PRESS RELEASE

Safe-T Reports Financial Results for the Second Quarter of 2019

Aug 29, 2019

HERZLIYA, Israel, August 29, 2019 – Safe- T® Group Ltd. (Nasdaq, 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™ 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
June 30,
For the Three-Month Period Ended
June 30,
For the year Ended
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.

CONTACT INVESTOR RELATIONS:
Michal Efraty
+972-(0)52-3044404
michal@efraty.com

 

Consolidated Statements of Financial Position (In thousands of USD)

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 5,823 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 noncurrent liabilities 5,522 760 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

(In thousands of USD, except per share amounts)

For the Six-Month Period Ended
June 30,
For the Three-Month Period Ended
June 30,
For the Year Ended December 31,
2019 2018 2019 2018 2018
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
Revenues 821 755 394 297 1,466
Cost of revenues 416 429 239 206 791
Gross profit 405 326 155 91 675
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
Operating loss (4,233) (4,781) (2,099) (2,452) (9,206)
Finance income (expenses), net 1,720 872 1,870 147 (2,541)
Taxes on income (expenses), net 3 (3) 3 (3) (6)
Total comprehensive loss (2,510) (3,912) (226) (2,308) (11,753)
Basic loss per share (0.02) (0.18) (0.002) (0.10) (0.33)
Diluted loss per share (0.02) (0.18) (0.006) (0.10) (0.35)

 

 

By Karin Tamir  |
29/08/2019 |

Amir Mizhar

Founder - President & Chief Software Architect

Amir Mizhar is the Chief Software Architect of Safe-T and leads the companies vision, research, and development, delivering the industry’s best enterprise security solutions, while streamlining security into critical business workflows. Prior to founding Safe-T, Amir founded and lead eTouchware, acting as chief software architect for an innovative file sharing system with over 500,000 users. As founder and CEO of M-Technologies Amir lead the vision and creation of online collaboration tools, and online merchandising systems for retail markets. Developing commercial software programs since the age of 13, Amir is an expert ethical hacker and currently holds multiple patents in the area of data transfer over communication networks.

Eitan Bremler

Co-Founder & VP Products and Technology

Eitan Bremler is responsible for overall global Marketing and Product Management activities of Safe-T including product strategy and roadmap, product marketing, positioning, and go-to-market.In addition Eitan is responsible for working with Safe-T’s strategic customers and technology partners, leading the technology relationships with the company’s service provider, OEM, and business development partners. Eitan brings to Safe-T more than 15 years’ experience in marketing, product marketing and product management roles. Prior to joining Safe-T, he held multiple product management and product marketing positions at Radware and Radvision an Avaya company.

Shai Avnit

Chief Financial Officer

Shai Avnit leads Safe-T’s regulatory, corporate governance, and all financials affairs including taxation, accounting, budgeting, cashflows and financing. He has an extensive experience in managing financial, operational, administrative, and regulatory affairs in companies within the medical device, consumer electronics and software fields. He served as a C.F.O. and other leading financial positions in several hi-tech companies, both public and private, Including Card Guard Scientific Survival (currently LifeWatch), Valor Computerized Systems, ProSight, BriefCam and others. He holds a B.A. in Accounting & Economics as well as an M.B.A. with majors in Finance & Marketing, both from Tel Aviv University.

Dafna Lipowicz

VP of Human Resources

In her role, Dafna leads all HR activities at Safe-T, including: partnering with management team to advance and support the company’s vision and strategy, developing strategic HR plans and policies (training, compensation and benefits etc.), organizational and managers development, recruitment and welfareDafna brings to Safe-T more than 17 years of experience in various HR managerial roles, in global and complex organizations as well as in growing start-ups (such as SanDisk, Logic industries and Mantis Vision), specializing in establishing and leading HR departments, initiating and building organizational development according to company strategy, management consultant, talent management and recruitment.Dafna holds LLB in and MA in labor studies both from Tel Aviv university. She is also a certified mediator and group facilitator.

Hagit Gal, Adv.

Legal Counsel

Hagit leads Safe-T’s legal and compliance activity, providing ongoing legal advice regarding corporate and commercial matters. Hagit brings with her extensive experience from her role at B.S.D. Crown Ltd. (LSE: BSD – formerly, Emblaze Ltd.). At B.S.D., Hagit led several corporate transactions, including mergers and acquisitions, fundraising, IPOs and other equity related offerings of both publicly and privately held companies with an emphasis on the tech sector. In addition, Hagit was responsible for the direction of corporate governance practices and regulatory compliance, structure, negotiation and drafting of commercial agreements, intellectual property, human resources and payroll, investor relations and more. She holds a Bachelor of Laws (LL.B) with major in commercial and civil law from the Academic Center of Law and Science.

Marcio Lempert

Advisory Board Chairman

Over the last 25 years, Marcio Lempert has held top management positions (CEO, SVP, Managing Director, Sales Operations) in hi-tech companies all over the world. Marcio has proven the ability to turnaround, grow profitable business and lead various hi-tech disciplines: Sales, Marketing, R&D, PM, Support, Finance and Operations.Marcio has managed sales & operations for a wide range of products and technologies, such as networking, enterprise software and cyber/IT security.During his last position at Finjan Software Security, Marcio was instrumental in leading the acquisition of the company by M86 Security and subsequently the acquisition by Trustwave in 2012.After 2012, Marcio has been involved in social projects as a volunteer and mentor at several non-for-profit organizations and later served in the position of CEO of Dualis – a Social Investment Fund whose vision is the promotion of social impact through for-profit social businesses.

Eran Ziv

Advisory Board Member

Eran Ziv has 30 years of high-tech and IT/telecom industry sales, marketing and management experience. He is the founder and CEO of SecurityDAM. A RAD Group company, involved in cloud security solutions. Prior to that, he served as the President of International Systems Division at Enablence Technologies Inc. and CEO and President of Teledata Networks Ltd. Organizations dealing with NGN (New Generation Network) solutions for the wired Telco markets. Eran was appointed as Teledata Networks Ltd. CEO and President in 2006, leading an intensive turnaround, resulting of successful accusation by Enablence Technologies Inc. in 2010. Prior to that, He served as President of Allot Communications Ltd. leading the company from early stage startup to a profitable NAZDAQ IPO organization. Eran joined Allot from his previous position as Vice President of Sales and Marketing for VocalTec Ltd. Prior to that, he served as the President and Chief Executive Officer of RADLINX (a RAD Group company), which was acquired by VocalTec in 1997. Before joining RADLINX, he held senior sales and marketing positions at Lannet Ltd. and Bynet Ltd. Eran holds a B.Sc. from the Technion – Israel Institute of Technology.

Avi Rubinstein

Advisory Board Member

Avi founded Inpedio after serving as Co-founder and CEO in number of vendors, including Co-founder of Ectel, GM Ectel US Inc., leading the Ectel’s IPO in Nasdaq in 1999, Co-founder of StorWiz in 2004 (acquired by IBM in 2010), Co-founder and CEO of VideoCodes in 2004 (acquired by Thompson in 2008). Prior to Inpedio, Avi participated in 2014/2015 in the turn-around of Nice Intelligence division (Ticker NICE) into a Cyber player, acquired by Elbit in 2015. Avi serves as advisory board member in Safe-T (DMZ-protection and Intellectual Property) and CyberX (Cyber defense for Critical infrastructure).

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Shachar Daniel

Co-founder and CEO

Shachar Daniel is the CEO at Safe-T and one of its co-founders. In his role, Mr. Daniel is responsible for overall vision, company’s strategy, day-to-day operations, and growing Safe-T’s business and presence around the world.Shachar brings to Safe-T more than 14 years of experience in various managerial and business roles. Prior to joining Safe-T, he was program manager at Prime-sense, head of operations for project managers at Logic and project manager at Elbit systems. Shachar is an experienced manager with passion and high commitment for project delivery. Shachar holds an Executive MBA from the Hebrew University , MBA from the college of management academic studies in Israel and B.Sc. in Industrial Engineering from the Holon Institute Technology.

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