencement Date, to register the resale of Securities by the Investor under the Securities Act pursuant to this Agreement and the Registration Rights Agreement, and in any case of this clause (ii), not more than once per calendar quarter, the Company shall (I) deliver to the Investor a Compliance Certificate, dated such date, and (II) cause to be furnished to the Investor an opinion “bring down” from counsel to the Company substantially in the form mutually agreed to by the Company and the Investor prior to the date of this Agreement, modified, as necessary, to relate to such Registration Statement or post-effective amendment, or the Prospectus contained therein as then amended or supplemented by such Prospectus Supplement, as applicable (each such opinion, a “Bring Down Opinion”).
Section 5.16 FINRA Corporate Actions. The Company shall not deliver a Fixed Purchase Notice, a VWAP Purchase Notice, nor an Additional VWAP Purchase Notice following the submission to FINRA of a Corporate Action (the “Corporate Action"), including a reverse stock split, unless and until FINRA has approved and effectuated or otherwise rejected and closed such Corporate Action.
ARTICLE VI
CONDITIONS TO CLOSING AND CONDITIONS TO THE SALE AND
PURCHASE OF THE SHARES
Section 6.1. Conditions Precedent to Closing. The Closing is subject to the satisfaction of each of the conditions set forth in this Section 6.1 on the Closing Date.
(i) Accuracy of the Investor’s Representations and Warranties. The representations and warranties of the Investor contained in this Agreement (a) that are not qualified by “materiality” shall be true and correct in all material respects as of the Closing Date, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct in all material respects as of such other date and (b) that are qualified by “materiality” shall be true and correct as of the Closing Date, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct as of such other date.
(ii) Accuracy of the Company’s Representations and Warranties. The representations and warranties of the Company contained in this Agreement (a) that are not qualified by “materiality” or “Material Adverse Effect” shall be true and correct in all material respects as of the Closing Date, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct in all material respects as of such other date and (b) that are qualified by “materiality” or “Material Adverse Effect” shall be true and correct as of the Closing Date, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct as of such other date.
(iii) Issuance of Commitment Note. On the Closing Date, simultaneously with the execution of this Agreement, the Company shall issue the Commitment Note to the Investor or its designee(s) (in which case such designee(s) name(s) shall have been provided to the Company prior to the Closing Date), in consideration for the Investor’s execution and delivery of this Agreement. For the avoidance of doubt, the Commitment Note shall be fully earned as of the Closing Date (and the Conversion Shares, when converted in accordance with the terms of the Commitment Note, shall be fully earned as of such conversion date) regardless of whether any Fixed Purchases, VWAP Purchases or Additional VWAP Purchases are made hereunder or any subsequent termination of this Agreement.
(iv) Closing Deliverables. At the Closing, counterpart signature pages of this Agreement and the Registration Rights Agreement executed by each of the parties hereto shall be delivered as provided in Section 1.2. Simultaneously with the execution and delivery of this Agreement and the Registration Rights Agreement, the Investor’s counsel shall have received the closing certificate from the Company, dated as of the Closing Date, in the form of Exhibit B hereto.
Section 6.2. Conditions Precedent to Commencement. The right of the Company to commence delivering Fixed Purchase Notices, VWAP Purchase Notices and Additional VWAP Purchase Notices under this Agreement, and the obligation of the Investor to accept Fixed Purchase Notices, VWAP Purchase Notices and Additional VWAP Purchase Notices delivered to the Investor by the Company under this Agreement, are subject to the initial satisfaction, at the time of Commencement, of each of the conditions set forth in this Section 6.2.
(i) Accuracy of the Company’s Representations and Warranties. The representations and warranties of the Company contained in this Agreement (a) that are not qualified by “materiality” or “Material Adverse Effect” shall have been true and correct in all material respects when made and shall be true and correct in all material respects as of the Commencement Date with the same force and effect as if made on such date, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct in all material respects as of such other date and (b) that are qualified by “materiality” or “Material Adverse Effect” shall have been true and correct when made and shall be true and correct as of the Commencement Date with the same force and effect as if made on such date, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct as of such other date.
(ii) Performance of the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Company at or prior to the Commencement. The Company shall deliver to the Investor on the Commencement Date the compliance certificate substantially in the form attached hereto as Exhibit C (the “Compliance Certificate”).
(iii) No Material Notices. None of the following events shall have occurred and be continuing: (a) receipt of any request by the Commission or any other federal or state governmental authority for any additional information relating to the Initial Registration Statement, or the Prospectus contained therein or any Prospectus Supplement thereto, or for any amendment of or supplement to the Initial Registration Statement, the Prospectus contained therein or any Prospectus Supplement thereto; (b) the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Initial Registration Statement or prohibiting or suspending the use of the Prospectus contained therein or any Prospectus Supplement thereto, or of the suspension of qualification or exemption from qualification of the Securities for offering or sale in any jurisdiction, or the initiation or contemplated initiation of any proceeding for such purpose; or (c) the occurrence of any event or the existence of any condition or state of facts, which makes any statement of a material fact made in the Initial Registration Statement, the Prospectus contained therein or any Prospectus Supplement thereto untrue or which requires the making of any additions to or changes to the statements then made in the Initial Registration Statement, the Prospectus contained therein or any Prospectus Supplement thereto in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements then made therein (in the case of the Prospectus or any Prospectus Supplement, in light of the circumstances under which they were made) not misleading, or which requires an amendment to the Initial Registration Statement or a supplement to the Prospectus contained therein or any Prospectus Supplement thereto to comply with the Securities Act or any other law. The Company shall not have any Knowledge of any event that would reasonably be expected to have the effect of causing the suspension of the effectiveness of the Initial Registration Statement or the prohibition or suspension of the use of the Prospectus contained therein or any Prospectus Supplement thereto in connection with the resale of the Registrable Securities by the Investor.
(iv) Other Commission Filings. The Current Report shall have been filed with the Commission as required pursuant to Section 1.3. The final Prospectus included in any post-effective amendment to the Initial Registration Statement, and any Prospectus Supplement thereto, required to be filed by the Company with the Commission pursuant to Section 1.3 and the Registration Rights Agreement after the Commencement Date and prior to the applicable Fixed Purchase Date and the applicable VWAP Purchase Date and Additional VWAP Purchase Date (as applicable), shall have been filed with the Commission in accordance with Section 1.3 and the Registration Rights Agreement. The final Prospectus included in any New Registration Statement and in any post-effective amendment thereto, and any Prospectus Supplement thereto, required to be filed by the Company with the Commission pursuant to Section 1.3 and the Registration Rights Agreement after the Commencement Date and prior to the applicable Fixed Purchase Date and the applicable VWAP Purchase Date and Additional VWAP Purchase Date (as applicable), shall have been filed with the Commission in accordance with Section 1.3 and the Registration Rights Agreement. All reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the Commission pursuant to the reporting requirements of the Exchange Act, including all material required to have been filed pursuant to Section 13(a) or 15(d) of the Exchange Act, after the Commencement Date and prior to the applicable Fixed Purchase Date and the applicable VWAP Purchase Date and Additional VWAP Purchase Date (as applicable), shall have been filed with the Commission and, if any Registrable Securities are covered by a Registration Statement on Form S-3, such filings shall have been made within the applicable time period prescribed for such filing under the Exchange Act.
(v) No Suspension of Trading in or Notice of Delisting of Ordinary Shares. Trading in the Ordinary Shares shall not have been suspended by the Commission, the Trading Market or the FINRA (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Commencement Date), the Company shall not have received any final and non-appealable notice that the listing or quotation of the Ordinary Shares on the Trading Market shall be terminated on a date certain (unless, prior to such date certain, the Ordinary Shares is listed or quoted on any other Eligible Market), nor shall there have been imposed any suspension of, or restriction on, accepting additional deposits of the Ordinary Shares, electronic trading or book-entry services by DTC with respect to the Ordinary Shares that is continuing, the Company shall not have received any notice from DTC to the effect that a suspension of, or restriction on, accepting additional deposits of the Ordinary Shares, electronic trading or book-entry services by DTC with respect to the Ordinary Shares is being imposed or is contemplated (unless, prior to such suspension or restriction, DTC shall have notified the Company in writing that DTC has determined not to impose any such suspension or restriction).
(vi) Compliance with Laws. The Company shall have complied in all material respects with all applicable federal, state and local governmental laws, rules, regulations and ordinances in connection with the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the Company shall have obtained all permits and qualifications required by any applicable state securities or “Blue Sky” laws for the offer and sale of the Securities by the Company to the Investor and the subsequent resale of the Registrable Securities by the Investor (or shall have the availability of exemptions therefrom).
(vii) No Injunction. No statute, regulation, order, decree, writ, ruling or injunction shall have been enacted, entered, promulgated, threatened or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of, or which would materially modify or delay any of the transactions contemplated by, the Transaction Documents.
(viii) No Proceedings or Litigation. No action, suit or proceeding before any arbitrator or any court or governmental authority shall have been commenced, and no inquiry or investigation by any governmental authority shall have been commenced, against the Company or any Subsidiary, or any of the officers, directors or Affiliates of the Company or any Subsidiary, seeking to restrain, prevent or change the transactions contemplated by the Transaction Documents, or seeking material damages in connection with such transactions.
(ix) Listing of Securities. All of the Securities that have been and may be issued pursuant to this Agreement shall have been approved for listing or quotation on the Trading Market as of the Commencement Date, subject only to notice of issuance.
(x) No Material Adverse Effect. No condition, occurrence, state of facts or event constituting a Material Adverse Effect shall have occurred and be continuing.
(xi) No Bankruptcy Proceedings. No Person shall have commenced a proceeding against the Company pursuant to or within the meaning of any Bankruptcy Law. The Company shall not have, pursuant to or within the meaning of any Bankruptcy Law, (a) commenced a voluntary case, (b) consented to the entry of an order for relief against it in an involuntary case, (c) consented to the appointment of a Custodian of the Company for all or substantially all of the Company’s property, or (d) made a general assignment for the benefit of its creditors. A court of competent jurisdiction shall not have entered an order or decree under any Bankruptcy Law that (I) is for relief against the Company in an involuntary case, (II) appoints a Custodian of the Company for all or substantially all of the Company’s property, or (III) orders the liquidation of the Company or of the Subsidiaries.
(xii) Delivery of Commencement Irrevocable Transfer Agent Instructions and Notice of Effectiveness. The Commencement Irrevocable Transfer Agent Instructions shall have been executed by the Company and delivered to acknowledged in writing by the Transfer Agent, and the Notice of Effectiveness relating to the Initial Registration Statement shall have been executed by the Company’s counsel and delivered to the Transfer Agent.
(xiii) Reservation of Shares. As of the Commencement Date, the Company shall have reserved out of its authorized and unissued Ordinary Shares, Ordinary Shares solely for the purpose of effecting Fixed Purchases, VWAP Purchases, and Additional VWAP Purchases under this Agreement.
(xiv) Opinions of Company Counsel. On the Commencement Date, the Investor shall have received the opinion and negative assurances from counsel to the Company, dated the Commencement Date, in the forms mutually agreed to by the Company and the Investor prior to the date of this Agreement.
Section 6.3. Conditions Precedent to Purchases by Investor. The right of the Company to deliver Fixed Purchase Notices, VWAP Purchase Notices and Additional VWAP Purchase Notices under this Agreement after the Commencement Date, and the obligation of the Investor to accept Fixed Purchase Notices, VWAP Purchase Notices and Additional VWAP Purchase Notices under this Agreement after the Commencement Date, are subject to the satisfaction of each of the conditions set forth in this Section 6.3: (i) with respect to each Fixed Purchase after the Commencement Date, at the time of delivery of the applicable Fixed Purchase Notice to the Investor on the applicable Fixed Purchase Date for such Fixed Purchase, (ii) with respect to each VWAP Purchase after the Commencement Date, (A) at the time of delivery of the applicable VWAP Purchase Notice to the Investor and (B) immediately prior to the applicable VWAP Purchase Commencement Time on the applicable VWAP Purchase Date for such VWAP Purchase, and (iii) with respect to each Additional VWAP Purchase after the Commencement Date, (A) at the time of delivery of the applicable Additional VWAP Purchase Notice to the Investor and (B) immediately prior to the applicable Additional VWAP Purchase Commencement Time on the applicable Additional VWAP Purchase Date for such Additional VWAP Purchase (each such time referred to in clauses (i), (ii) and (iii) hereof, a “Notice Delivery Time”).
(i) Satisfaction of Certain Prior Conditions. Each of the conditions set forth in subsections (i), (ii), and (vii) through (xiv) set forth in Section 6.2 shall be satisfied at the applicable Notice Delivery Time after the Commencement Date (with the terms “Commencement” and “Commencement Date” in the conditions set forth in subsections (i) and (ii) of Section 6.2 replaced with “applicable Notice Delivery Time”); provided, however, that the Company shall not be required to deliver the Compliance Certificate after the Commencement Date, except as provided in Section 5.1 and Section 6.2(ii).
(ii) Any Required New Registration Statement Effective. Any New Registration Statement covering the resale by the Investor of the Registrable Securities, included therein, and any post-effective amendment thereto, required to be filed by the Company with the Commission pursuant to the Registration Rights Agreement after the Commencement Date and prior to the applicable Fixed Purchase Date, the applicable VWAP Purchase Date and the applicable Additional VWAP Purchase Date (as applicable), in each case shall have been declared effective under the Securities Act by the Commission and shall remain effective for the applicable Registration Period, and the Investor shall be permitted to utilize the Prospectus therein, and any Prospectus Supplement thereto, to resell (a) all of the then-issued Conversion Shares (if any) included in such New Registration Statement, and any post-effective amendment thereto, (b) all of the Shares included in such New Registration Statement, and any post-effective amendment thereto, that have been issued and sold to the Investor hereunder pursuant to all Fixed Purchase Notices, all VWAP Purchase Notices and all Additional VWAP Purchase Notices (as applicable) delivered by the Company to the Investor prior to such applicable Fixed Purchase Date, such applicable VWAP Purchase Date, and such applicable Additional VWAP Purchase Date, respectively, and (c) all of the Shares included in such new Registration Statement, and any post-effective amendment thereto, that are issuable pursuant to the applicable Fixed Purchase Notice, the applicable VWAP Purchase Notice, and the applicable Additional VWAP Purchase Notice (as applicable) delivered by the Company to the Investor with respect to a Fixed Purchase, a VWAP Purchase, and an Additional VWAP Purchase, respectively, to be effected hereunder on such applicable Fixed Purchase Date, such applicable VWAP Purchase Date, and such Additional VWAP Purchase Date, respectively.
(iii) Delivery of Subsequent Irrevocable Transfer Agent Instructions and Notice of Effectiveness. With respect to any post-effective amendment to the Initial Registration Statement, any New Registration Statement or any post-effective amendment to any New Registration Statement, in each case declared effective by the Commission after the Commencement Date, the Company shall have delivered or caused to be delivered to the Transfer Agent (a) irrevocable instructions in the form substantially similar to the Commencement Irrevocable Transfer Agent Instructions executed by the Company and acknowledged in writing by the Transfer Agent and (b) the Notice of Effectiveness, in each case modified as necessary to refer to such Registration Statement or post-effective amendment and the Registrable Securities included therein, to issue the Registrable Securities included therein as DWAC Shares in accordance with the terms of this Agreement and the Registration Rights Agreement.
(iv) No Material Notices. None of the following events shall have occurred and be continuing: (a) receipt of any request by the Commission or any other federal or state governmental authority for any additional information relating to the Initial Registration Statement or any post-effective amendment thereto, any New Registration Statement or any post-effective amendment thereto, or the Prospectus contained in any of the foregoing or any Prospectus Supplement thereto, or for any amendment of or supplement to the Initial Registration Statement or any post-effective amendment thereto, any New Registration Statement or any post-effective amendment thereto, or the Prospectus contained in any of the foregoing or any Prospectus Supplement thereto; (b) the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Initial Registration Statement or any post-effective amendment thereto, any New Registration Statement or any post-effective amendment thereto, or prohibiting or suspending the use of the Prospectus contained in any of the foregoing or any Prospectus Supplement thereto, or of the suspension of qualification or exemption from qualification of the Securities for offering or sale in any jurisdiction, or the initiation or contemplated initiation of any proceeding for such purpose; or (c) the occurrence of any event or the existence of any condition or state of facts, which makes any statement of a material fact made in the Initial Registration Statement or any post-effective amendment thereto, any New Registration Statement or any post-effective amendment thereto, or the Prospectus contained in any of the foregoing or any Prospectus Supplement thereto untrue or which requires the making of any additions to or changes to the statements then made in the Initial Registration Statement or any post-effective amendment thereto, any New Registration Statement or any post-effective amendment thereto, or the Prospectus contained in any of the foregoing or any Prospectus Supplement thereto in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements then made therein (in the case of the Prospectus or any Prospectus Supplement, in light of the circumstances under which they were made) not misleading, or which requires an amendment to the Initial Registration Statement or any post-effective amendment thereto, any New Registration Statement or any post-effective amendment thereto, or the Prospectus contained in any of the foregoing or any Prospectus Supplement thereto to comply with the Securities Act or any other law (other than the transactions contemplated by the applicable Fixed Purchase Notice, the applicable VWAP Purchase Notice, and the applicable Additional VWAP Purchase Notice (as applicable) delivered by the Company to the Investor with respect to a Fixed Purchase, a VWAP Purchase, and an Additional VWAP Purchase, respectively, to be effected hereunder on such applicable Fixed Purchase Date, such applicable VWAP Purchase Date, and such applicable Additional VWAP Purchase Date, respectively, and the settlement thereof). The Company shall not have any Knowledge of any event that would reasonably be expected to have the effect of causing the suspension of the effectiveness of the Initial Registration Statement or any post-effective amendment thereto, any New Registration Statement or any post-effective amendment thereto, or the prohibition or suspension of the use of the Prospectus contained in any of the foregoing or any Prospectus Supplement thereto in connection with the resale of the Registrable Securities by the Investor.
(v) Other Commission Filings. The final Prospectus included in any post-effective amendment to the Initial Registration Statement, and any Prospectus Supplement thereto, required to be filed by the Company with the Commission pursuant to Section 1.3 and the Registration Rights Agreement after the Commencement Date and prior to the applicable Fixed Purchase Date and the applicable VWAP Purchase Date and Additional VWAP Purchase Date (as applicable), shall have been filed with the Commission in accordance with Section 1.3 and the Registration Rights Agreement. The final Prospectus included in any New Registration Statement and in any post-effective amendment thereto, and any Prospectus Supplement thereto, required to be filed by the Company with the Commission pursuant to Section 1.3 and the Registration Rights Agreement after the Commencement Date and prior to the applicable Fixed Purchase Date and the applicable VWAP Purchase Date and Additional VWAP Purchase Date (as applicable), shall have been filed with the Commission in accordance with Section 1.3 and the Registration Rights Agreement. All reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the Commission pursuant to the reporting requirements of the Exchange Act, including all material required to have been filed pursuant to Section 13(a) or 15(d) of the Exchange Act, prior to the Commencement Date shall have been made.
(vi) No Suspension of Trading in or Notice of Delisting of Ordinary Shares. Trading in the Ordinary Shares shall not have been suspended by the Commission, the Trading Market or FINRA (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the applicable Fixed Purchase Date, VWAP Purchase Date or Additional VWAP Purchase Date, as applicable), the Company shall not have received any final and non-appealable notice that the listing or quotation of the Ordinary Shares on the Trading Market shall be terminated on a date certain (unless, prior to such date certain, the Ordinary Shares is listed or quoted on any other Eligible Market), nor shall there have been imposed any suspension of, or restriction on, accepting additional deposits of the Ordinary Shares, electronic trading or book-entry services by DTC with respect to the Ordinary Shares that is continuing, the Company shall not have received any notice from DTC to the effect that a suspension of, or restriction on, accepting additional deposits of the Ordinary Shares, electronic trading or book-entry services by DTC with respect to the Ordinary Shares is being imposed or is contemplated (unless, prior to such suspension or restriction, DTC shall have notified the Company in writing that DTC has determined not to impose any such suspension or restriction).
(vii) Certain Limitations. The issuance and sale of the Shares issuable pursuant to the applicable Fixed Purchase Notice, applicable VWAP Purchase Notice, and applicable Additional VWAP Purchase Notice (as applicable) shall not (a) exceed the applicable Fixed Purchase Maximum Amount, the applicable VWAP Purchase Maximum Amount and the applicable Additional VWAP Purchase Maximum Amount, respectively, or (b) cause the Beneficial Ownership Limitation to be exceeded.
(viii) Shares Authorized and Delivered. All of the Shares issuable pursuant to the applicable Fixed Purchase Notice, the applicable VWAP Purchase Notice, and the applicable Additional VWAP Purchase Notice (as applicable) shall have been duly authorized by all necessary corporate action of the Company. All Shares relating to all prior Fixed Purchase Notices, VWAP Purchase Notices, and Additional VWAP Purchase Notices required to have been received by the Investor as DWAC Shares under this Agreement prior to the applicable Notice Delivery Time for the applicable Fixed Purchase, applicable VWAP Purchase and applicable Additional VWAP Purchase (as applicable) shall have been delivered to the Investor as DWAC Shares in accordance with this Agreement.
(ix) Bring Down Opinions of Company Counsel. The Investor shall have received (a) all Bring Down Opinions from counsel to the Company for which the Company was obligated to instruct their counsel to deliver to the Investor prior to the applicable Notice Delivery Time for the applicable Fixed Purchase, applicable VWAP Purchase, and applicable Additional VWAP Purchase (as applicable) and (b) all Compliance Certificates from the Company that the Company was obligated to deliver to the Investor prior to the applicable Notice Delivery Time for the applicable Fixed Purchase, applicable VWAP Purchase and applicable Additional VWAP Purchase (as applicable), in each case in accordance with Section 5.15.
ARTICLE VII
TERMINATION
Section 7.1. Automatic Termination; Termination by Consent. Unless earlier terminated as provided hereunder, this Agreement shall terminate automatically, without any further action or notice by any Person, on the earliest to occur of (i) the expiration of the Registration Statement pursuant to Rule 415(a)(5) of the Securities Act, (ii) the date on which the Investor shall have purchased the Total Purchase Commitment of Shares pursuant to this Agreement, (iii) the date on which the Ordinary Shares shall have failed to be listed or quoted on the Trading Market or any Eligible Market, (iv) the thirtieth (30th) Trading Day next following the date on which, pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, in each case that is not discharged or dismissed prior to such thirtieth (30th) Trading Day, and (v) the date on which, pursuant to or within the meaning of any Bankruptcy Law, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors. Subject to Section 7.3, this Agreement may be terminated at any time by the mutual written consent of the parties, effective as of the date of such mutual written consent unless otherwise provided in such written consent.
Section 7.2. Other Termination. Subject to Section 7.3, the Company may terminate this Agreement after the Commencement Date effective upon one (1) Trading Day’s prior written notice to the Investor in accordance with Section 9.4; provided, however, that (i) the Company shall have issued and delivered the Commitment Note to the Investor in accordance with Section 2.6 and paid all fees and amounts to the Investor’s counsel required to be paid pursuant to Section 9.1 of this Agreement prior to such termination, and (ii) prior to issuing any press release, or making any public statement or announcement, with respect to such termination, the Company shall consult with the Investor and its counsel on the form and substance of such press release or other disclosure, which consent shall not be unreasonably delayed or withheld. Subject to Section 7.3, this Agreement may be terminated at any time by the mutual written consent of the parties, effective as of the date of such mutual written consent unless otherwise provided in such written consent. Subject to Section 7.3, the Investor shall have the right to terminate this Agreement effective upon ten (10) Trading Days’ prior written notice to the Company in accordance with Section 9.4, if: (a) any condition, occurrence, state of facts or event constituting a Material Adverse Effect has occurred and is continuing; (b) a Fundamental Transaction shall have occurred; (c) the Initial Registration Statement and any New Registration Statement is not filed by the applicable Filing Deadline therefor or declared effective by the Commission by the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement) therefor, or the Company is otherwise in breach or default in any material respect under any of the other provisions of the Registration Rights Agreement, and, if such failure, breach or default is capable of being cured, such failure, breach or default is not cured within 15 Trading Days after notice of such failure, breach or default is delivered to the Company pursuant to Section 9.4; (d) while a Registration Statement, or any post-effective amendment thereto, is required to be maintained effective pursuant to the terms of the Registration Rights Agreement and the Investor holds any Registrable Securities, the effectiveness of such Registration Statement, or any post-effective amendment thereto, lapses for any reason (including, without limitation, the issuance of a stop order by the Commission) or such Registration Statement or any post-effective amendment thereto, the Prospectus contained therein or any Prospectus Supplement thereto otherwise becomes unavailable to the Investor for the resale of all of the Registrable Securities included therein in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of 25 consecutive Trading Days, other than due to acts of the Investor; (e) trading in the Ordinary Shares on the Trading Market (or if the Ordinary Shares are then listed on an Eligible Market, trading in the Ordinary Shares on such Eligible Market) shall have been suspended and such suspension continues for a period of three (3) consecutive Trading Days; or (f) the Company is in material breach or default of this Agreement, and, if such breach or default is capable of being cured, such breach or default is not cured within 15 Trading Days after notice of such breach or default is delivered to the Company (as applicable) pursuant to Section 9.4. Unless notification thereof is required elsewhere in this Agreement (in which case such notification shall be provided in accordance with such other provision), the Company shall promptly (but in no event later than 48 hours) notify the Investor (and, if required under Applicable Law, including, without limitation, Regulation FD promulgated by the Commission, or under the applicable rules and regulations of the Trading Market (or if the Ordinary Shares are then listed on an Eligible Market, the rules and regulations of such Eligible Market), the Company shall publicly disclose such information in accordance with Regulation FD and the applicable rules and regulations of the Trading Market, or the applicable rules and regulations of such Eligible Market, as applicable) upon becoming aware of any of the events set forth in the immediately preceding sentence.
Section 7.3. Effect of Termination. In the event of termination by the Company or the Investor (other than by mutual termination) pursuant to Section 7.2, written notice thereof shall forthwith be given to the other party as provided in Section 9.4 and the transactions contemplated by this Agreement shall be terminated without further action by either party. If this Agreement is terminated as provided in Section 7.1 or Section 7.2, this Agreement shall become void and of no further force and effect, except that (i) the provisions of Article IV (Representations and Warranties of the Company), Article VIII (Indemnification), Article IX (Miscellaneous) and this Article VII (Termination) shall remain in full force and effect indefinitely notwithstanding such termination, and, (ii) so long as the Investor owns any Securities, the covenants and agreements of the Company contained in Article V (Covenants) shall remain in full force and notwithstanding such termination for a period of six (6) months following such termination. Notwithstanding anything in this Agreement to the contrary, no termination of this Agreement by any party shall (i) become effective prior to the first Trading Day immediately following the settlement date related to any pending Fixed Purchase Notice, any pending VWAP Purchase Notice, or any pending Additional VWAP Purchase Notice (as applicable) that has not been fully settled in accordance with the terms and conditions of this Agreement (it being hereby acknowledged and agreed that no termination of this Agreement shall limit, alter, modify, change or otherwise affect any of the parties’ respective rights or obligations under the Transaction Documents with respect to any pending Fixed Purchase, pending VWAP Purchase, and pending Additional VWAP Purchase (as applicable), and that the parties shall fully perform their respective obligations with respect to any such pending Fixed Purchase, any such pending VWAP Purchase, and any such pending Additional VWAP Purchase (as applicable) under the Transaction Documents, provided all of the conditions to the settlement thereof set forth in Article VI are timely satisfied), (ii) limit, alter, modify, change or otherwise affect the parties’ respective rights or obligations under the Registration Rights Agreement, all of which shall survive any such termination, (iii) affect the Investor Expense Reimbursement paid to the Investor, all of which shall be non-refundable when paid as of the Closing Date pursuant to Section 9.1(i), regardless of whether any Fixed Purchases, VWAP Purchases, or Additional VWAP Purchases are made or settled hereunder or any subsequent termination of this Agreement, or (iv) affect any Conversion Shares previously issued or delivered, or any rights of any holder thereof, it being hereby acknowledged and agreed that the Commitment Note shall be fully earned as of the Closing Date, regardless of whether any Fixed Purchases, VWAP Purchases or Additional VWAP Purchases are made or settled hereunder or any subsequent termination of this Agreement. Nothing in this Section 7.3 shall be deemed to release the Company or the Investor from any liability for any breach or default under this Agreement or any of the other Transaction Documents to which it is a party, or to impair the respective rights of the Company and the Investor to compel specific performance by the other party of its obligations under the Transaction Documents to which it is a party.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Indemnification of Investor. In consideration of the Investor’s execution and delivery of this Agreement and acquiring the Securities hereunder and in addition to all of the other respective obligations of the Company under the Transaction Documents to which it is a party, subject to the provisions of this Section 8.1, the Company shall indemnify and hold harmless the Investor, each of its directors, officers, shareholders, members, partners, employees, representatives, agents and advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title), each Person, if any, who controls the Investor (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act), and the respective directors, officers, shareholders, members, partners, employees, representatives, agents and advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) of such controlling Persons (each, an “Investor Party”), from and against all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses (including all judgments, amounts paid in settlement, court costs, reasonable attorneys’ fees and costs of defense and investigation) (collectively, “Damages”) that any Investor Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents to which it is a party or (b) any action, suit, claim or proceeding (including for these purposes a derivative action brought on behalf of the Company) instituted against such Investor Party arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents, other than claims for indemnification within the scope of Section 6 of the Registration Rights Agreement; provided, however, that (x) the foregoing indemnity shall not apply to any Damages to the extent, but only to the extent, that such Damages resulted directly and primarily from any acts or failures to act, undertaken or omitted to be taken by such Investor Party through its fraud, bad faith, gross negligence, or willful or reckless misconduct.
The Company shall reimburse any Investor Party promptly upon demand (with accompanying presentation of documentary evidence) for all legal and other costs and expenses reasonably incurred by such Investor Party in connection with (i) any action, suit, claim or proceeding, whether at law or in equity, to enforce compliance by the Company with any provision of the Transaction Documents to which it is a party or (ii) any other any action, suit, claim or proceeding, whether at law or in equity, with respect to which it is entitled to indemnification under this Section 8.1; provided that the Investor shall promptly reimburse the Company for all such legal and other costs and expenses to the extent a court of competent jurisdiction determines that any Investor Party was not entitled to such reimbursement.
An Investor Party’s right to indemnification or other remedies based upon the representations, warranties, covenants and agreements of the Company set forth in the Transaction Documents to which it is a party shall not in any way be affected by any investigation or knowledge of such Investor Party. Such representations, warranties, covenants and agreements shall not be affected or deemed waived by reason of the fact that an Investor Party knew or should have known that any representation or warranty might be inaccurate or that the Company failed to comply with any agreement or covenant. Any investigation by such Investor Party shall be for its own protection only and shall not affect or impair any right or remedy hereunder.
To the extent that the foregoing undertakings by the Company set forth in this Section 8.1 may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Damages which is permissible under Applicable Law.
Section 8.2. Indemnification Procedures. Promptly after an Investor Party receives notice of a claim or the commencement of an action for which the Investor Party intends to seek indemnification under Section 8.1, the Investor Party will notify the Company in writing of the claim or commencement of the action, suit or proceeding; provided, however, that failure to notify the Company will not relieve the Company from liability under Section 8.1, except to the extent it has been materially prejudiced by the failure to give notice. The Company will be entitled to participate in the defense of any claim, action, suit or proceeding as to which indemnification is being sought, and if the Company acknowledges in writing the obligation to indemnify the Investor Party against whom the claim or action is brought, the Company may (but will not be required to) assume the defense against the claim, action, suit or proceeding with counsel satisfactory to it. After the Company notifies the Investor Party that the Company wishes to assume the defense of a claim, action, suit or proceeding, the Company will not be liable for any further legal or other expenses incurred by the Investor Party in connection with the defense against the claim, action, suit or proceeding except that if, in the opinion of counsel to the Investor Party, it would be inappropriate under the applicable rules of professional responsibility for the same counsel to represent both the Company and such Investor Party. In such event, the Company will pay the reasonable fees and expenses of no more than one separate counsel for all such Investor Parties promptly as such fees and expenses are incurred. Each Investor Party, as a condition to receiving indemnification as provided in Section 8.1, will cooperate in all reasonable respects with the Company in the defense of any action or claim as to which indemnification is sought. The Company will not be liable for any settlement of any action effected without its prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. The Company will not, without the prior written consent of the Investor Party, effect any settlement of a pending or threatened action with respect to which an Investor Party is, or is informed that it may be, made a party and for which it would be entitled to indemnification, unless the settlement includes an unconditional release of the Investor Party from all liability and claims which are the subject matter of the pending or threatened action.
The remedies provided for in this Article VIII are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Investor Party at law or in equity.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Certain Fees and Expenses; Commencement Irrevocable Transfer Agent Instructions; Use of Proceeds.
(i) Certain Fees and Expenses. Each party shall bear its own fees and expenses related to the transactions contemplated by this Agreement; provided, however, that immediately following the initial Settlement hereunder, the Company shall pay, by wire transfer of immediately available funds to an account designated by the Investor, an amount equal to $100,000 to be applied against the Investor’s reasonable out-of-pocket expenses, including the legal fees and disbursements of the Investor’s legal counsel, incurred by the Investor in connection with the preparation, negotiation, execution and delivery of the Transaction Documents by the Investor and its due diligence investigation of the Company (such amount, the “Investor Expense Reimbursement”). For the avoidance of doubt, the Investor Expense Reimbursement will not be payable in the event no Fixed Purchase, VWAP Purchases or Additional VWAP Purchases are made or settled hereunder. The Company shall pay all U.S. federal, state and local stamp and other similar transfer and other taxes and duties levied in connection with issuance of the Securities pursuant hereto.
(ii) Irrevocable Transfer Agent Instructions; Notice of Effectiveness. Upon the Effective Date of the Initial Registration Statement, the Company shall deliver or cause to be delivered to the Transfer Agent (and thereafter, shall deliver or cause to be delivered to any subsequent transfer agent of the Company), (i) irrevocable instructions executed by the Company and acknowledged in writing by the Transfer Agent (the “Commencement Irrevocable Transfer Agent Instructions”) and (ii) the notice of effectiveness in the form attached as an exhibit to the Registration Rights Agreement (the “Notice of Effectiveness”) relating to the Initial Registration Statement executed by the Company’s counsel. With respect to any post-effective amendment to the Initial Registration Statement, any New Registration Statement or any post-effective amendment to any New Registration Statement, in each case declared effective by the Commission after the Commencement Date, the Company shall deliver or cause to be delivered to the Transfer Agent (and thereafter, shall deliver or cause to be delivered to any subsequent transfer agent of the Company) (i) irrevocable instructions in the form substantially similar to the Commencement Irrevocable Transfer Agent Instructions executed by the Company and acknowledged in writing by the Transfer Agent and (ii) the Notice of Effectiveness, in each case modified as necessary to refer to such Registration Statement or post-effective amendment and the Registrable Securities included therein. For the avoidance of doubt, all Shares and Conversion Shares to be issued from and after Commencement to or for the benefit of the Investor pursuant to this Agreement shall be issued to the Investor or its designee only as DWAC Shares. The Company represents and warrants to the Investor that, while this Agreement is effective, no instruction other than those referred to in this Section 9.1(ii) will be given by the Company to the Transfer Agent, or any successor transfer agent of the Company, with respect to the Shares and the Conversion Shares from and after Commencement, and the Shares and the Conversion Shares (as applicable) covered by the Initial Registration Statement or any post-effective amendment thereof, or any New Registration Statement or post-effective amendment thereof, as applicable, shall otherwise be freely transferable on the books and records of the Company and no stop transfer instructions shall be maintained against the transfer thereof. The Company agrees that if the Company fails to fully comply with the provisions of this Section 9.1(ii) within three (3) Trading Days after the date on which the Investor has provided the deliverables referred to above that the Investor is required to provide to the Company or the Transfer Agent, the Company shall, at the Investor’s written instruction, purchase from the Investor all of the Ordinary Shares purchased or acquired by the Investor pursuant to this Agreement that contain the restrictive legend referred to in Section 7.i of the Commitment Note (or any similar restrictive legend) at the greater of (i) the purchase price paid for such Ordinary Shares (as applicable) and (ii) the Closing Sale Price of the Ordinary Shares on the date of the Investor’s written instruction.
(iii) Use of Proceeds. Thirty-three percent (33%) of the net proceeds received by the Company from a Fixed Purchase Notice, a VWAP Purchase Notice, and an Additional VWAP Purchase Notice shall be used to pay the then unpaid balance and/or accrued and unpaid interest on the demand promissory note issued by the Company to the Investor attached hereto as Exhibit E. All payments shall be applied first to any accrued but unpaid interest and then to the reduction of the unpaid principal balance of such obligation.
Section 9.2. Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial.
(i) The Company and the Investor acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Company, on the one hand, and the Investor, on the other hand, shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement by the other party and to enforce specifically the terms and provisions hereof (without the necessity of showing economic loss and without any bond or other security being required), this being in addition to any other remedy to which either party may be entitled by law or equity.
(ii) Each of the Company and the Investor (a) hereby irrevocably submits to the jurisdiction of the U.S. District Court and other courts of the United States sitting in the State of New York for the purposes of any suit, action or proceeding arising out of or relating to this Agreement, and (b) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Investor consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 9.2 shall affect or limit any right to serve process in any other manner permitted by law.
(iii) EACH OF THE COMPANY AND THE INVESTOR HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO. EACH OF THE COMPANY AND THE INVESTOR (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.2.
Section 9.3. Entire Agreement. The Transaction Documents set forth the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written, with respect to such matters. There are no promises, undertakings, representations or warranties by either party relative to subject matter hereof not expressly set forth in the Transaction Documents. The Disclosure Schedule and all exhibits to this Agreement are hereby incorporated by reference in, and made a part of, this Agreement as if set forth in full herein.
Section 9.4. Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery or electronic mail delivery at the address or number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The address for such communications shall be:
If to the Company:
Hub Cyber Security Ltd.
2 Kaplan St.
Tel Aviv 6473403, Israel
Attention: Tuvia Grossman, General Counsel and Chief Legal Officer
Email: tuvia.grossman@hubsecurity.io
With a copy (which shall not constitute notice) to:
Goldfarb, Gross, Seligman & Co.
One Azrieli Center, Round Building
Tel-Aviv 67021, Israel
Attention: Adam M. Klein; Daniel P. Kahn
Email: adam.klein@goldfarb.com; daniel.kahn@goldfarb.com
If to the Investor:
Keystone Capital Partners, LLC
139 Fulton Street, Suite 412
New York, NY 10038
Telephone Number: (646) 349-0916
Email: fz@keystone-cp.com
Attention: Fredric G. Zaino
With a copy (which shall not constitute notice) to:
Pryor Cashman LLP
7 Times Square
New York, NY 10036-6569
Email: ali.panjwani@pryorcashman.com
Attention: M. Ali Panjwani
Either party hereto may from time to time change its address for notices by giving at least five (5) days’ advance written notice of such changed address to the other party hereto.
Section 9.5. Waivers. No provision of this Agreement may be waived by the parties from and after the date that is one (1) Trading Day immediately preceding the filing of the Initial Registration Statement with the Commission. Subject to the immediately preceding sentence, no provision of this Agreement may be waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercises thereof or of any other right, power or privilege.
Section 9.6. Amendments. No provision of this Agreement may be amended other than by a written instrument signed by both parties hereto.
Section 9.7. Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.
Section 9.8. Construction. The parties agree that each of them and their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents. In addition, each and every reference to share prices and number of Ordinary Shares in any Transaction Document shall, in all cases, be subject to adjustment for any stock splits, stock combinations, stock dividends, recapitalizations, reorganizations and other similar transactions that occur on or after the date of this Agreement. Any reference in this Agreement to “Dollars” or “$” shall mean the lawful currency of the United States of America. Any references to “Section” or “Article” in this Agreement shall, unless otherwise expressly stated herein, refer to the applicable Section or Article of this Agreement.
Section 9.9. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors. Neither the Company nor the Investor may assign this Agreement or any of their respective rights or obligations hereunder to any Person.
Section 9.10. No Third Party Beneficiaries. Except as expressly provided in Article VIII, this Agreement is intended only for the benefit of the parties hereto and their respective successors, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
Section 9.11. Governing Law. This Agreement shall be governed by and construed in accordance with the internal procedural and substantive laws of the State of New York, without giving effect to the choice of law provisions of such state that would cause the application of the laws of any other jurisdiction.
Section 9.12. Survival. The representations, warranties, covenants and agreements of the Company and the Investor contained in this Agreement shall survive the execution and delivery hereof until the termination of this Agreement; provided, however, that (i) the provisions of Article IV (Representations and Warranties of the Company), Article VII (Termination), Article VIII (Indemnification) and this Article IX (Miscellaneous) shall remain in full force and effect indefinitely notwithstanding such termination, and, (ii) so long as the Investor owns any Securities, the covenants and agreements of the Company and the Investor contained in Article V (Covenants), shall remain in full force and effect notwithstanding such termination for a period of six (6) months following such termination.
Section 9.13. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature or signature delivered by e-mail in a “.pdf” format data file, including any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com, www.echosign.adobe.com, etc., shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.
Section 9.14. Publicity. The Company shall afford the Investor and its counsel with a reasonable opportunity to review and comment upon, shall consult with the Investor and its counsel on the form and substance of, and shall give due consideration to all such comments from the Investor or its counsel on, any press release, Commission filing or any other public disclosure made by or on behalf of the Company relating to the Investor, its purchases hereunder or any aspect of the Transaction Documents or the transactions contemplated thereby, prior to the issuance, filing or public disclosure thereof. For the avoidance of doubt, the Company shall not be required to submit for review any such disclosure (i) contained in periodic reports filed with the Commission under the Exchange Act if it shall have previously provided the same disclosure to the Investor or its counsel for review in connection with a previous filing or (ii) any Prospectus Supplement if it contains disclosure that does not reference the Investor, its purchases hereunder or any aspect of the Transaction Documents or the transactions contemplated thereby.
Section 9.15. Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement, and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.
Section 9.16. Further Assurances. From and after the Closing Date, upon the request of the Investor or the Company, each of the Company and the Investor shall execute and deliver such instrument, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officer as of the date first above written.
| THE COMPANY: | ||
| HUB CYBER SECURITY LTD.: | ||
| By: | /s/ Noah Hershcoviz | |
| Name: | Noah Hershcoviz | |
| Title: | Chief Executive Officer | |
| By: | /s/ Lior Davidsohn | |
| Name: | Lior Davidsohn | |
| Title: | Chief Financial Officer (Interim) | |
| THE INVESTOR: | ||
| KEYSTONE CAPITAL PARTNERS, LLC: | ||
| By: | /s/ Fredric Zaino | |
| Name: | Fredric Zaino | |
| Title: | Chief Investment Officer | |
ANNEX I TO THE ORDINARY SHARE PURCHASE AGREEMENT DEFINITIONS
“Additional VWAP Purchase” shall have the meaning assigned to such term in Section 2.3.
“Additional VWAP Purchase Commencement Time” means, the latest of (A) the applicable VWAP Purchase Termination Time with respect to the corresponding VWAP Purchase on such Additional VWAP Purchase Date, (B) the applicable Additional VWAP Purchase Termination Time with respect to the most recently completed prior Additional VWAP Purchase on such Additional VWAP Purchase Date, as applicable, and (C) the time at which all Ordinary Shares subject to all prior VWAP Purchases and Additional VWAP Purchases (as applicable), including, without limitation, those that have been effected on the same Business day as the applicable Additional VWAP Purchase.
“Additional VWAP Purchase Confirmation” shall have the meaning assigned to such term in Section 2.3 and shall be in the form attached hereto as Annex 2.3C.
“Additional VWAP Purchase Date” means, with respect to an Additional VWAP Purchase made pursuant to Section 2.3, the Trading Day (i) that is also the VWAP Purchase Date for the corresponding VWAP Purchase referred to in clause (i) of the second sentence of Section 2.3 and (ii) on which the Investor receives, prior to 1:30 p.m., New York City time, on such Trading Day, a valid Additional VWAP Purchase Notice for such Additional VWAP Purchase in accordance with this Agreement.
“Additional VWAP Purchase Maximum Amount” means, with respect to an Additional VWAP Purchase made pursuant to Section 2.3, a number of Ordinary Shares equal to the lesser of (i) 300% of the number of Shares directed by the Company to be purchased by the Investor pursuant to the corresponding Fixed Purchase Notice for the corresponding Fixed Purchase referred to in clause (i) of the second sentence of Section 2.3 and (ii) a number of Shares equal to (A) the Additional VWAP Purchase Share Percentage multiplied by (B) the trading volume of Ordinary Shares traded on the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, on such Eligible Market) during the applicable Additional VWAP Purchase Period on the applicable Additional VWAP Purchase Date for such Additional VWAP Purchase.
“Additional VWAP Purchase Notice” means, with respect to an Additional VWAP Purchase made pursuant to Section 2.3, an irrevocable written notice delivered by the Company to the Investor, prior to 1:30 p.m., New York City time, on the applicable Additional VWAP Purchase Date for such Additional VWAP Purchase, directing the Investor to purchase an Additional VWAP Purchase Share Amount (such specified Additional VWAP Purchase Share Amount subject to adjustment as set forth in Section 2.3 as necessary to give effect to the Additional VWAP Purchase Maximum Amount), at the applicable Additional VWAP Purchase Price therefor on the applicable Additional VWAP Purchase Date for such Additional VWAP Purchase in accordance with this Agreement.
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“Additional VWAP Purchase Period” means, with respect to an Additional VWAP Purchase made pursuant to Section 2.3, the period on the applicable Additional VWAP Purchase Date for such Additional VWAP Purchase beginning at the applicable Additional VWAP Purchase Commencement Time and ending at the applicable Additional VWAP Purchase Termination Time.
“Additional VWAP Purchase Price” means, with respect to an Additional VWAP Purchase made pursuant to Section 2.3, the purchase price per Share to be purchased by the Investor in such Additional VWAP Purchase equal to ninety percent (90%) of the lower of (i) the VWAP for the applicable Additional VWAP Purchase Period during the applicable Additional VWAP Purchase Date for such Additional VWAP Purchase, and (ii) the lowest sale price of the Ordinary Shares on such applicable Additional VWAP Purchase Date for such Additional VWAP Purchase (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction).
“Additional VWAP Purchase Share Amount” means, with respect to an Additional VWAP Purchase made pursuant to Section 2.3, the number of Shares to be purchased by the Investor in such Additional VWAP Purchase as specified by the Company in the applicable Additional VWAP Purchase Notice, which number of Shares shall not exceed the applicable Additional VWAP Purchase Maximum Amount.
“Additional VWAP Purchase Share Percentage” means, with respect to an Additional VWAP Purchase made pursuant to Section 2.3, thirty percent (30%).
“Additional VWAP Purchase Share Volume Maximum” means, with respect to an Additional VWAP Purchase made pursuant to Section 2.3, a number of Ordinary Shares equal to (i) the number of Shares specified by the Company in the applicable Additional VWAP Purchase Notice as the Additional VWAP Purchase Share Amount to be purchased by the Investor in such Additional VWAP Purchase, divided by (ii) the Additional VWAP Purchase Share Percentage (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction).
“Additional VWAP Purchase Termination Time” means, with respect to an Additional VWAP Purchase made pursuant to Section 2.3, the earliest of (i) 4:00 p.m., New York City time, on the applicable Additional VWAP Purchase Date, or such other time publicly announced by the Trading Market as the official close of trading on the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, by such Eligible Market as the official close of trading on such Eligible Market) on such applicable Additional VWAP Purchase Date, (ii) such time, from and after the Additional VWAP Purchase Commencement Time for such Additional VWAP Purchase, that the trading volume of Ordinary Shares traded on the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, on such Eligible Market) has exceeded the applicable Additional VWAP Purchase Share Volume Maximum and (iii) such time, from and after the Additional VWAP Purchase Commencement Time for such Additional VWAP Purchase, that any sale price of the Ordinary Shares traded on the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, on such Eligible Market) has fallen below the applicable Floor Price for such applicable Additional VWAP Purchase.
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“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with a Person, as such terms are used in and construed under Rule 144. With respect to the Investor, without limitation, any Person owning, owned by, or under common ownership with the Investor, and any investment fund or managed account that is managed on a discretionary basis by the same investment manager as the Investor will be deemed to be an Affiliate.
“Agreement” shall have the meaning assigned to such term in the preamble of this Agreement.
“Applicable Laws” shall have the meaning assigned to such term in Section 4.13.
“Bankruptcy Law” means Title 11, U.S. Code, or any similar U.S. federal or state law for the relief of debtors.
“Beneficial Ownership Limitation” shall have the meaning assigned to such term in Section 2.5.
“Bloomberg” means Bloomberg, L.P.
“Bring Down Opinion” shall have the meaning assigned to such term in Section 5.15.
“Broker-Dealer” shall have the meaning assigned to such term in Section 5.13.
“Business Day” means any day other than Friday, Saturday, Sunday or any other day on which commercial banks in New York, New York or Israel are authorized or required by law to remain closed.
“Charter” shall have the meaning assigned to such term in Section 3.3.
“Closing” shall have the meaning assigned to such term in Section 1.2
“Closing Date” means the date of this Agreement.
“Closing Sale Price” means, for the Ordinary Shares as of any date, the greater of (i) the then current book value of the Ordinary Shares, and (ii) the last closing trade price for the Ordinary Shares on the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, on such Eligible Market), as reported by Bloomberg, or, if the Trading Market (or such Eligible Market, as applicable) begins to operate on an extended hours basis and does not designate the closing trade price for the Ordinary Shares, then the last trade price for the Ordinary Shares prior to 4:00 p.m., New York City time, as reported by Bloomberg. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.
“Code” means the Internal Revenue Code of 1986, as amended.
“Commencement” shall have the meaning assigned to such term in Section 2.1
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“Commencement Date” shall have the meaning assigned to such term in Section 2.1.
“Commencement Irrevocable Transfer Agent Instructions” shall have the meaning assigned to such term in Section 9.1(iv).
“Commission” means the U.S. Securities and Exchange Commission or any successor entity.
“Commission Documents” shall mean (1) all reports, schedules, registrations, forms, statements, information and other documents filed with or furnished to the Commission by the Company pursuant to the reporting requirements of the Exchange Act, including all material filed with or furnished to the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, since December 31, 2023, including, without limitation, the Annual Report on Form 20-F filed by the Company for its fiscal year ended December 31, 2023 (the “2023 Form 20-F”), and which hereafter shall be filed with or furnished to the Commission by the Company, including, without limitation, the Current Report, (2) each Registration Statement, as the same may be amended from time to time, the Prospectus contained therein and each Prospectus Supplement thereto and (3) all information contained in such filings and all documents and disclosures that have been and heretofore shall be incorporated by reference therein.
“Commitment Note” shall have the meaning assigned to such term in Section 2.6.
“Company” shall have the meaning assigned to such term in the preamble of this Agreement.
“Compliance Certificate” shall have the meaning assigned to such term in Section 6.2(ii).
“Conversion Shares” shall have the meaning assigned to such term in Section 2.6.
“Current Report” shall have the meaning assigned to such term in Section 1.3.
“Custodian” shall mean any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
“Damages” shall have the meaning assigned to such term in Section 8.1.
“Dilutive Issuance” shall have the meaning assigned to such term in Section 5.6(ii).
“Disclosure Schedule” shall have the meaning assigned to such term in Section 4.1.
“Disqualification Event” shall have the meaning assigned to such term in Section 4.37.
“DTC” means The Depository Trust Company, a subsidiary of The Depository Trust & Clearing Corporation, or any successor thereto.
“DWAC” shall have the meaning assigned to such term in Section 2.6.
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“DWAC Shares” means shares of Ordinary Shares issued pursuant to this Agreement that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale and without stop transfer instructions maintained against the transfer thereof and (iii) timely credited by the Company to the Investor’s or its designated Broker-Dealer at which the account or accounts to be credited with the Securities being purchased by Investor are maintained specified DWAC account with DTC under its Fast Automated Securities Transfer (FAST) Program, or any similar program hereafter adopted by DTC performing substantially the same function.
“EDGAR” means the Commission’s Electronic Data Gathering, Analysis and Retrieval System.
“Effective Date” means, with respect to the Initial Registration Statement filed pursuant to Section 2(a) of the Registration Rights Agreement (or any post-effective amendment thereto) or any New Registration Statement filed pursuant to Section 2(c) of the Registration Rights Agreement (or any post-effective amendment thereto), as applicable, the date on which the Initial Registration Statement (or any post-effective amendment thereto) or any New Registration Statement (or any post-effective amendment thereto) is declared effective by the Commission.
“Effectiveness Deadline” shall have the meaning assigned to such term in the Registration Rights Agreement.
“Eligible Market” means The New York Stock Exchange American or Nasdaq (or any nationally recognized successor to any of the foregoing).
“Environmental Laws” shall have the meaning assigned to such term in Section 4.16 hereof.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder.
“Exempt Issuance” means the issuance of (a) Ordinary Shares, options or other equity incentive awards to employees, officers, directors or vendors of the Company pursuant to any equity incentive plan duly adopted for such purpose, by the Company’s Board of Directors or a majority of the members of a committee of the Board of Directors established for such purpose, (b) (1) any Securities issued to the Investor pursuant to this Agreement, (2) any securities issued upon the exercise or exchange of or conversion of any Ordinary Shares or Ordinary Shares Equivalents held by the Investor at any time, or (3) any securities issued upon the exercise or exchange of or conversion of any Ordinary Shares Equivalents issued and outstanding on the date of this Agreement, provided that such securities referred to in this clause (3) have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (c) securities issued pursuant to acquisitions, divestitures, licenses, partnerships, collaborations or strategic transactions approved by the Company’s Board of Directors or a majority of the members of a committee of directors established for such purpose, which acquisitions, divestitures, licenses, partnerships, collaborations or strategic transactions can have a Variable Rate Transaction component, provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, or (d) Ordinary Shares issued by the Company by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act, exclusively through a registered broker-dealer, as the Company’s sales agent, pursuant to one or more written agreements between the Company and such registered broker-dealer.
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“FCPA” shall have the meaning assigned to such term in Section 4.33.
“Filed Commission Document” shall have the meaning assigned to such term in Section 4.6.
“Filing Deadline” shall have the meaning assigned to such term in the Registration Rights Agreement.
“FINRA” means the Financial Industry Regulatory Authority.
“Fixed Purchase” shall have the meaning assigned to such term in Section 2.1.
“Fixed Purchase Date” means, with respect to a Fixed Purchase made pursuant to Section 2.1, the Trading Day on which the Investor receives, after 4:00 p.m., New York City time, but prior to 5:30 p.m., New York City time, on such Trading Day, a valid Fixed Purchase Notice for such Fixed Purchase in accordance with this Agreement.
“Fixed Purchase Maximum Amount” means, with respect to a Fixed Purchase made pursuant to Section 2.1, $50,000.
“Fixed Purchase Notice” means, with respect to a Fixed Purchase pursuant to Section 2.1, an irrevocable written notice delivered by the Company to the Investor directing the Investor to purchase a Fixed Purchase Share Amount (such specified Fixed Purchase Share Amount subject to adjustment as set forth in Section 2.1 as necessary to give effect to the Fixed Purchase Maximum Amount), at the applicable Fixed Purchase Price therefor on the applicable Fixed Purchase Date for such Fixed Purchase in accordance with this Agreement.
“Fixed Purchase Price” means, with respect to a Fixed Purchase made pursuant to Section 2.1, the purchase price per Share to be purchased by the Investor in such Fixed Purchase equal to the lesser of 95% (i) of the daily volume weighted average price of the Company’s Ordinary Shares on Nasdaq, as reported by Bloomberg Financial LP using the AQR function for the five (5) Trading Days immediately preceding the applicable Fixed Purchase Date for such Fixed Purchase and (ii) the lowest sale price of an Ordinary Share on the applicable Fixed Purchase Date for such Fixed Purchase during the full Trading Day on Nasdaq on such applicable Purchase Date (in each case, to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction that occurs on or after the date of this Agreement).
“Fixed Purchase Share Amount” means, with respect to a Fixed Purchase made pursuant to Section 2.1, the number of Shares to be purchased by the Investor in such Fixed Purchase as specified by the Company in the applicable Fixed Purchase Notice, which number of Shares shall not exceed the applicable Fixed Purchase Maximum Amount (calculated as of the applicable Fixed Purchase Date).
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“Floor Price” means a price equal to 75% of the Closing Price on the Trading Day the applicable Additional VWAP Purchase Notice or VWAP Purchase Notice is delivered to Investor along with the Fixed Purchase Notice.
“Fundamental Transaction” means that (i) the Company shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, with the result that the holders of the Company’s capital stock immediately prior to such consolidation or merger together beneficially own less than 50% of the outstanding voting power of the surviving or resulting corporation, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (3) take action to facilitate a purchase, tender or exchange offer by another Person that is accepted by the holders of the Company’s Voting Stock representing more than 50% of the total voting power of the Company’s Voting Stock (excluding any Voting Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires Voting Stock of the Company representing more than 50% of the total voting power of the Company’s Voting Stock (not including any Voting Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) reorganize, recapitalize or reclassify its Ordinary Shares, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting Stock of the Company representing more than 50% of the total voting power of the Company’s Voting Stock.
“GAAP” shall have the meaning assigned to such term in Section 4.6(b).
“Initial Registration Statement” shall have the meaning assigned to such term in the Registration Rights Agreement.
“Investment Period” means the period commencing on the Effective Date of the Initial Registration Statement and expiring on the date this Agreement is terminated pursuant to Article VII.
“Investor” shall have the meaning assigned to such term in the preamble of this Agreement.
“Investor Expense Reimbursement” shall have the meaning assigned to such term in Section 9.1(i).
“Investor Party” shall have the meaning assigned to such term in Section 8.1.
“Issuer Covered Person” shall have the meaning assigned to such term in Section 4.37.
“IT Systems” shall have the meaning assigned to such term in Section 4.36.
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“Knowledge” means, with respect to the Company, the actual knowledge of the Company’s Chief Executive Officer, Chief Strategy Officer, Chief Technology Officer, and President, its Chief Financial Officer and Treasurer, and its General Counsel, in each case after reasonable inquiry of all officers, directors and employees of the Company and its Subsidiaries under their direct supervision who would reasonably be expected to have knowledge or information with respect to the matter in question.
“Material Adverse Effect” means any material adverse effect on (i) the enforceability of any Transaction Document, (ii) the results of operations, assets, business or financial condition of the Company and its Subsidiaries, taken as a whole, other than any material adverse effect that resulted primarily from (A) any change in the United States or foreign economies or securities or financial markets in general, (B) any change that generally affects the industry in which the Company and its Subsidiaries operate, (C) any change arising in connection with earthquakes, hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities, acts of war, sabotage or terrorism or military actions existing as of the date hereof, (D) any action taken by the Investor, its Affiliates or its or their successors and assigns with respect to the transactions contemplated by this Agreement and the Registration Rights Agreement, (E) the effect of any change in applicable laws or accounting rules, or (F) any change resulting from compliance with terms of this Agreement or the Registration Rights Agreement or the consummation of the transactions contemplated by this Agreement and the Registration Rights Agreement, or (iii) the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document to which it is a party to be performed as of the date of determination.
“Material Agreements” shall have the meaning assigned to such term in Section 4.17.
“Money Laundering Laws” shall have the meaning assigned to such term in Section 4.34.
“Nasdaq” means The Nasdaq Stock Market.
“New Registration Statement” shall have the meaning assigned to such term in the Registration Rights Agreement.
“Notice Delivery Time” shall have the meaning assigned to such term in Section 6.3.
“Notice of Effectiveness” shall have the meaning assigned to such term in Section 9.1(iv).
“OFAC” shall have the meaning assigned to such term in Section 4.35.
“Ordinary Shares” shall have the meaning assigned to such term in the recitals of this Agreement.
“Ordinary Shares Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Ordinary Shares, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Ordinary Shares.
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“Person” means any person or entity, whether a natural person, trustee, corporation, partnership, limited partnership, limited liability company, trust, unincorporated organization, business association, firm, joint venture, governmental agency or authority.
“Personal Data” shall have the meaning assigned to such term in Section 4.36.
“Prospectus” means the prospectus in the form included in a Registration Statement, as supplemented from time to time by any Prospectus Supplement, including the documents incorporated by reference therein.
“Prospectus Supplement” means any prospectus supplement to the Prospectus filed with the Commission from time to time pursuant to Rule 424(b) under the Securities Act, including the documents incorporated by reference therein.
“Reference Period” shall have the meaning assigned to such term in Section 5.6(ii).
“Reference Price” shall have the meaning assigned to such term in Section 5.6(ii).
“Registrable Securities” shall have the meaning assigned to such term in the Registration Rights Agreement, and shall include the Conversion Shares.
“Registration Rights Agreement” shall have the meaning assigned to such term in the recitals hereof.
“Regulation D” shall have the meaning assigned to such term in the recitals of this Agreement.
“Restricted Period” shall have the meaning assigned to such term in Section 5.9(i).
“Restricted Person” shall have the meaning assigned to such term in Section 5.9(i).
“Restricted Persons” shall have the meaning assigned to such term in Section 5.9(i).
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect.
“Sale Price” means any trade price for an Ordinary Shars executed on the Trading Market (or if the Ordinary Shares are then traded on an Eligible Market, on such Eligible Market) between 9:30 a.m., New York City time, or such other time publicly announced by the Trading Market or such other Eligible Market, as the case may be, and ending at 4:00 p.m., New York City time, on the applicable Purchase Date, as reported by Bloomberg.
“Sanctioned Countries” shall have the meaning assigned to such term in Section 4.35.
“Sanctioned Country” shall have the meaning assigned to such term in Section 4.35.
“Sanctioned Persons” shall have the meaning assigned to such term in Section 4.35.
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“Sanctions” shall have the meaning assigned to such term in Section 4.35.
“Section 4(a)(2)” shall have the meaning assigned to such term in the recitals of this Agreement.
“Securities” means, collectively, the Shares and the Conversion Shares.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder.
“Shares” shall mean the shares of Ordinary Shares that are and/or may be purchased by the Investor under this Agreement pursuant to one or more Fixed Purchase Notices, VWAP Purchase Notices or Additional VWAP Purchase Notices, but not including the Conversion Shares.
“Short Sales” shall mean “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act.
“Stock Plan” shall have the meaning assigned to such term in Section 4.22.
“Subsidiary” and “Subsidiaries” means the subsidiaries listed in Exhibit 8.1 of the 2023 Form 20-F.
“Total Purchase Commitment” shall have the meaning assigned to such term in Section 1.1.
“Trading Day” shall mean any day on which the Trading Market or, if the Ordinary Shares are then listed on an Eligible Market, such Eligible Market is open for trading, including any day on which the Trading Market (or such Eligible Market, as applicable) is open for trading for a period of time less than the customary time.
“Trading Market” means the Nasdaq Capital Market (or any nationally recognized successor thereto).
“Transaction Documents” means, collectively, this Agreement (as qualified by the Disclosure Schedule) and the exhibits hereto, the Registration Rights Agreement and each of the other agreements, documents, certificates and instruments entered into or furnished by the parties hereto in connection with the transactions contemplated hereby and thereby.
“Transfer Agent” means American Stock Transfer & Trust Company, LLC, or such other Person who is then serving as the transfer agent for the Company in respect of the Ordinary Shares.
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“Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any equity or debt securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional Ordinary Shares or Ordinary Shares Equivalents either (A) at a conversion price, exercise price, exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Ordinary Shares at any time after the initial issuance of such equity or debt securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such equity or debt security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Ordinary Shares (including, without limitation, any “full ratchet” or “weighted average” anti-dilution provisions, but not including any standard anti-dilution protection for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction), (ii) issues or sells any equity or debt securities, including without limitation, Ordinary Shares or Ordinary Shares Equivalents, either (A) at a price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Ordinary Shares (other than standard anti-dilution protection for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction), or (B) that are subject to or contain any put, call, redemption, buy-back, price-reset or other similar provision or mechanism (including, without limitation, a “Black-Scholes” put or call right, other than in connection with a “fundamental transaction”) that provides for the issuance of additional equity securities of the Company or the payment of cash by the Company, or (iii) enters into any agreement with any Person other than the Investor or an Affiliate of the Investor, including, but not limited to, an “equity line of credit” or “at the market offering” or other continuous offering or similar offering of Ordinary Shares or Ordinary Shares Equivalents, whereby the Company may sell Ordinary Shares or Ordinary Shares Equivalents at a future determined price.
“Voting Stock” means securities of any class or kind having the power to vote generally for the election of directors, managers or other voting members of the governing body of the Company or any successor thereto.
“VWAP” means, for the Ordinary Shares for a specified period, the dollar volume-weighted average price for the Ordinary Shares on the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, on such Eligible Market), for such period, as reported by Bloomberg through its “AQR” function. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
“VWAP Purchase” shall have the meaning assigned to such term in Section 2.2.
“VWAP Purchase Commencement Time” means, with respect to a VWAP Purchase made pursuant to Section 2.2, 9:30 a.m., New York City time, on the applicable VWAP Purchase Date, or such other time publicly announced by the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, by such Eligible Market) as the official open (or commencement) of trading on the Trading Market (or such Eligible Market, as applicable) on such applicable VWAP Purchase Date.
“VWAP Purchase Confirmation” shall have the meaning assigned to such term in Section 2.2 and shall be in the form attached hereto as Annex 2.2B.
“VWAP Purchase Date” means, with respect to a VWAP Purchase made pursuant to Section 2.2, the Trading Day immediately following the applicable Fixed Purchase Date with respect to the corresponding Fixed Purchase referred to in clause (i) of the second sentence of Section 3.2, on which the Investor receives, concurrently with the receipt of the applicable Fixed Purchase Notice for such corresponding Fixed Purchase, after 4:00 p.m., New York City time, but prior to 5:30 p.m., New York City time, on such applicable Fixed Purchase Date, a valid VWAP Purchase Notice for such VWAP Purchase in accordance with this Agreement.
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“VWAP Purchase Maximum Amount” means, with respect to a VWAP Purchase made pursuant to Section 3.2, a number of Ordinary Shares equal to the lesser of (i) 300% of the number of Shares directed by the Company to be purchased by the Investor pursuant to the corresponding Fixed Purchase Notice for the corresponding Fixed Purchase referred to in clause (i) of the second sentence of Section 2.2 and (ii) 30% of the trading volume in the Company’s Ordinary Shares on Nasdaq during the applicable VWAP Purchase Period on the applicable VWAP Purchase Date.
“VWAP Purchase Notice” means, with respect to a VWAP Purchase made pursuant to Section 2.2, an irrevocable written notice delivered by the Company to the Investor (concurrently with the delivery of the applicable Fixed Purchase Notice by the Company to the Investor on the applicable Fixed Purchase Date with respect to the corresponding Fixed Purchase referred to in clause (i) of the second sentence of Section 2.2) directing the Investor to purchase a VWAP Purchase Share Amount (such specified VWAP Purchase Share Amount subject to adjustment as set forth in Section 3.2 as necessary to give effect to the VWAP Purchase Maximum Amount), at the applicable VWAP Purchase Price therefor on the applicable VWAP Purchase Date for such VWAP Purchase in accordance with this Agreement.
“VWAP Purchase Period” means, with respect to a VWAP Purchase made pursuant to Section 2.2, the period on the applicable VWAP Purchase Date for such VWAP Purchase beginning at the applicable VWAP Purchase Commencement Time and ending at the applicable VWAP Purchase Termination Time.
“VWAP Purchase Price” means, with respect to a VWAP Purchase made pursuant to Section 2.2, the purchase price per Share to be purchased by the Investor in such VWAP Purchase equal to the lesser of ninety percent (90%) of (i) the lowest sale price of the Ordinary Shares on the applicable VWAP Purchase Date and (ii) the VWAP during the applicable VWAP Purchase Period (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction).
“VWAP Purchase Share Amount” means, with respect to a VWAP Purchase made pursuant to Section 2.2, the number of Shares to be purchased by the Investor in such VWAP Purchase as specified by the Company in the applicable VWAP Purchase Notice, which number of Shares shall not exceed the applicable VWAP Purchase Maximum Amount.
“VWAP Purchase Share Percentage” means, with respect to a VWAP Purchase made pursuant to Section 2.2, thirty percent (30%).
“VWAP Purchase Share Volume Maximum” means, with respect to a VWAP Purchase made pursuant to Section 2.2, a number of Ordinary Shares equal to (i) the number of Shares specified by the Company in the applicable VWAP Purchase Notice as the VWAP Purchase Share Amount to be purchased by the Investor in such VWAP Purchase, divided by (ii) the VWAP Purchase Share Percentage (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction).
“VWAP Purchase Termination Time” means, with respect to a VWAP Purchase made pursuant to Section 2.2, the earliest of (i) 4:00 p.m., New York City time, on the applicable VWAP Purchase Date, or such other time publicly announced by the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, by such Eligible Market) as the official close of trading on the Trading Market on such applicable VWAP Purchase Date, (ii) such time, from and after the VWAP Purchase Commencement Time for such VWAP Purchase, that the trading volume of shares of Ordinary Shares traded on the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, on such Eligible Market) has exceeded the applicable VWAP Purchase Share Volume Maximum and (iii) such time, from and after the VWAP Purchase Commencement Time for such VWAP Purchase, that any sale price of the Ordinary Shares traded on the Trading Market (or, if the Ordinary Shares are then listed on an Eligible Market, on such Eligible Market) has fallen below the applicable Floor Price for such applicable VWAP Purchase.
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EXHIBIT A TO THE ORDINARY SHARE PURCHASE AGREEMENT
[TO BE FURNISHED SEPARATELY]
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EXHIBIT B TO THE ORDINARY SHARE PURCHASE AGREEMENT CERTIFICATE OF THE COMPANY
CLOSING CERTIFICATE
[ ], 2025
The undersigned, the Chief Executive Officer of Hub Cyber Security Ltd., a company incorporated under the laws of the State of Israel (the “Company”), delivers this certificate in connection with the Ordinary Shares Purchase Agreement, dated as of [ ], 2025 (the “Agreement”), by and between the Company and Keystone Capital Partners, LLC, a Delaware limited liability company (the “Investor”), and hereby certifies on the date hereof that (capitalized terms used herein without definition have the meanings assigned to them in the Agreement):
1. Attached hereto as Exhibit A is a true, complete and correct copy of the Articles of Association of the Company, as amended through the date hereof, which is in full force and effect on the date hereof, and no action has been taken by the Company in contemplation of any such amendment or the dissolution, merger or consolidation of the Company.
2. The Board of Directors of the Company has approved the transactions contemplated by the Transaction Documents; said approval has not been amended, rescinded or modified and remains in full force and effect as of the date hereof. Attached hereto as Exhibit B are true, correct and complete copies of the resolutions duly adopted by the Board of Directors of the Company on March __, 2025.
3. Each person who, as an officer of the Company, or as attorney-in-fact of an officer of the Company, signed the Transaction Documents to which the Company is a party, was duly elected, qualified and acting as such officer or duly appointed and acting as such attorney-in-fact, and the signature of each such person appearing on any such document is his genuine signature.
IN WITNESS WHEREOF, I have signed my name as of the date first above written.
| Name: | Noah Hershcoviz | |
| Title: | Chief Executive Officer |
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EXHIBIT C TO THE ORDINARY SHARE PURCHASE AGREEMENT COMPLIANCE CERTIFICATE
The undersigned, the [●] of Hub Cyber Security Ltd., a company incorporated under the laws of the State of Israel (the “Company”), delivers this certificate in connection with the Ordinary Share Purchase Agreement, dated as of [ ], 2025 (the “Agreement”), by and between the Company and Keystone Capital Partners, LLC, a Delaware limited liability company (the “Investor”), and hereby certifies on the date hereof that, to the best of his knowledge after reasonable investigation, on behalf of the Company (capitalized terms used herein without definition have the meanings assigned to them in the Agreement):
1. The undersigned is the duly appointed [●] of the Company.
2. Except as set forth in the attached Disclosure Schedule, the representations and warranties of the Company set forth in Article IV of the Agreement (i) that are not qualified by “materiality” or “Material Adverse Effect” are true and correct in all material respects as of [the Commencement Date] [the date hereof] with the same force and effect as if made on [the Commencement Date] [the date hereof], except to the extent such representations and warranties are as of another date, in which case, such representations and warranties are true and correct in all material respects as of such other date and (ii) that are qualified by “materiality” or “Material Adverse Effect” are true and correct as of [the Commencement Date] [the date hereof] with the same force and effect as if made on [the Commencement Date] [the date hereof], except to the extent such representations and warranties are as of another date, in which case, such representations and warranties are true and correct as of such other date.
3. Each of the Company has performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Agreement and the Registration Rights Agreement to be performed, satisfied or complied with by the Company, respectively, [at or prior to Commencement][on or prior to the date hereof].
4. The Shares issuable in respect of each Fixed Purchase Notice, each VWAP Purchase Notice, and each Additional VWAP Purchase Notice effected pursuant to the Agreement shall be delivered to the Investor electronically as DWAC Shares, and shall be freely tradable and transferable and without restriction on resale and without any stop transfer instructions maintained against such Shares.
5. As of [the Commencement Date][the date hereof], the Company does not possess any material non-public information.
6. As of [the Commencement Date][the date hereof], the Company has reserved out of its authorized and unissued Ordinary Shares, [●] Ordinary Shares solely for the purpose of effecting Fixed Purchases, VWAP Purchases and Additional VWAP Purchases under the Agreement.
7. No stop order suspending the effectiveness of the Registration Statement or the use of the Prospectus under the Securities Act has been issued and no proceedings for such purpose or pursuant to Section 8A of the Securities Act are pending before or, to the Knowledge of the Company, threatened by the Commission.
The undersigned has executed this Certificate this [●] day of [●], 2025.
| By: | ||
| Name: | ||
| Title: |
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EXHIBIT D TO THE ORDINARY SHARE PURCHASE AGREEMENT FORM OF COMMITMENT NOTE
DISCLOSURE SCHEDULES RELATING TO THE ORDINARY SHARE PURCHASE AGREEMENT, DATED AS OF [ ], 2025 BY AND AMONG HUB CYBER SECURITY LTD. AND KEYSTONE CAPITAL PARTNERS, LLC
EXHIBIT E TO THE ORDINARY SHARE PURCHASE AGREEMENT FORM OF DEMAND PROMISSORY NOTE This disclosure schedules are made and given pursuant to Article IV of the Ordinary Share Purchase Agreement, dated as of [ ], 2025 (the “Agreement”), by and between Hub Cyber Security Ltd., a company incorporated under the laws of the State of Israel (the “Company”), and Keystone Capital Partners, LLC, a Delaware limited liability company (the “Investor”). Unless the context otherwise requires, all capitalized terms are used herein as defined in the Agreement. The numbers below correspond to the section numbers of representations and warranties in the Agreement most directly modified by the below exceptions.
ANNEX 2.1 TO THE
ORDINARY SHARE PURCHASE AGREEMENT FORM OF FIXED PURCHASE NOTICE
| To: _______________________ | E-mail: _____________________ |
Reference is made to the Ordinary Share Purchase Agreement dated as of [ ], 2025, (the “Purchase Agreement”) between Hub Cyber Security Ltd., a company incorporated under the laws of the State of Israel (the “Company”), and Keystone Capital Partners, LLC, a Delaware limited liability company. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement.
In accordance with and pursuant to Section 2.1 of the Purchase Agreement, the Company hereby issues this Fixed Purchase Notice to exercise a Fixed Purchase for the Fixed Purchase Share Amount indicated below.
| Fixed Purchase Share Amount (number of Shares): | __________________________________ | ||
| Fixed Purchase Exercise Date: Fixed | __________________________________ | ||
| Purchase Price (per Share): | __________________________________ | ||
| Total Aggregate Fixed Purchase Price: Fixed | __________________________________ | ||
| Purchase Share Delivery Date: Fixed Purchase | __________________________________ | ||
| Settlement Date: | __________________________________ | ||
| Dollar Amount of Ordinary Shares | __________________________________ | ||
| Currently Available under the Total Purchase | __________________________________ | ||
| Commitment: | __________________________________ | ||
| Dated: __________________________ | Hub Cyber Security Ltd. | |
| By: | ||
| Name: | ||
| Title: | ||
| AGREED AND ACCEPTED: | ||
| Keystone Capital Partners, LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
ANNEX 2.2 TO THE
ORDINARY SHARE PURCHASE AGREEMENT FORM OF VWAP PURCHASE NOTICE
| To: | ___________________ | E-mail:___________________ |
Reference is made to the Ordinary Share Purchase Agreement dated as of [ ], 2025, (the “Purchase Agreement”) between Hub Cyber Security Ltd.., a company incorporated under the laws of the State of Israel (the “Company”), and Keystone Capital Partners, LLC, a Delaware limited liability company. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement.
In accordance with and pursuant to Section 2.2 of the Purchase Agreement, the Company hereby issues this VWAP Purchase Notice to exercise a VWAP Purchase for the VWAP Purchase Share Amount indicated below.
| VWAP Purchase Share Amount (number of Shares): | __________________________________ | ||
| VWAP Purchase Exercise Date: | __________________________________ | ||
| VWAP Purchase Date: | __________________________________ | ||
| VWAP Purchase Share Delivery Date: | __________________________________ | ||
| VWAP Purchase Settlement Date: | __________________________________ | ||
| Dollar Amount of Ordinary Shares Currently Available under the Total Purchase Commitment: | __________________________________ |
| Dated: ______________________ | Hub Cyber Security Ltd. | |
| By: | ||
| Name: | ||
| Title: | ||
| AGREED AND ACCEPTED: | ||
| Keystone Capital Partners, LLC | ||
| By: | ||
| Name: | ||
| Title | ||
ANNEX 2.2B
TO THE
ORDINARY SHARE PURCHASE AGREEMENT FORM OF VWAP PURCHASE CONFIRMATION
| To: | ___________________ | E-mail:___________________ |
Reference is made to the Ordinary Share Purchase Agreement dated as of [ ], 2025, (the “Purchase Agreement”) between Hub Cyber Security Ltd., a company incorporated under the laws of the State of Israel (the “Company”), and Keystone Capital Partners, LLC, a Delaware limited liability company. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement.
In accordance with and pursuant to Section 2.2 of the Purchase Agreement, the Investor hereby issues this VWAP Purchase Confirmation for the VWAP Purchase Share Amount indicated below.
| VWAP Purchase Share Amount (number of Shares): | __________________________________ | ||
| VWAP Purchase Exercise Date: | __________________________________ | ||
| VWAP Purchase Date: | __________________________________ | ||
| VWAP Purchase Commencement Time: | __________________________________ | ||
| VWAP Purchase Termination Time: | __________________________________ | ||
| VWAP during the VWAP Purchase Period: | __________________________________ | ||
| Closing Sale Price on the VWAP Purchase Date: | __________________________________ | ||
| VWAP Purchase Price (per Share) (90% of lower of two line items immediately above): | __________________________________ | ||
| Total Aggregate VWAP Purchase Price: | __________________________________ | ||
| VWAP Purchase Share Delivery Date: | __________________________________ | ||
| VWAP Purchase Settlement Date: | __________________________________ |
| Dated: ________________________ | Keystone Capital Partners, LLC | |
| By: | ||
| Name: | ||
| Title: | ||
| AGREED AND ACCEPTED: | ||
| Hub Cyber Security Ltd. | ||
| By: | ||
| Name: | ||
| Title: | ||
ANNEX 2.3 TO THE
ORDINARY SHARE PURCHASE AGREEMENT FORM OF ADDITIONAL VWAP PURCHASE NOTICE
| To: | ___________________ | E-mail:___________________ |
Reference is made to the Ordinary Share Purchase Agreement dated as of [ ], 2025 (the “Purchase Agreement”) between Hub Cyber Security Ltd., a company incorporated under the laws of the State of Israel (the “Company”), and Keystone Capital Partners, LLC, a Delaware limited liability company. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement.
In accordance with and pursuant to Section 2.3 of the Purchase Agreement, the Company hereby issues this Additional VWAP Purchase Notice to exercise an Additional VWAP Purchase for the Additional VWAP Purchase Share Amount indicated below.
| Additional VWAP Purchase Share Amount (number of Shares): | _______________________________ | ||
| Additional VWAP Purchase Date (indicate whether this is for the first, second, third, etc. Additional VWAP exercised by the Company on such Additional VWAP Purchase Date): | _______________________________ | ||
| Additional VWAP Purchase Share Delivery Date: | _______________________________ | ||
| Additional VWAP Purchase Settlement Date: | _______________________________ | ||
| Dollar Amount of Ordinary Shares Currently Available under the Total Purchase Commitment: | _______________________________ |
| Dated: ________________________ | Hub Cyber Security Ltd. |
|
| By: | ||
| Name: | ||
| Title: | ||
| AGREED AND ACCEPTED: | ||
| Keystone Capital Partners, LLC | ||
| By: | ||
| Name: | ||
| Title | ||
ANNEX 2.3B TO THE
ORDINARY SHARE PURCHASE AGREEMENT
FORM OF ADDITIONAL VWAP PURCHASE CONFIRMATION
| To: | ___________________ | E-mail:___________________ |
Reference is made to the Ordinary Share Purchase Agreement dated as of [ ], 2025, (the “Purchase Agreement”) between Hub Cyber Security Ltd., a company incorporated under the laws of the State of Israel (the “Company”), and Keystone Capital Partners, LLC, a Delaware limited liability company. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement.
In accordance with and pursuant to Section 2.3 of the Purchase Agreement, the Investor hereby issues this Additional VWAP Purchase Confirmation for the Additional VWAP Purchase Share Amount indicated below.
| Additional VWAP Purchase Share Amount (number of Shares): | _______________________________ | ||
| Additional VWAP Purchase Date (indicate whether this is for the first, second, third, etc. Additional VWAP exercised by the Company on such Additional VWAP Purchase Date): | _______________________________ | ||
| Additional VWAP Purchase Commencement Time: | _______________________________ | ||
| Additional VWAP Purchase Termination Time: | _______________________________ | ||
| VWAP during the Additional VWAP Purchase Period: | _______________________________ | ||
| Closing Sale Price on the Additional VWAP Purchase Date: | _______________________________ | ||
| Additional VWAP Purchase Price (per Share) (90% of lower of two line items immediately above): | _______________________________ | ||
| Total Aggregate Additional VWAP Purchase Price: | _______________________________ | ||
| Additional VWAP Purchase Share Delivery Date: Additional VWAP Purchase Settlement Date: | _______________________________ |
| Dated: _______________ | Hub Cyber Security Ltd. | |
| By: | ||
| Name: | ||
| Title: | ||
| AGREED AND ACCEPTED: | ||
| Keystone Capital Partners, LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 4.76
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of March 11, 2025, is by and between Keystone Capital Partners, LLC a Delaware limited liability company (the “Investor”), and Hub Cyber Security Ltd, a corporation organized under the laws of the State of Israel (the “Company”).
RECITALS
A. The Company and the Investor have entered into that certain Ordinary Share Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which the Company may issue to the Investor, from time to time, up to $50,000,000 of the Company’s Ordinary Shares, no par value (the “Ordinary Shares”).
B. Pursuant to the terms of, and in consideration for the Investor entering into, the Purchase Agreement, the Company shall cause to be issued to the Investor the Commitment Note in accordance with the terms of the Purchase Agreement.
C. Pursuant to the terms of, and in consideration for the Investor entering into, the Purchase Agreement, and to induce the Investor to execute and deliver the Purchase Agreement, the Company has agreed to provide the Investor with certain registration rights with respect to the Registrable Securities (as defined herein) as set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained herein and in the Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, intending to be legally bound hereby, the Company and the Investor hereby agree as follows:
| 1. | Definitions. |
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:
(a) “Agreement” shall have the meaning assigned to such term in the preamble of this Agreement.
(b) “Allowable Grace Period” shall have the meaning assigned to such term in Section 3(n).
(c) “Blue Sky Filing” shall have the meaning assigned to such term in Section 6(a).
(d) “Business Day” means any day other than Friday, Saturday, Sunday or any other day on which commercial banks in New York, New York or Israel are authorized or required by law to remain closed.
(e) “Claims” shall have the meaning assigned to such term in Section 6(a).
(f) “Commission” means the U.S. Securities and Exchange Commission or any successor entity.
(g) “Company” shall have the meaning assigned to such term in the preamble of this Agreement.
(h) “Effective Date” means the date that the applicable Registration Statement has been declared effective by the Commission.
(i) “Effectiveness Deadline” means with respect to any New Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the earlier of (A) the seventy-fifth (75th) calendar day following the date on which the Company was required to file such additional Registration Statement, if such Registration Statement is subject to review by the Commission, and (B) the third (3rd) Business Day following the date the Company is notified (orally or in writing, whichever is earlier) by the Commission that such New Registration Statement will not be reviewed.
(j) “Filing Deadline” means (i) with respect to the Initial Registration Statement required to be filed to pursuant to Section 2(a), the thirtieth (30th) Business Day after the date of the filing by the Company of its Annual Report on Form 20-F and (ii) with respect to any New Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the fourteenth (14th) Business Day following the sale of substantially all of the Registrable Securities included in the Initial Registration Statement or the most recent prior New Registration Statement, as applicable, or such other date as permitted by the Commission.
(k) “Indemnified Damages” shall have the meaning assigned to such term in Section 6(a).
(l) “Initial Registration Statement” shall have the meaning assigned to such term in Section 2(a).
(m) “Investor” shall have the meaning assigned to such term in the preamble of this Agreement.
(n) “Investor Party” and “Investor Parties” shall have the meaning assigned to such terms in Section 6(a).
(o) “Legal Counsel” shall have the meaning assigned to such term in Section 2(b).
(p) “New Registration Statement” shall have the meaning assigned to such term in Section 2(c).
(q) “Ordinary Shares” shall have the meaning assigned to such term in the recitals to this Agreement.
(r) “Person” means any person or entity, whether a natural person, trustee, corporation, partnership, limited partnership, limited liability company, trust, unincorporated organization, business association, firm, joint venture, governmental agency or authority.
(s) “Prospectus” means the prospectus in the form included in the Registration Statement, as supplemented from time to time by any Prospectus Supplement, including the documents incorporated by reference therein.
(t) “Prospectus Supplement” means any prospectus supplement to the Prospectus filed with the Commission from time to time pursuant to Rule 424(b) under the Securities Act, including the documents incorporated by reference therein.
(u) “Purchase Agreement” shall have the meaning assigned to such term in the recitals to this Agreement.
(v) “register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements in compliance with the Securities Act and pursuant to Rule 415 and the declaration of effectiveness of such Registration Statement(s) by the Commission.
(w) “Registrable Securities” means all of (i) the Shares, (ii) the Conversion Shares, as fully earned as of the date hereof and (iii) any share capital of the Company issued or issuable with respect to such Shares or Conversion Shares, including, without limitation, (1) as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise and (2) shares of share capital of the Company into Ordinary Shares that are converted or exchanged and shares of share capital of a successor entity into which the Ordinary Shares are converted or exchanged, in each case until such time as such securities cease to be Registrable Securities pursuant to Section 2(f).
(x) “Registration Period” shall have the meaning assigned to such term in Section 3(a).
(y) “Registration Statement” means the New Registration Statement of the Company filed under the Securities Act that registers the Registrable Securities, as such registration statement or registration statements may be amended and supplemented from time to time, including all documents filed as part thereof or incorporated by reference therein.
(z) “Rule 144” means Rule 144 promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the Commission that may at any time permit the Investor to sell securities of the Company to the public without registration.
(aa) “Rule 415” means Rule 415 promulgated by the Commission under the Securities Act, as such rule may be amended from time to time, or any other similar or successor rule or regulation of the Commission providing for offering securities on a delayed or continuous basis.
(bb) “Staff” shall have the meaning assigned to such term in Section 2(e).
(cc) “Violations” shall have the meaning assigned to such term in Section 6(a).
| 2. | Registration. |
(a) Mandatory Registration. The Company shall prepare and, as soon as practicable, but in no event later than the Filing Deadline, file with the Commission the New Registration Statement covering (i) all of the Conversion Shares and (ii) the maximum number of additional Registrable Securities as shall be permitted to be included thereon in accordance with applicable Commission rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Investor under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices) (the “Initial Registration Statement”). Such Initial Registration Statement shall contain the “Selling Shareholder” and “Plan of Distribution” sections in substantially the form attached hereto as Exhibit B.
(b) Legal Counsel. Subject to Section 5 hereof, the Investor shall have the right to select one legal counsel to review and oversee, solely on its behalf, any registration pursuant to this Section 2 (“Legal Counsel”). Except as provided under Section 9.1(i) of the Purchase Agreement, the Company shall have no obligation to reimburse the Investor for any and all legal fees and expenses of the Legal Counsel incurred in connection with the transactions contemplated hereby.
(c) Sufficient Number of Shares Registered. If at any time all Registrable Securities are not covered by the Initial Registration Statement filed pursuant to Section 2(a) as a result of Section 2(e) or otherwise, and if the Company desires to sell additional Shares to the Investor under the Agreement, the Company shall then use its best efforts to file with the Commission one or more additional Registration Statements so as to cover all of the Registrable Securities not covered by such Initial Registration Statement, in each case, as soon as practicable (taking into account any position of the staff of the Commission (“Staff”) with respect to the date on which the Staff will permit such additional Registration Statement(s) to be filed with the Commission and the rules and regulations of the Commission) (each such additional Registration Statement, a “New Registration Statement”), but in no event later than the applicable Filing Deadline for such New Registration Statement(s). The Company shall use its commercially reasonable efforts to cause each such New Registration Statement to become effective as soon as practicable following the filing thereof with the Commission, but in no event later than the applicable Effectiveness Deadline for such New Registration Statement.
(d) No Inclusion of Other Securities. In no event shall the Company include any securities other than Registrable Securities on any Registration Statement pursuant to Section 2(a) or Section 2(c) without consulting the Investor and Legal Counsel prior to filing such Registration Statement with the Commission.
(e) Offering. If the Staff or the Commission seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such Registration Statement to become effective and be used for resales by the Investor on a delayed or continuous basis under Rule 415 at then-prevailing market prices (and not fixed prices), or if after the filing of any Registration Statement pursuant to Section 2(a) or Section 2(c), the Company is otherwise required by the Staff or the Commission to reduce the number of Registrable Securities included in such Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such Registration Statement (after consultation with the Investor and Legal Counsel as to the specific Registrable Securities to be removed therefrom) until such time as the Staff and the Commission shall so permit such Registration Statement to become effective and be used as aforesaid. Notwithstanding anything in this Agreement to the contrary, if after giving effect to the actions referred to in the immediately preceding sentence, the Staff or the Commission does not permit such Registration Statement to become effective and be used for resales by the Investor on a delayed or continuous basis under Rule 415 at then-prevailing market prices (and not fixed prices), the Company shall not request acceleration of the Effective Date of such Registration Statement, the Company shall promptly (but in no event later than 48 hours) request the withdrawal of such Registration Statement pursuant to Rule 477 under the Securities Act. In the event of any reduction in Registrable Securities pursuant to this paragraph, if the Company desires to sell any Shares to the Investor that are not covered by a Registration Statement or New Registration Statement, the Company shall then use its commercially reasonable efforts to file one or more New Registration Statements with the Commission in accordance with Section 2(c) until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the Prospectuses contained therein are available for use by the Investor.
(f) Any Registrable Security shall cease to be a “Registrable Security” at the earliest of the following: (i) when a Registration Statement covering such Registrable Security becomes or has been declared effective by the Commission and such Registrable Security has been sold or disposed of pursuant to such effective Registration Statement; (ii) when such Registrable Security is held by the Company or one of its subsidiaries; and (iii) the date that is the later of (A) the first (1st) anniversary of the date of termination of the Purchase Agreement in accordance with Article VII of the Purchase Agreement and (B) the first (1st) anniversary of the date of the last sale of any Registrable Securities to the Investor pursuant to the Purchase Agreement.
| 3. | Related Obligations. |
The Company shall use its commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof, and, pursuant thereto, the Company shall have the following obligations:
(a) The Company shall promptly prepare and file with the Commission the Initial Registration Statement pursuant to Section 2(a) hereof and one or more New Registration Statements pursuant to Section 2(c) hereof with respect to the Registrable Securities, but in no event later than the applicable Filing Deadline therefor, and the Company use its commercially reasonable efforts to cause each such New Registration Statement to become effective as soon as practicable after such filing, but in no event later than the applicable Effectiveness Deadline therefor. Subject to Allowable Grace Periods, the Company shall keep each Registration Statement effective (and the Prospectus contained therein available for use) pursuant to Rule 415 for issuances and sales of the Registrable Securities by the Company to the Investor and for resales by the Investor on a continuous basis at then-prevailing market prices (and not fixed prices) at all times until the earlier of (i) the date on which the Investor shall have sold all of the Registrable Securities covered by such Registration Statement and (ii) the date of termination of the Purchase Agreement if as of such termination date the Investor holds no Registrable Securities (or, if applicable, the date on which such securities cease to be Registrable Securities after the date of termination of the Purchase Agreement) (the “Registration Period”). Notwithstanding anything to the contrary contained in this Agreement (but subject to the provisions of Section 3(o) hereof), the Company shall ensure that, when filed and at all times while effective, each Registration Statement (including, without limitation, all amendments and supplements thereto) and the Prospectus (including, without limitation, all amendments and supplements thereto) used in connection with such Registration Statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of Prospectuses, in the light of the circumstances in which they were made) not misleading. The Company shall submit to the Commission, as soon as reasonably practicable after the date that the Company learns that no review of a particular Registration Statement will be made by the Staff or that the Staff has no further comments on a particular Registration Statement (as the case may be), a request for acceleration of effectiveness of such Registration Statement to a time and date as soon as reasonably practicable in accordance with Rule 461 under the Securities Act.
(b) Subject to Section 3(c) of this Agreement, the Company shall use its commercially reasonable efforts to prepare and file with the Commission such amendments (including, without limitation, post-effective amendments) and supplements to each Registration Statement and the Prospectus used in connection with each such Registration Statement, which Prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep each such Registration Statement effective (and the Prospectus contained therein current and available for use) at all times during the Registration Period for such Registration Statement, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company required to be covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the Investor. Without limiting the generality of the foregoing, the Company covenants and agrees that (i) at or before 5:30 p.m. (New York City time) on the second (2nd) Trading Day immediately following the Effective Date of the Initial Registration Statement and any New Registration Statement (or any post-effective amendment thereto), the Company shall file with the Commission in accordance with Rule 424(b) under the Securities Act the final prospectus to be used in connection with sales pursuant to such Registration Statement (or post-effective amendment thereto), and (ii) if the transactions contemplated by any Fixed Purchase are material to the Company (individually or collectively with all other prior Fixed Purchases, VWAP Purchase, or Additional VWAP Purchase, as applicable, the consummation of which have not previously been reported in any Prospectus Supplement filed with the Commission under Rule 424(b) under the Securities Act or in any report, statement or other document filed by the Company with the Commission under the Exchange Act), or if otherwise required under the Securities Act (or the interpretations of the Commission thereof), in each case as reasonably determined by the Company and the Investor, then, within the time period prescribed under Rule 424(b) under the Securities Act, the Company shall file with the Commission a Prospectus Supplement pursuant to Rule 424(b) under the Securities Act with respect to the applicable Fixed Purchase(s), VWAP Purchase(s) and Additional VWAP Purchase(s), as applicable, disclosing the total number of Shares that are to be (and, if applicable, have been) issued and sold to the Investor pursuant to such purchase(s), the total purchase price for the Shares subject to such purchase(s), the applicable purchases price(s) for such Shares and the net proceeds that are to be (and, if applicable, have been) received by the Company from the sale of such Shares. To the extent not previously disclosed in the Prospectus or a Prospectus Supplement, the Company shall disclose on a quarterly basis on Reports on Form 6-K and in its Annual Reports on Form 20-F the information described in the immediately preceding sentence relating to all purchase(s) consummated during the relevant fiscal quarter and shall file such reports with the Commission within the applicable time period prescribed for such report under the Exchange Act. In the case of amendments and supplements to any Registration Statement on Form F-1 or a Prospectus related thereto which are required to be filed pursuant to this Agreement (including, without limitation, pursuant to this Section 3(b)) by reason of the Company filing a report on Form 6-K or Form 20-F or any analogous report under the Exchange Act, the Company shall have incorporated such report by reference into such Registration Statement and Prospectus, if applicable, or shall file such amendments or supplements to the Registration Statement or Prospectus with the Commission on the same day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement or Prospectus, for the purpose of including or incorporating such report into such Registration Statement and Prospectus. The Company consents to the use of the Prospectus (including, without limitation, any supplement thereto) included in each Registration Statement in accordance with the provisions of the Securities Act and with the securities or “Blue Sky” laws of the jurisdictions in which the Registrable Securities may be sold by the Investor, in connection with the resale of the Registrable Securities and for such period of time thereafter as such Prospectus (including, without limitation, any supplement thereto) (or in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required by the Securities Act to be delivered in connection with resales of Registrable Securities.
(c) The Company shall (A) permit Legal Counsel an opportunity to review and comment upon (i) each Registration Statement at least two (2) Business Days prior to its filing with the Commission and (ii) all amendments and supplements to each Registration Statement (including, without limitation, the Prospectus contained therein) (except for Annual Reports on Form 20-F, Reports on Form 6-K, and any similar or successor reports or Prospectus Supplements the contents of which is limited to that set forth in such reports) within a reasonable number of days prior to their filing with the Commission, and (B) shall reasonably consider any comments of the Investor and Legal Counsel on any such Registration Statement or amendment or supplement thereto or to any Prospectus contained therein. The Company shall promptly furnish to Legal Counsel, without charge, (i) electronic copies of any correspondence from the Commission or the Staff to the Company or its representatives relating to each Registration Statement (which correspondence shall be redacted to exclude any material, non-public information regarding the Company or any of its Subsidiaries), (ii) after the same is prepared and filed with the Commission, one (1) electronic copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by the Investor, and all exhibits and (iii) upon the effectiveness of each Registration Statement, one (1) electronic copy of the Prospectus included in such Registration Statement and all amendments and supplements thereto; provided, however, the Company shall not be required to furnish any document (other than the Prospectus, which may be provided in .PDF format) to Legal Counsel to the extent such document is available on EDGAR).
(d) Without limiting any obligation of the Company under the Purchase Agreement, the Company shall promptly furnish to the Investor, without charge, (i) after the same is prepared and filed with the Commission, at least one (1) electronic copy of each Registration Statement and any amendment(s) and supplement(s) thereto, including, without limitation, financial statements and schedules, all documents incorporated therein by reference, if requested by the Investor, all exhibits thereto, (ii) upon the effectiveness of each Registration Statement, one (1) electronic copy of the Prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request from time to time) and (iii) such other documents, including, without limitation, copies of any final Prospectus and any Prospectus Supplement thereto, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Investor; provided, however, the Company shall not be required to furnish any document (other than the Prospectus, which may be provided in .PDF format) to the Investor to the extent such document is available on EDGAR).
(e) The Company shall take such action as is reasonably necessary to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by the Investor of the Registrable Securities covered by a Registration Statement under such other securities or “Blue Sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such amendments (including, without limitation, post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be reasonably necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel and the Investor of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “Blue Sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
(f) The Company shall notify Legal Counsel and the Investor in writing of the happening of any event, as promptly as reasonably practicable after becoming aware of such event, as a result of which the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, non-public information regarding the Company or any of its Subsidiaries), and, subject to Section 3(c), promptly prepare a supplement or amendment to such Registration Statement and such Prospectus contained therein to correct such untrue statement or omission and deliver one (1) electronic copy of such supplement or amendment to Legal Counsel and the Investor (or such other number of copies as Legal Counsel or the Investor may reasonably request). The Company shall also promptly notify Legal Counsel and the Investor in writing (i) when a Prospectus or any Prospectus Supplement or post-effective amendment has been filed, when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel and the Investor by facsimile or e-mail on the same day of such effectiveness and by overnight mail), and when the Company receives written notice from the Commission that a Registration Statement or any post-effective amendment will be reviewed by the Commission, (ii) of any request by the Commission for amendments or supplements to a Registration Statement or related Prospectus or related information, (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate and (iv) of the receipt of any request by the Commission or any other federal or state governmental authority for any additional information relating to the Registration Statement or any amendment or supplement thereto or any related Prospectus. The Company shall respond as promptly as reasonably practicable to any comments received from the Commission with respect to a Registration Statement or any amendment thereto. Nothing in this Section 3(f) shall limit any obligation of the Company under the Purchase Agreement.
(g) The Company shall (i) use its commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement or the use of any Prospectus contained therein, or the suspension of the qualification, or the loss of an exemption from qualification, of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible time and (ii) notify Legal Counsel and the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding.
(h) The Company shall hold in confidence and not make any disclosure of information concerning the Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required to be disclosed in such Registration Statement pursuant to the Securities Act, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other Transaction Document. The Company agrees that it shall, upon learning that disclosure of such information concerning the Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investor and allow the Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.
(i) The Company shall cooperate with the Investor and, to the extent applicable, facilitate the timely preparation and delivery of Registrable Securities, as DWAC Shares, to be offered pursuant to a Registration Statement and enable such DWAC Shares to be in such denominations as the Investor may reasonably request from time to time and registered in such names as the Investor may request. Investor hereby agrees that it shall cooperate with the Company, its counsel and Transfer Agent in connection with any issuances of DWAC Shares, and hereby represents, warrants and covenants to the Company that that it will resell such DWAC Shares only pursuant to the Registration Statement in which such DWAC Shares are included, in a manner described under the caption “Plan of Distribution” in such Registration Statement, and in a manner in compliance with all applicable U.S. federal and state securities laws, rules and regulations, including, without limitation, any applicable prospectus delivery requirements of the Securities Act. DWAC Shares shall be free from all restrictive legends may be transmitted by the transfer agent to the Investor by crediting an account at DTC as directed in writing by the Investor.
(j) Upon the written request of the Investor, the Company shall as soon as reasonably practicable after receipt of notice from the Investor and subject to Section 3(n) hereof, (i) incorporate in a Prospectus Supplement or post-effective amendment such information as the Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such Prospectus Supplement or post-effective amendment after being notified of the matters to be incorporated in such Prospectus Supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement or Prospectus contained therein if reasonably requested by the Investor.
(k) The Company shall use its commercially reasonable efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.
(l) The Company shall otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission in connection with any registration hereunder.
(m) Within one (1) Business Day after each Registration Statement which covers Registrable Securities is declared effective by the Commission, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such Registration Statement has been declared effective by the Commission in a form to be provided by counsel to the Company and reasonably acceptable to the Investor.
(n) Notwithstanding anything to the contrary contained herein (but subject to the last sentence of this Section 3(n)), at any time after the Effective Date of a particular Registration Statement, the Company may, upon written notice to Investor, suspend Investor’s use of any prospectus that is a part of any Registration Statement (in which event the Investor shall discontinue sales of the Registrable Securities pursuant to such Registration Statement contemplated by this Agreement, but shall settle any previously made sales of Registrable Securities) if the Company (x) is pursuing an acquisition, merger, tender offer, reorganization, disposition or other similar material transaction and the Company determines in good faith that (A) the Company’s ability to pursue or consummate such a material transaction would be materially adversely affected by any required disclosure of such transaction in such Registration Statement or other registration statement or (B) such material transaction renders the Company unable to comply with Commission requirements, in each case under circumstances that would make it impractical or inadvisable to cause any Registration Statement (or such filings) to be used by Investor or to promptly amend or supplement any Registration Statement contemplated by this Agreement on a post effective basis, as applicable, or (y) has experienced some other material non-public event the disclosure of which at such time, in the good faith judgment of the Company, would materially adversely affect the Company (each, an “Allowable Grace Period”); provided, however, that in no event shall the Investor be suspended from selling Registrable Securities pursuant to any Registration Statement for a period that exceeds 20 consecutive Trading Days or an aggregate of 60 days in any 365-day period; and provided, further, the Company shall not effect any such suspension during (A) the first 10 consecutive Trading Days after the Effective Date of the particular Registration Statement or (B) the five-Trading Day period following each settlement date for a Fixed Purchase, VWAP Purchase, or Additional VWAP Purchase, as applicable. Upon disclosure of such information or the termination of the condition described above, the Company shall provide prompt notice, but in any event within one Business Day of such disclosure or termination, to the Investor and shall promptly terminate any suspension of sales it has put into effect and shall take such other reasonable actions to permit registered sales of Registrable Securities as contemplated in this Agreement (including as set forth in the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable). Notwithstanding anything to the contrary contained in this Section 3(n), the Company shall cause its transfer agent to deliver DWAC Shares to a transferee of the Investor in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which (i) the Company has made a sale to Investor and (ii) the Investor has entered into a contract for sale, and delivered a copy of the Prospectus included as part of the particular Registration Statement to the extent applicable, in each case prior to the Investor’s receipt of the notice of an Allowable Grace Period and for which the Investor has not yet settled.
| 4. | Obligations of the Investor. |
(a) At least two (2) Business Days prior to the first anticipated filing date of each Registration Statement (or such shorter period to which the parties agree), the Company shall notify the Investor in writing of the information the Company requires from the Investor with respect to such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of the Investor that the Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.
(b) The Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of each Registration Statement hereunder, unless the Investor has notified the Company in writing of the Investor’s election to exclude all of the Investor’s Registrable Securities from such Registration Statement.
(c) The Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(l) or the first sentence of 3(f), the Investor shall immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(l) or the first sentence of Section 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary in this Section 4(c), the Company shall cause its transfer agent to deliver DWAC Shares to a transferee of the Investor in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which the Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(l) or the first sentence of Section 3(f) and for which the Investor has not yet settled.
(d) The Investor covenants and agrees that it shall comply with the prospectus delivery and other requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to a Registration Statement.
| 5. | Expenses of Registration. |
All reasonable expenses of the Company, other than sales or brokerage commissions and fees and disbursements of counsel for, and other expenses of, the Investor, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company, shall be paid by the Company.
| 6. | Indemnification. |
(a) In the event any Registrable Securities are included in any Registration Statement under this Agreement, to the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, each of its directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Exchange Act and each of the directors, officers, shareholders, members, partners, employees, agents, advisors, representatives (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) of such controlling Persons (each, an “Investor Party” and collectively, the “Investor Parties”), against any losses, obligations, claims, damages, liabilities, contingencies, judgments, fines, penalties, charges, costs (including, without limitation, court costs, reasonable attorneys’ fees, costs of defense and investigation), amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) reasonably incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the Commission, whether pending or threatened, whether or not an Investor Party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “Blue Sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented) or in any Prospectus Supplement or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading (the matters in the foregoing clauses (i) and (ii) being, collectively, “Violations”). Subject to Section 6(c), the Company shall reimburse the Investor Parties, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Investor Party arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Investor Party for such Investor Party expressly for use in connection with the preparation of such Registration Statement, Prospectus or Prospectus Supplement or any such amendment thereof or supplement thereto (it being hereby acknowledged and agreed that the written information set forth on Exhibit C attached hereto is the only written information furnished to the Company by or on behalf of the Investor expressly for use in any Registration Statement, Prospectus or Prospectus Supplement); (ii) shall not be available to the Investor to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the Prospectus (as amended or supplemented) made available by the Company (to the extent applicable), including, without limitation, a corrected Prospectus, if such Prospectus (as amended or supplemented) or corrected Prospectus was timely made available by the Company pursuant to Section 3(d) and then only if, and to the extent that, following the receipt of the corrected Prospectus no grounds for such Claim would have existed; and (iii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Investor Party and shall survive the transfer of any of the Registrable Securities by the Investor pursuant to Section 9.
(b) In connection with any Registration Statement in which the Investor is participating, the Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each, an “Company Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case, to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information relating to the Investor furnished to the Company by the Investor expressly for use in connection with such Registration Statement, the Prospectus included therein or any Prospectus Supplement thereto (it being hereby acknowledged and agreed that the written information set forth on Exhibit C attached hereto is the only written information furnished to the Company by or on behalf of the Investor expressly for use in any Registration Statement, Prospectus or Prospectus Supplement); and, subject to Section 6(c) and the below provisos in this Section 6(b), the Investor shall reimburse a Company Party any legal or other expenses reasonably incurred by such Company Party in connection with investigating or defending any such Claim; provided, however, the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Investor, which consent shall not be unreasonably withheld or delayed; and provided, further that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to the Investor as a result of the applicable sale of Registrable Securities pursuant to such Registration Statement, Prospectus or Prospectus Supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Party and shall survive the transfer of any of the Registrable Securities by the Investor pursuant to Section 9.
(c) Promptly after receipt by an Investor Party or Company Party (as the case may be) under this Section 6 of notice of the commencement of any action or proceeding (including, without limitation, any governmental action or proceeding) involving a Claim, such Investor Party or Company Party (as the case may be) shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Investor Party or the Company Party (as the case may be); provided, however, an Investor Party or Company Party (as the case may be) shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the indemnifying party if: (i) the indemnifying party has agreed in writing to pay such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the defense of such Claim and to employ counsel reasonably satisfactory to such Investor Party or Company Party (as the case may be) in any such Claim; or (iii) the named parties to any such Claim (including, without limitation, any impleaded parties) include both such Investor Party or Company Party (as the case may be) and the indemnifying party, and such Investor Party or such Company Party (as the case may be) shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Investor Party or such Company Party and the indemnifying party (in which case, if such Investor Party or such Company Party (as the case may be) notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, then the indemnifying party shall not have the right to assume the defense thereof on behalf of the indemnified party and such counsel shall be at the expense of the indemnifying party, provided further that in the case of clause (iii) above the indemnifying party shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for all Investor Parties or Company Parties (as the case may be). The Company Party or Investor Party (as the case may be) shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Company Party or Investor Party (as the case may be) which relates to such action or Claim. The indemnifying party shall keep the Company Party or Investor Party (as the case may be) reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Company Party or Investor Party (as the case may be), consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Company Party or Investor Party (as the case may be) of a release from all liability in respect to such Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Company Party. For the avoidance of doubt, the immediately preceding sentence shall apply to Sections 6(a) and 6(b) hereof. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Company Party or Investor Party (as the case may be) with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Investor Party or Company Party (as the case may be) under this Section 6, except to the extent that the indemnifying party is materially and adversely prejudiced in its ability to defend such action.
(d) No Person involved in the sale of Registrable Securities who is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with such sale shall be entitled to indemnification from any Person involved in such sale of Registrable Securities who is not guilty of fraudulent misrepresentation.
(e) The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred; provided that any Person receiving any payment pursuant to this Section 6 shall promptly reimburse the Person making such payment for the amount of such payment to the extent a court of competent jurisdiction determines that such Person receiving such payment was not entitled to such payment.
(f) The indemnity and contribution agreements contained herein shall be in addition to (i) any cause of action or similar right of the Company Party or Investor Party against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
| 7. | Contribution. |
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6 of this Agreement, (ii) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the applicable sale of such Registrable Securities pursuant to such Registration Statement. Notwithstanding the provisions of this Section 7, the Investor shall not be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by the Investor from the applicable sale of the Registrable Securities subject to the Claim exceeds the amount of any damages that the Investor has otherwise been required to pay, or would otherwise be required to pay under Section 6(b), by reason of such untrue or alleged untrue statement or omission or alleged omission.
| 8. | Reports Under the Exchange Act. |
With a view to making available to the Investor the benefits of Rule 144, the Company agrees to:
(a) so long as the Investor owns Registrable Securities, use its reasonable best efforts to make and keep public information available, as those terms are understood and defined in Rule 144; (b) so long as the Investor owns Registrable Securities, use its reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit any of the Company’s obligations under the Purchase Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144;
(c) furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting, submission and posting requirements of Rule 144 and the Exchange Act, if applicable (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company with the Commission if such reports are not publicly available via EDGAR, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration; and
(d) take such additional action as is reasonably requested by the Investor to enable the Investor to sell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to the Company’s Transfer Agent as may be reasonably requested from time to time by the Investor and otherwise fully cooperate with Investor and Investor’s broker to effect such sale of securities pursuant to Rule 144.
| 9. | Assignment of Registration Rights. |
The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor; provided, however, that any transaction, whether by merger, reorganization, restructuring, consolidation, financing or otherwise, whereby the Company remains the surviving entity immediately after such transaction shall not be deemed an assignment. The Investor may not assign its rights under this Agreement without the prior written consent of the Company, other than to an affiliate of the Investor controlled by Fredric Zaino, in which case the assignee must agree in writing to be bound by the terms and conditions of this Agreement.
| 10. | Amendment or Waiver. |
No provision of this Agreement may be (i) amended other than by a written instrument signed by both parties hereto or (ii) waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
| 11. | Miscellaneous. |
(a) Solely for purposes of this Agreement, a Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.
(b) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement shall be given in accordance with Section 9.4 of the Purchase Agreement.
(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. The Company and the Investor acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that either party shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement by the other party and to enforce specifically the terms and provisions hereof (without the necessity of showing economic loss and without any bond or other security being required), this being in addition to any other remedy to which either party may be entitled by law or equity.
(d) All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(e) The Transaction Documents set forth the entire agreement and understanding of the parties solely with respect to the subject matter thereof and supersedes all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written, solely with respect to such matters. There are no promises, undertakings, representations or warranties by either party relative to subject matter hereof not expressly set forth in the Transaction Documents. Notwithstanding anything in this Agreement to the contrary and without implication that the contrary would otherwise be true, nothing contained in this Agreement shall limit, modify or affect in any manner whatsoever (i) the conditions precedent to a Fixed Purchase, a VWAP Purchase or an Additional VWAP Purchase contained in the Purchase Agreement or (ii) any of the Company’s obligations under the Purchase Agreement.
(f) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors. This Agreement is not for the benefit of, nor may any provision hereof be enforced by, any Person, other than the parties hereto, their respective successors and the Persons referred to in Sections 6 and 7 hereof.
(g) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.
(h) This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature or signature delivered by e-mail in a “.pdf” format data file, including any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com, www.echosign.adobe.com, etc., shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.
(i) Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(j) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.
[Signature Pages Follow]
IN WITNESS WHEREOF, Investor and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.
| COMPANY: | |||
| HUB CYBER SECURITY LTD. | |||
| By: | |||
| Name: | Noah Hershcoviz | ||
| Title: | Chief Executive Officer | ||
IN WITNESS WHEREOF, Investor and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.
| INVESTOR: | ||
| KEYSTONE CAPITAL PARTNERS, LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT
[●]
[●]
[●]
Re: Hub Cyber Security Ltd.
Ladies and Gentlemen:
We are counsel to Hub Cyber Security Ltd., a corporation organized in the State of Israel (the “Company”), and have represented the Company in connection with that certain Ordinary Share Purchase Agreement, dated [ ], 2025 (the “Purchase Agreement”), entered into by and among the Company and the Investor named therein (the “Holder”) pursuant to which the Company will issue to the Holder from time to time shares of the Company’s Ordinary Shares, no par value (the ”Ordinary Shares”). Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement, dated [ ], 2025, with the Holder (the “Registration Rights Agreement”), pursuant to which the Company agreed, among other things, to register the offer and sale by the Holder of the Registrable Securities (as defined in the Registration Rights Agreement) under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on [●], 2025, the Company filed a Registration Statement on Form F-1 (File No. 333-[●]) (the “Registration Statement”) with the Securities and Exchange Commission (the “Commission”) relating to the Registrable Securities which names the Holder as an underwriter and a selling shareholder thereunder.
In connection with the foregoing, based solely on our review of the Commission’s EDGAR website, we advise you that the Registration Statement became effective under the Securities Act on [●]. In addition, based solely on our review of the information made available by the Commission at http://www.sec.gov/litigation/stoporders.shtml, we confirm that the Commission has not issued any stop order suspending the effectiveness of the Registration Statement. To our knowledge, based solely on our participation in the conferences mentioned above regarding the Registration Statement and our review of the information made available by the Commission at http://www.sec.gov/litigation/stoporders.shtml, no proceedings for that purpose are pending or have been instituted or threatened by the Commission.
This letter shall serve as our standing opinion to you that the shares of Ordinary Shares are freely transferable by the Holder pursuant to the Registration Statement, provided the Registration Statement remains effective.
This opinion letter is limited to the federal securities laws of the United States of America. We express no opinion as to matters relating to state securities laws or Blue Sky laws.
We assume no obligation to update or supplement this opinion letter to reflect any facts or circumstances which may hereafter come to our attention with respect to the opinion and statements expressed above, including any changes in applicable law that may hereafter occur.
This opinion letter is being delivered solely for the benefit of the person to whom it is addressed; accordingly, it may not be quoted, filed with any governmental authority or other regulatory agency or otherwise circulated or utilized for any purposes without our prior written consent.
| Very truly yours, | ||
| [_________________________] | ||
| By: | ||
cc:
EXHIBIT B
SELLING SHAREHOLDER
This prospectus relates to the possible resale from time to time by Keystone Capital Partners, LLC of any or all Ordinary Shares that may be issued by us to Keystone Capital Partners, LLC under the Purchase Agreement. For additional information regarding the issuance of Ordinary Shares covered by this prospectus, see the section titled “Keystone Capital Partners, LLC Committed Equity Financing” above. We are registering the Ordinary Shares pursuant to the provisions of the Registration Rights Agreement we entered into with Keystone Capital Partners, LLC on [ ], 2025 in order to permit the selling shareholder to offer the shares for resale from time to time. Except for the transactions contemplated by the Purchase Agreement and the Registration Rights Agreement, Keystone Capital Partners, LLC has not had any material relationship with us within the past three years. As used in this prospectus, the term “selling shareholder” means Keystone Capital Partners, LLC.
The table below presents information regarding the selling shareholder and the Ordinary Shares that it may offer from time to time under this prospectus. This table is prepared based on information supplied to us by the selling shareholder, and reflects holdings as of [ ], 2025. The number of shares in the column “Maximum Number of Ordinary Shares to be Offered Pursuant to this Prospectus” represents all of the shares of Ordinary Shares that the selling shareholder may offer under this prospectus. The selling shareholder may sell some, all or none of its shares in this offering. We do not know how long the selling shareholder will hold the shares before selling them, and we currently have no agreements, arrangements or understandings with the selling shareholder regarding the sale of any of the shares.
Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act, and includes the Ordinary Shares with respect to which the selling shareholder has voting and investment power. The percentage of Ordinary Shares beneficially owned by the selling shareholder prior to the offering shown in the table below is based on an aggregate of [●] Ordinary Shares outstanding on [ ], 2025. Because the purchase price of the Ordinary Shares issuable under the Purchase Agreement is determined on each Fixed Purchase Date, with respect to a Fixed Purchase, on the applicable VWAP Purchase Date, with respect to a VWAP Purchase, and on the applicable Additional VWAP Purchase Date, with respect to an Additional VWAP Purchase, the number of shares that may actually be sold by the Company to Keystone Capital Partners, LLC under the Purchase Agreement may be fewer than the number of shares being offered by this prospectus. The fourth column assumes the sale of all of the shares offered by the selling shareholder pursuant to this prospectus.
| Number of Shares of Ordinary Shares Owned Prior to Offering | Maximum Number of Ordinary Shares to be Offered Pursuant to this | Number of Ordinary Shares Owned After Offering | ||||||||||||||||||
| Name of Selling Shareholder | Number(1) | Percent(2) | Prospectus | Number(3) | Percent(2) | |||||||||||||||
| Keystone Capital Partners, LLC | [●] | * | [●] | 0 | -- | |||||||||||||||
| * | Represents beneficial ownership of less than [_]% of the outstanding shares of our Ordinary Shares. |
| (1) | This number represents the [ ] Ordinary Shares issuable upon conversion of the Commitment Note we issued to Keystone Capital Partners, LLC on [ ], 2025 in consideration for entering into the Purchase Agreement with us. In accordance with Rule 13d-3(d) under the Exchange Act, we have excluded from the number of shares beneficially owned prior to the offering all of the shares that Keystone Capital Partners, LLC may be required to purchase under the Purchase Agreement, because the issuance of such shares is solely at our discretion and is subject to conditions contained in the Purchase Agreement, the satisfaction of which are entirely outside of Keystone Capital Partners, LLC’s control, including the registration statement that includes this prospectus becoming and remaining effective. Furthermore, the Fixed Purchases, VWAP Purchases, or Additional VWAP Purchases, as applicable, of Ordinary Shares are subject to certain agreed upon maximum amount limitations set forth in the Purchase Agreement. Also, the Purchase Agreement prohibits us from issuing and selling any of our Ordinary Shares to Keystone Capital Partners, LLC to the extent such shares, when aggregated with all other of our Ordinary Shares then beneficially owned by Keystone Capital Partners, LLC, would cause Keystone Capital Partners, LLC’s beneficial ownership of our Ordinary Shares to exceed the 4.99% Beneficial Ownership Cap. |
| (2) | Applicable percentage ownership is based on [●] Ordinary Shares outstanding as of [ ], 2025. |
| (3) | Assumes the sale of all shares being offered pursuant to this prospectus. |
PLAN OF DISTRIBUTION
The Ordinary Shares offered by this prospectus are being offered by the selling shareholder, Keystone Capital Partners, LLC. The shares may be sold or distributed from time to time by the selling shareholder directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of Ordinary Shares offered by this prospectus could be effected in one or more of the following methods:
| ● | ordinary brokers’ transactions; |
| ● | transactions involving cross or block trades; |
| ● | through brokers, dealers, or underwriters who may act solely as agents; |
| ● | “at the market” into an existing market for our Ordinary Shares; |
| ● | in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents; |
| ● | in privately negotiated transactions; or |
| ● | any combination of the foregoing. |
In order to comply with the securities laws of certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the state’s registration or qualification requirement is available and complied with.
Keystone Capital Partners, LLC is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act.
Keystone Capital Partners, LLC has informed us that it intends to use one or more registered broker-dealers to effectuate all sales, if any, of our Ordinary Shares that it has acquired and may in the future acquire from us pursuant to the Purchase Agreement. Such sales will be made at prices and at terms then prevailing or at prices related to the then current market price. Each such registered broker-dealer will be an underwriter within the meaning of Section 2(a)(11) of the Securities Act. Keystone Capital Partners, LLC has informed us that each such broker-dealer will receive commissions from Keystone Capital Partners, LLC that will not exceed customary brokerage commissions.
Brokers, dealers, underwriters or agents participating in the distribution of the shares of our Ordinary Shares offered by this prospectus may receive compensation in the form of commissions, discounts, or concessions from the purchasers, for whom the broker-dealers may act as agent, of the shares sold by the selling shareholder through this prospectus. The compensation paid to any such particular broker-dealer by any such purchasers of shares of our Ordinary Shares sold by the selling shareholder may be less than or in excess of customary commissions. Neither we nor the selling shareholder can presently estimate the amount of compensation that any agent will receive from any purchasers of Ordinary Shares sold by the selling shareholder.
We know of no existing arrangements between the selling shareholder or any other shareholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares of our Ordinary Shares offered by this prospectus.
We may from time to time file with the SEC one or more supplements to this prospectus or amendments to the registration statement of which this prospectus forms a part to amend, supplement or update information contained in this prospectus, including, if and when required under the Securities Act, to disclose certain information relating to a particular sale of shares offered by this prospectus by the selling shareholder, including the names of any brokers, dealers, underwriters or agents participating in the distribution of such shares by the selling shareholder, any compensation paid by the selling shareholder to any such brokers, dealers, underwriters or agents, and any other required information.
We will pay the expenses incident to the registration under the Securities Act of the offer and sale of the shares of our Ordinary Shares covered by this prospectus by the selling shareholder. As consideration for its irrevocable commitment to purchase our Ordinary Shares under the Purchase Agreement, we have issued to Keystone Capital Partners, LLC a Commitment Note convertible into our Ordinary Shares in accordance with the Purchase Agreement. We have also paid to Keystone Capital Partners, LLC $[_____] in cash as reimbursement for the reasonable, out-of-pocket expenses incurred by Keystone Capital Partners, LLC, including the legal fees and disbursements of Keystone Capital Partners, LLC’s legal counsel, in connection with its due diligence investigation of the Company and in connection with the preparation, negotiation and execution of the Purchase Agreement.
We also have agreed to indemnify Keystone Capital Partners, LLC and certain other persons against certain liabilities in connection with the offering of Ordinary Shares offered hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Keystone Capital Partners, LLC has agreed to indemnify us against liabilities under the Securities Act that may arise from certain written information furnished to us by Keystone Capital Partners, LLC specifically for use in this prospectus or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable.
We estimate that the total expenses for the offering will be approximately $[●].
Keystone Capital Partners, LLC has represented to us that at no time prior to the date of the Purchase Agreement has Keystone Capital Partners, LLC or its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our Ordinary Shares or any hedging transaction, which establishes a net short position with respect to our Ordinary Shares. Keystone Capital Partners, LLC has agreed that during the term of the Purchase Agreement, neither Keystone Capital Partners, LLC, nor any of its agents, representatives or affiliates will enter into or effect, directly or indirectly, any of the foregoing transactions.
We have advised the selling shareholder that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes the selling shareholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the securities offered by this prospectus.
This offering will terminate on the date that all shares of our Ordinary Shares offered by this prospectus have been sold by the selling shareholder.
Our Ordinary Shares are currently listed on the Nasdaq [Capital] Market under the symbol “HUBC”.
EXHIBIT C
Exhibit 4.77
THIS CONVERTIBLE PROMISSORY NOTE (AS MAY BE AMENDED FROM TIME TO TIME, THE “NOTE”) AND THE SECURITIES INTO WHICH IT MAY BE CONVERTED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE THEREOF OR EXEMPTION UNDER THE SECURITIES ACT.
CONVERTIBLE PROMISSORY NOTE
| Aggregate Principal Amount: $1,000,000 | Dated as of March 11, 2025 |
FOR VALUE RECEIVED, and subject to the terms and conditions set forth herein, Hub Cyber Security Ltd., a company incorporated under the laws of the State of Israel (the “Company”), hereby promises to pay to the order of Keystone Capital Partners, LLC, a Delaware limited liability company (the “Holder”), the principal sum of ONE MILLION DOLLARS ($1,000,000) or such lesser amount as shall remain unpaid under this Convertible Promissory Note (this “Note”) on the Maturity Date (as defined herein). Subject to Section 10, all payments on this Note shall be made by way of conversion into Ordinary Shares.
1. Principal. Subject to Sections 9 and 10, the entire unpaid principal balance of this Note shall be due and payable on December 11, 2025 (the “Maturity Date”) by way of conversion into a number of Conversion Shares, subject to the Beneficial Ownership Limitation, equal to such unpaid principal balance divided by the Closing Sale Price (as defined in the Ordinary Share Purchase Agreement between the Company and the Holder as of the date hereof) on the date immediately prior to the Maturity Date, or if this Note is converted prior to the Maturity Date, in accordance with Section 2, the Closing Sale Price on the date immediately prior to the date on which a party notifies the other party that it has elected to convert such unpaid principal balance (the “Conversion Date”), provided that in each case the applicable conversion price shall not be lower than twenty percent (20%) of the Closing Sale Price on the issuance date of this Note. Under no circumstances shall any individual, including but not limited to any officer, director, employee or equityholder of the Company, be obligated personally for any obligations or liabilities of the Company hereunder. For the avoidance of doubt, the principal balance of this Note shall only be payable by way of conversion into Ordinary Shares and not in cash.
2. Prepayment. At any time and from time to time following the earlier of (i) the date on which the Conversion Shares are registered under a registration statement filed with the Securities and Exchange Commission or (ii) six (6) months following the date of this Note, the principal balance of this Note, may be converted, in whole or in part, by either party without the prior written consent of the other party, subject to the Beneficial Ownership Limitation and provided that the Closing Sale Price on the Conversion Date is not lower than 10% as compared to the Closing Sale Price on the date immediately prior thereto.
3. Reserved.
4. Reserved.
5. Security. This Note is a general unsecured obligation of the Company.
6. Representations and Warranties of the Company. The Company hereby represents and warrants to the Holder as of the date hereof as follows:
a. Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.
b. Due Authorization. All corporate action on the part of the Company’s directors and shareholders necessary for the authorization, execution, delivery of, and the performance of all obligations of the Company under this Note has been taken and this Note constitutes the valid and legally binding obligations of the Company, enforceable against the Company in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the enforcement of creditor’s rights generally and (ii) general principles of equity.
c. Corporate Power. The Company has the requisite corporate power and authority to execute and deliver this Note to the Holder and to issue, and carry out and perform all of its obligations under, this Note.
d. Valid Issuance.
i. The Conversion Shares, when issued in accordance with the terms of this Note, will be duly and validly issued, fully paid and nonassessable and will be free of any liens, encumbrances, or restrictions on transfer other than restrictions on under applicable state and federal securities laws or as contemplated thereby.
ii. Assuming the accuracy of the representations made by the Holder in Section 7, the offer and sale of the Note and the Conversion Shares to the Holder in accordance with this Note are exempt from the registration and prospectus delivery requirements of the Securities Act, and the securities registration and qualification requirements of the currently effective provisions of the securities laws of the states in which the Holder is resident based upon its addresses set forth on the signature page, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.
7. Representations, Warranties and Certain Agreements of the Holder. The Holder hereby represents and warrants to the Company as of the date hereof as follows:
a. Organization, Good Standing and Qualification. The Holder is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware.
b. Authorization. This Note constitutes the Holder’s valid and legally binding obligation, enforceable in accordance with its terms except as may be limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws relating to or affecting the enforcement of creditor’s rights generally and (ii) general principles of equity. The Holder represents that it has full power and authority to enter into this Note.
c. Purchase for Own Account. This Note and the Conversion Shares, if and when acquired, are being acquired for investment for the Holder’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Securities Act, and the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same.
d. Disclosure of Information. The Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to this Note and the Conversion Shares. The Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Note and the Conversion Shares and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to the Holder or to which the Holder had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by the Company in Section 6.
e. Investment Experience. The Holder understands that the purchase of this Note and the Conversion Shares involves substantial risk. The Holder also understands that there can be no assurances that the Company will be able to repay this Note. The Holder has experience as an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment in this Note and the Conversion Shares and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in this Note and the Conversion Shares and protecting its own interests in connection with this investment.
f. Accredited Investor Status. The Holder is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act.
g. Restricted Securities. The Holder understands that this Note and the Conversion Shares are characterized as “restricted securities” under the Securities Act and Rule 144 promulgated thereunder inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and that under the Securities Act and applicable regulations thereunder such securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, the Holder represents that it is familiar with Rule 144 of the SEC, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. The Holder understands that the Company is under no obligation to register this Note or the Conversion Shares.
h. No Solicitation. At no time was the Holder presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of this Note or the Conversion Shares.
i. Legends. It is understood that the certificates or book entries evidencing the Conversion Shares will bear (1) any legend required by the laws of the State of Delaware, including any legend required by the General Corporation Law of the State of Delaware, or any other state securities law and (2) the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
j. No “Bad Actor” Disqualification. No “bad actor” disqualifying event is applicable to the Holder. The Holder has exercised reasonable care to determine whether any disqualification event is applicable to the Holder.
8. Events of Default. Each of the following shall constitute an event of default (“Event of Default”):
a. Failure to Pay. The Company’s failure to pay all or a portion of the unpaid principal balance of this Note to the Holder when due, whether at maturity, as a result of acceleration or otherwise.
b. Voluntary Bankruptcy. The commencement by the Company or any of its Significant Subsidiaries (as defined below) of a voluntary case under any applicable bankruptcy, insolvency, reorganization, rehabilitation or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or any of its Significant Subsidiaries or for any substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the failure of the Company or any of its Significant Subsidiaries generally to pay its debts as such debts become due, or the taking of corporate action by the Company or any of its Significant Subsidiaries in furtherance of any of the foregoing. As used herein, “Significant Subsidiary” shall have the meaning set forth in Article I, Rule 1-02(w) of Regulation S-X promulgated by the SEC (or any successor rule); provided, that in each instance in such definition in which the term “10 percent” is used, the term “5 percent” shall be substituted therefor.
c. Involuntary Bankruptcy. The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of the Company or any of its Significant Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or any of its Significant Subsidiaries or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days.
d. Change of Control. (i) The majority of the board of directors of the Company has changed within a 12-month period unless a majority of the directors then in office endorsed the appointment or election of the new directors or (ii) the Company consummates a sale, lease or transfer of all or substantially all of the assets, lines of business or divisions of the Company and its subsidiaries in a single transaction or series of related transactions, taken as a whole, to any person or persons, other than solely to one or more of the Company’s wholly owned subsidiaries; provided, that, in no event shall the consummation of any transaction with the Holder or any of its affiliates constitute an Event of Default pursuant to this Section 8.d.
e. Delisting of the Company’s Ordinary Shares. At any time after the date hereof, the ordinary shares, no par value, of the Company (“Ordinary Shares”) are no longer listed, or is suspended from trading for a period of five (5) or more consecutive trading days, on any national securities exchange.
f. Representations and Warranties. Any representation or warranty made by the Company in this Note shall be untrue or incorrect in any material respect as of the date when made or deemed made.
g. Breach. The Company’s failure to observe or perform in all material respects any covenant or agreement contained in this Note.
9. Remedies.
a. Upon the occurrence of an Event of Default, the Holder may, by written notice to the Company, declare this Note to be due immediately and payable, whereupon the unpaid principal balance of this Note, shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding.
b. Reserved.
c. The Company will furnish to the Holder prompt written notice of the occurrence of any Event of Default.
10. Reserved.
b. Reserved.
c. If at any time during the period between the date of this Note and any conversion of all or any portion of the unpaid principal balance of this Note, in accordance with this Note, any change in the outstanding shares of Ordinary Shares shall occur by reason of any stock split, reverse stock split, stock dividend, cash dividend, reorganization, recapitalization, reclassification, combination, exchanges of shares, rights, options, warrants, distributions, spin-off, tender offer, exchange offer or other change or transaction with respect to the Ordinary Shares (each, an “Adjustment Event”), any number or amount contained in this Note that is based on the price of an Ordinary Shares or a number of Ordinary Shares shall be equitably adjusted to the extent necessary to provide the Holder the same economic effect with respect to the Ordinary Shares as contemplated by this Note with respect to such conversion as of immediately prior to such Adjustment Event.
d. Upon any conversion of the principal balance of this Note, (i) the Holder shall surrender and deliver this Note, duly endorsed, to the Company against delivery of the Conversion Shares, (ii) in exchange for, and within one (1) business day following the receipt of, the surrendered Note, the Company shall, at the direction of the Holder, deliver (or cause to be delivered) to the Holder the Conversion Shares, which shall bear such legends as are required in the opinion of counsel to the Company, by applicable state and federal securities laws or by any other agreement between the Company and the Holder and the Company will pay any documentary, stamp or similar issue or transfer tax or duty due on the issue or delivery of any Conversion Share upon such conversion. Upon such delivery of the Conversion Shares to the Holder, the converted portion of this Note shall automatically become fully paid and satisfied. To the extent Israeli withholding tax shall apply on any payment or issuance of shares upon the repayment or conversion of this Note, Company shall be entitled to withhold such tax in accordance with the applicable law unless provided with an applicable exemption (or approval of reduced tax withholding rate) issued by the Israel Tax Authority.
e. For purposes of this Note, “Conversion Shares” means any Ordinary Shares issued upon conversion of all or a portion of the principal balance of this Note.
f. Authorized Shares. So long as this Note is outstanding, the Company shall take all action necessary, including amending the Company’s governing documents to authorize and reserve the requisite number of Ordinary Shares, solely for the purpose of effecting the conversion of this Note, such that the number of shares of Conversion Shares shall be duly and validly authorized, reserved and available for issuance at the time of the conversion of this Note, and upon issuance in accordance with the terms of this Note, the Conversion Shares will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under applicable federal and state securities laws or liens or encumbrances created by or imposed by the Holder.
g. Beneficial Ownership Limitation. Notwithstanding anything to the contrary contained in this Note, the Company shall not issue or sell, and the Holder shall not purchase or acquire, any Ordinary Shares under this Note which, when aggregated with all other Ordinary Shares then beneficially owned by the Holder and its Affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in the beneficial ownership by the Holder of more than 4.99% of the outstanding Ordinary Shares (the “Beneficial Ownership Limitation”). Upon the written or oral request of the Holder, the Company shall promptly (but not later than the next Business Day on which its transfer Agent is open for business) confirm orally or in writing to the Holder the number of Ordinary Shares outstanding as of the most recent date for which the transfer agent has such information. The Holder and the Company shall each cooperate in good faith in the determinations required under this Section 10.g and the application of this Section 10.g. The Holder’s written certification to the Company of the applicability of the Beneficial Ownership Limitation, and the resulting effect thereof hereunder at any time, shall be conclusive with respect to the applicability thereof and such result absent manifest error. The provisions of this Section 10.g shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 10.g to the extent necessary to properly give effect to the limitations contained in this Section 10.g.
11. Notices. Any notice or communication by the Company or the Holder to the other will be deemed to have been duly given if in writing and delivered in person or by first class mail (registered or certified, return receipt requested), electronic transmission or other similar means of unsecured electronic communication or overnight air courier guaranteeing next day delivery, or to the other’s address included on the signature page hereto. The Company or the Holder, by notice to the other, may designate additional or different addresses (including facsimile numbers and electronic addresses) for subsequent notices or communications. All notices and communications will be deemed to have been duly given: (a) at the time delivered by hand, if personally delivered; (b) five (5) business days after being deposited in the mail, postage prepaid, if mailed; (c) when transmitted, if transmitted by facsimile, electronic transmission or other similar means of unsecured electronic communication; and (d) the next business day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.
12. Governing Law. THIS NOTE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS PROMISSORY NOTE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE COMPANY, AND THE HOLDER BY ITS ACCEPTANCE THEREOF IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED BY THIS NOTE.
13. Severability. Any provision contained in this Note that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
14. Amendment; Waiver. Any amendment hereto or waiver of any provision hereof may be made with, and only with, the written consent of the Company and the Holder. No failure to exercise or delay in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive of rights available in law or in equity. Each party hereto acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the other party hereto and that the remedy at law for any such breach would be inadequate. Each party hereto therefore agrees that, in the event of any such breach or threatened breach, the other party hereto shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required.
15. Assignment. No assignment or transfer of this Note or any rights or obligations hereunder may be made by any party hereto (by operation of law or otherwise) without the prior written consent of the other party hereto (such consent not to be unreasonably withheld, conditioned or delayed) and any attempted assignment without the required consent shall be void.
16. Transfer Procedures. If this Note is to be transferred as permitted under this Note, in whole or in part, the Holder shall surrender this Note to the Company, whereupon the Company will issue and deliver a new Note to the transferee and, if less than the entire unpaid principal balance of this Note held by the Holder is being transferred, a new Note to the Holder, representing the portion of the unpaid principal balance not being transferred.
17. Lost, Stolen, Destroyed or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a replacement Note.
18. Issuance of Replacement Notes. Whenever the Company is required to issue a new or replacement Note (a “Replacement Note”) pursuant to the terms of this Note, such Replacement Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such Replacement Note, the outstanding principal balance of this Note (or, in the case of a Replacement Note being issued pursuant to Section 17, the outstanding principal balance of this Note designated by the Holder which, when added to the aggregate outstanding principal balance represented by the other Replacement Notes issued in connection with such issuance, does not exceed the outstanding principal balance under this Note immediately prior to such issuance of Replacement Notes), (iii) shall have an issuance date, as indicated on the face of such Replacement Note, which is the same as the issuance date of this Note, (iv) reserved, (v) shall have the same rights and conditions as this Note and (vi) shall be timely prepared and issued by the Company, but in any event the Company shall issue such Replacement Note not later than five (5) business days after surrender of this Note or the receipt of the evidence reasonably satisfactory to the Company in accordance with Section 17, as the case may be.
19. Counterparts. This Note may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. The exchange of copies of this Note and signature pages by email in .pdf or .tif format (and including any electronic signature complying with the U.S. ESIGN Act of 2000, e.g., www.docusign.com), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, or by combination of such means, shall constitute effective execution and delivery of this Note as to the parties hereto and may be used in lieu of the original Note for all purposes. Such execution and delivery shall be considered valid, binding and effective for all purposes.
[Signature page follows]
IN WITNESS WHEREOF, the parties to this Note have caused this Note to be duly executed as of the date first written above.
| HUB CYBER SECURITY LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
| Address: | ||
| Email: | ||
Accepted and agreed as of the date first written above.
| KEYSTONE CAPITAL PARTNERS, LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
| Address: | ||
| Email: | ||
[Signature Page to Convertible Promissory Note]
Exhibit 4.78
AGREEMENT AND PLAN OF MERGER
dated as of
January 15, 2025,
by and among
BLACKSWAN TECHNOLOGIES, INC.,
HUB CYBER SECURITY LTD.,
BST MERGER SUB, INC.,
and
RANAN GROBMAN,
in his capacity as the Equityholder Representative
TABLE OF CONTENTS
| Page | |||
| Article 1 Definitions | 1 | ||
| Section 1.01. | Definitions. | 1 | |
| Section 1.02. | Other Definitional and Interpretative Provisions. | 15 | |
| Article 2 The Merger | 16 | ||
| Section 2.01. | The Merger | 17 | |
| Section 2.02. | Certificate of Incorporation and Bylaws of the Surviving Corporation. | 17 | |
| Section 2.03. | Directors and Officers of the Surviving Corporation. | 17 | |
| Section 2.04. | Conversion of Shares. | 18 | |
| Section 2.05. | Company Stock Options and Company Warrants. | 18 | |
| Section 2.06. | No Dissenters’ Rights. | 19 | |
| Section 2.07. | Surrender and Payment. | 19 | |
| Section 2.08. | Allocation Schedule. | 20 | |
| Section 2.09. | Withholding Rights. | 21 | |
| Section 2.11. | Certificate Legends; Lock-Up. | 22 | |
| Section 2.12. | No Fractional Share Payment. | 23 | |
| Article 3 Representations and Warranties of the Company | 24 | ||
| Section 3.01. | Organization. | 24 | |
| Section 3.02. | Authority, Validity and Effect. | 24 | |
| Section 3.03. | Non-Contravention. | 25 | |
| Section 3.04. | Approvals. | 25 | |
| Section 3.05. | Capitalization. | 25 | |
| Section 3.06. | Financial Statements. | 27 | |
| Section 3.07. | Absence of Changes. | 27 | |
| Section 3.08. | Taxes. | 28 | |
| Section 3.09. | Litigation. | 30 | |
| Section 3.10. | Compliance with Laws; Anti-Corruption. | 31 | |
| Section 3.11. | Real Property. | 32 | |
| Section 3.12. | Intellectual Property | 32 | |
| Section 3.13. | Contracts. | 38 | |
| Section 3.14. | Employees; Labor Relations. | 39 | |
| Section 3.15. | Employee Plans. | 41 | |
| Section 3.16. | Permits. | 41 | |
| Section 3.17. | Insurance. | 42 | |
| Section 3.18. | Related-Party Transactions. | 42 | |
| Section 3.19. | Warranty; Product Liability. | 42 | |
| Section 3.20. | Privacy and Information Security. | 42 | |
| Section 3.21. | Brokers. | 43 | |
| Section 3.22. | Bank Accounts. | 43 | |
| Section 3.23. | Accounts Receivable. | 43 | |
| Section 3.24. | Full Disclosure. | 43 | |
| Article 4 Representations and Warranties of Parent and Merger Sub | 44 | ||
| Section 4.01. | Existence and Power. | 44 | |
| Section 4.02. | Authorization. | 44 | |
| Section 4.03. | Governmental Authorization. | 44 | |
| Section 4.04. | Noncontravention. | 44 | |
| Section 4.05. | Ownership and Operations of Merger Sub. | 45 | |
| Section 4.06. | Litigation. | 45 | |
| Section 4.07. | Issuance of Parent Shares | 45 | |
| Section 4.08. | Capitalization | 45 | |
| Section 4.09. | Exclusivity of Representations. | 45 | |
| Section 4.10. | No Outside Reliance. | 45 | |
| Article 5 Covenants of the Company | 46 | ||
| Section 5.01. | Conduct of the Acquired Companies. | 46 | |
| Section 5.02. | Access to Information. | 48 | |
| Section 5.03. | Written Consent; Information Statement. | 48 | |
| Section 5.04. | Takeover Statutes. | 49 | |
| Section 5.05. | Affiliate Contracts. | 49 | |
| Section 5.06. | Resignations. | 49 | |
| Section 5.07. | Exclusivity. | 49 | |
| Article 6 Tax Matters | 49 | ||
| Section 6.01. | Transfer Taxes. | 49 | |
| Section 6.02. | Tax Returns. | 50 | |
| Section 6.03. | Reserved. | 50 | |
| Section 6.04. | Certain Disputes. | 50 | |
| Section 6.05. | Conflict. | 51 | |
| Section 6.06. | Tax Survival. | 51 | |
| Article 7 Employee Matters | 51 | ||
| Section 7.01. | Employee Matters. | 51 | |
| Section 7.02. | D&O Indemnified Parties. | 51 | |
| Section 7.03. | No Third-Party Beneficiaries. | 51 | |
| Article 8 Additional Covenants | 52 | ||
| Section 8.01. | Efforts. | 52 | |
| Section 8.02. | Third-Party Notices and Consents. | 52 | |
| Section 8.03. | Confidentiality. | 53 | |
| Section 8.04. | Notices of Certain Events. | 53 | |
| Section 8.05. | Further Assurances. | 54 | |
| Article 9 Conditions to Closing | 54 | ||
| Section 9.01. | Conditions to the Obligations of Parent, Merger Sub and the Company. | 54 | |
| Section 9.02. | Conditions to the Obligations of Parent and Merger Sub. | 54 | |
| Section 9.03. | Conditions to the Obligation of the Company. | 56 | |
| Article 10 Indemnification | 57 | ||
| Section 10.01. | Indemnification by the Pro Rata Holders. | 57 | |
| Section 10.02. | Indemnification Claims. | 59 | |
| Section 10.03. | Resolution of Conflicts. | 60 | |
| Section 10.04. | Third-Party Claims. | 60 | |
| Section 10.05. | Effect of Indemnification Payments. | 61 | |
| Section 10.06. | Effect of Investigation. | 61 | |
| Section 10.07. | Additional Limitation. | 61 | |
| Section 10.08. | Exclusive Remedy. | 61 | |
| Section 10.09. | Obligations to Mitigate Damages. | 61 | |
| Section 10.10. | Indemnification by a Specific Pro Rata Holder. | 61 | |
| Article 11 Equityholder Representative | 62 | ||
| Section 11.01. | Equityholder Representative. | 62 | |
| Article 12 Termination | 64 | ||
| Section 12.01. | Grounds for Termination. | 64 | |
| Section 12.02. | Effect of Termination. | 64 | |
| Article 13 Miscellaneous | 65 | ||
| Section 13.01. | Notices. | 65 | |
| Section 13.02. | Amendments and Waivers. | 65 | |
| Section 13.03. | Expenses. | 66 | |
| Section 13.04. | Successors and Assigns; No Third-Party Beneficiaries. | 66 | |
| Section 13.05. | Governing Law. | 66 | |
| Section 13.06. | Jurisdiction. | 66 | |
| Section 13.07. | Counterparts; Effectiveness. | 67 | |
| Section 13.08. | Entire Agreement. | 67 | |
| Section 13.09. | Severability. | 67 | |
| Section 13.10. | Specific Performance. | 67 | |
| Exhibits | |
| Exhibit A: | Form of Written Consent |
| Exhibit B: | Certificate of Merger & Amended & Restated Certificate of Incorporation |
| Exhibit C: | Form of Pre-funded Warrant |
|
Schedules Company Disclosure Schedule |
|
| Schedule A: | Company Knowledge Individuals |
| Schedule B | Parent Fully Diluted Shares |
| Schedule 8.02(i): | Required Notices |
| Schedule 8.02(ii): | Third Party Consents |
| Schedule 8.02(iii): | Terminated Contracts |
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of January 15, 2025, is made by and among Hub Cyber Security Ltd. (“Parent”), an Israeli company, BST Merger Sub, Inc., a Delaware corporation and direct or indirect wholly owned Subsidiary (as defined below) of Parent (“Merger Sub”), Blackswan Technologies, Inc., a Delaware corporation (the “Company”), and Ranan Grobman, in his capacity as the representative of the Equityholders as set forth herein (the “Equityholder Representative”).
RECITALS:
WHEREAS, the Parent and the Company are parties to that certain Collaboration and Option Agreement, with an effective date as of November 1, 2023, pursuant to which the Company granted the Parent the exclusive right until August 22, 2025 to elect to acquire all of the outstanding share capital of the Company and the Parent is interested in exercising such right and consummating the Merger (as defined below) and the other transactions contemplated by this Agreement;
WHEREAS, the Board of Directors of each of the Company, Parent and Merger Sub has unanimously (i) declared that the Merger and the other transactions contemplated by this Agreement are fair, advisable and in the best interests of their respective companies and stockholders and (ii) approved this Agreement and the transactions contemplated hereby, including the Merger, upon the terms and subject to the conditions set forth herein;
WHEREAS, in order to induce Parent and Merger Sub to enter into this Agreement, promptly following the execution of this Agreement, the holders of Company Stock constituting at least the Required Stockholder Vote shall deliver to Parent an executed Action by Majority Consent of the Stockholders in the form attached hereto as Exhibit A (the “Written Consent”) adopting, among other things, this Agreement;
WHEREAS, the Board of Directors of each of the Company and Merger Sub has recommended to its stockholders the approval and adoption of this Agreement and the transactions contemplated hereby, including the Merger; and
WHEREAS, Parent, in its capacity as the sole stockholder of Merger Sub, has approved and adopted this Agreement and the transactions contemplated hereby, including the Merger.
NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1 DEFINITIONS
Section 1.01. Definitions. The following terms, as used herein, have the following meanings:
“1933 Act” means the Securities Act of 1933.
“1934 Act” means the Securities Exchange Act of 1934.
“Acquired Companies” means the Company and each Subsidiary of the Company.
“Acquired Company Employee” means an employee of an Acquired Company.
“Action” means any action, suit, inquiry, hearing, investigation, audit (including Tax audit), litigation, arbitration, mediation, claim (including any crossclaim or counterclaim), complaint, allegation, demand, charge, grievance, prosecution or proceeding (including any civil, criminal, administrative, investigative or appellate proceeding).
“Affiliate” means, with respect to any Person, any other Person who, as of the relevant time for which the determination of affiliation is being made, directly or indirectly controls, is controlled by or is under common control with such Person. For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings. For the avoidance of doubt, following the Effective Time, the Affiliates of Parent shall include the Surviving Corporation.
“Aggregate Closing Consideration” means an amount equal to (i) the Base Consideration, plus (ii) the Indebtedness Decrease Adjustment Amount (if any), minus (iii) the Indebtedness Increase Adjustment Amount (if any), minus (iv) the Transaction Expenses Adjustment Amount (if any), minus (v) the Escrow Amount.
“Aggregate Merger Consideration” means an amount of Parent Shares equal to the sum of (i) the Aggregate Closing Consideration, plus (ii) the amount of the Escrow Amount distributable to the Pro Rata Holders.
“Agreement” has the meaning set forth in the Preamble.
“Allocation Schedule” means the Allocation Schedule as prepared in accordance with Section 2.08(a) setting forth the following information:
(i) each Pro Rata Holder’s name, address and email address as of immediately prior to the Effective Time,
(ii) the number of shares of each class and series of Company Stock held as of immediately prior to the Effective Time by each such Pro Rata Holder,
(iii) the number of shares of each class and series of Company Warrants held by each Pro Rata Holder as of immediately prior to the Effective Time, including the exercise price thereof,
(iv) a calculation of the Aggregate Merger Consideration, including each component thereof, and the portion thereof payable to each Pro Rata Holder,
(v) a calculation of the Aggregate Closing Consideration, including each component thereof, and the portion thereof payable to each Pro Rata Holder,
(vi) each Pro Rata Holder’s Pro Rata Share expressed as a percentage, and each Pro Rata Holder’s Pro Rata Share of the Escrow Amount )expressed as a number of Parent Shares(, and
(vii) the number of Parent Shares beneficially owned by each Pro Rata Holder immediately prior to the Closing, calculated in accordance with the Israeli Companies Law, 5759-1999, and, if different, Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder.
“Anti-Corruption and Anti-Bribery Laws” means the U.S. Foreign Corrupt Practices Act of 1977, as amended, the Israeli Penal Law-1977, the Israeli Prohibition on Money Laundering Law, 2000, any rules or regulations thereunder, and any other applicable United States and non-U.S. anti-corruption or anti-bribery laws and regulations.
“Applicable Law” means, with respect to any Person, any transnational, domestic or foreign federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, permit, legislation, order (including extension order), injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.
“Average Price” shall mean the average closing market price per Parent Share on the principal trading market of the Parent Shares for the ten (10) trading days prior to the Closing Date.
“Base Consideration” means 36,500,000 Parent Shares.
“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York or Israel are authorized or required by Applicable Law to close.
“Cap” has the meaning set forth on in Section 10.01(d)(i).
“Certificate of Incorporation” means the Seventh Restated Certificate of Incorporation of the Company, dated as of December 2, 2022, as amended from time to time.
“Certificate of Merger” has the meaning set forth in Section 2.01(b).
“Change of Control Payment” has the meaning set forth in the definition of Transaction Expenses.
“Claims Period” has the meaning set forth in Section 10.02(d).
“Closing” has the meaning set forth in Section 2.01(a).
“Closing Balance Sheet” a consolidated balance sheet of the Acquired Companies as of the Closing Date, which shall have been prepared in accordance with GAAP applied on a basis consistent with the Company’s past practices used in preparation of the Financial Statements.
“Closing Date” has the meaning set forth in Section 2.01(a).
“Code” means the U.S. Internal Revenue Code of 1986.
“Collective Bargaining Agreement” means any written or oral agreement, memorandum of understanding, arrangement or other contractual obligation between any of the Acquired Companies and any labor organization or other authorized employee representative representing Service Providers.
“Company” has the meaning set forth in the Preamble.
“Company Certificate” has the meaning set forth in Section 9.02(d).
“Company Common Stock” means the Company’s Common Stock, par value $0.001 per share.
“Company Disclosure Schedule” means the disclosure schedules dated the date of this Agreement and delivered by the Company to Merger Sub and Parent in connection with the execution of this Agreement.
“Company Employee” has the meaning set forth in Section 3.14(a).
“Company Intellectual Property” means all Intellectual Property Rights that are Owned Intellectual Property Rights, Licensed Intellectual Property Rights, or are otherwise used or held for use by any Acquired Company.
“Company Material Adverse Effect” means any event, change, circumstance, effect, occurrence, condition, state of facts or development (each, an “Effect”) that, individually or in the aggregate with all other Effects, that have occurred or prior to the date of determination of the occurrence of a Company Material Adverse Effect, has had or would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), business, assets or results of operations of the Acquired Companies, taken as a whole, excluding any Effect to the extent arising or resulting from (A) changes, developments or conditions in the general economic or political conditions in the jurisdictions in which the Acquired Companies operate; (B) changes affecting the industry generally in which the Company operates; (C) acts of war, insurrection, sabotage or terrorism, natural disasters or epidemics or pandemics; or (D) changes in Applicable Law or GAAP or the binding interpretation or enforcement thereof; (E) the public announcement of the execution or consummation of this Agreement, (F) any action taken by the Company that is expressly required pursuant to this Agreement and/or Effects resulting from any action taken, or the failure to take any action, by the Company with the written request of Parent or Merger Sub, to the extent such written consent of the Parent or Merger Sub is expressly required under this Agreement, or (G) the identity of Parent (it being understood that this clause (G) shall not apply to a breach of any representation or warranty or covenant related to the announcement or consummation of the transactions contemplated hereby or by the other Transaction Documents), unless, in the case of each of the foregoing clauses (A) and (D)), such Effect has a materially disproportionate effect on the Acquired Companies relative to other companies in the same business as the Acquired Companies.
“Company Personnel” means any director, officer, employee or Contractor of an Acquired Company whether currently engaged or employed or engaged or employed in the past.
“Company Preferred Stock” means the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series A-3 Preferred Stock, the Series A-4 Preferred Stock, the Series A-5 Preferred Stock, and the Series B Preferred Stock.
“Company Products” has the meaning set forth in Section 3.12(f).
“Company Securities” has the meaning set forth in Section 3.05(c).
“Company Stock” means all of the issued and outstanding shares of Company Common Stock and Company Preferred Stock.
“Company Stock Option” means any outstanding option to purchase shares of Company Stock, whether granted under the Company Stock Plan or otherwise.
“Company Stock Plan” means the Company’s 2019 Global Share Incentive Plan, including all sub-plans and appendixes thereto, as amended from time to time.
“Company Warrants” means any outstanding warrants to purchase shares of Company Stock.
“Company’s Current Facilities” has the meaning set forth in Section 3.22.
“Company’s Facilities” has the meaning set forth in Section 3.22.
“Company’s Knowledge”, “Knowledge of the Company” or similar terms mean the actual knowledge of any of the individuals identified as “knowledge individuals” on Schedule A, or that each of them should have had, after reasonable inquiry.
“Contract” means any written or oral agreement, lease, sublease, license, sublicense, contract, sale or purchase order, instrument, arrangement, understanding, obligation, commitment or undertaking, in each case, that is or purports to be legally binding, including any legally binding exhibits, annexes, appendices or attachments thereto, and any amendments, modifications, supplements, extension or renewals thereof.
“Contractor” has the meaning set forth in Section 3.14(j).
“Copyleft Open Source Software” means any Open Source Software that, when such item of Open Source Software is incorporated or embedded into, linked to, or installed, distributed, integrated or bundled with other software (“Other Software”) the applicable license agreement for such Open Source Software: (i) prohibits or restricts a person’s ability to charge a royalty or receive consideration in connection with the sublicensing or distribution of the Other Software; (ii) requires the distribution or making available of source code of any Other Software; (iii) except as specifically permitted by law, grants any right to any person (other than the recipient of the software) or otherwise expressly allows any such person to decompile, disassemble or otherwise reverse-engineer any Other Software; (iv) requires to apply the licensing agreement thereof to the Other Software which is deemed as a derivative work or such Open Source Software; or (v) requires the source code of modifications to or modified versions of the Open Source Software to be distributed or made available to licensees or any third party. The term “Copyleft Open Source Software” includes, without limitation, each and every version of GNU’s General Public License (GPL), Lesser/Library GPL (LGPL), Affero General Public License (AGPL) and Server Side Public License (SSPL).
“Copyrights” has the meaning set forth in the definition of Intellectual Property Rights.
“Covered Tax” means any Taxes of, in connection with or related to on any Acquired Company on account of any Pre-Closing Tax Period, including for this purpose any Taxes with respect to deferred revenues arising in the Pre-Closing Tax Period, regardless of when recognized for income tax purposes. For the avoidance of doubt, Covered Taxes shall include (i) any payroll Taxes or other Taxes of any Acquired Company arising in connection with any payment required pursuant to, or arising as a result of, this Agreement; and (ii) any withholding Taxes that were required to be withheld pursuant to Section 2.9 hereof, including from any payment for Transaction Expenses. The determination of Covered Taxes of any Acquired Company for the portion of the Straddle Tax Period ending on and including the Closing Date shall be determined on a closing-of-the-books basis (assuming that the books of such Acquired Company were closed at the close of the Closing Date) by assuming that the Straddle Tax Period consisted of two taxable years or periods, one which ended at the close of the Closing Date and the other which began at the beginning of the day following the Closing Date, and items of income, gain, deduction, loss or credit of such Acquired Company for the Straddle Tax Period shall be allocated accordingly; provided, however, that exemptions, allowances, deductions or Taxes that are calculated on an annual basis, such as property Taxes and depreciation deductions, shall be apportioned between such two deemed taxable periods on the basis of the number of days in the deemed taxable period ending on the Closing Date compared to the number of days in the portion of the deemed taxable period beginning after the Closing Date. For the avoidance of doubt, Covered Taxes will not include any Taxes attributable to a Pre-Closing Tax Period which result from the transfer and/or sale of any asset(s) and/or activity(ies) and/or business(es) (including workforce) of any Acquired Company that is executed during a Post-Closing Tax Period but is deemed by the ITA or any other Taxing Authority to have occurred in a Pre-Closing Tax Period.
“Damages” has the meaning set forth in Section 10.01(a).
“Data Protection Laws” has the meaning set forth in Section 3.20(a).
“DGCL” means the Delaware General Corporation Law.
“D&O Indemnified Parties” has the meaning set forth in Section 7.02(a).
“Effect” has the meaning set forth in the definition of “Company Material Adverse Effect.”
“Effective Time” has the meaning set forth in Section 2.01(b).
“Employee Plan” means any bonus, incentive compensation, deferred compensation, pension plans, provident funds, education fund and any pension arrangement, profit sharing, retirement, share purchase, share option, share ownership, share appreciation rights, phantom share, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, further education fund, workmen’s compensation or other insurance, severance, separation, employment, consulting or other material employee benefit plan, practice, policy or arrangement of any kind, existing at the Closing Date or prior thereto, which is or was established, maintained, adopted, participated in, sponsored, contributed or required to be contributed to (or ever required to be contributed to), or provided by the Company to its employees and under which an Acquired Company has or has ever had liability to its employees.
“Encouragement Law Incentives” has the meaning set forth in Section 3.08(f).
“End Date” has the meaning set forth in Section 12.01(b)(i).
“Equityholder” means a Stockholder, Optionholder or Warrantholder, in each case immediately prior to the Effective Time, or Pro Rata Holder.
“Equityholder Representative” has the meaning set forth in the Preamble.
“Escrow Account” means an account designated by the Escrow Agent for the deposit of the Escrow Amount.
“Escrow Agent” means ESOP Management and Trust Services Ltd., an Israeli company (or, if they are unable or unwilling to serve, such other nationally recognized, reputable and impartial paying agent mutually agreed by Parent and the Equityholder Representative).
“Escrow Agreement” has the meaning set forth in Section 9.02(f).
“Escrow Amount” means 10% of the Base Consideration.
“Escrow Termination Date” means the date that is twelve (12) months after the Closing Date.
“Estimate Statement” has the meaning set forth in Section 2.08(a).
“Estimated Transaction Expenses” has the meaning set forth in Section 2.08(a).
“Expiration Date” has the meaning set forth in Section 10.01(b).
“Export, Encryption Controls and Sanctions Laws” means all Applicable Laws in the United States of America or Israel (i) imposing trade sanctions on countries, individuals or entities; (ii) regulating the export, re-export, transfer, disclosure or provision of commodities, software, technology or services, or (iii) regulating the use of or activities relating to encryption or decryption or cryptography capable products, including export controls, sanctions laws and regulations and encryption controls of the United States of America, Israel and any other relevant jurisdiction.
“Financial Statements” has the meaning set forth in Section 3.06.
“Fully Diluted Basis” means all issued and outstanding Parent Shares calculated in accordance with the principles set forth in Schedule B.
“Fundamental Representations” has the meaning set forth in Section 10.01(b).
“GAAP” means generally accepted accounting principles in the United States, applied on a consistent basis.
“Governing Documents” means the legal document(s) by which any Person (other than an individual) establishes its legal existence or which govern its internal affairs, including the articles or certificate of incorporation or formation, bylaws, operating agreement, limited liability company agreement, partnership agreement, investor rights’ agreement, shareholders’ agreement, voting agreement, voting trust agreement, joint venture agreement, registration rights agreement and any similar agreement, and any amendments or supplements to any of the foregoing.
“Governmental Authority” means an applicable Israeli or any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority (including self-regulatory authorities), department, court, agency or official, including any political subdivision thereof.
“Governmental Grant” means any grant, funding, incentive, subsidy, award, participation, exemption, status, cost sharing arrangement, or reimbursement arrangement, provided or made available by or on behalf of or under the authority of the IIA or any related authorities or programs, the Israeli Investment Center, the Israeli Tax Authority, the State of Israel, and any bi-, multi-national, regional or similar program, framework or foundation (including, for example, BIRD), the European Union, the Fund for Encouragement of Marketing Activities of the Israeli Government or any other Governmental Authority.
“IIA” means the Israel Innovation Authority, formerly known as the Office of the Chief Scientist of the Israeli Ministry of Economy and Industry.
“Indebtedness” means, with respect to the Acquired Companies as of immediately prior to the Effective Time, on a consolidated basis and without duplication: (i) all obligations of such Persons for borrowed money or indebtedness issued in substitution or exchange for borrowed money (excluding any trade payables or accounts payable that are not delinquent), including any indebtedness evidenced by any note, bond, debenture or other debt security (including a purchase money obligation), (ii) all obligations of such Persons in respect of letters of credit, to the extent drawn, (iii) all capital lease obligations, (iv) all obligations of the Acquired Companies under any interest rate swap agreement, forward rate agreement, interest rate cap or collar agreement or other financial agreement or arrangement entered into for the purpose of limiting or managing interest rate risks, (v) any obligations secured by a lien on the assets of such Persons, (vi) all unpaid Taxes with respect to Covered Taxes, which, notwithstanding anything to the contrary, shall be calculated as of the end of the Closing Date, (vii) all obligations and liabilities owed to Company Personnel, (viii) any accrued interest and fees with respect to the foregoing, (ix) any prepayment penalties or premiums, and any costs and fees that would arise or become due as a result of the prepayment of any of the obligations described in the foregoing, and (x) all direct and indirect guarantees made by such Persons with respect to the foregoing; provided that Indebtedness shall exclude any and all Transaction Expenses.
“Indebtedness Cap” means Indebtedness in an aggregate amount of $12,200,000.
“Indebtedness Decrease Adjustment Amount” means 1,176,829 Parent Shares, for each full amount of $1,000,000 by which the amount of Estimated Indebtedness as of the Closing Date, is lower than the Indebtedness Cap, up to 5,884,145 Parent Shares. For illustrative purposes only, (i) if the aforesaid Estimated Indebtedness will be $9,720,000 (i.e., $2,500,000 less than the Indebtedness Cap), then the Indebtedness Decrease Adjustment Amount will be 2,353,658 Parent Shares and (ii) if the Estimated Indebtedness will be $6,920,000 (i.e., $5,300,000 less than the Indebtedness Cap), then the Indebtedness Decrease Adjustment Amount will be 5,884,145 Parent Shares.
“Indebtedness Increase Adjustment Amount” means 1,176,829 Parent Shares, for each full amount of $1,000,000 by which the amount of Estimated Indebtedness as of the Closing Date, is higher than the Indebtedness Cap. For illustrative purposes only, if the aforesaid Indebtedness will be $14,720,000 (i.e., $2,500,000 more than the Indebtedness Cap), then the Indebtedness Increase Adjustment Amount will be 2,353,658 Parent Shares.
“Information Statement” has the meaning set forth in Section 5.03.
“Information Systems” has the meaning set forth in Section 3.20(d).
“Infringe” or “Infringing” shall mean infringe, misappropriate, dilute or otherwise violate any Intellectual Property Rights, and such term shall include all conjugated forms of each of the foregoing, as applicable.
“Institutions” has the meaning set forth in Section 3.12(n).
“Intellectual Property Agreements” has the meaning set forth in Section 3.12(d).
“Intellectual Property Rights” means any and all intellectual and proprietary rights of any kind or nature, including all rights in, to and under: (i) copyrights, copyrightable works and mask works (including all applications and registrations for each of the foregoing), and all other rights corresponding thereto throughout the world, including economic rights in copyrights (collectively, “Copyrights” or “copyrights”) (ii) (a) trademarks, service marks, logos, insignias, designs, trade dress, symbols, trade names and fictitious business names, emblems, signs, insignia, slogans, other similar designations of source or origin and general intangibles of like nature (including all applications and registrations for each of the foregoing and including unregistered trademarks), and (b) all goodwill associated with or symbolized by any of the foregoing (collectively, “Trademarks” or “trademarks”), (iii) issued patents (including utility and design patents) and pending patent applications (including invention disclosures, records of invention, certificates of invention and applications for certificates of inventions and priority rights filed with any registration office), including all non-provisional and provisional patent applications, substitutions, continuations, continuations-in-part, divisions, renewals, revivals, reissues, re-examinations and extensions thereof (collectively, “Patents” or “patents”), (iv) domain names, uniform resource locators and other names and locators associated with the Internet, (v) registered and unregistered designs, (vi) moral rights, (including the right to the integrity, the right to be associated with the work as its author by name or under pseudonym and the right to remain anonymous) (“Moral Rights”), rights of publicity, personality rights and other rights to use or exploit the name, image, voice and likeness of any individual, (vii) (a) all know-how, confidential, proprietary and non-public information, however documented and whether or not documented and (b) all trade secrets within the meaning of Applicable Law (collectively, such know-how, information and trade secrets are referred to herein as “Trade Secrets”), (viii) rights to bring an action for any past, present or future infringement, dilution, misappropriation or other impairment or violation of rights and to seek and receive damages, proceeds or any other legal or equitable protections and remedies with respect to any of the foregoing, and (ix) similar or equivalent rights to or embodied in any of the foregoing anywhere in the world.
“IP Representations” has the meaning set forth in Section 10.01(c).
“IRS” means the U.S. Internal Revenue Service.
“Israeli Subsidiary” means Cognitive Systems Ltd.
“ITA” means the Israel Tax Authority.
“ITO” means the Israel Income Tax Ordinance (New Version) 1961 and any regulations promulgated thereunder (as amended).
“Leased Property” has the meaning set forth in Section 3.11(b).
“Letter of Transmittal” has the meaning set forth in Section 2.07(a).
“Liability” means any debt, liability or obligation of any kind, whether due or to become due, absolute or contingent, inchoate or otherwise, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, secured or unsecured, determined or determinable, or otherwise and whether or not the same is required to be accrued on financial statements, and includes all costs and expenses relating thereto.
“Licensed Intellectual Property Rights” means any and all Intellectual Property Rights owned by any third party and that are licensed or sublicensed to any of the Acquired Companies.
“Lien” means any mortgage, pledge, security interest, lien, charge, hypothecation, option, right of first refusal, right of first negotiation, equitable interest, preemptive right, title retention or title reversion agreement, or any other encumbrance or restriction of any nature, whether accrued, absolute, contingent or otherwise (including any restriction on the transfer or licensing of any asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).
“Merger” has the meaning set forth in Section 2.01(c).
“Merger Sub” has the meaning set forth in the Preamble.
“Moral Rights” has the meaning set forth in the definition of Intellectual Property Rights.
“Officer’s Certificate” has the meaning set forth in Section 10.02(a).
“Off-the-Shelf Software” means any software (other than Open Source Software) that is made generally and widely available to the public on a commercial basis and is licensed on a non-exclusive basis under standard, unmodified terms and conditions for license fees of less than Ten Thousand Dollars ($10,000) per license per year.
“Open Source Software” is any Software that is made available under an agreement, license or distribution model that meets the Open Source (as promulgated by the Open Source Initiative) or the Free Software Definition (as promulgated by the Free Software Foundation), or any substantially similar license.
“Optionholder” means a holder of a Company Stock Option.
“Order” means any judgment, decree, injunction, ruling, award, subpoena, verdict, order, writ or decision of any Governmental Authority.
“Owned Intellectual Property Rights” means (i) all Intellectual Property Rights owned (solely or jointly with others) or purported to be owned (solely or jointly with others) by any of the Acquired Companies and (ii) all Intellectual Property Rights where Applicable Law precludes an employee, consultant, contractor or other Person from assigning Intellectual Property Rights to an Acquired Company where such employee, contractor, consultant or other Person grants to an Acquired Company, in lieu of such prohibited assignment, sole, exclusive, irrevocable, transferrable and sublicensable licenses and usage rights to fully exploit, use and practice such non-assignable Intellectual Property Rights (in an manner that is essentially equivalent to the transfer of ownership in such Intellectual Property Rights).
“Owned Software” means any Software owned or purported to be owned by an Acquired Company or that is otherwise included in or protected by the Owned Intellectual Property Rights.
“Owned Technology” means any Technology owned or purported to be owned by an Acquired Company or that is otherwise included in or protected by the Owned Intellectual Property Rights. The Owned Technology includes the Owned Software and the Company Products.
“Parent” has the meaning set forth in the Preamble.
“Parent Indemnified Person” has the meaning set forth in Section 10.01(a).
“Parent Material Adverse Effect” means any Effect that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), business, assets or results of operations of the Parent and its Affiliates, taken as a whole, excluding any Effect to the extent arising or resulting from (A) changes, developments or conditions in the general economic or political conditions in the jurisdictions in which the Parent or its Affiliates operate; (B) changes affecting the industry generally in which the Parent or any of its Affiliates operates; (C) acts of war, insurrection, sabotage or terrorism, natural disasters or epidemics or pandemics; or (D) changes in Applicable Law or GAAP or the binding interpretation or enforcement thereof, unless, in the case of each of the foregoing clauses (A) through (D), such Effect has a materially disproportionate effect on Parent and its Affiliates relative to other industry participants.
“Parent Shares” means Ordinary Shares, no par value, of the Parent.
“Patents” has the meaning set forth in the definition of Intellectual Property Rights.
“Paying Agent” means ESOP Management and Trust Services Ltd., an Israeli company (or, if they are unable or unwilling to serve, such other nationally recognized, reputable and impartial paying agent mutually agreed by Parent and the Equityholder Representative).
“Paying Agent Agreement” has the meaning set forth in Section 9.02(m).
“Payor” has the meaning set forth in Section 2.09.
“Permits” means all licenses, permits, franchises, approvals, authorizations, consents, or Orders of, any Governmental Authority, whether foreign, federal, state, or local.
“Permitted Liens” means (i) any Lien for Taxes not yet due or delinquent, (ii) covenants, conditions, rights-of-way, restrictions and other similar charges and encumbrances of record and other title defects not interfering materially with the ordinary conduct of the applicable Acquired Company or detracting materially from the use, occupancy, value or marketability of title of the assets subject thereto, and (iii) landlords’, materialmen’s, contractors’, warehousemen’s, mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business, in each case, with respect to the Company, that are (A) immaterial and (B) for sums not yet due and payable or due but not delinquent or being contested in good faith.
“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.
“Personal Information” means (i) any information that relates to an identified or identifiable individual; or (ii) any other information that is otherwise considered “personal information,” “personally identifiable information” or “personal data” under Applicable Law.
“Post-Closing Tax Period” means any Tax period beginning after the Closing Date and, with respect to a Straddle Tax Period, the portion of such Tax period beginning after the Closing Date.
“Pre-Closing Period” has the meaning set forth in Section 5.01(a).
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and, with respect to a Straddle Tax Period, the portion of such Tax period ending on the Closing Date.
“Processing” means any operation or set of operations which is performed on Personal Information or on sets of Personal Information, whether or not by automated means, such as collection, recording, organization, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure, or destruction.
“Pro Rata Holder” means the Persons listed as “Pro Rata Holders” in the Allocation Schedule as having eligibility to receive any portion of the Aggregate Merger Consideration.
“Pro Rata Share” means, with respect to each Pro Rata Holder, the percentage appearing opposite the name of such Pro Rata Holder in the Allocation Schedule in the column titled Pro Rata Share.
“Registered Intellectual Property” means all registrations and applications for the registration of any Intellectual Property Rights in any country or jurisdiction, including (i) copyright registrations and applications, (ii) trademark registrations and applications, (iii) domain name registrations, (iv) registered designs and applications, and (v) issued or granted patents and patent applications, in each case, that are either Owned Intellectual Property Rights, or exclusively licensed to any Acquired Company as Licensed Intellectual Property Rights.
“Related Party” means (i) any executive officer, director, or direct or indirect stockholder of an Acquired Company, (ii) any Affiliate, officer, director or manager of any of the foregoing, or (iii) any immediate family member of any of the foregoing natural Persons.
“Representative” with respect to any Person, means Affiliates of such Person, and such Person’s and its Affiliates’’ respective directors, officers, employees, counsel, financial advisors, auditors and other authorized representatives.
“Representative Confirmation Letters” means written confirmations, in a form reasonably satisfactory to Parent, from the Representatives of the Company providing legal, financial or accounting advice, as to all amounts owed and to be owed by the Company with respect to services performed by them through the Closing Date (or following the Closing Date at the pre-Closing direction of the Company or the Equityholders) with respect to the transactions contemplated by the Agreement that constitute Transaction Expenses.
“Required Stockholder Vote” means both (i) the affirmative vote or written consent of the holders of at least a majority of the issued and outstanding shares of Company Stock (on an as-converted basis with respect to any shares of Company Preferred Stock held by such Equityholder), voting together as a single class, (ii) the affirmative vote or written consent of the holders of at least a majority of the issued and outstanding shares of Company Preferred Stock (on an as-converted basis), voting together as a single class, including the holders of at least a majority of the issued and outstanding shares of Series B Preferred Stock (on an as-converted basis).
“Sanctioned Country” means a country or territory which is subject of or target of any Export, Encryption Controls and Sanctions Laws (at the time of this Agreement, the Crimea region of Ukraine, Cuba, Iran, Lebanon, North Korea, and Syria).
“Sanctioned Person” means a Person that is the subject or target of sanctions or restrictions under Export, Encryption Controls and Sanctions Laws: any Person (i) listed on any Export, Encryption Controls and Sanctions Laws related list of designated Persons maintained by a Governmental Authority, including but not limited to the lists and measures maintained by the Israeli Ministries of Defense, Finance or Foreign Affairs or the U.S. Departments of Commerce, State or Treasury, including the List of Specially Designated Nationals and Blocked Persons, (ii) greater than 50% owned, directly or indirectly, or otherwise controlled by one or more Persons described in clause (i) above, or (iii) located, organized, or resident in a Sanctioned Country.
“Series A Preferred Stock” means the Company’s preferred stock, par value $0.001 per share, designated Series A Preferred Stock.
“Series A-1 Preferred Stock” means the Company’s preferred stock, par value $0.001 per share, designated Series A-1 Preferred Stock.
“Series A-2 Preferred Stock” means the Company’s preferred stock, par value $0.001 per share, designated Series A-2 Preferred Stock.
“Series A-3 Preferred Stock” means the Company’s preferred stock, par value $0.001 per share, designated Series A-3 Preferred Stock.
“Series A-4 Preferred Stock” means the Company’s preferred stock, par value $0.001 per share, designated Series A-4 Preferred Stock.
“Series A-5 Preferred Stock” means the Company’s preferred stock, par value $0.001 per share, designated Series A-5 Preferred Stock.
“Series B Preferred Stock” means the Company’s preferred stock, par value $0.001 per share, designated Series B Preferred Stock.
“Service Provider” means any director, officer employee or Contractor of any of the Acquired Companies.
“Software” means any and all (i) computer programs, applications, systems and software, including any and all software implementations of algorithms, models and methodologies, plugins, APIs, interfaces, and any and all firmware, middleware in all cases in source code and object/executable code, architectures for software, development and design tools, applets, compliers and assemblers, (ii) databases and compilations, including any and all libraries and collections of data whether machine readable or otherwise, and (iii) technology supporting, and the contents and audiovisual displays of, any internet site(s).
“Stockholder” means any Person who holds one or more shares of Company Stock immediately prior to the Effective Time.
“Straddle Tax Period” means a Tax period that begins on or before the Closing Date and ends thereafter.
“Subsidiary” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions (or, if there are no such voting securities or voting interests, of which at least a majority of the equity interests) are directly or indirectly owned or controlled by such Person. Unless context otherwise requires, the term Subsidiary as used in this Agreement shall relate to Subsidiaries of the Company.
“Subsidiary Securities” has the meaning set forth in Section 3.05(h).
“Surviving Corporation” has the meaning set forth in Section 2.01(c).
“Tax” means (a) any and all federal, state and local taxes of any country, assessments and other governmental charges, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, stamp transfer, franchise, withholding, capital gain, payroll, recapture, employment, excise and property taxes, levy, impost, customs and other import duties, social security, national insurance (‘bituach leumi’) or national health insurance (‘bituach briyut’) contribution and charge in the nature of taxation and all related withholdings or deductions of any kind; and (b) all fines, penalties, charges, linkage differentials, costs and interest included in or relating to any of the above or to any obligation in respect of any of the above, including any liability for the payment of any amounts of the type described in clause (a) or (b) of this sentence as a result of being a transferee of or successor to any Person or as a result of any express or implied obligation to assume such Taxes or to indemnify any other Person, except if provided in the ordinary course of business under a Contract, the main purpose of which is not Taxes.
“Taxing Authority” shall mean any Governmental Authority responsible for the imposition or collection of any Tax.
“Tax Contest” has the meaning set forth in Section 6.04.
“Tax Representations” has the meaning set forth in Section 10.01(b).
“Tax Return” means any Tax return, statement, report, election, declaration, disclosure, document, schedule or form (including any estimated tax or information return or report) filed or required to be filed with any Taxing Authority.
“Technology” means (a) all (i) works of authorship (including Software); (ii) inventions designs, discoveries, and improvements (in each case whether or not patentable), (iii) proprietary, confidential and/or technical data and information, Trade Secrets, and know-how; (iv) customer and technical data, (v) methods and processes, and (vi) devices, prototypes, designs, specifications and schematics and (b) all Software constituting, disclosing or embodying any Intellectual Property Rights, including all versions thereof and all technology from which such items were or are derived.
“Threshold” has the meaning set forth in Section 10.01(c).
“Trademarks” has the meaning set forth in the definition of Intellectual Property Rights.
“Trade Secrets” has the meaning set forth in the definition of Intellectual Property Rights.
“Transaction Documents” means this Agreement, the Letters of Transmittal, the Escrow Agreement, the Paying Agent Agreement, and each other agreement, certificate or ancillary document executed and delivered in connection with transactions contemplated by this Agreement.
“Transaction Expenses Adjustment Amount” means a number of Parent Shares equal to the quotient obtained by dividing the amount of the Estimated Transaction Expenses by the Average Price.
“Transaction Expenses” means, without duplication (and, to avoid any doubt, excluding any amounts included in Indebtedness), and in each case plus any applicable VAT, the obligations, fees, expenses and other amounts payable by an Acquired Company and not paid prior to the Effective Time, (whether incurred (x) at or prior to the Effective Time, or (y) after the Effective Time at the pre-Closing direction of the Company or the Equityholders), including 50% of the fees of the Paying Agent and Escrow Agent and any fees and expenses of legal counsel, accountants, Tax advisors, financial advisors, investment bankers and brokers, that (a) relate to (i) the process of identifying, evaluating and negotiating with prospective purchasers of all or a portion of the business of an Acquired Company, (ii) the negotiation, preparation, review, execution, delivery or performance of this Agreement (including the Company Disclosure Schedule), or any certificate, opinion, agreement or other instrument or document delivered or to be delivered in connection with this Agreement or the transactions contemplated hereby, (iii) the preparation and submission of any filing or notice required to be made or given in connection with the Merger by an Acquired Company, or (iv) the obtaining of any consent required to be obtained by an Acquired Company in connection with the Merger or the transactions contemplated by this Agreement; or (b) is triggered or becomes due or payable solely as a result of the consummation of the Merger or any of the other transactions contemplated by this Agreement, including any cash bonuses, severance amounts, retention payments or bonuses, change-of-control payments, transaction or sale bonuses, and similar arrangements or obligations arising with respect to any Service Provider in connection with the Merger or any of the transactions contemplated by this Agreement (such obligation described in this clause (b), a “Change of Control Payment”). Without limiting the foregoing, Transaction Expenses shall include the employer’s share of any social security, unemployment or payroll Taxes or similar amounts payable in connection with any Change of Control Payment. Notwithstanding the above, Transaction Expenses will not include any severance or other payments arising solely as a result of the termination of any Service Provider of an Acquired Company at the request of Parent.
“Transfer Tax” means any transfer, documentary, sales, use, stamp, registration, value added or other similar Tax (including any penalties and interest) arising in connection with the Merger.
“Treasury Regulations” means the regulations promulgated under the Code.
“Valid Withholding Certificate” means a valid certification or ruling issued by the ITA that is applicable to the payments to be made to any Person pursuant to this Agreement, in form and substance reasonably acceptable to the Parent and the Paying Agent (which, for the avoidance of doubt, with respect to any Specified Persons (as defined below), includes Parent’s and Paying Agent’s opportunity to review, comment and approve the applications to the ITA prior to its submission), that is applicable to the payments to be made to any Person pursuant to this Agreement, (A) exempting the Paying Agent from the duty to withhold Israeli Tax with respect to a payment made under this Agreement, (B) determining the applicable rate of Israeli Tax to be withheld from such payment or (C) providing any other instructions regarding the payment or withholding with respect to such payment. It being agreed that, except with respect to payments made to Specified Persons, a valid certificate issued by the ITA in accordance with the Israeli Income Tax Regulation ((Withholding from Payment for Services or Assets), 1977), to the extent applicable, is deemed a Valid Withholding Certificate for purposes of any payment made pursuant to this Agreement, subject to any validity conditions described therein and excluding payments made outside of Israel. A “Specified Person” shall mean each of the following: (i) any founder of the Acquired Companies, (ii) any other Person that is or was an employee or service provider of the Acquired Companies, (iii) any Person whose securities (in whole or in part) originate from conversion of options, convertible securities, convertible loans, convertible instruments, SAFEs and like instruments, (iv) any Person that is, or has ever been, subject to any holdback or reverse vesting mechanism, and (v) any Person whose securities are held by a trustee or nominee.
“VAT” has the meaning set forth in Section 3.08(h).
“VAT Law” has the meaning set forth in Section 3.08(h).
“Virus” has the meaning set forth in Section 3.19(c).
“Warrant Acknowledgment Letter” has the meaning set forth in Section 2.05(c).
“Warrantholder” means a holder of a Company Warrant.
“Withholding Drop Date” has the meaning set forth in Section 2.09(b).
“Written Consent” has the meaning set forth in the Recitals.
Section 1.02. Other Definitional and Interpretative Provisions.
(a) The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(b) The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein, including the Company Disclosure Schedule, are hereby incorporated in and made a part of this Agreement as if set forth in full herein.
(c) Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein shall have the meaning as defined in this Agreement, and any accounting term not otherwise defined herein has the meaning assigned to it in accordance with GAAP.
(d) Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. References to “him,” “her,” “it,” “itself” and other like references shall be deemed to include the masculine or feminine reference, as the case may be. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. The word “will” shall be construed to have the same meaning and effect as the word “shall.” The word “or” when used in this Agreement is not exclusive. The word “fraud” shall mean common law fraud under Delaware law. The word “willful breach” means, with respect to a breach to perform a covenant contained in this Agreement, a material breach that is a consequence of an act undertaken by the breaching party with actual knowledge that such party’s act would result in a breach of this Agreement.
(e) References to any statute, rule, regulation, law or Applicable Law shall be deemed to refer to all Applicable Laws as amended or supplemented from time to time and to any rules, regulations and interpretations promulgated thereunder. References to any Contract are to that Contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of such Person.
(f) References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to “days” shall refer to calendar days unless Business Days are specified. All monetary figures shall be in United States dollars unless otherwise specified.
(g) The parties have participated jointly in the negotiation and drafting of this Agreement and each has been represented by counsel of its choosing and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.
(h) Each of the parties acknowledge that such party is not relying on any representations or warranties regarding the subject matter of this Agreement or the transactions contemplated hereby, express or implied, except as set forth in Article 3 and Article 4 or pursuant to certificates or ancillary agreements delivered pursuant to this Agreement.
(i) The phrases “delivered,” “provided to,” “made available” and “furnished to” and phrases of similar import when used herein, unless the context otherwise requires, means, with respect to any statement in Article 3 to the effect that any information, document or other material has been “delivered,” “provided to” or “furnished” to Parent or its Representatives, that such information, document, or material was (i) made available for review (without subsequent modification by the Company, or, if it was subsequently modified by the Company, then such modified information, document or other material was provided to the Parent or its Representatives) by Parent or its Representatives in the virtual data room set up in connection with this Agreement at least two (2) Business Days prior to the date hereof or (ii) has been otherwise delivered (whether by physical or electronic delivery) to the Parent or any of its Representatives at least two (2) Business Days prior to the date hereof.
ARTICLE 2 THE MERGER
Section 2.01. The Merger.
(a) Subject to the provisions of Article 9, the closing of the Merger (the “Closing”) shall take place remotely via telephone, email or other electronic means, or by such other means as mutually agreed by the parties, no later than the third (3rd) Business Day following the date on which there first occurs the satisfaction of the conditions set forth in Article 9 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permissible, waiver of those conditions at the Closing) have been satisfied or, to the extent permissible, waived by the party or parties entitled to the benefit of such conditions, or at such other place, at such other time or on such other date as Parent and the Company may mutually agree; or (ii) in another way, at such other time or on such other date as Parent and the Company may mutually agree. The date on which the Closing actually occurs is referred to in this Agreement as the “Closing Date.”
(b) Prior to the Closing, the Company shall prepare, and at the Closing the Company shall file or cause to be filed with the Secretary of State of the State of Delaware, a certificate of merger relating to the Merger in substantially the form of Exhibit B (the “Certificate of Merger”). The Merger shall become effective at such time (the “Effective Time”) as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware (or at such other later time as may be agreed by Parent and the Company and specified in the Certificate of Merger).
(c) At the Effective Time, and upon the terms and subject to the conditions set forth in this Agreement, Parent, Merger Sub and the Company shall cause Merger Sub to be merged with and into the Company in accordance with the applicable provisions of the DGCL (the “Merger”), whereupon the separate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation and a wholly owned Subsidiary of the Parent (the “Surviving Corporation”).
(d) From and after the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of the DGCL, and the Surviving Corporation shall possess all of the rights, powers, privileges and franchises and be subject to all of the obligations, liabilities, restrictions and disabilities of the Company and Merger Sub, all as provided under the DGCL.
Section 2.02. Certificate of Incorporation and Bylaws of the Surviving Corporation.
(a) At the Effective Time, the Certificate of Incorporation of the Company shall be amended and restated in its entirety in the form of the certificate of incorporation attached hereto as Exhibit B, and, as so amended, shall become the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL and such certificate of incorporation.
(b) At the Effective Time, the bylaws of the Company shall be amended and restated in their entirety in a form designated by Parent prior to the Closing (a copy of which shall be provided to the Company immediately following the Closing) and, as so amended, shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL, the certificate of incorporation of the Surviving Corporation and such bylaws.
Section 2.03. Directors and Officers of the Surviving Corporation.
(a) At the Effective Time, by virtue of the Merger, the directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.
(b) At the Effective Time, by virtue of the Merger, the officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly appointed or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.
Section 2.04. Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of any Person:
(a) except for shares that are owned by the Company as treasury stock, if any, each share of Company Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive a number of Parent Shares, without interest, equal to the portion of the Aggregate Merger Consideration as set forth in the Allocation Schedule, and as of the Effective Time, all such shares of Company Stock shall no longer be outstanding, shall automatically be cancelled and retired and shall cease to exist, and each holder of such shares shall cease to have any rights with respect thereto except for the right to receive the portion of the Aggregate Merger Consideration as set forth in the Allocation Schedule; provided that, for clarity, each Pro Rata Holder’s Pro Rata Share of the Escrow Amount shall be withheld from the amounts payable at the Closing and deposited into the Escrow Account, which distribution shall be subject to the terms and conditions of the Escrow Agreement and this Agreement;
(b) each share of common stock, par value $0.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation, with the same rights, powers and privileges as the shares so converted; as of the Effective Time, such shares of common stock of Merger Sub shall no longer be outstanding, shall automatically be cancelled and retired and shall cease to exist, and the holder of such shares shall cease to have any rights with respect thereto except for the right to receive shares of common stock in the Surviving Corporation to be issued in consideration therefore as provided herein, without interest.
(c) Adjustments.
(i) Before the Effective Time. In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to the Company Stock or Parent Shares occurring after the date hereof and prior to the Effective Time, all references herein to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.
(ii) After the Effective Time. In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to the Parent Shares occurring after the Effective Time, all references herein to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.
Section 2.05. Company Stock Options and Company Warrants.
(a) Subject to the terms and conditions set forth in this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of any Optionholder or Warrantholder, as applicable, or any other Person:
(i) Each Company Stock Option shall be cancelled, terminated and cease to represent a right to acquire Company Stock, and no consideration will be paid in consideration of such cancellation and the Company shall ensure prior to the Effective Time that, following the Effective Time, there shall be no rights to acquire shares of Company Stock, Company Stock Options, or any other interests of the Company or the Surviving Corporation.
(ii) Each outstanding Company Warrant shall be cancelled and converted into the right to receive the portion of the Aggregate Merger Consideration set forth in the Allocation Schedule, if any, less all applicable Tax withholdings in accordance with the terms hereof.
(b) Prior to the Effective Time, the Company shall take all actions as are necessary or appropriate to effectuate and approve the actions with respect to Company Stock Options contemplated by this Section 2.05, including the Board of Directors of the Company (and/or the compensation committee (or equivalent committee) of the Board of Directors of the Company) adopting such resolutions as are necessary to give effect to the transactions contemplated by this Section 2.05.
(c) Notwithstanding anything in this Section 2.05 to the contrary, unless a Warrantholder has delivered to the Surviving Corporation a properly completed and duly executed Letter of Transmittal (as defined below), such Warrantholder shall not be entitled to receive any portion of the Aggregate Merger Consideration.
Section 2.06. No Dissenters’ Rights. In accordance with Section 262 of the DGCL, no dissenters’ or appraisal rights shall be available to the Stockholders in connection with the Merger.
Section 2.07. Surrender and Payment.
(a) As promptly as practicable after the date of this Agreement, the Company shall deliver or cause to be delivered to each Pro Rata Holder a letter of transmittal in a form agreed between the Parent, the Equityholder Representative and the Paying Agent and such other documents as may be required pursuant to the instructions thereto (the “Letter of Transmittal”), to be completed and delivered by such Pro Rata Holder, and, to clarify that the completion thereof will be a condition to effect the payment of the portion of the Aggregate Merger Consideration payable thereto pursuant to Section 2.04 and Section 2.05, without any interest thereon.
(b) At the Closing, Parent shall deliver or cause to be delivered to the Paying Agent, for the benefit of the Pro Rata Holders, (i) the portion of the Aggregate Closing Consideration to be paid to the Pro Rata Holders on account of their Company Stock, and (ii) the portion of the Aggregate Closing Consideration to be paid to the Pro Rata Holders in respect of the Company Warrants, if any, in accordance with Section 2.05.
(c) On the Closing Date, the Company will (i) cancel, or cause to be canceled, all book-entry entitlements or other instruments existing immediately prior to the Effective Time representing Company Stock, effective as of the Effective Time, and (ii) deliver to Parent, as promptly as practicable, written confirmation of such cancellation.
(d) Upon delivery to the Paying Agent of a duly executed Letter of Transmittal, a Pro Rata Holder whose shares of Company Stock has been converted into the right to receive the any portion of the Aggregate Merger Consideration shall be entitled to (A) promptly receive from the Paying Agent the portion of the Aggregate Merger Consideration payable for each such share of Company Stock held by it immediately prior to the Effective Time, and (B) receive from the Paying Agent the remainder of the Aggregate Merger Consideration payable, as applicable, therefor in the manner and at (or promptly following) the times such amounts become payable pursuant to this Agreement. Until the Letter of Transmittal so surrendered, each Company Stock shall represent after the Effective Time for all purposes only the right to receive the portion of the Aggregate Merger Consideration set forth in the Allocation Schedule.
(e) Upon receipt by the Paying Agent of a properly completed and duly executed Letter of Transmittal, each Pro Rate Holder whose Company Warrants has been converted into the right to receive any portion of the Aggregate Merger Consideration shall be entitled to (A) promptly receive from the Paying Agent the portion of the Aggregate Merger Consideration payable for each such Company Warrant pursuant to Section 2.05(a)(ii) and (B) receive from the Paying Agent the remainder of the Aggregate Merger Consideration payable, as applicable, therefor in the manner and at (or promptly following) the times paid or delivered to the Paying Agent, for the benefit of the Pro Rate Holders entitled thereto, as set forth in this Agreement. Until such receipt, each such Company Warrant shall represent after the Effective Time for all purposes only the right to receive the portion of the Aggregate Merger Consideration set forth in the Allocation Schedule, and such Company Warrant shall be automatically cancelled and retired and shall cease to exist.
(f) After the Effective Time and pending delivery of a Pro Rata Holder’s Letter of Transmittal, such Pro Rata Holder shall be deemed for all purposes to evidence only such holder’s right to receive from the Paying Agent, the Parent or the Surviving Corporation or an Affiliate thereof, its portion of the Aggregate Merger Consideration, and each such Pro Rata Holder shall look only to the Paying Agent, the Parent, the Surviving Corporation or an Affiliate thereof, as applicable, for payment or delivery of the applicable consideration payable pursuant to Section 2.04 or Section 2.05, as applicable, and the other amounts payable pursuant to this Agreement, in each case, in respect of such share of Company Stock or Company Warrant, as applicable. A Pro Rata Holder may deliver a properly completed and duly executed Letter of Transmittal to the Paying Agent, and (subject to applicable abandoned property, escheat and similar Applicable Laws) receive in exchange therefor its portion of the Aggregate Merger Consideration, pursuant to Section 2.04 or Section 2.05, as applicable, and the other amounts payable pursuant to this Agreement. Any amounts remaining unclaimed with respect to any Company Security one year after the Effective Time (or such earlier date, immediately prior to such time when the amounts would escheat to or become property of any Governmental Authority) shall become, to the extent permitted by Applicable Law, the property of the Parent, free and clear of any claims or interest of any Person previously entitled thereto.
(g) Except as required by Applicable Law, no dividends or other distributions with respect to capital stock of the Surviving Corporation with a record date after the Effective Time shall be paid to any Equityholder (whether surrendered or unsurrendered).
(h) All consideration paid in respect of the surrender or exchange of shares of Company Stock or Company Warrants or in accordance with the terms hereof shall be deemed to be in full satisfaction of all rights pertaining to such shares of Company Stock or Company Warrants.
Section 2.08. Allocation Schedule.
(a) At least two (2) Business Days prior to the Closing Date, the Company shall deliver to Parent (i) a certificate of an officer of the Company (the “Estimate Statement”), setting forth in reasonable detail the Company’s good faith estimate of the (1) Transaction Expenses (“Estimated Transaction Expenses”), (2) Transaction Expenses Adjustment Amount, (3) Indebtedness (“Estimated Indebtedness”), (4) Indebtedness Decrease Adjustment Amount, and (5) Indebtedness Increase Adjustment Amount, together with reasonable supporting documentation therefor, in each case, calculated as of the Closing Date, and (ii) a duly completed Allocation Schedule. The Company shall promptly provide all supporting documentation reasonably requested by Parent in connection with Parent’s review of the Estimate Statement and Allocation Schedule.
(b) Notwithstanding anything to the contrary in this Agreement, or any investigation or examination conducted, or any knowledge possessed or acquired, by or on behalf of Parent, Merger Sub, the Surviving Corporation or any of their respective Affiliates, (i) it is expressly acknowledged and agreed that the preparation of the Allocation Schedule and the allocation set forth therein are the sole responsibility of the Company and that Parent, Merger Sub and their respective Affiliates shall be entitled to rely on the Allocation Schedule, without any obligation to investigate or verify the accuracy or correctness thereof, and to make payments in accordance therewith and (ii) subject to the provisions of Article 10, in no event shall Parent, Merger Sub or, after the Effective Time, the Surviving Corporation, or any of their respective Affiliates, have any Liability to any Person (including the Equityholder Representative and each of the Equityholders) in connection with any claims relating to any alleged inaccuracy or miscalculations in, or otherwise relating to, the preparation of the Allocation Schedule and the allocation set forth therein or payments made by any Person (including Parent, Merger Sub, the Surviving Corporation, and their respective Affiliates) in accordance therewith.
Section 2.09. Withholding Rights.
(a) Notwithstanding anything herein to the contrary, each of Parent and the Paying Agent (each, a “Payor”) shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Agreement or any other Transaction Document, such amounts as it is required to deduct and withhold with respect to the making of such payment or delivery under any provision of U.S. federal, state or local or non-U.S. (including Israeli) Tax law as reasonably determined by the Payor. Any amounts so deducted, withheld and remitted to the applicable Governmental Authority shall be treated for all purposes of this Agreement and the other Transaction Documents as having been paid to the Person in respect of which such deduction and withholding was made. The applicable Payor shall provide a certification, in customary form, to the relevant Person from which such amounts were withheld with regard to any Taxes so withheld. Each Payor shall be entitled to request, and each payee shall provide upon request in properly executed form, any applicable Tax forms with respect to any payment described in this Section 2.09(a), including IRS Form W-9 or the applicable IRS Form W-8.
(b) Notwithstanding the provisions of Section 2.09(a), if the Paying Agent provides Parent prior to the Closing Date with an undertaking as required under Section 6.2.4.3 of the Income Tax Circular 19/2018 (Transaction for Sale of Rights in a Corporation that includes Consideration that will be transferred to the Seller at Future Dates), any payment payable or other consideration deliverable pursuant to this Agreement or any other Transaction Document to any Pro Rata Holder shall be paid to and retained by the Paying Agent for a period of 180 days (unless extended by Parent) from Closing Date or, with respect to any amounts released from the Escrow Fund, and any other payment or consideration payable or otherwise deliverable following the Closing Date, for a period of 90 days (unless extended by Parent) following the date on which the applicable consideration should have been paid to such Pro Rata Holder, or an earlier date, if requested in writing by the relevant Pro Rata Holder, or as otherwise requested in writing by the ITA (and the Payor shall promptly notify the applicable Pro Rata Holder of such written request by the ITA and act in accordance with the procedure set forth in Section 2.09(c) hereto) (the “Withholding Drop Date”), and during which time no payments shall be made by a Payor to any said Pro Rata Holder and no amounts for Israeli Taxes shall be withheld or deducted from the payments payable pursuant to this Agreement, except as provided below and during which time said Pro Rata Holder may obtain a Valid Withholding Certificate. In the event that no later than three (3) Business Days prior to the Withholding Drop Date the relevant Pro Rata Holder submits a Valid Withholding Certificate, then the Paying Agent shall act in accordance with the provisions of such Valid Withholding Certificate, subject to any deduction and withholding as may be required to be deducted and withheld under the Code, or any provision of state, local or foreign Tax law (other than Israeli Tax law) and the balance of the payment that is not withheld shall be paid to said Pro Rata Holder. If such a relevant Pro Rata Holder (A) does not provide the Paying Agent with a Valid Withholding Certificate no later than three (3) Business Days prior to the Withholding Drop Date, or (B) submits a written request to the Paying Agent to release his, her or its portion of the applicable payment prior to the Withholding Drop Date and fails to submit a Valid Withholding Certificate at or before such time, then the amount of Israeli Tax to be withheld from such Pro Rata Holder’s applicable payment shall be calculated according to the applicable withholding rate pursuant to the ITO as reasonably determined by Parent and the Paying Agent and/or any regulations or rules promulgated thereunder and such amount will be calculated in NIS based on the US$:NIS exchange rate known on the date the payment is actually made to such Pro Rata Holder, which amount shall be timely delivered or caused to be delivered to the ITA by the Paying Agent, and the Paying Agent shall pay to such Pro Rata Holder the balance of the payment due to such Pro Rata Holder that is not so withheld, subject to any deduction and withholding as may be required to be deducted and withheld under any provision of U.S. federal, state or local or non-U.S. Tax law (other than Israeli Tax law). Any currency conversion commissions will be borne by the applicable payment recipient and deducted from payments to be made to such payment recipient. It should be clarified, since the consideration payable hereunder does not include any cash payments, to the extent a Pro Rata Holder has not provided a Valid Withholding Certificate in form and substance reasonably acceptable to the Parent and the Paying Agent, which fully exempts any Israeli Tax withholding, the Paying Agent shall make any payment of Parent Shares to the payee only after: (i) the Pro Rata Holder has satisfied its Israeli tax obligation to the sole satisfaction of Parent and the Paying Agent, or (ii) the Parent Shares are sold to the extent necessary to satisfy the full amount due with regards to Israeli taxes. For the avoidance of doubt, any amounts required to be deducted or withheld pursuant to this Section 2.09(b) in connection with the Parent Shares payable to a Pro Rata Holder pursuant to this Agreement, shall be calculated based on the value of such Parent Shares at Closing or on the date of their actual payment, whichever results in a higher amount to be withheld, unless the ITA instructs otherwise.
(c) In the event that the Payor receives a demand from the ITA to withhold any amount and transfer it to the ITA, the Payor (i) shall notify the applicable Pro Rata Holder of such matter reasonably promptly after receipt of such demand, and provide such Pro Rata Holder with reasonable time (but in no event less than 20 days unless otherwise required by the ITA) to attempt to delay such requirement or extend the period for complying with such requirement as evidenced by a written certificate, ruling or confirmation from the ITA and (ii) to the extent that any such certificate, ruling or confirmation is not timely provided by such Pro Rata Holder to the Payor, transfer to the ITA any amount so demanded, including any interest, indexation and fines required by the ITA in respect thereof, and such amounts shall be treated for all purposes of this Agreement as having been delivered and paid to the applicable Pro Rata Holder. The applicable Payor shall provide a certification, in customary form, to the relevant Pro Rata Holder from which such amounts were withheld with regard to any Taxes so withheld.
(d) All Israeli tax amounts required to be withheld and remitted to the ITA shall be converted by the Paying Agent to New Israeli Shekels. Such conversion and transfer of amounts to the ITA shall be effected within the periods required under the terms of Applicable Law, and in accordance with the exchange rate known at the time of actual payment. For the avoidance of any doubt, any exchange or conversion commissions shall be deducted from applicable consideration and be borne by the Pro Rata Holder. Each Pro Rata Holder hereby irrevocably waives and releases any claims it may have resulting from loss of value due to fluctuations in foreign currency exchange rates in connection with any transaction contemplated by this Agreement and bank fees in connection with currency conversions.
Section 2.11. Certificate Legends; Lock-Up.
(a) The Parties acknowledge and agree that each Parent Share that forms part of the Aggregate Merger Consideration to be issued pursuant to this Agreement shall constitute “restricted securities” pursuant to Rule 144 under the 1933 Act and shall bear the following legend:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING SUCH SECURITIES, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS SET FORTH IN THE AGREEMENT AND PLAN OF MERGER DATED JANUARY 15, 2025, (THE “AGREEMENT”). THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE AGREEMENT, A COPY OF WHICH IS AVAILABLE AT NO COST UPON REQUEST FROM THE SECRETARY OF THE COMPANY.”
(b) The Parties further acknowledge and agree that each Pro Rata Holder will not during the period ending eighteen (18) months after the Closing Date, offer, pledge, sell, contract or agree to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly (each, a “Transfer”), any of the Parent Shares issuable to such Pro Rata Holder hereunder, except that (i) commencing on the six (6) month anniversary of the Closing Date (the “First Release Date”), such Pro Rata Holder will have the right to Transfer up to an aggregate amount of 28% of the Parent Shares issuable to such Pro Rata Holder hereunder, and (ii) upon the end of each of the following twelve (12) one-month periods following the First Release Date, such Pro Rata Holder will have the right to Transfer an additional amount of 6% of the Parent Shares issuable to such Pro Rata Holder hereunder. Parent undertakes to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 of the 1933 Act (“Rule 144”); (b) file with the United States Securities and Exchange Commission in a timely manner all reports and other documents required of the Company under the 1934 Act; (c) use its commercially reasonable efforts to comply with the ongoing listing and maintenance requirements of the Nasdaq market, and (d) upon request by a Pro Rata Holder, use its commercially reasonable efforts to cause its counsel to issue a legal opinion to the Company’s transfer agent and to generally cooperate with its transfer agent to remove the restricted legend on the Parent Shares to enable the free Transfer of the Parent Shares pursuant to Rule 144, subject to the Transfer limitations above. The Company will also cooperate with interested Pro Rata Holders to sell Parent Shares in unregistered secondary offerings, subject to the Transfer limitations above. Parent and any duly appointed transfer agent for the registration of transfer of the securities described herein are hereby authorized to decline to register any Transfer of securities if such Transfer would constitute a violation or breach of the above Transfer restrictions.
(c) Anything to the contrary herein notwithstanding, to the extent a Pro Rata Holder or any of its Affiliates (either individually or collectively) would hold, directly or indirectly, in excess of 4.99% of the number of Parent Shares outstanding after giving effect to the issuance of any Parent Shares thereto under this Agreement, calculated in accordance with the Israeli Companies Law, 5759-1999 or Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder (the “Maximum Percentage”), such Pro Rata Holder shall be issued pre-funded warrants to acquire a number of Parent Shares equal to the portion of the Aggregate Merger Consideration issuable to the Pro Rata Holder that exceeds the Maximum Percentage, substantially in the form attached hereto as Exhibit C. The limitations contained in this paragraph shall apply to any successor or transferee of the Pro Rata Holder for so long as Parent is a public company.
Section 2.12. No Fractional Share Payment. No fraction of a Parent Share will be issued by virtue of the Merger, and there shall not be any cash payments made under this Agreement in lieu of fractional shares. The aggregate number of Parent Shares issuable to any Equityholder hereunder shall be rounded down to the nearest whole share.
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule, the Company represents and warrants to Parent and Merger Sub as of the date hereof and as of the Closing Date that:
Section 3.01. Organization. Each Acquired Company is a legal entity duly organized and validly existing under the laws of its jurisdiction of formation. Each Acquired Company has the requisite power and authority to enable it to own, lease or otherwise hold its properties and assets and to conduct its business as presently conducted. The applicable Acquired Company is duly qualified to do business and, except for as set forth on Section 3.05(d)(i) of the Company Disclosure Schedule, is in good standing in those jurisdictions specified with respect to such Acquired Company in Section 3.01(ii) of the Company Disclosure Schedule, which are the only jurisdictions in which the ownership, use or leasing of such Acquired Company assets and properties or the conduct or nature of such Acquired Company’s business, makes such qualification necessary except where the failure to so qualify would not result in a significant liability or have a significant adverse effect on the operation of such Acquired Company’s business. Prior to the date hereof, complete and accurate copies of each Acquired Company’s Governing Documents have been made available for review to Parent, and each as so made available is in full force and effect. Except for as set forth on Section 3.05(d)(iii) of the Company Disclosure Schedule, the minute books, stock records and other corporate or similar records of each Acquired Company are complete and accurate in all material respects and contain all material resolutions and other appropriate documents authorizing or ratifying the actions of such Acquired Company, and Company has made all such documents that are in its possession available for review by Parent. No Acquired Company is in material violation of such Acquired Company’s Governing Documents.
Section 3.02. Authority, Validity and Effect. The Company has the power and authority to execute and deliver this Agreement and the other Transaction Documents and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of each Acquired Company. The execution, delivery and performance of this Agreement, and the Transaction Documents executed and delivered by the Company as contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by the Company’s Board of Directors and, upon the receipt of the Required Stockholder Vote, will also be approved by the Stockholders, and no other corporate (including stockholder) action on the part of the Company or Stockholders is necessary to authorize the performance of this Agreement and the Transaction Documents by the Company and the consummation of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Company and, at or before the Closing, the Company will have duly executed and delivered each of the Transaction Documents to which it is, or is specified to be, a party. This Agreement constitutes, and each of the Transaction Documents to which it is, or is specified to be, a party will after such execution and delivery constitute, assuming the due authorization, execution and delivery by the other parties thereto, valid and binding obligations of the Company, enforceable against it in accordance with their respective terms, subject only to applicable bankruptcy, reorganization, insolvency, moratorium or other similar Laws affecting the enforcement of creditors’ rights generally from time to time in effect (“Enforceability Exceptions”).
Section 3.03. Non-Contravention. Neither the execution and delivery by the Company of this Agreement or any other Transaction Document to which it is a party, nor the consummation by the Acquired Companies of the transactions contemplated by this Agreement and such other Transaction Documents will (a) except for as set forth on Section 3.05(d) of the Company Disclosure Schedule, conflict with or violate the Governing Documents of any Acquired Company, (b) conflict with, or result in any breach of, or constitute a default under, require notice pursuant to, or give rise to any right of termination, cancellation, modification or acceleration of (whether after the filing of notice or the lapse of time or both), or give rise to a loss of any material benefit to which any Acquired Company is entitled to under, (i) except for as set forth on Section 3.05(d)3 of the Company Disclosure Schedule, any provision of any Permit held by an Acquired Company or (ii) any Contract to which an Acquired Company is a party or by which its assets are bound, (c) conflict with or violate any Order or Law applicable to any Acquired Company, (d) result in the creation of any Lien upon any Company Securities or Subsidiary Securities (other than restrictions on transfer imposed by applicable securities Laws), or result in the creation of any Lien upon any of the properties or assets of any Acquired Company, (e) conflict with, alter or impair, any of an Acquired Company’s rights in, to or under any Company Intellectual Property Rights or the validity, enforceability, use, right to use, registration, right to register, ownership, priority, duration, scope or effectiveness of any Company Intellectual Property Rights; or (f) except for as set forth on Section 3.05(d) of the Company Disclosure Schedule, result in or otherwise trigger termination of any licensed rights in, or any additional payment obligations with respect to, any Company Intellectual Property Rights.
Section 3.04. Approvals. Other than the filing of the Certificate of Merger with the Delaware Secretary of State in accordance with Section 2.01(b) and the DGCL, no consent, approval, waiver, notice or authorization of, or registration, declaration or filing with, any Governmental Authority is required to be obtained or made by an Acquired Company in connection with the execution, delivery and performance of this Agreement and the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby.
Section 3.05. Capitalization.
(a) The authorized capital stock of the Company consists of 35,318,174 shares divided into:
(i) 18,892,024 shares of Company Common Stock, $0.001 par value per share of which 1,722,054 shares are issued and outstanding;
(ii) 16,426,150 shares of Company Preferred Stock, $0.001 par value per share of which (A) 847,864 shares are designated Series A Preferred Stock, of which 326,290 are issued and outstanding; (B) (B) 904,744 shares are designated Series A-1 Preferred Stock, of which 406,426 are issued and outstanding; (C) 201,547 shares are designated Series A-2 Preferred Stock, of which 36,438 are issued and outstanding; (D) 371,091 shares are designated Series A-3 Preferred Stock, of which 21,388 are issued and outstanding; (E) 193,066 shares are designated Series A-4 Preferred Stock, of which 35,783 are issued and outstanding; (F) 2,045,412 shares are designated Series A-5 Preferred Stock, of which 2,023,696 are issued and outstanding; (G) 11,385,426 shares are designated Series B Preferred Stock, of which 7,502,093 are issued and outstanding.
(b) All Company Stock has been duly authorized and are validly issued, fully paid, and nonassessable and were not issued in violation of the preemptive rights of any Person. Except for as set forth on Section 3.05(d) of the Company Disclosure Schedule, no Person (other than the Company) is the holder or the beneficial owner of, or has any right to acquire or to obtain record or beneficial ownership of, any capital stock of, or any other voting, equity or other ownership interest in, the Company. Upon consummation of the transactions contemplated by this Agreement, Parent shall hold and own all of the Company Stock, free and clear of any and all Liens and restrictions on transfer of any kind (other than restrictions on transfer imposed by applicable securities laws).
(c) Except for (i) the Company Warrants set forth on Section 3.05(d) of the Company Disclosure Schedule, and (ii) the Company Stock set forth on Section 3.05(e) of the Company Disclosure Schedule:
(i) there are no securities of the Company having the right to vote, or convertible into, or exchangeable for, any (A) stock or other voting securities of or ownership interests in the Company, (B) securities of the Company convertible into or exchangeable or exercisable for shares or other voting securities of or ownership interests in the Company, (C) warrants, calls, options or other rights to acquire from the Company, or other obligation of the Company to issue, any shares or other voting securities or ownership interests in or any securities convertible into or exchangeable or exercisable for shares or other voting securities or ownership interests in the Company or (D) restricted stock, share appreciation rights, performance units, contingent value rights, “phantom” shares or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any stock or voting securities of the Company (the items in clauses (A) through (D) being referred to collectively as the “Company Securities”);
(ii) there are no outstanding Company Securities, and the Company is not obligated to sell, transfer or issue, or cause to be sold, transferred or issued, any Company Securities;
(iii) there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any of the Company Securities; and
(iv) Except as set forth on Section 3.05(d)(iv) of the Company Disclosure Schedule, neither the Company, nor any holder of Company Securities, is party to any voting agreement with respect to the voting of any Company Securities.
(d) [Reserved]
(e) Section 3.05(e) of the Company Disclosure Schedule sets forth, with respect to each Stockholder, as of the date of this Agreement, (i) the number, class and series of shares of Company Stock that such Person holds, (ii) the number of shares of Company Common Stock that would be owned by such Person assuming conversion of all shares of Company Preferred Stock so owned by such Person after giving effect to all anti-dilution and similar adjustments that have been triggered (if any), and (iii) the address, state and country of residence of such Person. No outstanding shares of Company Stock are subject to a risk of forfeiture or right of repurchase at less than the fair market value of such share.
(f) The treatment of the Company Stock Options under Section 2.07 is permitted under the applicable Company Stock Plan, Applicable Law and the underlying individual agreements for such equity awards without obtaining the consent of any participant or holder thereof.
(g) All of the information contained in the Allocation Schedule will be accurate and complete immediately prior to the Effective Time, and, except as set forth on the Allocation Schedule, no other holder of Company Stock or Company Securities will have any right, title or claim to any Merger consideration. The allocation of the Merger consideration as set forth in the Allocation Schedule will comply with and be in accordance with the Certificate of Incorporation, except as set forth on Section 3.05(d) of the Company Disclosure Schedule, and Applicable Law, including the DGCL.
(h) Except for the Company’s holdings in the Subsidiaries set forth in Section 3.05(h) of the Company Disclosures Schedule, the Company does not own, directly or indirectly, any shares of or other voting or equity interests in (including any securities exercisable or exchangeable for or convertible into shares of or other voting or equity interests in) any other Person (the “Subsidiary Securities”).
Section 3.06. Financial Statements.
(a) Section 3.06(a) of the Company Disclosure Schedule sets forth complete and accurate copies of the audited consolidated balance sheets of the Company as of December 31, 2021 (the “Reference Date”), and the related audited consolidated statements of income and shareholders’ equity and cash flows for each of the fiscal years then ended, together with the report of the Company’s independent auditors thereon (collectively, the “Financial Statements”).
(b) The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis and present fairly in all material respects the consolidated financial position, results of operations and cash flows of the Company at the dates and for the respective periods indicated (subject, in the case of the unaudited Financial Statements, to (i) year-end adjustments which are both normal and recurring (and none of which, individually or in the aggregate, are or would reasonably be expected to be material), and (ii) the absence of footnotes that, if presented, would not differ materially from those presented in the audited Financial Statements).
(c) The Acquired Companies maintain a system of internal accounting controls designed to provide reasonable assurance that: (i) all transactions are executed in accordance with management’s general or specific authorizations, (ii) except as set forth on Section 3.05(d) of the Company Disclosure Schedule, all transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions are taken with respect to any differences.
(d) The Acquired Companies do not have any Liabilities, except (i) Liabilities reflected in, and fully reserved against in, the Financial Statements, (ii) Liabilities for performance of obligations under Contracts to which an Acquired Company is party to the extent such Liabilities are readily apparent (in nature, scope and amount) from the copies of such Contracts made available to Parent prior to the date hereof, (iii) Liabilities under this Agreement, or (iv) as set forth in Section 3.06(d) of the Company Disclosure Schedule.
(e) Other than as set forth in Section 3.05(c) of the Company Disclosure Schedule, the Financial Statements make full provision for accrued severance pay, vacation pay, convalesce pay and all other social and fringe benefits due and unpaid to employees.
Section 3.07. Absence of Changes.
(a) Since the Reference Date, the Company has conducted its business in the ordinary course of business consistent with past practice and there has not been or occurred:
(i) any Company Material Adverse Effect;
(ii) any material damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or any material assets owned or operated by the Company; or (b) Except as set forth in Section 3.07(b) of the Company Disclosure Schedule, since December 31, 2023, the Company has conducted its business in the ordinary course of business consistent with past practice and there has not been or occurred any event, condition, action or occurrence that, if taken during the period from the date of this Agreement through the Closing, would constitute a breach of Section 5.01.
Section 3.08. Taxes.
(a) Section 3.08(a)(i) of the Company Disclosure Schedule lists all jurisdictions in which the Acquired Companies have filed Tax Returns since January 1, 2020. Except as set forth in Section 3.07(b)(ii) of the Company Disclosure Schedule, the Acquired Companies have duly and timely filed with the appropriate Taxing Authorities all Tax Returns required to be filed by or on behalf of the Acquired Companies, and all Taxes due and owing by the Acquired Companies (whether or not shown as due on such Tax Returns) have been paid and have no liability for Taxes in excess of the amounts so paid. The Acquired Companies Tax Returns are true, complete and accurate in all material respects. Neither of the Acquired Companies is currently the beneficiary of any extension of time within which to file any Tax Return. Neither of the Acquired Companies has any liabilities for unpaid Taxes that have not been accrued for or reserved on the Financial Statements.
(b) The Company has made available to Parent complete copies of all (i) Tax Returns of the Acquired Companies, (ii) audit report issued with respect to or relating to any Taxes due from or with respect to the Acquired Companies, (iii) closing or settlement agreements entered into by or with respect to the Acquired Companies with any Taxing Authority, and (iv) Tax opinions, memoranda and similar documents addressing Tax matters or positions of the Acquired Companies. None of the Acquired Companies has received or is subject to any Tax ruling, “Tax decision” (Hachlatat Misui) or has entered into any agreements with, any Taxing Authority.
(c) No deficiencies for Taxes with respect to the Acquired Companies have been claimed, proposed or assessed in writing by any Taxing Authority, which deficiency has not yet been settled. The Acquired Companies have not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency which waiver or extension is still in effect, nor has any request been made in writing for any such extension or waiver.
(d) Other than as set forth in Section 3.08(d) of the Company Disclosure Schedule, the Acquired Companies have withheld all Taxes required to have been withheld pursuant to any Applicable Law in connection with (i) amounts paid or owing to any employee, independent contractor, creditor or shareholder, including, for the avoidance of doubt, all payments and deemed payments for the exercise, conversion, repayment and cancellation of stock options, warrants, convertible securities, and convertible debt and equity equivalents of the Company, and (ii) any distributions to a stockholder as a dividend, repurchase, or redemption. Other than as set forth in Section 3.08(d) of the Company Disclosure Schedule, each of the Acquired Companies is in compliance with, and its records contain all information and documents necessary to comply with, all applicable information reporting and withholding requirements under all applicable Tax laws.
(e) Neither of the Acquired Companies is a party to, and it does not have any obligation under, any Tax sharing, Tax allocation, Tax indemnity or similar agreement or arrangement (excluding customary Tax provisions in commercial Contracts not primarily relating to Taxes).
(f) Neither of the Acquired Companies is benefiting (and has never benefited) from any grants, Tax incentives, tax holidays, reduced tax rates or accelerated depreciation under the Law for the Encouragement of Capital Investment, 5719-1959.
(g) Neither of the Acquired Companies is or and has ever been (i) a real property corporation (‘Igud Mekarke’in’) within the meaning of this term under Section 1 of the Israeli Land Taxation Law (Appreciation and Acquisition), 5723-1963, or (ii) a United States Real Property Holding Corporation within the meaning of Section 897(c)(2) of the Code.
(h) The Israeli Subsidiary is duly registered for the purposes of Israeli value added Tax and has complied in all respects with all requirements concerning value added Taxes (“VAT”). The Israeli Subsidiary (i) has not made any exempt transactions (as defined in the Israel Value Added Tax Law, 5736-1975 (the “VAT Law”)) which it is not entitled to make under the VAT Law and there are no circumstances by reason of which there might not be an entitlement to full credit of all VAT chargeable or paid on inputs, supplies, and other transactions and imports made by it, (ii) has collected and timely remitted to the relevant Taxing Authority all output VAT which it is required to collect and remit under any Applicable Law, and (iii) has not received a refund or credit for input VAT for which it is not entitled under any Applicable Law. Other than the Israeli Subsidiary, no member of the Acquired Companies is required to effect Israeli VAT registration and has never been so required.
(i) Neither of the Acquired Companies is subject to any restrictions or limitations pursuant to Part E2 of the ITO or pursuant to any Tax ruling made with reference to the provisions of Part E2.
(j) The Israeli Subsidiary does not participate, and has never participated in, engage and has ever engaged, in any transaction listed in Section 131(g) of the ITO and the Income Tax Regulations (Reportable Tax Planning), 5767-2006 promulgated thereunder (or any comparable provision of state, local or foreign law) or is not subject to reporting obligations under Sections 131D and 131E of the ITO or similar provisions under the Israel Value Added Tax Law of 1975.
(k) To the Company’s Knowledge, no Tax Returns of the Acquired Companies have been audited by any Taxing Authority, nor is any such audit in process or pending, and neither of the Acquired Companies has been notified in writing of any request for such an audit or other examination.
(l) Neither of the Acquired Companies has been a member of an affiliated group of corporations filing a consolidated income Tax Return.
(m) The Company has disclosed to Parent any of the following documents that exist and are in its possession (i) any Tax exemption, Tax holiday or other Tax-sparing arrangement that the Company or any Company Subsidiary has in any jurisdiction, including the nature, amount and lengths of such Tax exemption, Tax holiday or other Tax-sparing arrangement; and (ii) any expatriate tax programs or policies affecting the Company or any Company Subsidiary. The Acquired Companies are in compliance with all terms and conditions required to maintain such Tax exemption, Tax holiday or other Tax-sparing arrangement or order of any Governmental Authority and the consummation of the transactions contemplated hereby will not have any adverse effect on the continuing validity and effectiveness of any such Tax exemption, Tax holiday or other Tax-sparing arrangement or order.
(n) There are no liens or encumbrances on the assets of the Acquired Companies relating to or attributable to other than Permitted Liens.
(o) No power of attorney has been granted with respect to Taxes of the Acquired Companies, that will remain in effect immediately following the Closing Date.
(p) Neither of the Acquired Companies’ Tax Returns has ever been subject to a Code Section 482 adjustment or corresponding provision of state, local or foreign law. The Acquired Companies are in compliance with all transfer pricing requirements in all jurisdictions (including Section 85A of the ITO and regulations promulgated thereunder) in which the Acquired Companies do business. If so required by Applicable Law, the Acquired Companies have prepared contemporaneous transfer pricing documentation in every jurisdiction in which the Acquired Companies do business and has provided Parent with copies of such documentation.
(q) Each Acquired Company is, and has always been, tax resident solely in its country of incorporation, has not otherwise become subject to Tax in a country other than the country of its incorporation (including by virtue of its “management and control” being located in such jurisdiction) and to the Acquired Companies' Knowledge there is no reasonable basis for any such Taxing Authority to assert such a claim against any of the Acquired Companies. No claim has been made in writing by a Taxing Authority (domestic or foreign) in a jurisdiction where either of the Acquired Companies does not file Tax Returns pursuant to which any Acquired Company may be subject to Tax by that jurisdiction, other than any Tax withholding. Neither of the Acquired Companies has ever had a permanent establishment, as defined in any applicable Tax treaty or convention, or a fixed place of business giving rise to Tax reporting or payment obligations in any country outside its country of formation.
(r) No Company Subsidiary has ever been (i) a “passive foreign investment company” as defined in Section 1297 of the Code, (ii) a “surrogate foreign corporation” as defined in Section 7874(a)(2)(B) of the Code, or (iii) subject to U.S. federal income Tax on a net basis under any provision of the Code. The Company has not made an election pursuant to Section 965(h) of the Code.
(s) Neither the execution of this Agreement nor any of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events): (i) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code; or (ii) require a “gross-up” or other payment to any “disqualified individual” within the meaning of Section 280G(c) of the Code.
(t) For Tax purposes, all Intellectual Property that has ever been developed by the Company or any Subsidiary is wholly and exclusively owned by the Company (and not by any Subsidiary).
(u) No individual classified by the Acquired Companies as a non-employee (such as an independent contractor, leased employee, or consultant) was or will be considered an employee of the Acquired Companies by an applicable Tax Authority.
(v) Other than as set forth in Section 3.09(v) of the Company Disclosure Schedule, each of the Acquired Companies has in its possession official foreign government receipts for any Taxes paid by it to any foreign Tax Authorities for which receipts have been provided or are customarily provided.
(w) Neither the Acquired Companies owns any interest in any controlled foreign corporation pursuant to Section 75B of the ITO, or other entity the income of which is required to be included in the income of the Company or any Subsidiary.
Section 3.09. Litigation.
(a) Other than as set forth in Section 3.09(a) of the Company Disclosure Schedule, there are no Actions and during the seven (7) years prior to the date of this Agreement there have not been any Actions, pending or threatened in writing (i) by or against any Acquired Company or any officer, director or manager of an Acquired Company in his or her capacity as such, or (ii) that could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or any of the other Transaction Documents or otherwise result in a material diminution of the benefits contemplated by this Agreement or any of the other Transaction Documents to Parent.
(b) Other than as set forth in Section 3.09(b) of the Company Disclosure Schedule, there is no Order, and during the three (3) year prior to the date of this Agreement there has not been any Order, to which any Acquired Company or its businesses, properties or assets is or was subject.
Section 3.10. Compliance with Laws; Anti-Corruption.
(a) Other than as set forth in Section 3.10(a) of the Company Disclosure Schedule, the Acquired Companies and the operation of their businesses are and have been in the past seven (7) years in compliance in all material respects with all Applicable Laws and Orders. Other than as set forth in Section 3.10(a) of the Company Disclosure Schedule, during the past seven (7) years, no Acquired Company has received any notice or other communication from any Governmental Authority or other Person regarding any actual, alleged, possible or potential material violation of, or failure to comply with, any Applicable Law or any Order or threatening to take action that was or would reasonably be expected to be material to an Acquired Company. To the Knowledge of the Company, other than as set forth in Section 3.10(a) of the Company Disclosure Schedule, (i) no material investigation or review by any Governmental Authority with respect to any Acquired Company is pending or threatened, and (ii) no such investigations have been conducted by any Governmental Authority in the seven (7) years.
(b) No Acquired Company, nor, to the Company’s Knowledge, any director, officer, executive, employee, representative, agent, joint venture, distributor, consultant or any other Person acting on their behalf, have (i) directly, or indirectly through a third party, given, agreed, offered or promised to give any unlawful gift, contribution, payment, rebate, payoff, influence payment, bribe, kickback, offer of employment or anything of value, (ii) established or maintained, or is maintaining, any unlawful fund of corporate monies or other properties or made any false, incomplete or misleading entries on any books or records for any purpose in any case, (iii) used or is using, directly, or indirectly through a third party, any corporate funds for any illegal contributions, gifts, entertainment, payments, travel or other unlawful expenses, (iv) violated or is violating in any respect the bribery sections of the Israeli Penal Law, 5737-1977, the U.S. Foreign Corrupt Practices Act of 1977, or any other Anti-Corruption and Anti-Bribery Law or requirement applicable to an Acquired Company, (v) directly, or indirectly through a third party, made, offered, paid, authorized, facilitated, or promised any payment, contribution, gift, entertainment, bribe, rebate, kickback, financial or other advantage, or anything else of value, regardless of form or amount, for the purpose of employing an improper advantage for an Acquired Company, (vi) been (or currently is) under administrative, civil, or criminal investigation, indictment, suspension, debarment or audit (other than a routine contract audit) by any party, in connection with alleged or possible violations of any Applicable Law that prohibits bribery, corruption, fraud, money laundering or other improper payments, or (vii) received written notice from, or made a voluntary disclosure to any Governmental Authority regarding alleged or possible violations of any Applicable Law that prohibits bribery, corruption, fraud, money laundering or other improper payments.
(c) The Acquired Companies maintain a system of internal controls sufficient to provide reasonable assurance that their books of account and other financial records: (i) are accurate, complete, and correct, (ii) represent actual, bona fide transactions, and (iii) have been maintained, in all material respects, in accordance with sound business practices, including the maintenance of adequate internal accounting controls as required by all Applicable Laws.
(d) No Acquired Company nor, to the Company’s Knowledge, any of its officers, directors, employees or agents (which agents are acting on an Acquired Company’s behalf) is currently or has in the last seven (7) years been: (i) a Sanctioned Person; (ii) operating in, organized in, conducting business with, or otherwise engaging in dealings with or for the benefit of any Sanctioned Person or in or for the benefit of any Sanctioned Country; (iii) otherwise in violation of any Export, Encryption Controls and Sanctions Laws; or (iv) has violated or failed to comply with applicable Export, Encryption Controls and Sanctions Laws, or conducted or engaged in any trade, activities, sales, transactions, business, dealings or provision of services in or with any embargoed country (including Cuba, Iran, North Korea, Sudan, Syria, Lebanon, and the Crimea Region of Ukraine), or any entity or individual therein, either directly or indirectly through, inter alia, distributors, agents, resellers, integrators, officers, directors, consultants, trustees, service providers, contractors, or employees acting on their behalf. No acquired Company nor, to the Company’s Knowledge, any of its officers, directors, employees or agents (which agents are acting on an Acquired Company’s behalf) has been the subject of any notice, investigation, inquiry or enforcement proceedings by any Governmental Authority (including by virtue of having made any disclosures) regarding any offense or alleged offense under any Export, Encryption Controls and Sanctions Laws, and no such investigation, inquiry, or enforcement proceedings are pending or, to the Company’s Knowledge, have been threatened.
(e) To the Company’s Knowledge, the Acquired Companies have conducted and currently conduct all of their respective activities, including their respective export and re-export activities, in accordance with all Export, Encryption Controls and Sanctions Laws. There are no pending or, to the Company’s Knowledge, threatened claims against any Acquired Company with respect to the violation of any Export, Encryption Controls and Sanctions Laws.
(f) The Acquired Companies do not develop or engage in, nor does their respective businesses as currently conducted involve the development of or engagement in, any form of encryption or decryption technology, whether software or hardware, whose use is restricted under the Control of Products and Services Order (Engagement in Means of Encryption)-1974 or other Applicable Law that regulate the use of cryptography.
Section 3.11. Real Property.
(a) No Acquired Company owns, or has ever owned, any real property.
(b) No Acquired Company currently has any real property that is leased, subleased, licensed or otherwise used or occupied by it (together with all buildings, structures and other improvements thereon and rights and appurtenances pertaining thereto, individually, a “Leased Property” and collectively, the “Leased Properties”).
(c) Title to Assets. The applicable Acquired Company is in possession of and has good title to or has valid leasehold interests in or valid rights under Contract to use, all of its properties, interests in property and assets (real and personal), including all tangible personal property used in the conduct of its business, in each case free and clear of any Lien other than Permitted Liens. All such tangible personal property is in good working order and condition, ordinary wear and tear excepted and its use complies in all material respects with all Applicable Laws.
Section 3.12. Intellectual Property
(a) Section 3.12(a)(i) of the Company Disclosure Schedule sets forth a complete and accurate list of all Registered Intellectual Property that qualifies as Owned Intellectual Property Rights (the “Company Registered Intellectual Property”) and, for each such item of Registered Intellectual Property, lists (i) the jurisdictions in which such item of Registered Intellectual Property has been filed and, as applicable, registered, issued or granted and, in the case of domain names, the registrant and registrar thereof, respectively, (ii) the record and legal owner(s) thereof, including all co-owners or joint-owners thereof, (iii) the filing, registration, issuance and grant dates, as applicable, (iv) the application, serial, registration, issuance and grant numbers, as applicable, and (v) all filing, maintenance, renewal, fees and other deadlines pertaining thereto that are due or otherwise will occur within one-hundred twenty (120) days of the date hereof. Section 3.12(a)(ii) of the Company Disclosure Schedule sets forth a complete and accurate list of all Licensed Intellectual Property Rights and, in the case of Licensed Intellectual Property Rights, whether the applicable Licensed Intellectual Property Right is exclusively or non-exclusively licensed or sublicensed to the Company.
(b) Except as provided in Section 3.12(b) of the Company Disclosure Schedule, each item of Company Registered Intellectual Property was applied for and filed in compliance with Applicable Law, and all filings, payments, and other actions required to be made or taken to maintain the application, prosecution or registration of such item of Company Registered Intellectual Property in full force and effect have been made by the applicable deadline for such application, prosecution or registration.
(c) The applicable Acquired Company (i) exclusively owns and has good, valid and marketable titled to, all rights, title and interest in, to and under the Owned Intellectual Property Rights, free and clear of any Liens other than Permitted Liens and (ii) owns or possesses valid, legally enforceable licenses and other rights to use all Intellectual Property Rights used in connection with the business of the Acquired Companies as currently conducted and, to the Company’s Knowledge, subject to future ordinary course research and development (and licensing of third party Technology and Intellectual Property Rights that it reasonably believes it can acquire on commercially reasonable terms) in accordance with Company’s current Technology development road-map for current products. Other than Off-the-Shelf Software which can be procured in reasonable terms and Open Source Software the Company Intellectual Property constitutes all of the Intellectual Property Rights that are necessary to operate and conduct the business of the Acquired Companies as currently conducted and as proposed to be conducted by the Company in accordance with the Company’s current Technology development road-map for current products, including using, making, and selling Company Products. The applicable Acquired Company has the sole and exclusive right to bring a claim or suit against any other Person for past, present or future Infringement of Owned Intellectual Property. Other than as detailed in Section 3.12(c) of the Company Disclosure Schedule, no Acquired Company has transferred ownership of, or granted any exclusive license with respect to, any Intellectual Property Rights to any Person. Except in connection with exercise reasonable business judgment, each Acquired Company has employed reasonable efforts to avoid the publication of the source code of its Software or any of its trade secrets and has not permitted the rights in any Company Intellectual Property to enter into the public domain. Without limiting any other representation or warranty in this Agreement, each of the inventors identified on each of the Patents included in the Registered Intellectual Property that is Owned Intellectual Property Rights was an employee of an Acquired Company at the time of the conception of the inventions claimed in such Patents or has otherwise been properly and fully assigned its ownership over the applicable Intellectual Property Rights to the Company. To the Company’s Knowledge, all Licensed Intellectual Property Rights (including any interest therein acquired through a license or other right to use, but excluding any Off-the-Shelf Software) are free and clear of Liens and no Acquired Company has received any notice that any portion of the Licensed Intellectual Property Rights is subject to any Lien. No Acquired Company jointly owns any right, title or interest with any other Person any Intellectual Property Rights. All of the Owned Intellectual Property that was developed by any Acquired Company was fully assigned to the Company.
(d) Except for Open Source Software and Off-the-Shelf Software that is used or included in any Company Product or its otherwise used in connection with the business of the Acquired Companies as currently conducted, no Acquired Company is granted (or entitled to be granted) any license, sublicense, covenant not to sue/assert, waiver, release or other immunity, right of first offer, refusal or negotiation, option or other right or interest (including or where an Acquired Company is the beneficiary of a covenant or obligation not to assert any Intellectual Property Rights against an Acquired Company or any existing or future Affiliate of an Acquired Company prior to asserting such Intellectual Property Rights against any other Person or a covenant or obligation to exhaust remedies as to particular Intellectual Property Rights against any Person prior to seeking remedies against an Acquired Company) from a Person with respect to any Intellectual Property Rights, and, except for (A) Open Source Software, (B) Off-the-Shelf Software that is not used or included in any Company Product, no such Intellectual Property Right of a third party is used in or proposed to be used in the business of any Acquired Company or otherwise is necessary to the conduct of the business of any Acquired Company. Section 3.12(d)(i) of the Company Disclosure Schedule sets forth a complete and accurate list of all Contracts pursuant to which any Acquired Company has granted (or is required to grant) any license (other than short-term non-exclusive evaluation licenses granted in the ordinary course), sublicense, covenant not to sue/assert, waiver, release or other immunity, right of first offer, refusal or negotiation, option or other right or interest (including where an Acquired Company or any existing or future Affiliate of an Acquired Company has undertaken or assumed any obligation not to assert any current or future Intellectual Property Rights against any Person prior to asserting such Intellectual Property Rights against any other Person or any obligation to exhaust remedies as to any Intellectual Property Rights against one or more Persons prior to seeking remedies against any other Person) to any Person with respect to any Company Intellectual Property (including any Contracts where Company Intellectual Property is incorporated in, tied, bundled or co-branded with any third-party Intellectual Property Rights or any third-party product). Collectively, the Contracts referenced in this Section 3.12, or required to be disclosed on Section 3.12 of the Company Disclosure Schedule, are referred to herein as “Intellectual Property Agreements.” Other than as provided in Section 3.12(d)(ii) of the Company Disclosure Schedule, immediately following the Closing, the Acquired Companies will be permitted to exercise all of their rights under all Intellectual Property Agreements to the same extent they would have been able to had the transactions contemplated by this Agreement not occurred and without being required to pay any additional amounts or consideration other than fees, royalties or payments that the Acquired Companies would otherwise have been required to pay had such transactions not occurred.
(e) Section 3.12(e) of the Company Disclosure Schedule sets forth a complete and accurate list of all Contracts providing for royalties, license fee and other payment obligations of any Acquired Company of more than 1% in royalties or an aggregate annual amount of more than $50,000 per year with respect to each such contract with respect to the Company Products or any Licensed Intellectual Property Rights (except for Off-the-Shelf Software) or by reason of ownership, use, exploitation, practice, sale or disposition of any Intellectual Property Rights or Technology. The Closing will not result in any increase or other change to any such royalties, license fees or other amounts or consideration. No Acquired Company has entered into any Contract to defend, indemnify or hold harmless any Person against any charge of Infringement with respect to any Intellectual Property Rights, other than in customer agreements or the Intellectual Property Agreements, with respect to Infringement by Company Products. No customer or other Person has requested that any Acquired Company defend or indemnify the customer or Person from a third party claim, suit or action related to an allegation that a Company Product Infringes a third party’s Intellectual Property Rights.
(f) Section 3.12(f)(i) of the Company Disclosure Schedule sets forth a complete and accurate list of all products and services that an Acquired Company sell or license, offer for sale or license on the date of this Agreement or otherwise intends to sell, license or offer during the twelve (12) month period following the date of this Agreement (collectively, the “Company Products”). Neither the conduct of the business of the Acquired Companies as it is currently conducted, nor any Owned Technology, any Technology licensed to any Acquired Company, or any of the Company Products (including the use, manufacture or sale of Company Products), (i) has infringed, is or will be Infringing the Intellectual Property Rights of any Person, or (ii) as are used, made or sold by any Acquired Company as of or prior to the Closing, or as contemplated by the Company to be used, made or sold by any of the Acquired Companies as of the Closing, will Infringe the Intellectual Property Rights of any Person. No Acquired Company has received any written notice from any Person that the conduct of the business of the Acquired Companies as such business has been conducted, as it is currently being conducted or as it is currently proposed to be conducted, or any Company Intellectual Property, Owned Technology, Technology licensed to any Acquired Company, or any Company Products, Infringes the Intellectual Property Rights or other proprietary rights of any Person, including in the form of a cease and desist letter, an unsolicited written offer from any Person to license such Person’s Intellectual Property Rights or a written request for indemnification for Infringement claims asserted against such Person. Except as set forth in Section 3.12(f)(ii) of the Company Disclosure Schedule, no Acquired Company has obtained any non-infringement, freedom to operate, clearances, or invalidity opinions from counsel (inside or outside counsel) regarding any Owned Technology or any Company Product, and the Company has identified to Parent each such opinion prepared by or on behalf of an Acquired Company. No Acquired Company has conducted business using deceptive, misleading or unfair business or trade practices.
(g) No Owned Intellectual Property Rights and, to the Company’s Knowledge, no Licensed Intellectual Property Rights is subject to any outstanding Order, stipulation or compulsory or confirmatory licensing terms entered or imposed by any Governmental Authority or other administrative or arbitration tribunal that restricts or limits in any manner the use, exploitation, transfer or licensing thereof by an Acquired Company, or which restricts or limits the ownership, use, right to use, right to register, registration, scope, priority, duration, effectiveness, validity or enforceability of such Company Intellectual Property or that restricts the use, manufacture, sale, export or importation of any Company Product.
(h) To the Company’s Knowledge, no Person has Infringed or is Infringing any Registered Intellectual Property or any Owned Intellectual Property Rights or to the Company’s Knowledge any material Licensed Intellectual Property Rights. No Acquired Company has asserted any claim, taken any action against, or notified any Person of any actual or suspected Infringement with respect to any Company Intellectual Property, including in the form of a cease-and-desist letter or offer or invitation to obtain a license. No Acquired Company has made an assertion that any Person is Infringing any Owned Intellectual Property Rights, including before any Governmental Authority.
(i) The Acquired Companies have taken reasonable steps to protect, preserve and maintain their rights, title and interests in and to the Company Intellectual Property and to protect, preserve and maintain the confidentiality and security of the Trade Secrets in the Company Intellectual Property, including implementing reasonable security measures and back-up and recovery procedures. The Acquired Companies have taken reasonable measures and precautions necessary to avoid the misappropriation of Trade Secrets owned by other Persons. The Acquired Companies have not disclosed any Trade Secrets in which any Acquired Company has (or purports to have) any right, title or interest (or any tangible embodiment thereof) to any Person without having such Person execute a valid, binding, enforceable written agreement regarding the non-disclosure and non-use thereof. The use, disclosure or appropriation of any Trade Secret not owned by any Acquired Company has been pursuant to the terms of a valid, binding, enforceable written agreement between the Acquired Company and the owner of such Trade Secret, or is otherwise lawful. The Acquired Companies have not received any notice from any Person that there has been an unauthorized use or disclosure of any Trade Secrets included in the Company Intellectual Property. No Person that has received any Trade Secrets from any Acquired Company has refused to provide to the Acquired Company, after the Acquired Company’s request therefor, a certificate of return or destruction of any documents or materials containing such Trade Secrets. The Acquired Companies have taken reasonable measures in connection with the hiring and employment of its employees and Contractors to ensure that Trade Secrets owned by any other Person have not been disclosed to or used by any Acquired Company without authorization.
(j) All Company Personnel and other Persons who have contributed to or were involved in the conception, reduction to practice, creation, authoring or development of Technology, Company Products or Owned Intellectual Property Rights for any Acquired Company, including but not limited to any founders of the Acquired Companies and all current and former employees, contractors, consultants and service providers, have executed written, valid, binding and enforceable agreements pursuant to which such Persons have irrevocably assigned to the Company or an Acquired Company in a present assignment all their rights in, title and interests to Intellectual Property Rights conceived, reduced to practice, created, authored or developed in the course of their employment or engagement with such Acquired Company for the benefit of an Acquired Company and related to the business of an Acquired Company, Company Products or Technology of an Acquired Company , or otherwise for or on behalf of the Company, or (ii) using an Acquired Company’s facilities, personnel, equipment or Trade Secrets. In case of individual service providers engaged through entity contractors, in addition to such written agreements between the Acquired Companies and the entity contractors, all such individual service providers also have entered into written agreements with such entity contractors pursuant to which such individuals have assigned all their rights in and to Intellectual Property Rights developed in the course of their services for the Acquired Companies, enabling the entity contractors to assign all such Intellectual Property Rights to the Acquired Companies. Where any such assignment is not permitted under Applicable Laws, the applicable Persons have granted to an Acquired Company an irrevocable, exclusive, worldwide, royalty-free, fully paid, transferrable and sublicensable licenses or usage rights, each, to the extent permitted by Applicable Laws, of such non-assignable Intellectual Property Rights. Each such agreement is substantially identical to the forms of invention assignment (including as part of employment/consulting agreements) previously delivered by Company to Parent. No such Persons have any right to further remuneration or consideration for such assignment, including for royalties in ‘services inventions’ as defined under Sections 132-134 of the Israeli Patents Law, 5727–1967, and all such Persons have executed irrevocable waivers with respect to the right to receive compensation in connection with “service inventions” under Section 134 of the Israeli Patents Law 1967 (and any other equivalent statute, if applicable). The Acquired Companies have timely paid in full all, and do not currently owe any, compensation to any Person (whether required by Applicable Laws or individually agreed with the respective inventors) in connection with any Owned Intellectual Property Rights, Owned Technology or Company Products, including with respect to any Patent that is based on an invention of any such Person. The contractual commitments and internal policies adopted by the Company with respect to employee inventor compensation have complied with Applicable Laws, and the Company has complied, in all material respects, with such contractual commitments and internal policies. All Persons who have been provided by an Acquired Company with access to confidential information of an Acquired Company are parties to executed written, valid, binding and enforceable agreements or legal obligations under which each such Person is obligated to maintain the confidentiality of such confidential information. To the Company’s Knowledge, none of such Persons is in violation of the agreements described in this Section 3.12(j). No Company Personnel or other Persons who have contributed to or were involved in the conception, reduction to practice, creation, authoring or development of Owned Intellectual Property Rights or Owned Technology has, or has ever claimed to have, any right, title or interest in, to or under any Owned Intellectual Property Rights or Owned Technology that has not been either (i) irrevocably assigned or transferred to the Company or (ii) licensed (with the right to grant sublicenses) to the applicable Acquired Company under an exclusive, irrevocable, worldwide, royalty free, fully paid and assignable license. All authors of any works of authorship in the Owned Technology have waived their Moral Rights and have agreed to a covenant not to assert their Moral Rights, in each case, to the extent permitted by Applicable Law or such authors otherwise prepared such works in jurisdictions that do not recognize Moral Rights.
(k) Section 3.12(k)(i) of the Company Disclosure Schedule sets forth a complete and accurate list of any and all Open Source Software that is integrated into the Company Products or is otherwise used and/or distributed by an Acquired Company (excluding that which is used exclusively for research, development or customer support purposes, and is not incorporated into, embedded into, hosted with, linked to, distributed with, or installed with any Company Products), and separately identifies for each such item of Open Source Software listed on such Schedule: (i) the license that applies to such Open Source Software, (ii) the Company Products into which such Open Source Software is incorporated into, embedded into, hosted with, linked to, distributed with, or installed with, (iii) whether or not the Open Source Software was modified by an Acquired Company, (iv) whether or not the Open Source Software was distributed by an Acquired Company, and (v) a description of how the Open Sources Software is used with or in the Company Products, including whether the Open Source Software is dynamically or statically linked (if applicable).
With respect to any Open Source Software that is so integrated into the Company Products or has been used by any Acquired Company in any manner, the Acquired Company has been and is in compliance in all material respects with all applicable licenses with respect thereto, including attribution and copyright notice requirements. None of the Company Products: (A) incorporates Copyleft Open Source Software; (B) interacts with Copyleft Open Source Software other than (I) via command-line arguments, pipes or sockets, or (II) via commercially-available network protocols such that the Owned Software and the Copyleft Open Source Software are being executed by different processors that are separated by a physical distance; (C) dynamically or statically links with Copyleft Open Source Software; (D) interacts with Copyleft Open Source Software such that the interaction results in a derivative or collective work of, or a work based on or derived in whole or in part on, both the Owned Software and the Copyleft Open Source Software; or produces a work by modifying Copyleft Open Source Software. No Acquired Company nor, any of the Company Personnel, have contributed any Company Product or Owned Technology to Open Source Software or any Open Source Software project, and no contributions made by any Acquired Company or, any of their employees, of Company Product or Owned Technology to Open Source Software or any Open Source Software project, if any, (x) were made in breach of confidentiality, Intellectual Property Rights or other obligations under any Contract to which the Acquired Company or the contributing employee is a party, (y) breach the terms of the open source license or other Contract under which they were contributed or released or (z) infringe, misappropriate or otherwise violate any Intellectual Property Rights of any Person.
(l) No source code of any Owned Software has been licensed, put in escrow or otherwise provided by any Acquired Company to a third party other than to the Parent consultants and contractors solely for performing work on behalf of an Acquired Company who are bound by confidentiality obligations with respect to such source code that prohibit disclosure of such source code to any Person and limit the use of such source code to performing work on behalf of the applicable Acquired Company. Neither this Agreement nor any transactions contemplated by this Agreement will result in any Person (other than the Parent and its Affiliates) being granted rights or access to, or the placement in or release from escrow of, any Software source code or other Intellectual Property Rights or Technology, under or pursuant to any Contracts to which an Acquired Company is a party or by which any assets or properties of an Acquired Company are bound.
(m) Governmental Grants. No Acquired Company has developed any Intellectual Property Rights, to which an Acquired Company has any rights, through the application of any financing made available by any Governmental Grant, or, through the assistance or use of the facilities of a university, college, other educational institution, research center, hospitals, medical centers or other similar institutions. The Company has not entered into, applied for, requested, accepted, been notified that it has been approved for, elected to participate in or received or become subject to or bound by any requirement or obligation relating to, any Governmental Grant, or amended or terminated, or waived any right or remedy related to, any Governmental Grant.
(n) No funding, facilities or resources of a university or other educational institution, the Israeli Defense Forces, research center or similar institution (collectively, “Institutions”) was used in the development of the Owned Intellectual Property Rights, Owned Technology or Company Products, and no Institution has any claim or right in or to any Owned Intellectual Property Rights, Owned Technology or Company Products. Without limiting the generality of any of the foregoing no current or former Company Personnel or other Person who has contributed to or was involved in the conception, reduction to practice creation, authoring or development of Technology, Company Products or Intellectual Property Rights for any Acquired Company: (i) performed services for, or was under a scholarship from, any Institution during a period of time during which such Company Personnel or other Person was also performing services for the Company, other than employees who were students at an Institution not subject to the applicable Institution’s rules regarding intellectual property ownership while being employed by any Acquired Company; or (ii) was employed by or has performed services (either directly or as the employee of a sub-contractor providing services) for, or was subject to any regulations, guidelines and/or directive of, the Israel Defense Forces or the Israel Ministry of Defense during a period of time during which such Person was also involved in, or contributing to, the creation or development of such Technology, Company Products or Intellectual Property Rights, or during the twelve-month period immediately prior to his or her employment or engagement with the Acquired Company, other than reserves duty.
(o) No Acquired Company is now nor has ever been, and no previous owner of any Owned Intellectual Property Rights or Owned Technology was during the duration of their respective ownership, a member or promoter of, or a contributor to or made any commitments or agreements regarding any patent pool, industry standards body, standard setting organization, industry or other trade association or similar organization, in each case that could or does require or obligate any Acquired Company or the previous owner to grant or offer to any other Person any license or other right to the Owned Intellectual Property Rights or Owned Technology, including any future Technology and Intellectual Property Rights developed, conceived, made or reduced to practice by any Acquired Company or any Affiliate of an Acquired Company after the Closing Date.
(p) Section 3.12(p) of the Company Disclosure Schedule is a complete and accurate list, grouped by subsection, of all Contracts as follows: (i) regarding joint development of any products, Company Products or Technology and a complete and accurate description of (A) the products, Company Products and Technology that were developed under such Contracts and (B) whether any such Technology or related Intellectual Property Rights are used in the Company Products or otherwise in the in the conduct of any Acquired Company’s current or planned business; (ii) by which any Acquired Company or any existing or future Affiliate of an Acquired Company grants, granted or is required to grant any ownership right or title to any Owned Intellectual Property Rights, (iii) by which an Acquired Company is assigned or granted an ownership interest in any Intellectual Property Rights (other than written agreements with employees and independent contractors that assign or grant to the Company ownership of Intellectual Property Rights developed in the course of providing services to the Company); (iv) under which any Person is granted any right to access Acquired Company source code for any Owned Software or to use such source code, including the right to create derivative works of Company Products; and (v) pursuant to which an Acquired Company has deposited or is required to deposit with an escrow agent or any other Person the source code for any Owned Software or any other Owned Technology, or the execution of this Agreement or the consummation of any of the transactions contemplated hereby could reasonably be expected to result in the release or disclosure of any source code for any Owned Software.
(q) Except as set forth in Section 3.12(q) of the Company Disclosure Schedule, there are no Contracts pursuant to which an Acquired Company or any existing or future Affiliate of an Acquired Company granted or is required to grant to any Person any rights under the Intellectual Property Rights of any Affiliate of an Acquired Company (other than Intellectual Property Rights owned or controlled by an Acquired Company as of the Closing Date).
Section 3.13. Contracts. Section 3.13 of the Company Disclosure Schedule sets forth a complete and accurate list of each of the following Contracts to which an Acquired Company is a party or by which it (or any of its assets or properties) is bound and which is in the Company’s possession (each, and each Intellectual Property Agreement, a “Material Contract”):
(a) any Contract that involves aggregate payments by or to an Acquired Company of more than $50,000 during the 12-month period prior to the date of this Agreement;
(b) any Contract that is not listed Section 3.13(a) involving expected payments by or to an Acquired Company in the 12-month period following the Closing in excess of $50,000;
(c) any Contract relating to Indebtedness of an Acquired Company, and each other Contract in respect of which an Acquired Company is obligated to guarantee or assume any Indebtedness of any Person, and each other Contract relating to mortgaging, pledging or otherwise placing a Lien on any portion of any of an Acquired Company’s assets or properties;
(d) (i) any Contract for the sale of any assets of an Acquired Company and (ii) any Contract with respect to any completed or pending business acquisition, investment or disposition, in each case, other than with respect to the sale of inventory in the ordinary course of business consistent with past practice;
(e) any Contract pursuant to which an Acquired Company is subject to indemnification obligations (other than indemnification obligations in the ordinary course of business);
(f) any consulting agreement, independent contractor agreement, or advisory services agreement, that involved aggregate payments by or to an Acquired Company of more than $50,000 during the 12-month period prior to the date of this Agreement;
(g) any staffing agreement, professional employer organization agreement, employer of record agreement, or other Contract with any employer providing staffing services, outsourced labor, or joint employment services to an Acquired Company;
(h) any Contract containing (i) a covenant not to compete restricting an Acquired Company, including any Contract imposing exclusive dealing obligations or limitations on an Acquired Company in any geographic area during any period of time, (ii) a right of first refusal, right of first offer or right of first negotiation in favor of the counterparty thereto, or (iii) a most-favored nation or similar clause; or
(i) any Contract which creates any joint venture or similar arrangement;
(j) any Contract relating to the acquisition or disposition of any business (whether by merger, sale of stock, sale of assets or otherwise);
(k) any employee or employment-related Contract (i) with an officer or director of an Acquired Company, or (ii) which provides for annual cash compensation in excess of $50,000;
(l) any Contract that is with a Governmental Authority or an Institution;
(m) any Contract that provides for an outstanding commitment for capital expenditures in excess of $50,000; or
(n) any Contract not otherwise addressed above that could reasonably be expected to have a Company Material Adverse Effect if breached by an Acquired Company.
No Acquired Company nor, to the Company’s Knowledge, any other party thereto, is in breach or default in any material respect under any Material Contract and, to the Company’s Knowledge, there does not exist any event, condition or omission which, with notice or lapse of time, or both, would constitute a breach or default in any material respect by any Person under any Material Contract. Each Material Contract is in full force and effect and is valid, binding and enforceable against each party thereto in accordance with its terms, except as such enforceability may be limited by the Enforceability Exceptions. Complete and accurate copies of each written Material Contract (and written summaries of oral Material Contracts) have been made available to Parent, including all schedules, exhibits and other annexes attached to such Material Contracts or incorporated in them by reference.
Section 3.14. Employees; Labor Relations.
(a) Section 3.14(a) of the Company Disclosure Schedule contains a true and complete list of (i) the names of all employees of an Acquired Company (a “Company Employee”), (ii) the name of each other Person who has accepted an offer of employment made by an Acquired Company, but whose employment has not yet commenced, and (iii) the names of each other Person to whom an offer of employment at a management level is outstanding by the Company, in each case at the date hereof. With respect to each such Person referred to in subsections (i), (ii) and (iii) above, Section 3.14(a) of the Company Disclosure Schedule further contains such Person’s (A) actual or offered position or function, (B) work location, (C) date of hire, (D) status as active or non-active and expected return date to work, actual scope of employment (part time, full time), and term (fixed or unfixed term), (F) overtime classification (e.g., exempt or non-exempt), and (G) salary and any other compensation or benefit payable, maintained or contributed to each of the listed Company Employees, including the following entitlements: vacation entitlement or other paid time-off, accrued vacation, deferred compensation, overtime payment (including global overtime pay), travel entitlement (e.g. travel pay, car maintenance or car entitlement), sick leave entitlement and accrual, recuperation pay entitlement and accrual, as well as entitlement to pension arrangement or any other provident fund (including manager’s insurance, pension fund and education fund), their respective contribution rates and the salary basis for such contributions and the commencement date for such contributions, prior notice period entitlement, and any incentive, commission or bonus arrangement (including type of bonus). (i) No Company Employee is entitled by Applicable Law, Contract, and/or employment policies to any benefits, entitlement or compensation that is not listed in Section 3.14(a) of the Company Disclosure Schedule, and (ii) no Acquired Company has made any promises or commitments to any of its employees or former employees or individuals listed in Section 3.14(a) of the Company Disclosure Schedule, whether in writing or not, with respect to any future changes to their compensation or benefits, as listed in Section 3.14(a) of the Company Disclosure Schedule. Other than their salaries, the Company Employees are not entitled to any payment or benefit that may be reclassified as part of their determining salary for any purpose, including for calculating any social contributions.
(b) The employment of each of the Company Employees and other individuals listed in Section 3.14(a) of the Company Disclosure Schedule is terminable by the applicable Acquired Company with no more than one month prior notice.
(c) Currently, there are no employees of the Israeli Subsidiary.
(d) Without derogating from any of the above representations, other than as set forth under Section 3.14(d) of the Company Disclosure Schedule, the Acquired Companies’ liability towards the Company Personnel regarding severance pay, accrued vacation and contributions to pension arrangements and provident funds of whatever kind, to the extent applicable, is fully funded or, if not required by any source to be fully funded, is lawfully accrued in the Financial Statements as of the date thereof.
(e) Other than as set forth under Section 3.14(e) of the Company Disclosure Schedule, all source deductions and other material amounts required by Applicable Law or Contract to be deducted or withheld from remuneration payable to Company Personnel, and all employer premiums, contributions or amounts payable by the Acquired Companies thereon or in respect thereof, have been so deducted and withheld and remitted, paid or contributed in accordance with Applicable Law and the applicable Contract to the appropriate Governmental Authority or other Person on or before the due dates thereunder, and no Acquired Company has any outstanding obligation to make any such deduction, transfer, withholding or payment (other than routine payments, deductions or withholdings to be timely made in the ordinary course of business and consistent with past practice).
(f) No Acquired Company is, and no Acquired Company has ever been, a party to any Collective Bargaining Agreement (whether written or oral) or any other Contract with any trade union, employee representative, workers council, staff association or any other employee body representing workers, and no such agreement is being negotiated. There are no and have never been any labor unions or other organizations representing any Company Employee and, to the Company’s Knowledge, there are no threatened or contemplated attempts to organize for collective bargaining purposes any of the Company Employees or purporting to represent or seeking to represent any Company Employees.
(g) Except for extension orders which generally apply to all employees in Israel, there are no extension orders that apply to any Acquired Company and no Company Employee benefits from any such extension orders. No Acquired Company (i) is or has ever been a member of any employers’ association or organization, or (ii) has paid, been required to pay or been requested to pay any payment (including professional organizational handling charges) to any employers’ association or organization. No Acquired Company deducts or is required or requested to deduct, any membership fee or organizational fee from its employees’ salaries to any labor organizations. No Acquired Company is engaged or has ever been engaged, in any unfair labor practice of any nature. No Acquired Company has ever had any strike, slowdown, work stoppage, lockout, job action or, to the Company’s Knowledge, threat thereof, or question concerning representation, by or with respect to any Company Employees.
(h) Other than as set forth under Section 3.14(e) of the Company Disclosure Schedule, for the past seven (7) years, the Acquired Companies have complied in all material respects with the provisions of Applicable Law and all applicable Contracts pertaining to employees and employment issues, including termination of employment of Company Personnel, including all such Applicable Laws relating to labor relations, terms and condition of employment, equal employment, fair employment practices, wages and hours, severance, entitlements, discrimination, immigration status, overtime and overtime payment, records of hours, shifts payments, bonuses, foreign employees, working during rest days, social benefits contributions, severance pay, pension, notification on employment terms, termination of employment, notices to employees, employing employees through services providers in accordance with the Israeli Law for Strengthening the Enforcement of Labor Laws, 5772–2011, the Wage Protection Law, 5718–1958, the Prevention of Sexual Harassment Law, 5758–1998, engagement of service providers, collective bargaining, employees’ rights and benefits which derive from Collective Bargaining Agreements and extension orders, civil rights, immigration, privacy issues, fringe benefits, employment practices, recruitment of employees, workers’ compensation and the collection, discrimination, fair labor standards and occupational health and safety, wrongful discharge or violations of the personal rights of employees, former employees or prospective employees, Tax information reporting, employment and withholding Taxes or other similar employment practices or acts.
(i) No current or former employee or Contractor of the Company did not execute an agreement concerning intellectual property and confidentiality. The Company has delivered to Parent (i) accurate and complete copies of all standard employment agreements, employment agreements with all key employees and agreements with all Contractors, (ii) accurate and complete copies of all employee manuals, handbooks, policies and guidelines with regard to engagement terms and procedures and other material documents relating to the engagement of Company Personnel which exist and are in its possession; and (iii) a written summary of all material unwritten policies, practices and customs of the Acquired Companies which exist and are in its possession.
(j) No Acquired Company has received written notice that any officer, executive or key employee of an Acquired Company will or may cease to be employed, or will refuse employment with Parent. Section 3.14(j) of the Company Disclosure Schedule sets forth a true and complete list of all (i) temporary employees of an Acquired Company, including personnel engaged through manpower agencies, (ii) employees of third parties placed at the premises of an Acquired Company and (iii) individuals who are providing or have provided services to an Acquired Company while classified as independent consultants or contractors (each, a “Contractor”), and includes each Contractor’s name, term of engagement, date of commencement, scope of services, rate of all regular compensation and benefits, bonus or any other compensation payable. During the last three (3) years, no Acquired Company has used the services of any Contractor under circumstances that would reasonably be expected to classify them as Company Employees or entitle them to any employment benefits under any Applicable Law or to participate in any Employee Plan. Without derogating from the generality of the above, all current and former Contractors have been (or in the case of former Contractors, were) lawfully and properly classified by the applicable Acquired Company as independent contractors and would not reasonably be expected to be reclassified by any authority as employees of any Acquired Company for any purpose whatsoever, and no Acquired Company owes any compensation or any other obligation to any current or former Contractors according to any Contract or Applicable Law. The applicable Acquired Company’s engagement with all Contractors can be terminated at any time for any reason with no more than thirty (30) days’ notice without any amounts being owed to such individuals, other than with respect to fees accrued before the notice of termination or any other compensation that are required by Contract.
(k) To the Company’s Knowledge, no Company Personnel is in violation of any term of any employment Contract, confidentiality, noncompetition or other proprietary rights Contract.
(l) There is no employment-related Action of any kind pending or to the Company’s Knowledge threatened, relating to compliance with, or an alleged violation or breach of, any Applicable Law (including applicable labor law) other than routine claims for benefits, and no Acquired Company has any unsatisfied obligations of any nature to any of its former employees or former Contractors. The termination of all such former employees and Contractors was in compliance in all materials respects with Applicable Law and any applicable Contract.
(m) To the Company’s Knowledge, there are no pending claims against any Acquired Company under any workers’ compensation plan or policy or for short or long term disability. Other than as set forth under Section 3.14(e) of the Company Disclosure Schedule, within the past three (3) years, no Acquired Company has implemented any layoff of employees or reduction in workforce, unpaid leave of absences or reduction in salaries.
Section 3.15. Employee Plans.
(a) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any material payment becoming due, or increase the amount of any material compensation due, to any employee or former employee of any Acquired Company, (ii) increase any material benefits otherwise payable under any Employee Plan, (iii) result in the acceleration of the time of payment or vesting of any such compensation or benefits, (iv) result in the triggering or imposition of any restrictions or limitations on the rights of an Acquired Company to amend or terminate any Employee Plan, (v) entitle the recipient of any material payment or benefit to receive a “gross up” payment for any income or other taxes that might be owed with respect to such payment or benefit, or (vi) have a material adverse effect on the labor relations at an Acquired Company.
(b) Other than as set forth under Section 3.15(b) of the Company Disclosure Schedule, all material contributions and other payments required to be made by an Acquired Company to any Employee Plan with respect to any period ending on the Closing Date have been made, and were made within the time periods, if any, prescribed by Applicable Law (other than routine payments, deductions and withholdings to be timely made in the ordinary course of business and consistent with past practice). As of the Closing Date, there will be no outstanding material Liabilities of any Employee Plan other than material Liabilities for benefits to be paid to participants in such Employee Plan and their beneficiaries in accordance with the terms of such Employee Plan.
(c) Other than as set forth under Section 3.15(b) of the Company Disclosure Schedule, the Acquired Companies have complied in all material respects with the terms of each Employee Plan and Applicable Law with respect to such Employee Plans. To the Company’s Knowledge, no Actions with respect to any Employee Plan are pending or threatened (other than routine claims for benefits).
Section 3.16. Permits. No Acquired Company holds any Permits issued or issuable by Governmental Authorities, and no such Permits that are necessary to the conduct of its respective business, except where the failure to obtain a Permit would not result in a significant liability or have a significant adverse effect on the operation of such Acquired Company’s business.
Section 3.17. Insurance. No Acquired Company has any insurance policies which are currently in effect.
Section 3.18. Related-Party Transactions. Section 3.18 of the Company Disclosure Schedule sets forth a complete and accurate list of all Contracts, arrangements and other commitments or transactions to which an Acquired Company, on the one hand, and a Related Party, on the other hand, are parties, or are otherwise bound or affected. Immediately following the Closing, no Acquired Company will have any obligation to pay any salary, fees, expenses, costs, reimbursements or other amounts to any Related Party and no such Person will owe any amounts to the Company. To the Company’s Knowledge, no Related Party (a) possesses, directly or indirectly, any financial interest in, or is a director, officer or employee of, any Person which is a material client, supplier, customer, lessor, lessee or competitor of an Acquired Company, or (b) owns any property right, tangible or intangible, which is used by an Acquired Company in the conduct of its business.
Section 3.19. Warranty; Product Liability.
(a) During the last three (3) years, no Acquired Company has received any written notice from any Person regarding any actual, alleged, possible or potential product liability claim related to any Company Product, whether on account of any express or implied warranty, breach of contract or otherwise.
(b) No Owned Technology contain any “back door,” “time bomb,” “Trojan horse,” “worm,” “malware,” “malicious code,” “drop dead device,” “virus” or other software routines or hardware components designed to permit unauthorized access or to disable or erase software, hardware or data (“Viruses”). The Acquired Companies have taken reasonable steps to prevent the introduction of Viruses into the Owned Technology.
Section 3.20. Privacy and Information Security.
(a) The Acquired Companies are in material compliance with Applicable Law regarding the Processing of Personal Information (collectively, “Data Protection Laws”). The Acquired Companies are further in material compliance with the Company’s privacy parties and the terms of all Contracts to which an Acquired Company is a party relating to the Processing of Personal Information. The Company and the Company Subsidiaries have taken appropriate, adequate, and industry standard measures to protect and maintain the confidentiality of Personal Information.
(b) The Acquired Companies do not access any Personal Information in connection with the conduct of their business, and, to the Company’s Knowledge, no Personal information has been accessed or obtained by an Acquired Company in the past seven (7) years. To the Company’s Knowledge, in the past seven (7) years, there has been no unauthorized access, use, or disclosure of any Personal Information in the possession or control of an Acquired Company or any of its contractors with regard to any Personal Information obtained from or on behalf of an Acquired Company that would require notification of any individual or Governmental Authority under Applicable Law.
(c) No Actions relating to the Processing of Personal Information are pending or, to the Company’s Knowledge, threatened against an Acquired Company, and, in the last seven (7) years, no Acquired Company has received any written complaints or, to the Company’s Knowledge, has been the subject of any governmental investigations (whether formal or informal) regarding an Acquired Company’s Processing of Personal Information.
(d) The Acquired Companies have implemented and maintained, consistent with their contractual and other obligations to other Persons, reasonable and appropriate security and other measures designed to protect all Personal Information, computers, networks, software and systems used in connection with the operation of the Company’s business (the “Information Systems”) from Viruses and unauthorized access, use, modification, disclosure or other misuse of Personal Information. To the Company’s Knowledge, no Acquired Company has, in the last five (5) years, experienced any loss, damage or unauthorized access, disclosure, use or breach of security of any Personal Information in an Acquired Company’s possession, custody or control, or otherwise held or processed on its behalf (whether by a contractor, by an Acquired Company or otherwise).
Section 3.21. Brokers. Except as set forth in Section 3.21 of the Disclosure Schedule, there is no investment banker, broker, finder, financial advisor or other intermediary that has been retained by or is authorized to act on behalf of the Company or any Affiliate thereof that might be entitled to any fee or commission in connection with this Agreement or the transactions contemplated hereby.
Section 3.22. Bank Accounts. Section 3.23 of the Company Disclosure Schedule sets forth a true and complete list of the names and locations of all banks, trust companies, savings and loan associations and other financial institutions at which an Acquired Company maintains a safe deposit box or account, and the related account numbers and authorized signatories with respect thereto.
Section 3.23. Accounts Receivable. Subject to any reserves set forth in the applicable balance sheet, the accounts receivable set forth on the balance sheets in the Financial Statements and the Closing Balance Sheet are valid and genuine, have arisen solely out of bona fide sales and deliveries of goods, performance of services, and other business transactions in the ordinary course of business consistent with past practices, are not subject to any prior assignment, lien or security interest, and are not subject to valid defenses, set-offs or counter claims. No Acquired Company has been notified in writing that any outstanding accounts receivable is being disputed by the payor thereof, and all accounts receivable on the Closing Balance Sheet are collectible in accordance with their terms at their recorded amounts, subject only to the reserve for doubtful accounts set forth thereon.
Section 3.24. Full Disclosure. No representation or warranty regarding an Acquired Company in this Agreement or any certificate or other document furnished or to be furnished to Parent pursuant to this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the Parent Disclosure Schedule, each of Parent and Merger Sub represents and warrants to the Company as of the date hereof and as of the Closing Date that:
Section 4.01. Existence and Power. Each of Parent and Merger Sub is an entity duly formed, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all powers required to carry on its business as now conducted, except where the failure to have such power would not have a Parent Material Adverse Effect. Each of Parent and Merger Sub has all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, except where the failure to be so licensed would not have a Parent Material Adverse Effect.
Section 4.02. Authorization. The execution, delivery of, and performance by each of Parent and Merger Sub of their respective obligations under this Agreement and the other Transaction Documents to which it is or will be a party, and the consummation by Parent and Merger Sub of the transactions contemplated hereby and thereby, are within the corporate powers of Parent and, except for the adoption of this Agreement by Parent in its capacity as the sole stockholder of Merger Sub, Merger Sub, and have been duly authorized by all necessary corporate action on the part of each of Parent and Merger Sub. This Agreement has been, and each of the other Transaction Documents to which Parent or Merger Sub is or will be a party will be at or prior to the Effective Time, duly executed and delivered by each of Parent and Merger Sub and, assuming due authorization, execution and delivery by the other parties thereto, constitutes (or will constitute) the valid and binding agreement of each of Parent and Merger Sub, as applicable, enforceable against Parent and Merger Sub, respectively, in accordance with their respective terms (subject to the Enforceability Exceptions). Except for the adoption of this Agreement by Parent in its capacity as the sole stockholder of Merger Sub, no votes, approvals or consents of the holders of any of Parent’s or Merger Sub’s capital stock are necessary in connection with execution and delivery of, or the performance by Parent or Merger Sub of their respective obligations under, this Agreement and the Transaction Documents or the consummation by Parent or Merger Sub of the transactions contemplated hereby or thereby.
Section 4.03. Governmental Authorization. The execution, delivery and performance by each of Parent and Merger Sub of this Agreement and the Transaction Documents to which it is or will be a party and the consummation by each of Parent and Merger Sub of the transactions contemplated hereby and, to the extent applicable, thereby require no consent, approval, authorization or permit of, or filing with or notification to, or other action in respect of, any Governmental Authority other than (i) the filing of the Certificate of Merger with the Delaware Secretary of State in accordance with Section 2.01(b) and the DGCL; (ii) without derogating from the provisions of Section 4.07 below, compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other state or federal securities laws; and (iii) any actions or filings the absence of which, individually or in the aggregate, would not reasonably be expected to have a Parent Material Adverse Effect or materially delay the Closing.
Section 4.04. Noncontravention. The execution, delivery and performance by each of Parent and Merger Sub of this Agreement and the Transaction Documents to which it is a party and the consummation by Parent and Merger Sub of the transactions contemplated hereby and thereby do not and will not (i) contravene, conflict with or violate any provision of any Governing Document of Parent or Merger Sub, (ii) contravene, conflict with or violate any Applicable Law, (iii) result in the creation or imposition of any Lien (other than Permitted Liens) on any asset of Parent or any of its Subsidiaries, or (iv) require any consent from or other action by any Person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default, violation or breach under, or give rise to any right of termination, modification, cancellation or acceleration of any right or obligation of Parent or any of its Subsidiaries or to a loss of any benefit to which Parent or such Subsidiary is entitled under any provision of, any Contract binding upon Parent or any of its Subsidiaries, with only such exceptions, in the case of clauses (ii), (iii) and (iv) as would not, individually or in the aggregate, be material to Parent’s or Merger Sub’s ability to consummate the Merger or any of the transactions contemplated under this Agreement or the Transaction Documents.
Section 4.05. Ownership and Operations of Merger Sub. Parent owns of record and beneficially all outstanding shares of capital stock of Merger Sub. Merger Sub was formed solely for the purpose of engaging in the transactions contemplated hereby and by the other Transaction Documents and has engaged in no other business or other activities or incurred any Liabilities other than in connection with or as contemplated in this Agreement and the other Transaction Documents.
Section 4.06. Litigation. Except as disclosed in Parent’s publicly available filings, as of the date of this Agreement, there is no Action pending against, or to the knowledge, after reasonable inquiry, of the General Counsel of Parent, threatened against Parent or Merger Sub before any Governmental Authority or arbitrator that, if determined or resolved adversely in accordance with the plaintiff’s demands, would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. As of the date hereof, neither Parent nor Merger Sub is subject to any Order of any Governmental Authority that is or would reasonably be expected to have a Parent Material Adverse Effect
Section 4.07. Issuance of Parent Shares. The Parent Shares to be issued pursuant to this Agreement have been duly authorized, and when issued in accordance with this Agreement, will be (i) validly issued (including, for the removal of doubt, be issued in full compliance with the Applicable Law, including in compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other state or federal securities laws), fully paid and nonassessable and not subject to any preemptive or similar rights or to any Lien (with respect to the latter, excluding any restriction on transfer provided in this Agreement, Parent’s organizational requirements and Applicable Law).
Section 4.08. Capitalization. The issued and outstanding share capital of Parent, as of the date hereof on a Fully Diluted Basis, is as set forth on Schedule B. Other than as set forth in Schedule B, as of the date hereof there are no outstanding warrants and/or options to purchase shares of the Parent.
Section 4.09. Exclusivity of Representations.Section 4.10. The representations and warranties made by Parent and Merger Sub in this Agreement and the other Transaction Documents are the exclusive representations and warranties made by Parent and Merger Sub in connection with the transactions contemplated by this Agreement or the other Transaction Documents. Each of Parent and Merger Sub hereby disclaims any other express or implied representations or warranties.
Section 4.10. No Outside Reliance. Parent and Merger Sub acknowledge that, except for the representations and warranties set forth in Article 3, the Company Disclosure Schedule and the certificates delivered in connection with the transactions set forth in this Agreement, the Company expressly disclaims any representations or warranties of any kind or nature, express or implied, as to the condition, value or quality of its businesses or its assets.
All representations and warranties made by the Parent and Merger Sub herein, or any certificate delivered by the Parent and Merger Sub, pursuant to this Agreement, shall survive the execution and delivery of this Agreement, the Closing Date and shall survive until the eighteen (18) month anniversary of the Closing Date.
ARTICLE 5 COVENANTS OF THE COMPANY
Section 5.01. Conduct of the Acquired Companies.
(a) From the date hereof until the earlier of the Closing Date and the date that this Agreement is terminated in accordance with Article 12 (the “Pre-Closing Period”), except as set forth in Section 5.01(a) of the Company Disclosure Schedule, as otherwise expressly required by this Agreement or any other Transaction Document, as required by Applicable Law or as consented to by Parent in writing (which consent shall not be unreasonably withheld, delayed or conditioned), the Company shall and shall cause each of its Subsidiaries to conduct its business in the ordinary course consistent with past practice and use its commercially reasonable efforts to (i) preserve intact its present business organization and keep available the services of its directors, officers and employees, (ii) maintain in effect all Permits, (iii) maintain its assets and properties, (iv) maintain satisfactory relationships with its customers, lenders, suppliers, lessors and others having material business relationships with it and (v) manage its working capital (including the timing of collection of accounts receivable and of the payment of accounts payable) in the ordinary course of business consistent with past practice.
(b) Without limiting the generality of Section 5.01(a), during the Pre-Closing Period, except as set forth in Section 5.01(b) of the Company Disclosure Schedule, as otherwise expressly required by this Agreement or any other Transaction Document, as required by Applicable Law, or as consented to by Parent in writing (which consent shall not be unreasonably withheld, delayed or conditioned), the Company shall not and shall cause its Subsidiaries not to:
(i) adopt or propose any change to, or amend or otherwise alter, its Governing Documents (whether by merger, consolidation or otherwise);
(ii) split, combine or reclassify any shares of capital stock, equity interests, voting securities or other ownership interests of any Acquired Company or declare, set aside or pay any dividend or other distribution (whether in cash, stock or other property or any combination thereof) in respect of any Company Securities or Subsidiary Securities, or redeem, repurchase or otherwise acquire or offer to redeem, repurchase or otherwise acquire any Company Securities or any Subsidiary Securities other than the repurchase of any unvested Company Securities as a result of a termination of service of the holder of the Company Securities;
(iii) (A) issue, deliver or sell, or authorize the issuance, delivery or sale of, any shares of any Company Securities or Subsidiary Securities or (B) amend any term of any Company Security or any Subsidiary Security (in each case, whether by merger, consolidation or otherwise) other than the issuance of Company Securities pursuant to the exercise of Company Stock Options;
(iv) enter into, adopt a plan of or effect any restructuring, reorganization or complete or partial liquidation, dissolution, merger or consolidation;
(v) acquire (by merger, consolidation, acquisition of shares, assets or otherwise), directly or indirectly, any assets, securities, properties, interests or businesses, other than supplies in the ordinary course of business of the Company in a manner that is consistent with past practice; (vi) sell, lease, license or otherwise transfer or dispose of, or abandon or allow to lapse, or create or incur any Lien (other than Permitted Liens) on any of an Acquired Company’s tangible assets, securities, properties, interests or businesses, other than sales or abandonment of obsolete equipment in the ordinary course of business consistent with past practice;
(vii) make any loans, advances or capital contributions to, or investments in, any other Person other than in another Acquired Company;
(viii) create, incur, assume, suffer to exist or otherwise become liable with respect to any Indebtedness or guarantees thereof, other than in the ordinary course of business;
(ix) (A) enter into, renew, amend or modify in any material respect or terminate any Material Contract or (B) otherwise waive, release or assign any material rights, claims or benefits of the Acquired Companies under any Material Contract, other than in the ordinary course of business; provided, that Parent’s prior written consent to any such actions with respect to Material Contracts described in Section 3.10(a) that are entered into in the ordinary course of business on customary terms shall not be unreasonably withheld, conditioned, or delayed;
(x) (A) enter into any Collective Bargaining Agreement or (B) enter into or amend the terms of any employment, termination, retirement or similar agreement, including by increasing the compensation, bonus or other benefits payable thereto other than in the ordinary course of business and consistent with past practice;
(xi) change any of the Acquired Companies’ methods of accounting, except as required by concurrent changes in GAAP or Applicable Law, as agreed to by the independent accountants of the Acquired Companies;
(xii) except as required by Applicable Laws, make, change or revoke any Tax election, change any annual Tax accounting period adopt or change any method of Tax accounting, amend any Tax Returns or file claims for material Tax refunds, enter any closing agreement, settle any Tax claim, audit or assessment, surrender any right to claim a Tax refund, offset or other reduction in Tax liability, consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment. All of the actions mentioned in this sub-section (xii) shall not be taken in the event that such actions could have the effect of increasing the Tax liability of any Acquired Company for a Post-Closing Tax Period;
(xiii) enter into or amend any Contracts pursuant to which an Acquired Company transfers or licenses to any Person or entity any rights to its Intellectual Property Rights or any other party is granted rights of any type or scope with respect to any of an Acquired Company’s proposed products or Intellectual Property Rights other than non-exclusive licenses granted in the ordinary course of business;
(xiv) make any capital expenditures, capital additions or capital improvements;
(xv) materially reduce the amount of any insurance coverage provided by existing insurance policies;
(xvi) terminate or waive any right of substantial value (other than in the ordinary course of business) or forgive, cancel or defer any Indebtedness or waive any claim or rights of material value (including any indebtedness owing by any holder of the Company’s securities, officer, director or employee); (xvii) grant, agree to grant or pay any severance, change of control, retention or termination pay or benefits (A) to any director or officer or (B) to any other employee, consultant, independent contractor, or other service provider;
(xviii) (A) commence a lawsuit other than (I) for the routine collection of bills, (II) in such cases where the Company in good faith determines that failure to commence suit would result in the material impairment of a valuable aspect of the Company’s business or would otherwise be harmful to the best interests of the Company, provided that the Company consults with Parent prior to the filing of such a suit or (III) for a breach of this Agreement; or (B) enter into any settlement agreement with respect to any lawsuit involving any payment; or
(xix) enter into any binding agreement to do any of the foregoing, or take any action that would prevent it from materially performing or cause it not to materially perform its covenants hereunder.
Section 5.02. Access to Information. During the Pre-Closing Period, the Company shall, and the Company shall cause its Subsidiaries to, (a) upon reasonable advance notice, give Parent and its Representatives reasonable access to the offices, properties, books and records of the Acquired Companies, (b) furnish to Parent and its Affiliates and their respective Representatives such financial, operating and human resources data and other information relating to the Acquired Companies as such Persons may reasonably request and (c) instruct the Representatives of the Acquired Companies to cooperate with Parent and its Affiliates and their respective Representatives in their investigation of the Acquired Companies, provided that, neither the Company nor any of its Subsidiary shall be required to disclose any information if such disclosure would, (a) in the written opinion of outside counsel to the Company, violate Applicable Law, or, (b) in the written opinion of outside counsel to the Company, jeopardize any attorney-client privilege; provided, that, in any such event, the parties shall cooperate with respect to alternative access or disclosure that would not result in such violation or loss. No investigation by Parent, its Affiliates or any of their respective Representatives or other information received by Parent, its Affiliates or any of their respective Representatives shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by the Company hereunder.
Section 5.03. Written Consent; Information Statement. The Company shall use its reasonable efforts to obtain from each Stockholder a counterpart to the Written Consent as expeditiously as possible after the execution and delivery of this Agreement and shall promptly deliver such Written Consent to Parent, once available. The materials submitted to such holders in connection with soliciting the Written Consent shall include the unanimous recommendation of the Company’s Board of Directors that such holders vote their shares of Company Stock in favor of the adoption of this Agreement, the Merger and the transactions contemplated hereby. If any holder of Company Stock does not sign the Written Consent by 5:00 P.M. Israel Time on the Business Day following the date hereof, then promptly thereafter (but in any event no later than 10 days after receipt by the Company of the Required Stockholder Vote), the Company shall prepare and deliver to each such holder an information statement (the “Information Statement”) containing notice of the receipt of the Required Stockholder Vote, a description of the Merger and this Agreement and such other information as may be required to be included therein by Sections 228 and 262 of the DGCL. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Information Statement and any amendment or supplement thereto before they are delivered to such holders of Company Stock, and the Company shall incorporate any reasonable comments of Parent and its counsel in connection therewith; provided, however, that Parent shall in no way be responsible for any of the content of the Information Statement.
Section 5.04. Takeover Statutes. If any “control share acquisition,” “fair price,” “moratorium” or other similar antitakeover law is or may become applicable to this Agreement or the transactions contemplated hereby, the Company and its Board of Directors shall grant such approvals and take such actions as are reasonably necessary so that such transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise act to eliminate or minimize the effects of such statute or regulation on such transactions.
Section 5.05. Affiliate Contracts. The Company shall, and shall cause its Subsidiaries to, terminate, or cause to be terminated, the Contracts with Related Parties set forth on 0 of the Company Disclosure Schedule at or prior to Closing with no further Liability or obligation, directly or indirectly, of any kind thereunder on the part of any of the Acquired Companies.
Section 5.06. Resignations. At or prior to Closing, the Company shall deliver to Parent resignation letters executed by each officer and director of each of the Acquired Companies.
Section 5.07. Exclusivity. From the date hereof until the earlier of the Effective Time and the termination of this Agreement pursuant to its terms, except for the transactions contemplated by this Agreement and the other Transaction Documents, the Company, the Equityholder Representative and the Equityholders shall not, and each shall cause their respective Affiliates and Representatives not to, directly or indirectly, solicit, encourage, initiate, enter into any Contract regarding or entertain the submission of any proposal or offer from any Person relating to the direct or indirect acquisition of any of the equity interests in the Acquired Companies or all or any material portion of the assets of the Acquired Companies (other than the acquisition of inventory in the ordinary course of business), whether in an acquisition structured as a merger, business combination, consolidation, exchange, sale of assets, sale of stock or otherwise, or participate in any discussions or negotiations regarding, furnish any information with respect to, assist, cooperate with or participate in or knowingly facilitate or knowingly encourage in any other manner any effort or attempt by any Person to do or seek any of the foregoing. The Company shall, and shall cause its Affiliates and Representatives to, immediately cease and cause to be terminated any existing discussions or negotiations with any Person (other than Parent and Merger Sub) conducted heretofore with respect to any of the matters addressed in this Section 5.07. In the event that any Acquired Company, the Equityholder Representative, or any of their respective Affiliates or Representatives, receives or becomes aware of any communication from any Person (other than Parent, Merger Sub or their respective Affiliates and Representatives) regarding any of the matters addressed in this Section 5.07, such Acquired Company or Equityholder Representative (or respective Affiliate or Representative), as applicable, shall promptly (and no later than 24 hours after receipt thereof) provide Parent with written notice of the same, which notice (unless prohibited by the terms of any confidentiality agreement in effect as of the date hereof or otherwise by Applicable Law) shall indicate in reasonable detail the identity of the offeror and the terms and conditions of such proposal, inquiry or contact.
ARTICLE 6 TAX MATTERS
Section 6.01. Transfer Taxes. Parent shall cause all Transfer Taxes to be remitted to the appropriate Taxing Authority when due, and shall cause all necessary Tax Returns to be filed with respect to all such Transfer Taxes, and, if required by Applicable Law, the Equityholders will, and will cause their respective Affiliates to, join in the execution of any such Tax Returns. All Transfer Taxes shall be borne by the Parent.
Section 6.02. Tax Returns.
(a) Parent shall prepare or cause to be prepared and cause to be timely filed all Tax Returns of the Acquired Companies required to be filed following the Closing Date. To the extent that any such Tax Return includes a Pre-Closing Tax Period, Parent shall prepare the Tax Returns of the Acquired Companies on a basis consistent with the Company’s past practice (except as otherwise required by applicable Tax Law) and provide the Equityholder Representative with a copy of each such draft Tax Return, at least thirty (30) Business Days prior to its filing (taking into account any extensions thereof). Parent shall reasonably and in good faith consider any revisions to such Tax Returns as are requested by the Equityholder Representative, provided that such revisions are requested no more than 15 days after such Tax Return is delivered to the Equityholder Representative. Any Covered Taxes for any Tax period with respect to which such Tax Returns were filed shall be borne by the Pro Rata Holders in accordance with their Pro Rata Share and the provisions set forth on Section 10.01. To the extent not taken into account in calculating the Indebtedness, the Pro Rata Holders shall pay Parent the amount of any Covered Taxes due with respect to such Tax Returns at least two (2) Business Days before payment of such Taxes is due to the Tax Authority in connection with the filing of such Tax Returns.
(b) To the extent permitted under Applicable Law, Parent and the Equityholders agree to cause the Acquired Companies to file all Tax Returns for the periods including the Closing Date on the basis that the relevant Tax period ended on the Closing Date. Except as required by Applicable Law or with the consent of the Equityholder Representative (not to be unreasonably withheld, conditioned or delayed), Parent shall not amend any income or other material Tax Return of an Acquired Company for a Pre-Closing Tax Period.
(c) Parent and the Equityholders and their respective Affiliates shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns and any audit or other proceeding with respect to Taxes of any of the Acquired Companies. Such cooperation shall include retaining (until the expiration of the relevant statute of limitations) and (upon the other party’s reasonable request) providing records and information which are reasonably relevant to any such audit or other proceeding and within such party’s possession or obtainable without material cost, expense and efforts and making their best efforts that employees or other representatives will be available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Notwithstanding any provision of this Agreement to the contrary, Parent shall not be required to provide to any Person any right to access or to review any Tax Return or Tax work papers of Parent or any Affiliate (other than the Acquired Companies) of Parent (including any consolidated, combined, affiliated, unitary or similar Tax Return that includes Parent or any Affiliate of Parent).
Section 6.03. Reserved.
Section 6.04. Certain Disputes. Parent shall have the right to control the conduct of any Tax audit, investigation, assessment or administrative or judicial proceeding or of any demand or claim on any of the Acquired Companies relating to Taxes (collectively, a “Tax Contest”) which could give rise to an indemnification claim under this Agreement; provided, however, that (i) Parent shall keep the Equityholder Representative reasonably informed concerning the progress of any such Tax Contest, (ii) the Equityholder Representative shall be entitled to participate in such Tax Contest at the sole expense of the Equityholders (including having the opportunity to consult with Parent regarding significant actions and the opportunity to review and comment on significant written materials furnished in connection with such actions) and (iii) Parent shall not settle, compromise or abandon any such Tax Contest without obtaining the prior written consent of the Equityholder Representative (which shall not be unreasonably withheld, delayed or conditioned).
Section 6.05. Conflict. To the extent that any obligation or responsibility pursuant to Article 10 may conflict with any obligation or responsibility pursuant to this Article 6, the provisions of this Article 6 shall control.
Section 6.06. Tax Survival. Notwithstanding anything in this Agreement to the contrary, the provisions of this Article 6 shall survive until 60 days after the expiration of the applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof).
ARTICLE 7 EMPLOYEE MATTERS
Section 7.01. Employee Matters.
(a) Prior to the Closing Date, to the extent requested by Parent, the Company shall take all actions necessary or appropriate to cause the Employee Plans set forth in Section 7.01(a) of the Company Disclosure Schedule to be terminated as of the day immediately preceding the Closing Date. All resolutions, notices, participant communications or other documents issued, adopted or executed in connection with the termination of such Employee Plans shall be subject to Parent’s prior reasonable review and approval.
Section 7.02. D&O Indemnified Parties.
(a) Following the Effective Time, Parent shall cause the Surviving Corporation to maintain in full force and effect and continue to honor the obligations thereunder and cause each of the Acquired Companies to fulfill and honor in all respects their respective obligations to their current and former directors and officers as of immediately prior to the Effective Time (the “D&O Indemnified Parties”) pursuant to indemnification agreements with the Acquired Companies, respectively, in effect on the date hereof and set forth on Section 7.02 of the Company Disclosure Schedule, and pursuant to the Acquired Companies’ Governing Documents, in each case, in effect on the date hereof. This Section 7.02 shall survive the Merger, is intended to benefit and shall be enforceable by each D&O Indemnified Party and their respective heirs, shall be binding on all successors and assigns of Parent and the Acquired Companies, as applicable, and shall not be terminated or modified in a manner as to adversely affect the rights of any D&O Indemnified Party without the written consent of such D&O Indemnified Party.
(b) Notwithstanding the foregoing, no D&O Indemnified Party will have any right of indemnification or right of advancement from the Surviving Corporation or its successors or Parent pursuant to this Section 7.02 with respect to any Damages recoverable by any of the Parent Indemnified Persons from such D&O Indemnified Party in his or her capacity as a Pro Rata Holder pursuant to Article 10.
Section 7.03. No Third-Party Beneficiaries. Without limiting the generality of Section 13.04, nothing in this Article 7, express or implied, (a) is intended to or shall confer upon any Person other than the parties hereto and their respective successors and assigns, including any current or former Service Provider, any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, (b) shall establish or constitute an amendment, termination or modification of, or an undertaking to establish, amend, terminate or modify, any benefit plan, program, agreement or arrangement, (c) shall alter or limit the ability of Parent or any of its Subsidiaries (including, following the Effective Time, the Surviving Corporation) to amend, modify or terminate any benefit plan, program, agreement or arrangement at any time assumed, established, sponsored or maintained by any of them or (d) shall create any obligation on the part of Parent or its Subsidiaries (including, following the Effective Time, the Surviving Corporation) to employ or engage any Service Provider for any period following the Effective Time; provided that in the case of Section 7.02, the D&O Indemnified Parties and their respective heirs, executors, administrators, legal representatives, successors and assigns are intended third party beneficiaries of such Section and shall have the right to enforce such Section in their own name.
ARTICLE 8 ADDITIONAL COVENANTS
Section 8.01. Efforts. Subject to the terms and conditions of this Agreement, during the Pre-Closing Period, each of Parent and the Company will use commercially reasonable efforts to take, or cause to be taken (including, in the case of the Company, by causing the other Acquired Companies to take), all actions and to do, or cause to be done, and to assist and cooperate with the other parties hereto in doing, all things necessary, proper or advisable under Applicable Law to consummate and make effective the transactions contemplated by this Agreement and the other Transaction Documents, including (i) satisfying the conditions precedent to the obligations of any party hereto set forth in Article 9, (ii) determining whether any action by or in respect of, or filing with, any Governmental Authority or any other third party is required in connection with the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, (iii) preparing and filing as promptly as practicable with any Governmental Authority or other third party all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents, and taking any other required action and (iv) obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or, at the direction of Parent, other third party that are necessary, proper or advisable to consummate the transactions contemplated by this Agreement; provided that the parties hereto understand and agree that neither Parent nor any of its Affiliates shall be obligated to (and, without Parent’s prior written consent, no Acquired Company shall) (1) enter into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the transactions contemplated hereby, (2) unless specifically specified in this Agreement, divest, license, dispose of, transfer or otherwise hold separate (including by establishing a trust or otherwise), (3) litigate, challenge or take any action with respect to any Action by any Person, including any Governmental Authority or (4) agree to do any of the foregoing. Each of Parent and the Company shall promptly notify the other parties hereto of any written notice from any Governmental Authority in connection with the transactions contemplated by this Agreement or the Transaction Documents.
Section 8.02. Third-Party Notices and Consents. Promptly following the date hereof, each of Parent and the Company shall cooperate with one another, and the Company shall cause the other Acquired Companies to cooperate with Parent, in determining whether any actions are required to be taken or any consents, approvals or waivers are required to be obtained from any parties to any Material Contracts or other Contracts in connection with the consummation of the transactions contemplated by this Agreement and the other Transaction Documents. Upon Parent’s request, the Company shall, and shall cause the other Acquired Companies to, use reasonable efforts (including by cooperating with Parent and its Affiliates and Representatives) in connection with the giving of notices of the transactions contemplated by this Agreement and the other Transaction Documents to any third parties, including pursuant to any Contracts to which any of the Acquired Companies is a party, including those notices set forth on Schedule 8.02(i). Prior to the Effective Time, at the direction of Parent, the Company shall use reasonable efforts (and the Company shall cause the other Acquired Companies to use their respective reasonable efforts) to (a) obtain any third-party consents, waivers or novations required pursuant to the terms of any Contracts that are necessary or appropriate to operate the Acquired Companies after the Closing, including those consents set forth on Schedule 8.02(ii) and (b) terminate the agreements set forth on Schedule 8.02(iii); provided that in connection with obtaining any such third-party consent, waiver or novation, or terminating such agreements, neither Parent nor any of the Acquired Company shall be required to make any payment or accept any material condition or obligation with respect thereto.
Section 8.03. Confidentiality. Parent, Merger Sub, the Company and each Acquired Company, the Equityholder Representative and each Equityholder shall not, and shall not permit their respective Affiliates or Representatives to, directly or indirectly disclose, without the prior written consent of the Company (in the case of a disclosure by the Parent or Merger Sub or their respective Affiliates or Representatives) or the Parent (in the case of a disclosure by the Company, an Acquired Company, the Equityholder Representative and an Equityholder or their respective Affiliates or Representatives), to any third party any details concerning the Agreement or the transactions contemplated hereby or any confidential or proprietary information furnished to it or its Affiliates or Representatives in connection with the negotiation and execution of, and performance of the obligations arising under, the Transaction Documents and the transactions contemplated thereby, whether disclosed prior or after the date hereof (collectively, the “Confidential Information”); provided, however, that the term “Confidential Information” will not include any information concerning the other party (i) that becomes available from a third-party source that is not known by the receiving party, after reasonable due inquiry, to be under any obligations of confidentiality in respect of such information, (ii) that is or becomes generally available to, or known by, the public (other than as a result of disclosure in violation hereof) or (iii) that is or was derived independently by the receiving party its Affiliates or its Representatives without use of Confidential Information. If this Agreement is terminated, each Acquired Company, the Equityholder Representative and each Equityholder shall, and shall cause their respective Representatives to, destroy all documents and other materials, and all copies thereof, that it or its Affiliates or Representatives obtained, or that were obtained on their behalf, from the other party in connection with the Transaction Documents and the transactions contemplated thereby and that constitute Confidential Information. Press releases and other publicity concerning the transactions contemplated by this Agreement shall be made only with the prior written agreement of the Parent. Notwithstanding anything in this Section 8.04 to the contrary, no Equityholder which is a private equity or venture capital fund shall be precluded from disclosing to (i) its members, partners or limited partners (who are subject to a duty of confidentiality) (A) such terms of this Agreement that such fund is reasonably required to disclose to its members, partners or limited partners, as applicable, under its partnership agreement, limited liability company agreement or comparable organizational agreement, (B) that such fund sold its interest in the Company to Parent, and (C) the rate of return on such fund’s investment in the Company, and (ii) prospective investors (who are subject to a duty of confidentiality) (A) that such fund sold its interest in the Company to Parent and (B) the rate of return on such fund’s investment in the Company.
Section 8.04. Notices of Certain Events. Each party hereto shall promptly notify the other parties in writing of the occurrence of any matter or event that would reasonably be expected to cause any of the conditions set forth in Section 9.01 not to be satisfied. The Company shall promptly notify Parent in writing of the occurrence of any matter or event that would reasonably be expected to cause any of the conditions set forth in Section 9.01(c) not to be satisfied. Each of Parent and Merger Sub shall promptly notify the Company in writing of the occurrence of any matter or event that would reasonably be expected to cause any of the conditions set forth in Section 9.03 not to be satisfied. The Company shall promptly notify Parent of any notice or other communication from any Person asserting that (i) such Person is entitled to compensation or consideration from any of Parent, Merger Sub, any Acquired Company or any of their respective Affiliates in connection with the transactions contemplated by this Agreement or the other Transaction Documents (other than as reflected on the Allocation Schedule), (ii) the consent of such Person is or may be required in connection with the transactions contemplated by the Transaction Documents or (iii) an Action that, if pending on the date of this Agreement, would have been required to have been disclosed on the Company Disclosure Schedule, or an Action relating to the consummation of the transactions contemplated by the Transaction Documents, has been commenced or threatened. The delivery of any notice pursuant to this Section 8.04 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. In particular, the delivery of any notice by the Company to Parent hereunder shall not be deemed to constitute an exception to the representations and warranties made by the Company hereunder, nor limit the rights of Parent under this Agreement for any breach by the Company of such representations and warranties or have any effect for purposes of determining the satisfaction of the conditions set forth in Article 9.
Section 8.05. Further Assurances. From and after the Closing, each party hereto shall take, or shall cause to be taken, such further actions and to execute, or cause to be executed, such further documents, agreements, instruments, writings and certificates as may be reasonably necessary or reasonably requested by any other party hereto to effectuate the intent of this Agreement and to provide such other party in all material respects with the intended benefits of this Agreement and the other Transaction Documents.
ARTICLE 9 CONDITIONS TO CLOSING
Section 9.01. Conditions to the Obligations of Parent, Merger Sub and the Company. The obligations of Parent, Merger Sub and the Company to consummate the Closing are subject to the satisfaction of the following conditions (or, to the extent permitted by Applicable Law, waiver by each of (i) Parent, on behalf of itself and Merger Sub, and (ii) the Company):
(a) No provision of any Applicable Law and no Order shall prohibit, restrain or make illegal the consummation of the transactions contemplated hereby or by the Transaction Documents;
(b) There shall not be pending or threatened any Action in which a Governmental Authority is or is threatened to become a party or is otherwise involved, and neither Parent nor any Acquired Company shall have received any communication from any Governmental Authority in which such Governmental Authority indicates the probability of commencing any Action or taking any other action: (i) challenging or seeking to restrain or prohibit the consummation of the Merger; (ii) relating to the Merger and seeking to obtain from Parent or any of its Subsidiaries, or from any Acquired Company, any damages or other relief that would be material to Parent or to the Company, as applicable; or (iii) that would materially and adversely affect the right of Parent or an Acquired Company to own the assets or operate the business of the Acquired Companies or of the Parent, as applicable; and
(c) The Required Stockholder Vote adopting this Agreement, approving the Merger, the transactions contemplated by this Agreement and the other Transaction Documents shall have been validly obtained under the DGCL and the Company’s Governing Documents.
Section 9.02. Conditions to the Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate the Closing is subject to the satisfaction (or, to the extent permitted by Applicable Law, waiver by Parent, on behalf of itself and Merger Sub) of the following further conditions:
(a) The Company shall have performed and complied with in all material respects all of its obligations and agreements hereunder required to be performed or complied with by the Company at or prior to the Closing;
(b) The representations and warranties of the Company contained in this Agreement and in any certificate or other writing delivered pursuant hereto shall be true and correct (i) in all material respects as of the date of this Agreement (except where any such representations and warranties expressly relate to a specific date prior to the date of this Agreement, then such representations and warranties will be true and correct in all material respects as of such date), and (ii) as of the Closing (or, if such representations and warranties expressly relate to a specific date between signing and the Closing, then as of such date), except, in the case of this clause (ii) where the failure of such representations and warranties of the Company to be accurate at the Closing (or such other date), when taken as a whole, would not reasonably be expected to result in a Company Material Adverse Effect; (c) Since the date of this Agreement, there shall not have occurred a Company Material Adverse Effect;
(d) Parent and Merger Sub shall have received a certificate duly executed by an officer of the Company, dated as of the Closing Date, certifying as to the satisfaction of the conditions set forth in Section 9.02(a), 9.02(b) and 9.02(c) (the “Company Certificate”);
(e) Reserved;
(f) The Equityholder Representative shall have delivered to Parent a duly executed counterpart to the Escrow Agreement, in a form to be agreed between the Parent, the Equityholder Representative and the Escrow Agent (the “Escrow Agreement”);
(g) Reserved;
(h) The Company shall have delivered to Parent, the Estimate Statement and the Allocation Schedule pursuant to Section 2.08(a);
(i) The Company shall have delivered to Parent written resignations of each of the directors and officers of each of the Acquired Companies, which resignations shall be effective as of the Effective Time;
(j) Parent and Merger Sub shall have received from an officer of the Company a certificate having attached thereto (i) the Certificate of Incorporation as in effect immediately prior to the Effective Time, (ii) the Bylaws of the Company as in effect immediately prior to the Effective Time, (iii) the Governing Documents of each other Acquired Company, (iv) resolutions approved by the Company’s Board of Directors authorizing the transactions contemplated hereby, including the treatment of Company Stock Options, (v) the executed Written Consent by at least 70% of (1) the issued and outstanding shares of Company Stock (on an as-converted basis with respect to any shares of Company Preferred Stock held by such holder), voting together as a single class, (2) the Company Preferred Stock (on an as-converted basis), voting together as a single class, and (3) the Series B Preferred Stock (on an as-converted basis) (the “Required Stockholders”), and (vi) certificates of good standing (including tax good standing) issued by the Delaware Secretary of State and for each other state where the Company is qualified to do business, in each case dated as of a date no more than two (2) Business Days prior to the Closing Date;
(k) Reserved;
(l) All outstanding Company Warrants are terminated as of or prior to the Closing or were exercised prior to or at the Closing, or the holder thereof shall have executed a Letter of Transmittal;
(m) The Equityholder Representative shall have delivered to Parent a duly executed counterpart to the Paying Agent Agreement, in a form to be agreed between the Parent, the Equityholder Representative and the Paying Agent (the “Paying Agent Agreement”); (n) The Company shall have delivered to Parent the Representative Confirmation Letters;
(o) The Indebtedness shall not exceed $15,450,000;
(p) All notices referenced on Schedule 8.02(i) shall have been delivered in form and substance reasonably satisfactory to Parent, and a copy of each such notice shall have been provided to Parent at or prior to the Closing;
(q) All consents and approvals referenced on Schedule 8.02(ii) shall have been obtained in form and substance reasonably satisfactory to Parent and shall be in full force and effect, and a copy of each such consent or approval shall have been provided to Parent at or prior to the Closing;
(r) Each of the Contracts listed or described on Schedule 8.02(iii) are terminated as of or prior to the Closing, and the Company shall have delivered confirmation of such terminations to Parent in form and substance reasonably satisfactory to Parent.
Section 9.03. Conditions to the Obligation of the Company. The obligation of the Company to consummate the Closing is subject to the satisfaction (or, to the extent permitted by Applicable Law, waiver by the Company) of the following further conditions:
(a) Each of Parent and Merger Sub shall have performed in all material respects (and, with respect to the issuance of the Aggregate Merger Consideration, in all respects) all of its respective obligations hereunder required to be performed by it at or prior to the Closing;
(b) The representations and warranties of Parent and Merger Sub contained in this Agreement and in any certificate or other writing delivered pursuant hereto shall be true and correct in all material respects as of the date of this Agreement (except where any such representations and warranties expressly relate to a specific date prior to the date of this Agreement, then such representations and warranties will be true and correct in all material respects as of such date) and as of the Closing, (or, if such representations and warranties expressly relate to a specific date between signing and the Closing, then as of such date), except, in the case of this clause (ii) where the failure of such representations and warranties of the Company to be accurate at the Closing (or such other date), when taken as a whole, would not reasonably be expected to result in a Parent Material Adverse Effect or, with respect to the representation provided in Section 4.08 (Capitalization), it is not accurate in all material respects;
(c) The Company shall have received a certificate signed by an officer of Parent certifying as to Parent’s and Merger Sub’s satisfaction of the conditions set forth in Section 9.03(a) and 9.03(b);
(d) Parent and the Escrow Agent shall have delivered to the Equityholder Representative duly executed counterparts to the Escrow Agreement.
(e) Parent and the Paying Agent shall have delivered to the Equityholder Representative duly executed counterparts to the Paying Agent Agreement.
(f) Since the date of this Agreement, there shall not have occurred a Parent Material Adverse Effect.
ARTICLE 10 INDEMNIFICATION
Section 10.01. Indemnification by the Pro Rata Holders.
(a) Subject to the limitations set forth in this Article 10, the Pro Rata Holders shall, severally and not jointly, based on each Pro Rata Holder’s Pro Rata Share, from and after the Closing indemnify and hold harmless Parent and the Surviving Corporation and their respective Affiliates, officers, directors, representatives and employees (individually a “Parent Indemnified Person” and collectively the “Parent Indemnified Persons”) from and against any and all direct losses, costs, damages, fees, diminution of value, liabilities, costs of investigation, Taxes and expenses, including costs and expenses arising from claims, demands, actions, causes of action and settlements, reasonable fees and expenses of lawyers, experts and other professionals (in each case, including reasonable fees and expenses incurred in connection with a Third Party Claim or a successful claim for indemnification hereunder, and excluding any punitive damages, other than those awarded by a court to a third party in a Third Party Claim and for purposes hereof) (collectively, “Damages”), incurred by the Parent Indemnified Persons, resulting from or arising out of:
(i) any failure of any of the representations and warranties given or made by the Company in this Agreement, the Company Disclosure Schedule or the Company Certificate to be true and correct as of the date of this Agreement and as of the Closing Date (as though such representation or warranty were made as of the Closing Date), except in the case of representations and warranties which by their terms speak only as of a specific date or dates, in which case such representations and warranties shall have been true and correct on and as of such specified date or dates;
(ii) all Covered Taxes;
(iii) any breach of any covenant or agreement made by the Company in this Agreement;
(iv) Reserved;
(v) any inaccuracies in the Allocation Schedule, including any Transaction Expenses or Indebtedness of the Company or any Acquired Company not reflected in the Estimate Statement;
(vi) any fraud, willful breach or intentional misrepresentation by or on behalf of the Company (including by a Pro Rata Holder on behalf of the Company), by the Pro Rata Holder with respect to any representation it has made under its respective Letter of Transmittal, or of which the Pro Rata Holder had or has knowledge; (provided, however, that with respect to any willful breach or intentional misrepresentation by or on behalf of a specific Pro Rata Holder with respect to any representation it has made under its respective Letter of Transmittal or of which the Pro Rata Holder had or has knowledge, the indemnification shall be made solely by such Pro Rata Holder);
(vii) any liability pursuant to indemnification undertakings granted by any of the Acquired Companies to directors or officers of the Acquired Companies in connection with the period prior to the Closing Date;
(viii) claims by or purportedly on behalf of any current or former holder of Company Securities or equity interests in an Acquired Company related to or in connection with (i) the invalidity of the execution of this Agreement, (ii) such Person’s status or alleged status as a holder of Company Securities or equity interests in an Acquired Company Equity Interests at any time at or prior to the Closing, whether for breach of fiduciary duty or otherwise, or (iii) the allocation of the Aggregate Closing Consideration, Aggregate Merger Consideration or any portion thereof; and
(ix) any claim or threatened claim against a Parent Indemnified Person by any Equityholder relating to any alleged action or failure to act on its behalf by the Equityholder Representative.
Notwithstanding anything in this Agreement to the contrary (but subject to the second sentence of this paragraph), for the purposes of determining whether a breach has occurred and the amount of Damages resulting from or arising out of such breach, all qualifications or exceptions in any representation or warranty relating to or referring to the terms “material”, “materiality”, “in all material respects”, “Material Adverse Effect” or any similar term or phrase shall be disregarded. Notwithstanding anything to the contrary herein, (i) a representation or warranty that contains any “material”, “material respects”, “Material Adverse Effect” or any similar term, qualification or limitation shall be deemed to have been given with such qualification for purposes of determining whether there has been any fraud, intentional misrepresentation or willful breach with respect to such representation or warranty herein, (ii) this provision shall not apply to the use of, or definition of, “Material Contract” and (iii) this provision shall not apply to the reference to “Material Adverse Effect” in the representations and warranties set forth in Sections 3.07 and 3.25.
(b) Survival of Representations and Warranties. All representations and warranties made by the Company herein, or in the Company Disclosure Schedule or any certificate delivered by the Company pursuant to this Agreement, shall survive the execution and delivery of this Agreement, the Closing Date and shall survive through the Escrow Termination Date; provided, however, that any claims for indemnification (x) (i) arising with respect to the Company’s representations set forth in (A) Section 3.01 (Organization), 3.02 (Authority, Validity and Effect), 3.05 (Capitalization), 3.08 (Taxes) , and 3.21 (Brokers) (together, the “Fundamental Representations”), or (ii) involving fraud, willful breach or intentional misrepresentation, shall survive until the expiration of the applicable statute of limitations, and (y) arising with respect to the Company’s representations set forth in Section 3.12 (Intellectual Property) (the “IP Representations”), shall survive the Closing until the date that is thirty-six (36) months following the Closing Date. There shall be no termination of any representation or warranty as to which a claim has been asserted by Parent under a duly served Officer’s Certificate prior to the termination of such survival period. All covenants and agreements (whether by the Parent, Merger Sub or the Company) shall survive indefinitely or for such shorter period explicitly specified therein, except that such covenants and agreements that survive for such shorter period, shall survive indefinitely or until the latest date permitted by Applicable Law for the purposes of indemnification hereunder or for the purpose of any claims on account of the payment of the Aggregate Merger Consideration. The date of expiration of a claim for indemnification under this Agreement is referred to as such claim’s “Expiration Date.”
(c) Threshold for Claims. No claim for Damages shall be made under Section 10.01(a) unless the aggregate amount of Damages exceeds $100,000 (the “Threshold”), in which case the Parent Indemnified Person shall be entitled to seek compensation for all Damages only in excess of the Threshold. Notwithstanding the above, the Threshold shall not apply with respect to (i) any Damages arising from or related to any claims for indemnification based on a breach or an inaccuracy of the Fundamental Representations, or (ii) for the avoidance of doubt, any matter described under Section 10.01(a)(ii) through (ix) (each, a “Special Claim”).
(d) Cap on Indemnification by Pro Rata Holders.
(i) The aggregate amount to be paid by each Pro Rata Holder for claims for Damages made under Section 10.01(a)(i) shall not exceed an amount equal to such Pro Rata Holder’s Pro Rata Share of the Escrow Amount (the “Cap”). For the avoidance of doubt, the Cap shall not apply to any Damages arising from, or directly or indirectly related to, any Special Claim.
(ii) Notwithstanding anything herein to the contrary, (x) in no event shall a Pro Rata Holder be responsible for Damages under this Agreement in excess of the amount of Aggregate Merger Consideration such Pro Rata Holder has actually received hereunder, including, without duplication, Pro Rata Holder’s portion of the Escrow Amount, and (y) any indemnification obligation of a Pro Rata Holder under this Agreement shall be (I) first satisfied by the forfeiture of Parent Shares in the Escrow Account, and (II) in the forfeiture of Parent Shares held by such Pro Rata Holder, unless (1) such Pro Rata Holder and the applicable Parent Indemnified Person have resolved otherwise or (2) such Pro Rata Holder does not hold any Parent Shares on the date on which it is required to pay an indemnification payment to a Parent Indemnified Party hereunder.
(iii) Notwithstanding anything to the contrary contained herein, the amounts that a Parent Indemnified Person recovers from the Escrow Account for indemnification involving a Special Claim shall not reduce the amount that a Parent Indemnified Person may recover directly from the Pro Rata Holders with respect to claims that are not claims for indemnification involving Special Claims. By way of illustration and not limitation, assuming there are no other claims for indemnification in the event that Damages resulting from a Special Claim are first satisfied from the Escrow Account and such recovery fully depletes the Escrow Account, the maximum amount recoverable directly from the Pro Rata Holders by a Parent Indemnified Person pursuant to a subsequent claim that is not a Special Claim shall continue to be the full dollar value of the Escrow Account irrespective of the fact that the Escrow Account was used to satisfy such Special Claim, such that the amount recoverable for such two claims would be the same regardless of the chronological order in which they were made.
(e) For purposes of calculating the number of Parent Shares to be returned by a Pro Rata Holder for claims of Damages to the applicable Parent Indemnified Person, if and as applicable, each Parent Share shall be valued at the average closing price per Parent Share on the principal trading market of the Parent Shares (as reported by such trading market) for the five (5) trading days prior to the date of return or, if the Parent Shares are not then listed or quoted on a trading market, then the price per Parent Share as of the date hereof.
Section 10.02. Indemnification Claims.
(a) To recover Damages under the indemnification obligations of the Pro Rata Holders set forth in Section 10.01, the Parent must deliver to the Equityholder Representative on or before the applicable Expiration Date a certificate signed by an officer of Parent (an “Officer’s Certificate”) stating that a Parent Indemnified Person has incurred or accrued or reserved, or in good faith believes that it may incur, pay, reserve or accrue, Damages and for which indemnification from the Pro Rata Holders is sought, as set forth in Section 10.01 (including an estimate of the maximum amount thereof, to the extent reasonably ascertainable on the date of delivery of such Officer’s Certificate), and specifying in reasonable detail the individual items of such Damages included in the amount so stated, and the nature of the misrepresentation, breach of warranty, covenant or claim to which such item is related.
(b) The Equityholder Representative shall have a period of forty-five (45) days from and after delivery of any Officer’s Certificate to deliver to Parent a response, in which the Equityholder Representative shall: (i) agree that Parent is entitled to receive all of the requested Damages (in which case the response shall be accompanied by written notice executed by the Equityholder Representative instructing the Escrow Agent to disburse the requested Damages to Parent) or (ii) dispute or object that Parent is entitled to receive the requested Damages.
(c) If the Equityholder Representative does not deliver a response before the expiration of the forty-five (45) day period referred to in Section 10.02(b) disputing or objecting any claim or claims made in the Officer’s Certificate, Parent shall, subject to the provisions of this Article 10, be entitled to recover such Damages and, if the Escrow Account has not yet been released, receive from the Escrow Account a portion of such Escrow Account having a value equal to such Damages and such amount shall no longer be payable to the Pro Rata Holders.
(d) If the Equityholder Representative disputes or objects any claim or claims made in any Officer’s Certificate, Parent shall have forty-five (45) days to respond in a written statement to the objection of the Equityholder Representative. If after such forty-five (45) day period there remains a dispute as to any claims, the Equityholder Representative and Parent shall attempt in good faith for forty-five (45) days to agree upon the rights of the respective parties with respect to each of such claims (the “Claims Period”). If the Equityholder Representative and Parent should so agree, a memorandum setting forth such agreement shall be prepared and signed by Parent and the Equityholder Representative and shall be delivered to the Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum for the release of any portion of the Escrow Account to Parent in accordance with the terms of such memorandum and the Escrow Agreement.
Section 10.03. Resolution of Conflicts. If no agreement can be reached after good faith negotiation between the parties pursuant to Section 10.02(d), either Parent or the Equityholder Representative may initiate formal legal action with the applicable court in accordance with Section 13.05 and Section 13.06 to resolve such dispute. The decision of the court as to the validity and amount of any claim in such Officer’s Certificate shall be binding and conclusive upon the parties to this Agreement (including, for purposes of this Section, any Parent Indemnified Person), and notwithstanding anything in Article 10 hereof, the said parties and the Escrow Agent shall be entitled to act in accordance with such decision. Any indemnification payments which a Pro Rata Holder is liable to pay to a Parent Indemnified Parent under this Agreement (and in accordance with its terms, including Section 10.02 above) shall be made promptly by the Pro Rata Holder in accordance with the terms of this Agreement (including Section 10.02(d)), and the Pro Rata Holder shall cooperate with the Parent Indemnified Parent to make such payment in an efficient and effective manner.
Section 10.04. Third-Party Claims. In the event an executive officer of Parent gains actual knowledge of a third-party claim which it believes may result in an indemnification claim under Article 10 (a “Third Party Claim”), Parent shall promptly notify the Equityholder Representative of such claim in a notice that shall contain any and all information that is required under Section 10.02 with respect to an Officer’s Certificate (provided that any failure to timely deliver such notice shall not affect a Parent Indemnified Person’s rights hereunder except to the extent that the Pro Rata Holders are prejudiced by such failure). Parent shall have the right in its sole discretion to defend or settle any such claim; provided, however, that if Parent settles any such claim without the prior written consent of the Equityholder Representative (which consent shall not be unreasonably withheld, delayed or conditioned), then such settlement shall not be conclusive evidence of the amount of Damages incurred in connection with such claim or that such Damages are indemnifiable hereunder. The Equityholder Representative shall be entitled, on behalf of the Pro Rata Holders, at his/its/their expense, to participate in the investigation, defense and settlement of any such Third Party Claim and to assist with the defense thereof; provided, that, if the Equityholder Representative wishes to so assist with the investigation, defense and settlement of such Third Party Claim, it shall provide notice to Parent of its intent to do so within twenty-one (21) days of its receipt of the Third Party Claim Notice. In the event that the Equityholder Representative has provided its prior written consent to any such settlement (including to the settlement amount under such settlement), the Equityholder Representative shall have no power or authority to object under Section 10.02 or any other provision of this Article 10 to the amount of any claim by Parent against the Escrow Account for indemnity with respect to such settlement. If Parent exercises it right to participate in the defense or settlement of a Third Party Claim, Parent shall keep the Equityholder Representative reasonably apprised of any material development in such claim, and promptly provide to the Equityholder Representative with information reasonably requested by the Equityholder Representative to evaluate such Third Party Claim; provided that Parent shall not be required to provide any information that is subject to attorney-client privilege, attorney work product protection, or other confidentiality or privilege to the extent doing so, as reasonably determined by Parent or its counsel, would cause such privilege or protection to be waived.
Section 10.05. Effect of Indemnification Payments. All indemnification payments made pursuant to this Article 10, including the return of Parent Shares, shall be treated for all purposes as adjustments to the Aggregate Merger Consideration.
Section 10.06. Effect of Investigation. The right to indemnification, payment of Damages or for other remedies based on any representation, warranty, covenant or obligation of any Acquired Company or the Pro Rata Holders contained in or made pursuant to this Agreement shall not be affected by any investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the date the Closing occurs, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant or obligation. The waiver of any condition to the obligation of Parent to consummate the Merger, where such condition is based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, shall not affect the right to indemnification, payment of Damages, or other remedy based on such representation, warranty, covenant or obligation.
Section 10.07. Additional Limitation. Notwithstanding anything to the contrary in this Agreement, no Pro Rata Holder may make any claim for indemnification in his or her capacity as an Equityholder by reason of the fact that such Pro Rata Holder was a controlling person, director, officer, member, manager, employee or representative of the Company or was serving as such for another Person at the request of the Company (whether such claim is for Damages of any kind or otherwise and whether such claim is pursuant to an Acquired Company’s Governing Documents or any Applicable Law, Order, Contract or otherwise) with respect to any claim for indemnification brought by a Parent Indemnified Person against the Pro Rata Holders under this Agreement or otherwise relating to this Agreement or any of the transactions contemplated hereby, or that is based upon any facts or circumstances that form the basis for a claim for indemnification by a Parent Indemnified Person, provided, however, that it is hereby expressly stated the above limitation shall not include or apply to any rights to continuing indemnification as provided in Section 7.02 above.
Section 10.08. Exclusive Remedy. From and after the Closing, the indemnification provided in this Article 10 shall be the sole and exclusive remedy of the Parent Indemnified Persons with respect to any matters arising under or relating to this Agreement and any Transaction Document and the transactions contemplated by this Agreement and the Transaction Documents and the only legal action that may be asserted by any Parent Indemnified Person with respect to any matter that is the subject of this Article 10 shall be a contract action to enforce, or to recover damages for the breach of, this Article 10. Notwithstanding the foregoing, injunctive relief may be obtained to enjoin the breach, or threatened breach, of any provision of this Agreement and each party hereto shall be entitled to seek specific performance by the other of the obligations hereunder in accordance with and subject to the provisions of this Agreement.
Section 10.09. Obligations to Mitigate Damages. Each Parent Indemnified Person shall take, and Parent shall cause all other Parent Indemnified Persons to take, commercially reasonable efforts to mitigate all Damages upon and after becoming aware of any event that could reasonably be expected to give rise to Damages. In the event that an insurance recovery is made by any Parent Indemnified Person with respect to any Damages for which any such Parent Indemnified Person has been indemnified hereunder, then a refund equal to the aggregate amount of the recovery (net of costs and expenses actually incurred in recovering such amounts, as determined in good faith by such Parent Indemnified Person) shall be made promptly to the Pro Rata Holders provided that no Parent Indemnified Person shall have any obligation to seek to obtain or continue to pursue any such recovery.
Section 10.10. Indemnification by a Specific Pro Rata Holder. In the case of any claim for indemnification against a specific Pro Rata Holder on account of such Pro Rata Holder breaching the representations and warranties provided by it under the Letter of Transmittal shall be brought against the specific Pro Rata Holder, in which case, and with respect to Damages exceeding the Pro Rata Portion of such Pro Rata Holder of the Escrow Amount, any reference to the Equityholder Representative’s role in such process shall be disregarded, unless specifically agreed to by the respective Pro Rata Holder and the Equityholder Representative.
ARTICLE 11 EQUITYHOLDER REPRESENTATIVE
Section 11.01. Equityholder Representative.
(a) By virtue of the approval and adoption of this Agreement and the Merger by the Required Stockholder Vote and the delivery of the Written Consent, and without further action of any Equityholder, each Equityholder shall be deemed to have irrevocably constituted and appointed Ranan Grobman (which, by execution of this Agreement, hereby accepts such appointment) to act as the Equityholder Representative and as the sole, exclusive agent and attorney-in-fact for and on behalf of the Equityholders (in their capacity as such), for all purposes in connection with this Agreement, the Transaction Documents and any other agreements ancillary hereto, with full power of substitution, including without limitation (i) to execute and deliver on behalf of the Equityholders any amendment, consent or waiver under this Agreement and the other Transaction Documents, (ii) to assert, and to agree to resolution of, all claims and disputes hereunder or thereunder, (iii) to retain legal counsel and other professional services, at the expense of the Equityholders, in connection with the performance by the Equityholder Representative of this Agreement and the other Transaction Documents, (iv) to execute and deliver on the Equityholders’ behalf all documents and instruments which may be executed and delivered pursuant to this Agreement and the other Transaction Documents, (v) to make and receive notices and other communications pursuant to this Agreement, including any notice or communications under Article 10 hereof, and the other Transaction Documents and service of process in any Action arising out of or related to this Agreement and the other Transaction Documents, (vi) to negotiate, settle or compromise any Action arising out of or related to this Agreement or the other Transaction Documents or any of the transactions hereunder or thereunder, including to take any action (or determine not to take action) in connection with the defense, prosecution, settlement, compromise or other resolution of any claim of any right under this Agreement, and (vii) to do each and every act and exercise all rights that are either (x) necessary or appropriate in the judgment of the Equityholder Representative for the accomplishment of the foregoing or (y) specifically mandated by the terms of this Agreement or the other Transaction Documents. The Equityholder Representative shall use reasonable efforts to keep the Equityholders reasonably informed with respect to actions of the Equityholder Representative pursuant to the authority granted to the Equityholder Representative under this Agreement which actions have a material impact on the amounts payable to the Equityholders.
(b) The Equityholder Representative shall not be liable to any Pro Rata Holder for any act done or omitted in connection with the acceptance or administration of the Equityholder Representative’s responsibilities hereunder, under the Escrow Agreement or under the Paying Agent Agreement, while acting in good faith and any act done or omitted in accordance with the advice of counsel or other expert shall be conclusive evidence of such good faith. The Pro Rata Holders shall jointly and severally indemnify the Equityholder Representative, defend the Equityholder Representative and hold the Equityholder Representative harmless from and against any and all losses, liabilities, damages, claims, penalties, fines, forfeitures, actions, fees, costs and expenses (including the reasonable fees and expenses of counsel) (collectively, “Representative Losses”) actually incurred by the Equityholder Representative, arising out of or in connection with the acceptance or administration of the Equityholder Representative’s duties hereunder, under the Escrow Agreement or under the Paying Agent Agreement, in each case as such Representative Loss is suffered or incurred; except in the event that any such indemnified Representative Loss is finally adjudicated to have been directly caused by the fraud, bad faith, gross negligence or willful misconduct of the Equityholder Representative, the Equityholder Representative will reimburse the Pro Rata Holders the amount of such indemnified Representative Loss to the extent attributable to such fraud, bad faith, gross negligence or willful misconduct. Any such Representative Losses may be recovered by the Representative from the amounts in the Escrow Fund at such time as remaining amounts would otherwise be distributable to the Pro Rate Holders and directly from the Pro Rata Holders. In no event will the Equityholder Representative be required to advance or risk its own funds on behalf of the Pro Rata Holder or otherwise, or otherwise incur any financial liability in the exercise or performance of any of its powers, rights, duties or privileges or pursuant to this Agreement, the Escrow Agreement, the Paying Agent Agreement or the transactions contemplated hereby or thereby. Furthermore, the Equityholder Representative shall not be required to take any action unless the Equityholder Representative has been provided with funds, security or indemnities which, in its reasonable determination, are sufficient to protect the Equityholder Representative against the costs, expenses and liabilities which may be incurred by the Equityholder Representative in performing such actions. The Equityholder Representative shall be entitled to: (i) rely upon the Allocation Schedule, (ii) rely upon any signature believed by it to be genuine, and (iii) reasonably assume that a signatory has proper authorization to sign on behalf of the applicable Pro Rata Holders or party hereto or to the Transaction Documents. The Pro Rata Holders acknowledge and agree that the foregoing indemnities and immunities will survive the resignation or removal of the Equityholder Representative and the Closing and/or the termination of this Agreement, the Escrow Agreement or the Paying Agent Agreement.
(c) The power of attorney granted in this Article 11 and the powers, immunities and rights to indemnification granted to the Equityholder Representative hereunder: (i) are coupled with an interest and shall be irrevocable, may be delegated by the Equityholder Representative and shall survive the death or incapacity of each Equityholder and (ii) shall survive the delivery of an assignment by any Equityholder of the whole or any fraction of his, her or its interest in the Escrow Fund.
(d) The Equityholder Representative may resign at any time or may be changed by the Equityholders constituting a majority in interest of the aggregate Pro Rata Share of all Equityholders as of such time (including in the event of the death, disability or other incapacity of an Equityholder Representative that is an individual), and, following the provision of notice to Parent, the newly appointed representative shall be the Equityholder Representative for all purposes hereunder, and any such successor shall succeed the Equityholder Representative as the Equityholder Representative hereunder. Neither the removal of, nor the appointment of a successor to, the Equityholder Representative shall affect in any manner the validity or enforceability of any actions taken or agreements, understandings or commitments entered into by the prior Equityholder Representative, which shall continue to be effective and binding on the Equityholders. For the avoidance of doubt, any compromise or settlement of any matter by the Equityholder Representative hereunder shall be binding on, and fully enforceable against, all Equityholders. No bond shall be required of the Equityholder Representative.
(e) A decision, act, consent or instruction of the Equityholder Representative hereunder shall constitute a decision, act, consent or instruction of all of the Equityholders and shall be final, binding and conclusive upon each of the Equityholders and their respective successors, and all defenses which may be available to any Equityholder to contest, negate or disaffirm the action of the Equityholder Representative taken in good faith under this Agreement or the Escrow Agreement are waived. Parent, Merger Sub and, after the Effective Time, the Surviving Corporation, may rely upon any such decision, act, consent or instruction of the Equityholder Representative as being the decision, act, consent or instruction of each and every such Equityholder. Each Equityholder hereby agrees that for any Action arising under this Agreement or any other Transaction Document, such Equityholder may be served legal process by registered mail to the address set forth in Section 13.01 for the Equityholder Representative (or any alternative address designated to the parties in writing by the Equityholder Representative), and that service in such manner shall be adequate and such Equityholder shall not assert any defense of claim that service in such manner was not adequate or sufficient in any court in any jurisdiction. Each Equityholder shall promptly provide written notice to the Equityholder Representative of any change of address of such Equityholder.
(f) Each Equityholder, by its acceptance of its share of the Aggregate Merger Consideration as set forth in the Allocation Schedule, to the extent payable, payable hereunder, accepts and agrees to be bound by the provisions set forth in this Article 11.
ARTICLE 12
TERMINATION
Section 12.01. Grounds for Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Closing (notwithstanding any approval of this Agreement by the Stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Closing shall not have been consummated on or before February 15, 2025 (such date, the “End Date”); provided that the right to terminate this Agreement pursuant to this Section 12.01(b) shall not be available to Parent, if Parent’s or Merger Sub’s, or to the Company, if the Equityholder Representative’s or the Company’s, breach of any provision of this Agreement results in the failure of the Closing to occur by such date; or
(ii) there shall be any Applicable Law that makes consummation of the transactions contemplated hereby illegal or otherwise prohibited or enjoins the Company or Parent from consummating the transactions contemplated hereby, or if consummation of the transactions contemplated hereby would violate any nonappealable final order, decree or judgment of any Governmental Authority having competent jurisdiction;
(c) by the Company if there has been a misrepresentation, breach of warranty or breach of covenant or other agreement set forth in this Agreement by Parent or Merger Sub that would cause the conditions set forth in Section 9.03(a) or Section 9.03(b) not to be satisfied, and either (A) Parent is not using its commercially reasonable efforts to cure such misrepresentation or breach as promptly as reasonably practicable or (B) such condition is incapable of being satisfied by the End Date; and
(d) by Parent if:
(i) there has been a misrepresentation, breach of warranty or breach of covenant or other agreement set forth in this Agreement by the Company that would cause the conditions set forth in Section 9.02(a), Section 9.02(b) or Section 9.02(c) to not be satisfied, and either (A) the Company is not using its reasonable best efforts to cure such misrepresentation or breach as promptly as reasonably practicable or (B) such condition is incapable of being satisfied by the End Date;
(ii) there shall have been an intentional and material breach of Section 5.07;
(iii) if there shall have occurred a Company Material Adverse Effect; or
(iv) if the executed Written Consent by the Required Stockholders shall not have been obtained within twenty-four (24) hours of the execution and delivery of this Agreement.
The party desiring to terminate this Agreement pursuant to this Section 12.01 (other than pursuant to Section 12.01(a)) shall give notice of such termination to the other party.
Section 12.02. Effect of Termination. If this Agreement is terminated as permitted by Section 12.01, such termination shall be without Liability of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to any other party to this Agreement; provided that if such termination shall result from the intentional (i) failure of either party to fulfill a condition to the performance of another party or (ii) failure of either party to perform a covenant hereof, such failing party shall be fully liable for any and all damages incurred or suffered by any other party as a result of such failure. The provisions of this Section 12.02, Section 8.03, Section 13.03, Section 13.04, Section 13.05, Section 13.06, and Section 13.09 shall survive any termination hereof pursuant to Section 12.01.
ARTICLE 13 MISCELLANEOUS
Section 13.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including e-mail transmission, so long as a receipt of such e-mail is requested and received) and shall be given,
if to Parent, Merger Sub or the Surviving Corporation, to:
Hub Cyber Security Ltd.
2 Kaplan St.
Tel Aviv 6473403, Israel
Attention: Tuvia Grossman, General Counsel
and Chief Legal Officer
E-mail: tuvia.grossman@hubsecurity.io
with a copy to (which shall not constitute notice):
Goldfarb, Gross, Seligman & Co.
One Azrieli Center, Round Building
Tel-Aviv 67021, Israel
Attention: Adam M. Klein; Daniel P. Kahn
Email: adam.klein@goldfarb.com; daniel.kahn@goldfarb.com
if to the Company or the Equityholder Representative, to:
Ranan Grobman
Attention: Ranan Grobman
E-mail: ranan@shefacap.com
or, in each case, to such other address as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 P.M. Israel Time and such day is a Business Day. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding Business Day. It is agreed that, unless agreed by he/she/it otherwise, any notices delivered to the Equityholder Representative must be delivered solely by email.
Section 13.02. Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the amendment is in writing and signed by Parent, the Company (or the Surviving Corporation following the Closing) and the Equityholder Representative; provided, however, that after the receipt of the Required Stockholder Vote, and prior to the Effective Time, no amendment to this Agreement shall be made which by Applicable Law requires further approval by the Stockholders without first obtaining such further approval by the Stockholders. No waiver of any provision of this Agreement shall be valid unless the waiver is in writing and signed by each party against whom the waiver is to be effective, provided, however, that the right of the Company that has accrued prior to the Effective Time or of any Equityholder may be waived without the consent of the Equityholder Representative. No failure or delay by in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Except as otherwise provided herein (including, for the removal of doubt, as provided in Article 10 and in Section 10.08 thereto and the limitations provided therein with respect to any recovery of Damages on the part of any Parent Indemnified Person), the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.
Section 13.03. Expenses. Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.
Section 13.04. Successors and Assigns; No Third-Party Beneficiaries. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto; provided, further, that (a) Parent and Merger Sub, or, after the Effective Time, the Surviving Corporation, as the case may be, may transfer or assign its rights and obligations under this Agreement, in whole or from time to time in part, to (i) one or more of Parent’s Affiliates at any time and (ii) after the Effective Time, to any Person; provided that no such transfer or assignment shall relieve any such assigning party of its obligations hereunder or enlarge, alter or change any obligation of any other party hereto or due to the assigning party. Except as expressly provided herein, no provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto, the Equityholders (following the Effective Time) and their respective successors and assigns.
Section 13.05. Governing Law. This Agreement and all Actions arising out of or relating to this Agreement shall be governed by and construed solely in accordance with the laws of the State of Israel, without regard to the conflicts of law rules of such state, except that (i) the internal affairs of the corporations party hereto that are organized and existing under the DGCL and (ii) all other provisions of, or transactions contemplated by, this Agreement that are expressly or otherwise required to be governed by the DGCL, shall be governed by the DGCL.
Section 13.06. Jurisdiction. The parties hereto agree that any Action seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in the courts in Tel-Aviv, Israel. Each of the parties hereto hereby irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Action so long as one of such courts shall have subject matter jurisdiction over such Action, and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any such Action in any such court or that any such Action brought in any such court has been brought in an inconvenient forum. Process in any such Action may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 13.01 shall be deemed effective service of process on such party.
Section 13.07. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts (including by electronic means), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto. Until and unless each party has received a counterpart hereof signed by each other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).
Section 13.08. Entire Agreement. This Agreement and the other Transaction Documents constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement and the other Transaction Documents.
Section 13.09. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
Section 13.10. Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in the courts set forth in Section 13.06, in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereby waives any requirement for the securing or posting of any bond in connection with any such remedy. If, prior to the End Date, any party brings Action to enforce specifically the performance of the terms and provisions hereof by any other party, the End Date shall automatically be extended by: (i) the amount of time during which such Action is pending, plus twenty (20) Business Days or (ii) such other time period established by the court presiding over such Action, as the case may be.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date set forth on the cover page of this Agreement.
| HUB CYBER SECURITY LTD. | |||
| By: | /s/ Azriel Moskovich | ||
| Name: | Azriel Moskovich | ||
| Title: | |||
| BST MERGER SUB, INC. | |||
| By: | /s/ Azriel Moskovich | ||
| Name: | Azriel Moskovich | ||
| Title: | Authorized Signatory | ||
| BLACKSWAN TECHNOLOGIES, INC. | |||
| By: | /s/ Ranan Grobman | ||
| Name: | Ranan Grobman | ||
| Title: | Director | ||
| Ranan Grobman, in his capacity as the Equityholder Representative | |||
| By: | /s/ Ranan Grobman | ||
Exhibit 8.1
LIST OF SUBSIDIARIES
The following table sets forth our material subsidiaries, all of which are wholly owned, directly or indirectly, with the exception of ALD Software Ltd, of which we own 98.63%.
| Name of Subsidiary | Jurisdiction of Organization | |
| HUB Cyber Security TLV Ltd. | Israel | |
| ALD Manpower Solutions Ltd. | Israel | |
| ALD College Ltd | Israel | |
| Qpoint Solutions Ltd | Israel | |
| Sensecom Consulting & Project Management Ltd | Israel | |
| Comsec Ltd. | Israel | |
| Comsec International Information Security B.V | The Netherlands | |
| BlackSwan Technologies, Inc. | Delaware, United States | |
| BlackSwan Technologies GmbH | Germany |
Exhibit 11.1
HUB CYBER SECURITY LTD.
INSIDER TRADING COMPLIANCE POLICY AND PROCEDURES
Federal and state laws prohibit trading in the securities of a company while in possession of material nonpublic information and in breach of a duty of trust or confidence. These laws also prohibit anyone who is aware of material nonpublic information from providing this information to others who may trade. Violating such laws can undermine investor trust, harm the reputation and integrity of Hub Cyber Security Ltd. (together with its subsidiaries, the “Company”), and result in dismissal from the Company or even serious criminal and civil charges against the individual and the Company. The Company reserves the right to take whatever disciplinary or other measure(s) it determines in its sole discretion to be appropriate in any particular situation, including disclosure of wrongdoing to governmental authorities.
Persons Covered and Administration of Policy
This Insider Trading Compliance Policy and Procedures (this “Policy”) applies to all officers, directors, employees and consultants of the Company. For purposes of this Policy, “officers” refer to those individuals who meet the definition of “officer” under Section 16 of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”). Individuals subject to this Policy are responsible for ensuring that members of their household comply with this Policy. This Policy also applies to any entities controlled by individuals subject to the Policy, including any corporations, limited liability companies, partnerships or trusts, and transactions by these entities should be treated for the purposes of this Policy as if they were for the individual’s own account. Officers, directors employees and consultants, together with any other person designated as being subject to this Policy by the Chief Legal, Compliance and Data Protection Officer or his or her designee (the “Compliance Officer”), are referred to collectively as “Covered Persons.”
Questions regarding the Policy should be directed to the Compliance Officer, who is responsible for the administration of this Policy.
Policy Statement
No Covered Person shall purchase or sell any type of security while in possession of material nonpublic information relating to the security or the issuer of such security in breach of a duty of trust or confidence, whether the issuer of such security is the Company or any other company. In addition, if a Covered Person is in possession of material nonpublic information about other publicly-traded companies, such as suppliers, customers, competitors or potential acquisition targets, the Covered Person may not trade in such other companies’ securities until the information becomes public or is no longer material. Further, no Covered Person shall purchase or sell any security of any other company, including another company in the Company’s industry, while in possession of material nonpublic information if such information is obtained in the course of the Covered Person’s employment or service with the Company.
In addition, Covered Persons shall not directly or indirectly communicate material nonpublic information to anyone outside the Company (except in accordance with the Company’s policies regarding confidential information) or to anyone within the Company other than on a “need-to-know” basis.
“Securities” includes stocks, bonds, notes, debentures, options, warrants, equity and other convertible securities, as well as derivative instruments.
“Purchase” and “sale” are defined broadly under the federal securities law. “Purchase” includes not only the actual purchase of a security, but also any contract to purchase or otherwise acquire a security. “Sale” includes not only the actual sale of a security, but also any contract to sell or otherwise dispose of a security. These definitions extend to a broad range of transactions, including conventional cash-for-stock transactions, conversions, the exercise of stock options, transfers, gifts, and acquisitions and exercises of warrants or puts, calls, pledging and margin loans, or other derivative securities.
The laws and regulations concerning insider trading are complex, and Covered Persons are encouraged to seek guidance from the Compliance Officer prior to considering a transaction in Company securities.
| 1 | Blackout Periods |
No director, officer, employee or consultant listed on Schedule I, as amended from time to time, (as well as any individual or entity covered by this Policy by virtue of their relationship to such director, officer, employee or consultant) shall purchase or sell any security of the Company during the period beginning on the 14th calendar day of the last month of any fiscal quarter of the Company and ending after completion of the second full trading day after the public release of earnings data for such fiscal quarter or during any other trading suspension period declared by the Company, such period, a “blackout period.” A “trading day” is a day on which U.S. national stock exchanges are open for trading. If, for example, the Company were to make an announcement on Monday prior to 9:30 a.m. Eastern Time, then the blackout period would terminate after the close of trading on Tuesday. If an announcement were made on Monday after 9:30 a.m. Eastern Time, then the blackout period would terminate after the close of trading on Wednesday. If you have any question as to whether information is publicly available, please direct an inquiry to the Compliance Officer.
These prohibitions do not apply to:
| ● | purchases of the Company’s securities from the Company, or sales of the Company’s securities to the Company; |
| ● | exercises of stock options or other equity awards or the surrender of shares to the Company in payment of the exercise price or in satisfaction of any tax withholding obligations in a manner permitted by the applicable equity award agreement, or vesting of equity-based awards, in each case, that do not involve a market sale of the Company’s securities (the “cashless exercise” of a Company stock option or other equity award through a broker does involve a market sale of the Company’s securities, and therefore would not qualify under this exception); |
| ● | bona fide gifts of the Company’s securities, unless the individual making the gift knows, or is reckless in not knowing, the recipient intends to sell the securities while the donor is in possession of material nonpublic information about the Company; or |
| ● | purchases or sales of the Company’s securities made pursuant to a plan adopted to comply with the Exchange Act Rule 10b5-1 (“Rule 10b5-1”). |
Exceptions to the blackout period policy may be approved by the Compliance Officer or, in the case of exceptions for directors, the Board of Directors.
The Compliance Officer may recommend that directors, officers, employees, consultants or others suspend trading in Company securities because of developments that have not yet been disclosed to the public. Subject to the exceptions noted above, all of those individuals affected should not trade in the Company’s securities while the suspension is in effect, and should not disclose to others that the Company has suspended trading.
| 2 | Preclearance of Trades by Directors, Officers, Employees and Consultants |
All transactions in the Company’s securities by directors, officers, employees and consultants listed on Schedule II (each, a “Preclearance Person”) must be precleared by the Compliance Officer or the Chief Financial Officer for transactions by the Compliance Officer. Preclearance should not be understood to represent legal advice by the company that a proposed transaction complies with the law.
A request for preclearance must be in writing, should be made at least two business days in advance of the proposed transaction, and should include the identity of the Preclearance Person, a description of the proposed transaction, the proposed date of the transaction, and the number of shares or other securities involved. In addition, the Preclearance Person must execute a certification that he or she is not aware of material nonpublic information about the Company. The Compliance Officer, or the Chief Financial Officer for transactions by the Compliance Officer, shall have sole discretion to decide whether to clear any contemplated transaction. All trades that are precleared must be effected within five business days of receipt of the preclearance. A precleared trade (or any portion of a precleared trade) that has not been effected during the five business day period must be submitted for preclearance determination again prior to execution. Notwithstanding receipt of preclearance, if the Preclearance Person becomes aware of material nonpublic information, or becomes subject to a blackout period before the transaction is effected, the transaction may not be completed. Transactions under a previously established Rule 10b5-1 Trading Plan that has been preapproved in accordance with this Policy are not subject to further preclearance.
None of the Company, the Compliance Officer, or the Company’s other employees will have any liability for any delay in reviewing, or refusal of, a request for preclearance.
| 3 | Material Nonpublic Information |
Information is considered “material” if there is a substantial likelihood that a reasonable investor would consider it important in making a decision to buy, sell, or hold a security, or if the information is likely to have a significant effect on the market price of the security. Material information can be positive or negative, and can relate to virtually any aspect of a company’s business or to any type of security, debt, or equity. Also, information that something is likely to happen in the future—or even just that it may happen—could be deemed material.
Examples of material information may include (but are not limited to) information about:
| ● | corporate earnings or earnings forecasts; |
| ● | possible mergers, acquisitions, tender offers, or dispositions; |
| ● | major new products, services or product developments; |
| ● | important business developments, such as developments regarding strategic collaborations; |
| ● | management or control changes; |
| ● | significant financing developments including pending public sales or offerings of debt or equity securities; |
| ● | defaults on borrowings; |
| ● | bankruptcies; |
| ● | cybersecurity or data security incidents; and |
| ● | significant litigation or regulatory actions. |
Information is “nonpublic” if it is not available to the general public. In order for information to be considered “public,” it must be widely disseminated in a manner that makes it generally available to investors in a Regulation FD-compliant method, such as through a press release, a filing with the U.S. Securities and Exchange Commission (the “SEC”) or a Regulation FD-compliant conference call. The Compliance Officer shall have sole discretion to decide whether information is public for purposes of this Policy.
The circulation of rumors, even if accurate and reported in the media, does not constitute public dissemination. In addition, even after a public announcement, a reasonable period of time may need to lapse in order for the market to react to the information. Generally, the passage of two full trading days following release of the information to the public, is a reasonable waiting period before such information is deemed to be public.
| 4 | Post-Termination Transactions |
If an individual is in possession of material nonpublic information when the individual’s service terminates, the individual may not trade in the Company’s securities until that information has become public or is no longer material.
| 5 | Prohibited Transactions |
The Company has determined that there is a heightened legal risk and the appearance of improper or inappropriate conduct if persons subject to this Policy engage in certain types of transactions. Therefore, Covered Persons shall comply with the following policies with respect to certain transactions in the Company’s securities.
| 5.1 | Short Sales |
Short sales of the Company’s securities are prohibited by this Policy. Short sales of the Company’s securities, or sales of shares that the insider does not own at the time of sale, or sales of shares against which the insider does not deliver the shares within 20 days after the sale, evidence an expectation on the part of the seller that the securities will decline in value, and, therefore, signal to the market that the seller has no confidence in the Company or its short-term prospects.
| 5.2 | Options |
Transactions in puts, calls, or other derivative securities involving the Company’s equity securities, on an exchange, on an over-the-counter market, or in any other organized market, are prohibited by this Policy. A transaction in options is, in effect, a bet on the short-term movement of the Company’s stock and, therefore, creates the appearance that a Covered Person is trading based on material nonpublic information. Transactions in options, whether traded on an exchange, on an over-the-counter market, or any other organized market, also may focus a Covered Person’s attention on short-term performance at the expense of the Company’s long-term objectives.
| 5.3 | Hedging Transactions |
Hedging transactions involving the Company’s securities, such as prepaid variable forward contracts, equity swaps, collars and exchange funds, or other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s equity securities, are prohibited by this Policy. Such transactions allow the Covered Person to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the Covered Person may no longer have the same objectives as the Company’s other stockholders.
| 5.4 | Margin Accounts and Pledging |
Individuals are prohibited from pledging Company securities as collateral for a loan, purchasing Company securities on margin (i.e., borrowing money to purchase the securities), or placing Company securities in a margin account. This prohibition does not apply to cashless exercises of stock options under the Company’s equity plans, nor to situations approved in advance by the Compliance Officer.
| 5.5 | Partnership Distributions |
Nothing in this Policy is intended to limit the ability of an investment fund, venture capital partnership or other similar entity with which a director is affiliated to distribute Company securities to its partners, members, or other similar persons. It is the responsibility of each affected director and the affiliated entity, in consultation with their own counsel (as appropriate), to determine the timing of any distributions, based on all relevant facts and circumstances, and applicable securities laws.
| 6 | Rule 10b5-1 Trading Plans |
The trading restrictions set forth in this Policy, other than those transactions described under “Prohibited Transactions,” do not apply to transactions under a previously established contract, plan or instruction to trade in the Company’s securities entered into in accordance with Rule 10b5-1 (a “Trading Plan”) that:
| ● | has been submitted to and preapproved by the Compliance Officer; |
| ● | includes a “Cooling Off Period” for |
| ○ | Section 16 reporting persons that extends to the later of 90 days after adoption or modification of a Trading Plan or two business days after filing the Form 20-F or Form 6-K covering the fiscal quarter in which the Trading Plan was adopted, up to a maximum of 120 days; and |
| ○ | employees and any other persons, other than the Company, that extends 30 days after adoption or modification of a Trading Plan; |
| ● | for Section 16 reporting persons, includes a representation in the Trading Plan that the Section 16 reporting person is (1) not aware of any material nonpublic information about the Company or its securities; and (2) adopting the Trading Plan in good faith and not as part of a plan or scheme to evade Rule 10b-5; |
| ● | has been entered into in good faith at a time when the individual was not in possession of material nonpublic information about the Company and not otherwise in a blackout period, and the person who entered into the Trading Plan has acted in good faith with respect to the Trading Plan; |
| ● | either (1) specifies the amounts, prices, and dates of all transactions under the Trading Plan; or (2) provides a written formula, algorithm, or computer program for determining the amount, price, and date of the transactions, and (3) prohibits the individual from exercising any subsequent influence over the transactions; and |
| ● | complies with all other applicable requirements of Rule 10b5-1. |
The Compliance Officer may impose such other conditions on the implementation and operation of the Trading Plan as the Compliance Officer deems necessary or advisable. Individuals may not adopt more than one Trading Plan at a time except under the limited circumstances permitted by Rule 10b5-1 and subject to preapproval by the Compliance Officer.
An individual may only modify a Trading Plan outside of a blackout period and, in any event, when the individual does not possess material nonpublic information. Modifications to and terminations of a Trading Plan are subject to preapproval by the Compliance Officer and modifications of a Trading Plan that change the amount, price, or timing of the purchase or sale of the securities underlying a Trading Plan will trigger a new Cooling-Off Period.
The Company reserves the right to publicly disclose, announce, or respond to inquiries from the media regarding the adoption, modification, or termination of a Trading Plan and non-Rule 10b5-1 trading arrangements, or the execution of transactions made under a Trading Plan. The Company also reserves the right from time to time to suspend, discontinue, or otherwise prohibit transactions under a Trading Plan if the Compliance Officer or the Board of Directors, in its discretion, determines that such suspension, discontinuation, or other prohibition is in the best interests of the Company.
Compliance of a Trading Plan with the terms of Rule 10b5-1 and the execution of transactions pursuant to the Trading Plan are the sole responsibility of the person initiating the Trading Plan, and none of the Company, the Compliance Officer, or the Company’s other employees assumes any liability for any delay in reviewing and/or refusing to approve a Trading Plan submitted for approval, nor the legality or consequences relating to a person entering into, informing the Company of, or trading under, a Trading Plan.
| 7 | Interpretation, Amendment, and Implementation of this Policy |
The Compliance Officer shall have the authority to interpret and update this Policy and all related policies and procedures. In particular, such interpretations and updates of this Policy, as authorized by the Compliance Officer, may include amendments to or departures from the terms of this Policy, to the extent consistent with the general purpose of this Policy and applicable securities laws.
Actions taken by the Company, the Compliance Officer, or any other Company personnel do not constitute legal advice, nor do they insulate you from the consequences of noncompliance with this Policy or with securities laws.
| 8 | Certification of Compliance |
All directors, officers, employees, consultants and others subject to this Policy may be asked periodically to certify their compliance with the terms and provisions of this Policy.
The Company reserves the right to amend, modify, waive or terminate the provisions of this Policy at any time for any reason.
6
Exhibit 12.1
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)
I, Noah Hershcoviz, certify that:
| 1. | I have reviewed this annual report on Form 20–F of HUB Cyber Security Ltd.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting. |
| 5. | The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors: |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
| Date: April 30, 2025 | /s/ Noah Hershcoviz |
| Noah Hershcoviz | |
| Chief Executive Officer |
Exhibit 12.2
CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13a-14(a) or 15d-14(a)
I, Lior Davidsohn, certify that:
| 1. | I have reviewed this annual report on Form 20–F of HUB Cyber Security Ltd.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
| Date: April 30, 2025 | /s/ Lior Davidsohn |
| Lior Davidsohn | |
| Interim Chief Financial Officer |
Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2024 (the “Report”) by HUB Cyber Security Ltd. (the “Company”), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: April 30, 2025 | /s/ Noah Hershcoviz |
| Noah Hershcoviz | |
| Chief Executive Officer |
Exhibit 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2024 (the “Report”) by HUB Cyber Security Ltd. (the “Company”), the undersigned, as the Interim Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: April 30, 2025 | /s/ Lior Davidsohn |
| Lior Davidsohn | |
| Interim Chief Financial Officer |