SCHEDULE 13D/A: HUB Cyber Security Settles $4.5 Million Debt with Dominion Capital, Averting Insolvency Proceedings

HUB Cyber Security Ltd. has reached a forbearance and settlement agreement with Dominion Capital LLC, resolving a $4.5 million debt through a structured payment plan facilitated by Claymore Capital Pty Ltd., thereby staying and moving to dismiss ongoing litigation and insolvency proceedings.

Summary

• HUB Cyber Security Ltd. (HUB) and Dominion Capital LLC (Dominion) entered into a Forbearance and Settlement Agreement on February 20, 2025, to resolve a long-standing debt dispute.
• The agreement settles claims stemming from a $2.5 million Senior Secured Demand Promissory Note issued by HUB to Dominion on February 28, 2023.
• Dominion had previously secured a summary judgment award against HUB for $2.5 million plus significant accrued interest (10% from Feb 23, 2023-May 7, 2023; 24% from May 8, 2023-Jan 28, 2025; 9% thereafter) and attorneys' fees.
• The total settlement amount agreed upon is $4.5 million, which will be paid to Dominion by Claymore Capital Pty Ltd. (Claymore) through an Assignment Agreement.
• The payment schedule from Claymore to Dominion includes an initial $400,000 by February 21, 2025, followed by $200,000 by March 3, 2025, and then ten monthly payments of $390,000 each, concluding by December 1, 2025.
• Upon receipt of the first installment, Dominion filed a motion to stay Israeli insolvency proceedings against HUB, and upon the second installment, filed a motion to cancel these proceedings and discontinue a New York appeal with prejudice.
• HUB has waived its right to appeal the summary judgment award.
• Dominion Capital LLC and related reporting persons no longer own any securities of HUB Cyber Security Ltd. and are not currently adverse to the Issuer.

Sentiment

Score: 7

Explanation: The settlement resolves a major legal and financial overhang for HUB, preventing immediate enforcement of a judgment and potential insolvency proceedings. This is a significant positive. However, the company still has a substantial debt obligation being paid on its behalf, and there are contingencies related to Claymore's payments and the Israeli court's discretion, which introduce some residual risk. The fact that Dominion no longer holds HUB securities and is not adverse is also a positive.

Positives

• Resolution of significant litigation: The agreement settles a breach of contract claim and avoids further legal battles in New York and Israel.
• Avoidance of immediate enforcement of summary judgment: Dominion agrees to forbear from enforcing the judgment, provided payment terms are met.
• Cessation of Israeli insolvency proceedings: Motions have been filed to stay and withdraw the insolvency proceedings, removing a major financial threat.
• Debt payment facilitated by a third party: Claymore Capital Pty Ltd. is responsible for making the $4.5 million settlement payments to Dominion on HUB's behalf.
• HUB's counterclaim against Dominion for tortious interference, which had been dismissed, is now definitively resolved with HUB agreeing to discontinue its appeal.

Negatives

• Significant financial obligation: HUB remains liable for a $4.5 million settlement amount, even if paid by a third party, as the underlying obligation is reaffirmed.
• Contingent forbearance: Dominion's forbearance from enforcing the judgment is contingent on Claymore's timely payments; failure to pay could reactivate enforcement and insolvency proceedings.
• Ongoing creditor status: Dominion retains its rights as a creditor for unassigned portions of the Note until the full $4.5 million is paid, and can assert full rights in any future Israeli insolvency proceeding.
• Waiver of appeal rights: HUB has waived its right to appeal the summary judgment award, solidifying the judgment against it.

Risks

• Payment Default Risk: If Claymore Capital Pty Ltd. fails to make any of the scheduled payments, Dominion Capital LLC retains the right to resume the Israeli insolvency proceedings and/or enforce the Summary Judgment Award and seek other legal remedies.
• Israeli Court Discretion: The court presiding over the Israeli Proceeding may choose to continue the insolvency proceeding despite the motion to withdraw, potentially leading to further legal complications for HUB.
• Unsatisfied Judgment: The Summary Judgment Award against HUB will not be deemed fully satisfied unless and until the full $4.5 million Assignment Payment is received by Dominion.

Future Outlook

The agreement outlines a clear path to resolve the existing debt and legal disputes by December 2025, contingent on timely payments from Claymore. This suggests a stabilization of HUB's legal and financial standing concerning this specific creditor, provided the payment schedule is adhered to.

Management Comments

• HUB acknowledges that unless and until Claymore fully completes the timely payment of all amounts of the Assignment Payment, Dominion shall retain its rights to the unassigned portions of the Note, and the Summary Judgment Award shall not be deemed to be fully satisfied unless and until the full payment of the Assignment Payment is received by Dominion.
• HUB understands and acknowledges that the mere filing of the motion does not guarantee the dismissal of the Israeli Proceedings, and that, the court presiding over the Israeli Proceeding may choose to continue the Israeli Proceeding and/or any if any future insolvency proceeding is commenced against HUB in Israel.
• HUB expressly waives any right to, and agrees that it shall not file, an appeal in connection with the Summary Judgment Award.

Industry Context

NA

Legal Proceedings

• Dominion Capital LLC v. HUB Cyber Security Ltd., No. 656000/2023 (New York Action): Breach of contract claim for nonpayment of a $2.5 million Note, resulting in a summary judgment award to Dominion. This action is being settled.
• HUB's Counterclaim for tortious interference with prospective contractual and business relations: Dismissed by order dated August 7, 2024. HUB's appeal (2024-05557) is being discontinued with prejudice.
• Israeli Proceedings (Case Number -25936-04-24): Application by Dominion to the District Court of Tel Aviv Jaffa to commence proceedings under Israeli insolvency law as to HUB. Motions have been filed to stay and withdraw these proceedings.

Stakeholder Impact

• Shareholders: Benefit from the resolution of significant legal and financial uncertainty, potentially reducing downside risk and removing an overhang on the stock. The company avoids immediate enforcement of a judgment and potential insolvency.
• Creditors (Dominion Capital LLC): Will receive $4.5 million in structured payments, resolving their claims and judgment against HUB.
• Employees: Benefit from increased stability and reduced risk of insolvency, which could otherwise impact job security.
• Customers/Suppliers: Benefit from the company's improved financial stability, ensuring continued operations and business relationships.

Next Steps

• Claymore Capital Pty Ltd. to continue making scheduled payments to Dominion Capital LLC through December 1, 2025.
• Dominion Capital LLC to continue forbearing from enforcing the judgment as long as payment terms are met.
• The Israeli court to rule on the motion to withdraw the insolvency proceedings.
• The Summary Judgment Award against HUB will remain binding and enforceable until the full $4.5 million Assignment Payment is received by Dominion.

Key Dates

Recommendation

Keywords

HUB Cyber Security, Dominion Capital, Claymore Capital, settlement agreement, debt, promissory note, litigation, summary judgment, insolvency proceedings, New York Action, Israeli Proceedings, debt restructuring, SEC filing, Schedule 13D/A