Ability Inc. Reports Fourth Quarter and Full Year 2016 Financial Results
TEL AVIV, Israel, May 16, 2017 /PRNewswire/ -- Ability Inc. (NASDAQ: ABIL) (the "Company"), a leading provider of innovative tactical communications intelligence solutions, today announced its financial results for the three and 12 months ended December 31, 2016. The Company also filed today with the Securities and Exchange Commission (the "SEC") its Annual Report on Form 20-F for the year ended December 31, 2016 (the "Annual Report'). This press release should be read in conjunction with the Annual Report. The Annual Report can be accessed on the SEC's website at http://www.sec.gov as well as on the Investor Relations page of the Company's web site at http://ir.interceptors.com/sec-filings. Shareholders may receive a hard copy of the Annual Report, free of charge, upon request.
Anatoly Hurgin, Ability's Chief Executive Officer commented: "Although the market penetration of the ULIN technology has been more challenging than we had expected, we continue to be encouraged by the great interest in ULIN around the world and we are hopeful that this interest will translate into revenues over the next quarters. I believe our new directors, Levi Ilsar, Brigadier General (Ret.) Eli Polak and Nimrod Schwartz, all of whom have meaningful experience, will create significant value to our company."
2016 Fourth Quarter Financial Summary
Revenues for the fourth quarter of 2016 were $2.5 million compared with $2.0 million for the fourth quarter of 2015. Revenues include the contribution from the first ULIN sale, which amounted to approximately $1.3 million in the fourth quarter of 2016.
Gross margin for the fourth quarter of 2016 increased to 54.1% compared to 13.3% in the same period the previous year. The increase was primarily due to the absence of cost of revenues in the fourth quarter of 2016 in connection with the first sale of ULIN due to the waiver of the ULIN supplier of its right to the excess of the 50% of the net revenues generated from such sale over the minimum commitment amount such supplier is entitled to.
Net loss for the three months ended December 31, 2016 was $(3.8) million, or $(0.16) per basic and diluted share, compared with $(380,000), or $(0.02) per basic and diluted share, for the fourth quarter of 2015. Negative EBITDA for the three months ended December 31, 2016 was $(3.3) million compared to $(381,000) in the fourth quarter of 2015. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.
The results for the fourth quarter of 2016 reflect approximately $1.7 million in non-operational costs in connection with the internal investigation that the Company conducted that was overseen by the Company's Audit Committee regarding the previously announced restatement. No similar expenses were incurred in the year-ago period. In addition, the Company expensed approximately $300,000 of legal fees in connection with the previously announced $1.8 million legal settlement regarding a claim brought against Ability Computer & Software Industries Ltd., a wholly-owned subsidiary of the Company, and the Company's controlling shareholders, Messrs. Anatoly Hurgin and Alexander Aurovsky. The amount was reduced in the fourth quarter of 2016 by approximately $100,000 primarily due to the final allocation of the settlement amount between Ability Computer & Software Industries Ltd. and the Company's controlling shareholders. The aggregate settlement amount for the claim was settled at $2.12 million plus VAT, of which the Company was required to pay 70% and the aggregate VAT, and Messrs. Hurgin and Aurovsky were each required to pay half of the remaining balance.
2016 Full-Year Financial Summary
Due to the significant decline in revenues and an increase in legal and professional services fees, the Company has suffered losses from operations, and has a net capital deficiency that, along with other matters, raises a substantial doubt about its ability to continue as a going concern.
Revenues for the full-year 2016 were $16.5 million compared with $52.2 million for 2015. The decrease was primarily due to customer adoption of ULIN, which has been much slower than the Company had anticipated, the project-oriented nature of Company's business and the completion of a number of large projects in 2015, as well as the ongoing transition to a revenue stream more focused on ULIN.
Gross margin for 2016 was 47.8% compared with 43.1% for 2015. The increase was primarily due to the absence of cost of revenues in 2016 in connection with the first sale of ULIN due to the waiver of the ULIN supplier of its right to the excess of the 50% of the net revenues generated from such sale over the minimum commitment amount such supplier is entitled to.
Net loss for the year ended December 31, 2016 was $(8.1) million, or $(0.33) per basic and diluted share, compared with net income of $14.8 million, or $0.60 per basic and diluted share, for the year ended December 31, 2015. Negative EBITDA for the full year 2016 was $(6.4) million compared to a positive $18.0 million in 2015. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results. For the year ended December 31, 2016, the Company incurred $4.6 million in non-operating expenses, including $2.6 million in legal and professional services fees in connection with the internal investigation the Company conducted that was overseen by Company's Audit Committee and $2.0 million in connection with a legal settlement and related legal fees, as mentioned above.
Balance Sheet Highlights
Cash and cash equivalents at December 31, 2016 totaled $11.8 million compared to $25.8 million as of December 31, 2015. Cash used in operating activities was $10.6 million for the full year 2016 compared with cash provided by operating activities of $10.2 million for the full year 2015. Shareholders' equity totaled $9.7 million as of December 31, 2016 compared with $17.8 million as of December 31, 2015.
About Ability Inc.
Ability Inc. is the sole owner of Ability Computer & Software Industries Ltd. ("Ability") and Ability Security Systems Ltd.
Headquartered in Tel Aviv, Israel, Ability was founded in 1994. Ability provides advanced interception, geolocation and cyber intelligence tools used by security and intelligence agencies, military forces, law enforcement and homeland security agencies worldwide. Ability has sold to governments and government agencies in over 50 countries. Ability offers a broad range of lawful interception, decryption, cyber and geolocation solutions for cellular and satellite communication, including ULIN, or Ultimate Interceptor, which to our knowledge, is the first-to-market SaaS strategic interception system with voice and geolocation capabilities without geographic limitation. State-of-the-art technology underpins Ability's scalable offerings, which can be tactical-and-portable, or strategic-and-fixed, depending on its customers' needs. Additional information regarding Ability may be found at http://www.interceptors.com.
Caution Regarding Forward-Looking Statements
This press release contains "forward-looking statements." Words such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," and similar expressions, as well as statements in future tense, often signify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information that the Company has when those statements are made or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.
Investor Relations Contacts:
Hayden/ MS-IR LLC
Miri Segal
Tel: 917-607-8654
msegal@ms-ir.com
or
Brett Maas
Tel: 646-536-7331
brett@haydenir.com
Ability Inc.
Consolidated Statements of Balance Sheets
Audited
-------
December 31, December 31,
2016 2015
---- ----
ASSETS U.S. Dollar in thousands
------------------------
CURRENT ASSETS:
Cash and cash equivalents (VIE -$764
thousand as of December 31, 2015) $11,840 $25,829
Restricted deposits $1,758 $325
Restricted deposit for put option $12,028 $ -
Accounts receivable (VIE -$593 thousand
as of December 31, 2015) $3,173 $3,804
Inventory* $481 $1,476
Accumulated costs with respect to
projects in excess of progress payments $151 $ -
Due from Controlling Shareholders $196 $574
Income tax receivable $267 $ -
Other current assets (VIE -$137 thousand
as of December 31, 2015) $353 $1,812
---- ------
Total Current Assets* $30,247 $33,820
NON-CURRENT ASSETS:
Other long term assets $ - $112
Restricted deposit for put option $ - $11,900
Property and equipment, net $1,588 $757
------ ----
Total Non-Current Assets $1,588 $12,769
Total Assets* $31,835 $46,589
======= =======
LIABILITIES & SHAREHOLDER'S EQUITY:
CURRENT LIABILITIES:
Accrued payroll and other compensation
related accruals $270 $60
Accounts payable, accrued expenses and
other accounts payable* $4,952 $1,844
Put option liability $11,900 $ -
Income tax payable $32 $6,062
Accrued expenses and accounts payable
with respect to Projects (VIE -$588
thousand as of December 31, 2015)* $4,734 $6,967
Due to related company $ - $600
Progress payments in excess of
accumulated costs with respect to
Projects* $ - $1,019
--- --- ------
Total Current Liabilities* $21,888 $16,552
NON CURRENT LIABILITIES:
Other accounts payable $ - $112
Put option liability $ - $11,900
Accrued severance pay $245 $270
---- ----
Total Non Current Liabilities $245 $12,282
Total Liabilities* $22,133 $28,834
SHAREHOLDERS' EQUITY
Preferred shares $0.0001 par value,
5,000,000 shares authorized, 0 shares
issued and outstanding at December 31,
2016 and December 31, 2015. $ - $ -
Ordinary shares $0.0001 par value,
200,000,000 shares authorized,
25,756,142 and 25,276,142 shares issued
and outstanding at December 31, 2016 and
December 31, 2015, respectively. $3 $3
Additional paid in capital $18,560 $18,560
Accumulated deficit (VIE -$906 thousand
as of December 31, 2015) $(8,861) $(808)
------- -----
Total Shareholders' Equity $9,702 $17,755
------ -------
Total Liabilities and Shareholders'
Equity* $31,835 $46,589
* Reclassified
Ability Inc.
Consolidated Statements of Comprehensive Income (Loss)
Unaudited Audited
--------- -------
Three months ended Year ended
December 31, December 31,
------------ ------------
2016 2015 2016 2015
---- ---- ---- ----
U.S. Dollar in thousands, except per share data
-----------------------------------------------
Revenues $2,538 $1,967 $16,508 $52,151
Cost of revenues $1,164 $1,705 $8,617 $29,654
------ ------ ------ -------
Gross profit $1,374 $262 $7,891 $22,497
Sales and marketing expenses $1,317 $440 $5,323 $3,305
General and administrative
expenses $3,795 $259 $9,662 $1,317
------ ---- ------ ------
Operating income (loss) $(3,738) $(437) $(7,094) $17,875
Finance (income) expenses, net $(116) $57 $(127) $99
----- --- ----- ---
Income (loss) before income taxes $(3,622) $(494) $(6,967) $17,776
Income taxes (benefit) expenses $210 $(114) $1,086 $3,023
---- ----- ------ ------
Net Income (loss) $(3,832) $(380) $(8,053) $14,753
Weighted-average ordinary shares
outstanding - Basic and diluted 24,582,874 24,582,874 24,582,874 24,582,874
Earnings (loss) per ordinary basic
and diluted $(0.16) $(0.02) $(0.33) $0.60
Ability Inc.
Consolidated Statements of Cash Flows
Audited
-------
Year ended
December 31,
------------
2016 2015
---- ----
U.S. Dollar in thousands
------------------------
CASH FLOW FROM
OPERATING
ACTIVITIES
Net income (loss) $(8,053) $14,753
Adjustments to
reconcile net
income (loss) to
net cash provided
by (used in)
operating
activities:
Depreciation $149 $132
Amortization $193 -
Impairment of
inventory $201 -
Impairment of
fixed assets $114 -
Capital (gain)
loss $(10) $18
Change in
operating assets
and liabilities:
Restricted
deposits $(1,433) $162
Accounts
receivable $631 $(3,756)
Inventory* $(311) (799)
Deferred taxes $ - $(423)
Other current
assets $1,459 $(1,180)
Restricted deposit
for put option $(128) $ -
Accrued payroll
and other
compensation
related accruals* $210 $(291)
Accounts payable,
accrued expenses
and other
accounts payable* $3,108 $1,030
Income tax payable $(2,674) $2,426
Accrued expenses
and accounts
payable with
respect to
Projects* $(2,233) $2,618
Due to related
company $(600) $600
Progress payments
in excess of
accumulated costs
with respect to
Projects* $(1,170) $(5,304)
Accrued severance
pay $(25) $171
---- ----
Total adjustments $(2,519) $(4,596)
------- -------
Net cash provided
by (used in)
operating
activities $(10,572) $10,157
CASH FLOW FROM
INVESTING
ACTIVITIES
Purchase of
Property and
equipment $(182) $(353)
Proceeds from sale
of Property and
equipment $10 $158
Loans repaid by
related company,
net $ - $709
--- --- ----
Net cash provided
by (used in)
investing
activities $(172) $514
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Proceeds from the
Reverse Merger,
net of
transactions
costs $ - $18,995
Dividends paid $ - $(14,951)
Due from/to
Controlling
Shareholders, net
* $378 $(595)
Withholding taxes
paid by the
Company on behalf
of the
Controlling
shareholders'
with respect to
dividends
distributed $(4,393) -
Withholding taxes
paid by the Authorities
Controlling
Shareholders to
the Company with
respect to
dividends
distributed, to
be paid by the
Company to the
Israeli Tax $770 $ -
---- --- ---
Net cash provided
by (used in)
financing
activities $(3,245) $3,449
Net Change In Cash $(13,989) $14,120
CASH AT BEGINNING
OF THE YEAR $25,829 $11,709
------- -------
CASH AND CASH
EQUIVALENTS AT
END OF THE FISCAL
PERIOD $11,840 $25,829
SUPPLEMENTAL
DISCLOSURE OF
CASH FLOW
INFORMATION:
Cash paid:
Interest and
banks' charges $36 $40
--- ---
Income tax $3,758 $568
------ ----
* Reclassified
Ability Inc.
Consolidated Statements of EBITDA
Unaudited Audited
--------- -------
Three months ended Year ended
December 31, December 31,
------------ ------------
2016 2015 2016 2015
---- ---- ---- ----
U.S. Dollar in thousands
------------------------
Operating income (loss) $(3,738) $(437) $(7,094) $17,875
Depreciation $37 $56 $149 $132
Amortization $193 $ - $193 $ -
Impairment of inventory $201 $ - $201 $ -
Impairment of fixed assets $ - $ - $114 $ -
--- --- --- --- ---- --- ---
EBITDA income (loss) $(3,307) $(381) $(6,437) $18,007
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SOURCE Ability Inc.
