Hub Cyber Security Ltd.

Hub Cyber Security Ltd. operates in the cybersecurity industry, providing professional services and technology solutions that enable enterprise clients to identify, manage and respond to cybersecurity threats. The company also focuses on secured data fabric based solutions for the financial services sector, though it was not successful in penetrating that market. The industry is characterized by intense competition, constant innovation, rapid adoption of different technological solutions and services, and evolving security threats. The cybersecurity professional services markets are experiencing heightened competition driven by rapid technological advancements, evolving regulatory landscapes, and increasing client demands.

Primary competitors named in the filing include IBM, Microsoft, SAP, Oracle, and SAS Institute, which are expanding their offerings through strategic acquisitions and the integration of AI and machine learning to provide comprehensive, cloud-based GRC solutions. Most competitors have greater financial, personnel and other resources than Hub. The company competes with a multitude of companies that offer a broad array of network security products and that employ different approaches and delivery models. IT security spending is spread across a wide variety of solutions and strategies, including endpoint, network and cloud security, vulnerability management and identity and access management.

The company generates the majority of its revenues from its Professional Services division, which 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, the company focused on providing secured data fabric based solutions to the financial services sector, but was not successful in penetrating that market. The company intended to derive most of its revenues from its Products and Technology division, including its secured data fabric and confidential computing protection solutions, but only succeeded in deriving a small portion of revenues from technology and product-oriented solutions and has since impaired and shut down that business.

The Professional Services division generates the majority of the company's revenues, enabling enterprise clients to identify, manage and respond to cybersecurity threats with comprehensive, bundled solutions. The Products and Technology division was intended to generate most of the company's revenues through secured data fabric and confidential computing protection solutions, but the company only succeeded in deriving a small portion of revenues from technology and product-oriented solutions and has since impaired and shut down that business. The company is in the process of developing its 'single chip' solution, which is a complicated process and there is no assurance that it will be able to successfully release this solution as planned.

The company acquired A.L.D. Advanced Logistics Development Ltd., which became the foundation upon which the Professional Services division was built. Comsec Ltd. and Qpoint Technologies Ltd. were acquired for their strengths in marketing, support, sales and cybersecurity consulting as the foundation of sales efforts. In January 2025, the company acquired BST, believing it had the potential to solidify its position as a leading provider of secured data fabric solutions, but this did not ultimately succeed. 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. The company acquired assets of Legacy Technologies GmbH, a European cyber firm, but has yet to recognize any revenues or acquire new customers from those assets. In fiscal year 2022, an impairment loss of $8.7 million ¹ was recorded for the assets acquired from Legacy. Certain subsidiaries of BST were classified as 'held for sale' and subsequently sold to third parties during 2025. As of December 31, 2025, a full impairment was recorded on the technology asset acquired in the BST acquisition. During June 2026, the company ceased BST's operations, terminated BST's main commercial contract and terminated the employees of this business. On March 31, 2026, Noah Hershcoviz resigned from his position as Chief Executive Officer and a member of the Board of Directors. During May and June of 2026, four more executive management members departed: Shai Schiller (Head of Strategy), Nachman Geva (Chief Technology Officer), Paul Parisi (Chief Revenue Officer) and John Rogers (President of the Americas Region). The company effected a 1-for-10 reverse share split on March 28, 2025, a 1-for-15 reverse share split on January 15, 2026, a 1-for-50 reverse share split on April 20, 2026 and a 1-for-20 reverse share split on June 5, 2026. Between April 20, 2026 and May 20, 2026, outstanding ordinary shares increased from 1,282,052 ² to 44,052,835 ³, more than 3,000% in only ten days, as a result of conversions of outstanding convertible debt at substantially discounted prices. Since January 1, 2026, outstanding debt was converted into approximately 4,591,633 ⁴ of the company's ordinary shares (post-reverse splits).

The company has incurred net losses each year since inception, including net losses (including discontinued operations) of approximately $119.8 million ⁵, $39.0 million ⁶ and $86.6 million ⁷ in the years ended December 31, 2025, 2024 and 2023, respectively. In 2025, the company generated $28.1 million ⁸ of revenues from Israel, $2.9 million ⁹ of revenues from Europe and less than $1 million ¹⁰ from the rest of the world. The company continues to generate negative cash flow, requiring constant and immediate cash injections to continue to operate. The independent registered public accounting firm's report includes an explanatory paragraph that expresses substantial doubt about the company's ability to continue as a going concern.

The company is in the process of developing its 'single chip' solution, which is a complicated process and there is no assurance that it will be able to successfully release this solution as planned. The company has focused on providing secured data fabric based solutions to the financial services sector, but was not successful in penetrating the secured data fabric market. The company believed that its January 2025 acquisition of BST had the potential to solidify its 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, however this did not ultimately succeed. During June 2026, the company ceased BST's operations, terminated BST's main commercial contract and terminated the employees of this business.

The company has in the past and may again implement a plan to reduce its workforce in order to become more efficient in costs and to optimize facilities-related costs. Such plans are meant to improve operational efficiencies and align investments more closely with strategic priorities. The company may incur additional expenses associated with the reduction in its workforce not contemplated by such plans, such as employment litigation costs, which may have an impact on other areas of liabilities and obligations and contribute to losses in future periods. The company may not realize, in full or in part, the anticipated benefits and savings from such plans due to unforeseen difficulties, delays or unexpected costs.

The company utilizes reputable third-party service providers or vendors for all of its IT and communications systems. Some of the company's systems will not be fully redundant, and its disaster recovery planning cannot account for all eventualities. The company is currently conducting a global search for a permanent Chief Executive Officer and has recently made significant changes to its executive management team in an effort to reduce costs and increase efficiency. The company has had difficulty quickly filling certain open positions in the past and expects to have significant future hiring needs.

The company's ability to introduce new products, features, integrations and enhancements is dependent on adequate research and development resources. Research and development projects can be technically challenging and expensive. The nature of these research and development cycles may cause the company to experience delays between the time it incurs expenses associated with research and development and the time it is able to offer compelling features, integrations and enhancements and generate revenue, if any, from such investment. The company is in the process of developing its 'single chip' solution, which is a complicated process and there is no assurance that it will be able to successfully release this solution as planned.

The company is currently in default under certain of its convertible loans totaling approximately $43 million ¹¹ and under certain of its debt obligations totaling approximately $7 million ¹². The company is 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. The company has raised and will continue to seek to raise additional funds during 2026 through a variety of equity and/or debt financing arrangements. The company is currently evaluating strategic alternatives to address its liquidity issues.

The company's liquidity issues and defaults under outstanding debt may force it to seek bankruptcy or insolvency court protection. As of the date of the filing, two motions to declare the company and its subsidiary, Comsec Ltd., insolvent have been submitted to court, and the company is currently in breach of a court-approved settlement with the unsecured creditors of Comsec. The company is subject to a pending lawsuit in the Supreme Court of the State of New York relating to its 2023 de-SPAC merger seeking damages of not less than $5.08 million ¹³, plus interest, attorneys' fees and costs, and the plaintiff has filed a motion for entry of a default judgment. The company has not been able to consistently remain in compliance with the continued listing standards of Nasdaq. On January 21, 2026, the company received a letter from Nasdaq notifying that for the period from December 5, 2025 to January 20, 2026, its market value of listed securities was below the $35 million ¹⁴ threshold. The company has a compliance period of 180 calendar days, or until July 20, 2026, to regain compliance.

Conditions in Israel, including the war between Israel and Hamas, Hezbollah and Iran could materially and adversely affect the company's business. A significant portion of the company's business operations are concentrated in core geographic areas such as the Middle East and Europe. In 2025, the company generated $28.1 million ¹⁵ of its revenues from Israel, $2.9 million ¹⁶ of its revenues from Europe and less than $1 million ¹⁷ from the rest of the world. A significant portion of revenue is generated from customers in the financial services industry, including banking and insurance. The company's sales and operations in international markets expose it to operational, financial and regulatory risks.

The company's liquidity issues and defaults under outstanding debt, including convertible loans totaling approximately $43 million ¹⁸ and debt obligations totaling approximately $7 million ¹⁹, may force it to seek bankruptcy or insolvency court protection. Two motions to declare the company and its subsidiary Comsec Ltd. insolvent have been submitted to court, and the company is in breach of a court-approved settlement with unsecured creditors of Comsec. Conversions of outstanding convertible debt at substantially discounted prices have caused severe dilution, with outstanding ordinary shares increasing from 1,282,052 ²⁰ to 44,052,835 ²¹ between April 20, 2026 and May 20, 2026 alone. The company has not been able to consistently remain in compliance with Nasdaq's continued listing standards, and on January 21, 2026 received notice that its market value of listed securities was below the $35 million ²² threshold. A pending lawsuit in the Supreme Court of the State of New York seeks damages of not less than $5.08 million ²³ plus interest, attorneys' fees and costs, and a motion for entry of a default judgment has been filed.

Management's message emphasizes the company's history of net losses and the substantial doubt about its ability to continue as a going concern, as expressed by the independent registered public accounting firm's report. Management currently believes that it will be necessary to secure additional funds to continue existing business operations and to fund obligations. The company has raised and will continue to seek to raise additional funds during 2026 through a variety of equity and/or debt financing arrangements. Management is currently evaluating strategic alternatives to address liquidity issues, but cannot assure that any strategies will yield sufficient funds to meet working capital or other liquidity needs. The strategic priorities emphasized include addressing the company's liquidity issues and defaults under outstanding debt, regaining and maintaining compliance with Nasdaq's continued listing standards, and remediating material weaknesses in internal control over financial reporting.