Safe-T Reports Financial Results for the Second Quarter of 2019
HERZLIYA, Israel, Aug. 29, 2019 /PRNewswire/ -- Safe- T® Group Ltd. (Nasdaq: SFET) (TASE: SFET), a provider of secure access solutions for the hybrid cloud, today announced its financial results for the second quarter and six-month period ended June 30, 2019. The results include 18 days of the financial results of NetNut which was acquired by Safe-T on June 12, 2019, for the period from the acquisition date through June 30, 2019.
Safe-T reported that during the three-month period ended June 30, 2019, revenues totaled $394,000, an increase of 33% compared to $297,000 in the three-month period ended June 30, 2018.
Revenues for the six-month period ended June 30, 2019 totaled $821,000, an increase of 9% compared to $755,000 in the six-month period ended June 30, 2018.
The Company's cash balance at the end of the quarter was $943,000.
Recent Developments:
-- Based on the findings of a preliminary due diligence performed by
reputable patent experts, Safe-T is examining potential infringements of
its patents by local and global companies, including American Fortune
500 companies. For that purpose, the Company engaged an Israeli law firm
and patent experts, specializing in the field, to assist it in
determining the strategy and managing the proceedings related to these
alleged international patent infringements.
Second Quarter 2019 Highlights:
-- The Israel Patent Office granted a patent to Safe-T's wholly owned
subsidiary, Safe-T Data A.R Ltd., covering its reverse access
technology. The Israeli patent number 218185 is titled "Reverse Access
System for Securing Front-End Applications."
-- Following the launch of Safe-T's SmarTransfer(TM) solution and the
receipt of an order from a military-grade customer, Safe-T successfully
completed the product's implementation on the customer's premises.
-- The Company launched its user and web-based anomaly detection product,
named Safe-T Telepath. Safe-T completed integrating the Safe-T Telepath
as part of Safe-T's Software Defined Perimeter (SDP) solution.
-- Safe-T was named a Representative Vendor in Gartner's April 2019 Market
Guide for Zero Trust Network Access, identifying Safe-T as a
Representative Vendor for a stand-alone ZTNA offering.
-- Safe-T received a purchase order for its SDP solution from a leading
European manufacturer, specializing in the connected devices industry
and IoT solutions.
-- Three new leading E-commerce customers joined NetNut's customer base.
-- A leading cloud provider and Safe-T launched the SDA solution with six
U.S. customers.
-- The Company launched its unique SDP (otherwise known also as Zero Trust
Network Access) cloud service.
Three months ended June 30, 2019 Financial Results
-- Total revenues amounted to $394,000 (Q2 2018: $297,000). The increase is
mainly due to consolidation of NetNut's revenues, since the acquisition
date of June 12, 2019.
-- Cost of revenues totaled $239,000 (Q2 2018: $206,000). The increase is
mainly due to the consolidation of NetNut's cost of revenues, as well as
amortization of intangible assets acquired under the acquisition,
partially offset by a decrease resulting from the streamlining of
support and post sales teams.
-- Research and development (R&D) expenses were $559,000 (Q2 2018:
$547,000). The slight increase was mainly attributed to enhanced
investment in R&D subcontractors' costs, partially offset by reduced
salary costs.
-- Sales and marketing expenses (S&M) totaled $739,000 (Q2 2018:
$1,556,000). The decrease was primarily attributed to a reduction of
salary costs, as well as overall professional and marketing costs.
-- General and administrative expenses (G&A) totaled $956,000 (Q2 2018:
$440,000). The increase is a result of higher share-based costs and
professional services costs due to the Company's Nasdaq dual listing and
costs associated with the closing of the NetNut acquisition, as well as
the debentures used to finance such acquisition.
-- IFRS net loss totaled $226,000, or $0.002 basic loss per ordinary share
(Q2 2018: $2,308,000, or $0.10 basic loss per ordinary share).
-- Non-IFRS net loss was $1,744,000, or $ 0.01 basic loss per ordinary
share (Q2 2018: $2,307,000, or $0.10 basic loss per ordinary share).
Six months ended June 30, 2019 Financial Results
-- Total revenues amounted to $821,000 (H1 2018: $755,000). The main reason
for the increase is consolidation of NetNut's revenues since the
acquisition date of June 12, 2019, partially offset by a reduction of
revenues in the APAC region.
-- Cost of revenues totaled $416,000 (H1 2018: $429,000). The decrease is
mainly due to streamlining of support and post sales teams, partially
offset by an increase due to amortization costs of intangible assets
acquired with the NetNut acquisition.
-- R&D expenses were $1,373,000 (H1 2018: $1,034,000). The increase was
mainly attributed to enhanced investment in R&D staff during the first
quarter of 2019, as well as an increase in subcontractors' costs.
-- S&M expenses totaled $1,637,000 (H1 2018: $3,149,000). The decrease was
primarily attributed to a reduction of overall salaries, professional
and marketing costs.
-- G&A expenses totaled $1,628,000 (H1 2018: $927,000). The increase is a
result of higher share-based costs and professional services costs due
to the Company's Nasdaq dual listing and costs associated with the
closing of the NetNut acquisition, as well as the debentures used to
finance such acquisition.
-- IFRS net loss totaled $2,510,000, or $0.02 basic loss per ordinary share
(H1 2018: $3,912,000, or $0.18 basic loss per ordinary share).
-- Non-IFRS net loss was $3,526,000, or $ 0.03 basic loss per ordinary
share (H1 2018: $4,399,000, or $0.12 basic loss per ordinary share).
The following table presents the reconciled effect of the non-cash expenses/income on the Company's net loss for the six and three-month periods ended June 30 of 2019 and 2018, respectively:
For the Six-Month Period Ended For the Three-Month Period
For the year
June 30, Ended Ended
June 30, December 31,
(thousands of U.S. dollars) 2019 2018 2019 2018 2018
Net loss for the period 2,510 3,912 226 2,308 11,753
Issuance expenses 517
Amortization of intangible assets 201 125 126 63 276
Share-based compensation 529 303 275 106 381
Finance liabilities at fair value (1,746) (915) (1,919) (168) 1,891
Total adjustment (1,016) (487) (1,518) 1 3,065
Non-IFRS net loss 3,526 4,399 1,744 2,307 8,688
Balance Sheet Highlights
-- In April 2019 and June 2019, Safe-T completed a $6,000,000 ("transaction
price") convertible debenture financing which included (1) debentures
convertible into ADSs (the "Debentures"), (2) warrants, and (3) an
option to issue an additional debenture on the same terms, not including
additional warrants, until December 4, 2019 (the "Option"). These
financial instruments were classified as long-term financial liabilities
in the consolidated statement of financial position as of June 30, 2019
(the warrants and Option as "derivative financial instruments" and the
Debentures as "convertible debenture"), and are measured at fair value
through profit or loss in each reporting period. The financial
liabilities were initially recognized at fair value, adjusted to defer
the difference between the fair value at initial recognition and the
transaction price ("day 1 loss"). The financial liabilities are measured
at fair value in each period-end while unrecognized day 1 loss is
amortized over the contractual life of each instrument, and both are
carried to equity upon exercise/conversion of the respective host
instrument. During June 2019, the lenders were issued 346,428 ADSs upon
conversion of debentures, and as a result, a net amount of $224,000 was
classified to equity. As of June 30, 2019, the convertible debentures
and the warrants (including the Option) totaled to $2,527,000 and
$1,327,000, respectively.
-- On June 12, 2019, Safe-T completed the NetNut Ltd. acquisition, which
included the purchase of all (100%) of the share capital of NetNut, and
certain assets of DiViNetworks Ltd., NetNut's controlling shareholder,
which assets are required for the ongoing operations of NetNut. The
total purchase price amounted to $11,396,000 (including an amount of
$2,008,000 for a contingent consideration) and was allocated to net
tangible and intangible assets acquired and goodwill, as follows: an
amount of $7,589,000 as goodwill, an amount of $4,651,000 as technology
and contractual suppliers' relations, an amount of $259,000 as
customers' relations, an amount of $199,000 as servers, an amount of
$276,000 as net tangible liabilities and an amount of $1,026,000 as a
deferred tax liability. The results of NetNut are consolidated with the
Company's financial results commencing June 12, 2019. After the
acquisition, tangible and intangible assets will be depreciated and
amortized periodically, while goodwill will not be amortized but rather
tested for impairment at least annually or upon the occurrence of
triggering events. The contingent consideration will be measured at fair
value with periodic changes carried to the income statement.
-- As of June 30, 2019, cash and cash equivalents totaled $943,000,
compared to $3,717,000 on December 31, 2018. The decrease in cash and
cash equivalents is attributed mainly to the net loss during the first
half of 2019, partially offset by the debenture funding that was not
used for the NetNut acquisition.
-- As of June 30, 2019, shareholders' equity totaled $6,423,000, compared
to $3,710,000 on December 31, 2018.
Use of Non-IFRS Financial Results
In addition to disclosing financial results calculated in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, this press release contains non-IFRS financial measures of net loss for the periods presented that exclude the effect of share-based compensation expenses, amortization of intangible assets, non-cash issuance expenses and the revaluation of finance liabilities at fair value. The Company's management believes the non-IFRS financial information provided in this release is useful to investors' understanding and assessment of the Company's ongoing operations. Management also uses both IFRS and non-IFRS information in evaluating and operating its business internally, and as such deemed it important to provide this information to investors. The non-IFRS financial measures disclosed by the Company should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with IFRS, and the financial results calculated in accordance with IFRS and reconciliations to those financial statements should be carefully evaluated. Investors are encouraged to review the reconciliations of these non-IFRS measures to their most directly comparable IFRS financial measures provided in the financial statement tables herein.
About Safe-T® Group Ltd.
Safe-T Group Ltd. (Nasdaq, TASE: SFET) is a provider of Zero Trust Access solutions which mitigate attacks on enterprises' business-critical services and sensitive data, while ensuring uninterrupted business continuity. Safe-T's cloud and on-premises solutions ensure that an organization's access use cases, whether into the organization or from the organization out to the internet, are secured according to the "validate first, access later" philosophy of Zero Trust. This means that no one is trusted by default from inside or outside the network, and verification is required from everyone trying to gain access to resources on the network or in the cloud.
Safe-T's wide range of access solutions reduce organizations' attack surface and improve their ability to defend against modern cyberthreats. As an additional layer of security, our integrated business-grade global proxy solution cloud service enables smooth and efficient traffic flow, interruption-free service, unlimited concurrent connections, instant scaling and simple integration with our services.
With Safe-T's patented reverse-access technology and proprietary routing technology, organizations of all size and type can secure their data, services and networks against internal and external threats.
For more information about Safe-T, visit www.safe-t.com
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements. For example, Safe-T is using forward-looking statements in this press release when it discusses the potential of its products. Because such statements deal with future events and are based on Safe-T's current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of Safe-T could differ materially from those described in or implied by the statements in this press release. The forward-looking statements contained or implied in this press release are subject to other risks and uncertainties, including those discussed under the heading "Risk Factors" in Safe-T's annual report on Form 20-F filed with the Securities and Exchange Commission ("SEC") on March 25, 2019, and in any subsequent filings with the SEC. Except as otherwise required by law, Safe-T undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. References and links to websites have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release. Safe-T is not responsible for the contents of third-party websites.
Consolidated Statements of Financial Position
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(In thousands of USD)
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June 30, December 31,
2019 2018 2018
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents 943 1,995 3,717
Restricted deposits 107 93 104
Trade receivables 781 779 854
Other receivables 1,451 147 231
Total current assets 3,282 3,014 4,906
Non-current assets:
Property, plant and equipment, net 330 167 143
Deferred issuance expenses 206
Right of use assets 534
Goodwill 8,112 523 523
Intangible assets 5,510 640 796
Total non-current assets 14,486 1,536 1,462
Total assets 17,768 4,550 6,368
Liabilities and equity
Current liabilities:
Short-term loan 24
Trade payables 1,602 194 103
Other payables 1,325 905 951
Contract liability 615 727 495
Contingent consideration 2,011
Short-term lease liabilities 219
Liability in respect of the Israeli Innovation Authority 27 71 49
Total current liabilities 3,812 1,897 1,598
Non-current liabilities:
Contract liability 186 269 249
Long-term lease liabilities 367
Liability in respect of anti-dilution feature 468
Derivative financial instruments 1,327 23 729
Deferred tax liability 1,021
Convertible debentures 2,527
Liability in respect of the Israeli Innovation Authority 94 82
Total non-current liabilities 7,533 760 1,060
Total liabilities 11,345 2,657 2,658
Equity:
Ordinary shares
Share premium 46,604 31,585 41,594
Other equity reserves 12,018 12,156 11,805
Accumulated deficit (52,199) (41,848) (49,689)
Total equity 6,423 1,893 3,710
Total liabilities and equity 17,768 4,550 6,368
Consolidated Statements of Profit or Loss
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(In thousands of USD, except per share amounts)
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For the Six-Month Period For the Three-Month
For the Year
Ended Period Ended Ended
June 30, June 30, December 31,
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2019 2018 2019 2018 2018
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Audited)
Revenues 821 755 394 297 1,466
Cost of revenues 416 429 239 206 791
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Gross profit 405 326 155 91 675
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Research and development expenses, net 1,373 1,034 559 547 2,414
Sales and marketing expenses 1,637 3,149 739 1,556 5,542
General and administrative expenses 1,628 924 956 440 1,925
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Operating loss (4,233) (4,781) (2,099) (2,452) (9,206)
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Finance income (expenses), net 1,720 872 1,870 147 (2,541)
Taxes on income (expenses), net 3 (3) 3 (3) (6)
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Total comprehensive loss (2,510) (3,912) (226) (2,308) (11,753)
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Basic loss per share (0.02) (0.18) (0.002) (0.10) (0.33)
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Diluted loss per share (0.02) (0.18) (0.006) (0.10) (0.35)
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CONTACT INVESTOR RELATIONS:
Michal Efraty
+972-(0)52-3044404
michal@efraty.com
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SOURCE Safe-T
