UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

 

For the month of: August 2024 (Report No. 2)

 

Commission file number: 001-38610

 

ALARUM TECHNOLOGIES LTD.

(Translation of registrant’s name into English)

 

30 Haarba’a Street Tel-Aviv (P.O. Box 174)

Tel-Aviv, 6473926 Israel

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒       Form 40-F ☐

 

 

 

 

 

 

CONTENTS

 

This Report of Foreign Private Issuer on Form 6-K (this “Report”) consists of (i) Alarum Technologies Ltd.’s (the “Registrant”) press release issued on August 26, 2024, announcing its financial results for the three- and six-month periods ended June 30, 2024, which is attached hereto as Exhibit 99.1; (ii) the Registrant’s unaudited Interim Condensed Consolidated Financial Statements (Unaudited) as of and for the period ended June 30, 2024, which are attached hereto as Exhibit 99.2; and (iii) the Registrant’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2024, which is attached hereto as Exhibit 99.3

 

The paragraphs titled “Recent Business Highlights”, “Second Quarter and First Half 2024 Financial Analysis”, “Financial Outlook”, “Forward-Looking Statements” and the IFRS financial statements in the press release attached as Exhibit 99.1, the Interim Condensed Consolidated Financial Statements (Unaudited) as of June 30, 2024 attached as Exhibit 99.2, and the Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2024 attached as Exhibit 99.3, are incorporated by reference into the registration statements on Form S-8 (File Nos. 333-233510, 333-239249, 333-250138, 333-258744, 333-267586 and 333-274585) and Form F-3 (File Nos. 333-233724, 333-235368, 333-236030, 333-233976, 333-237629, 333-267580 and 333-274604) of the Registrant, filed with the Securities and Exchange Commission, to be a part thereof from the date on which this Report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.

 

Exhibit No.   Description
     
99.1   Alarum Technologies Ltd.’s press release issued on August 26, 2024, announcing its financial results for the three- and six-month periods ended June 30, 2024.
99.2   Alarum Technologies Ltd.’s Interim Condensed Consolidated Financial Statements (Unaudited) as of June 30, 2024.
99.3   Alarum Technologies Ltd.’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2024.

 

1

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Alarum Technologies Ltd.

(Registrant)

     
Date: August 26, 2024 By /s/ Omer Weiss
  Name: 

Omer Weiss

  Title: Corporate Legal Counsel

 

 

2

 

Exhibit 99.1

 

 

Alarum Technologies Announces Second Quarter 2024 Results

 

Concludes strong first half of 2024 with record revenues of $17.3 million, progressing profitability metrics,
solid cash generation and $21.6 million in cash and equivalents

 

TEL AVIV, Israel, Aug. 26, 2024 (GLOBE NEWSWIRE) -- Alarum Technologies Ltd. (Nasdaq, TASE: ALAR) (“Alarum” or the “Company”), a global provider of internet access and web data collection solutions, today announced financial results for the second quarter ended June 30, 2024. 

 

“Today we announced the results of yet another strong record-breaking quarter, marking the first year since we announced our shift to focusing on Enterprise Internet Access through our NetNut data collection product line,” said Mr. Shachar Daniel, Chief Executive Officer of Alarum. “As we intend to establish the broadest data collection and insights offering in the market, we continued to increase our market share in the IP Proxy Network (IPPN) segment, won initial sales in the data collection and labelling market with our new Web-Unblocker and continued to make progress towards providing our customers with artificial intelligence (AI) and analysis capabilities. Our cash balance positions us well to invest in prospects that will provide the foundation for sustained growth.”

 

Mr. Daniel concluded: “Looking into the third quarter of 2024, I am extremely proud that NetNut revenues are expected to surpass the full year 2023 revenue-bar within the first three quarters of 2024. The market we operate in is an ever evolving and nascent market and as we continue to expand our customer base, enhance our offerings and grow the business we may experience some short-term variances. In the third quarter of 2024, we estimate continued year-over-year growth. While third quarter revenues are assumed to be impacted by market dynamics that some of our customers have been experiencing since June, our main growth KPIs are positive: consistent growth in the monthly revenue rates from June to July and into August. We evaluate the value created by new customers over their lifecycle. Our new customer-indicator shows enhanced growth in the second quarter compared to the first quarter, and to the last four quarters’ average. Furthermore, we will maintain strong net customer retention rates in the third quarter, in line with our growth strategy and strong balance sheet. These are all clear indicators of the strength and resilience of our business, as Alarum is in it for the long run.”

 

Recent Business Highlights

 

As the Company focuses on expanding its presence in the Data Collection Market, it:

 

-Added major and highly regarded brand names to the NetNut customer base, including a Fortune 100 customer in Q3 2024

 

-Onboarded in Q2 2024 dozens of new customers who generated approximately $400,000 in the first month of activity, 60% higher than the revenue generated from those that onboarded in Q1 2024 and about 35% higher than the last four quarters’ average

 

-To date, NetNut customers have been generating revenues at an average rate of about 15-18 times higher than their initial month’s activity over a period of approximately three years

 

-Net Retention Rate (“NRR”)1 reached 1.59 as of June 30, 2024

 

-Continued to expand and further the Company’s network ; its infrastructure is now capable of handling significantly higher traffic, supporting larger and a growing number of customers that can drive scalable and profitable growth

 

-Continued to invest in and make substantial progress into the Data Collection and Labelling Market with the new Web-Unblocker and the AI Data Collection products

 

-Generated initial revenues from new customers who placed orders for the Web-Unblocker in Q2 2024

 

-Continued to advance towards adding AI and analysis capabilities to the Company’s Data Products

 

 
1NRR represents the average growth rate for the preceding four quarters compared to the equivalent period in the prior year, of current customers only, while excluding revenues generated from new customers but including up-sales and cross-sales as well as churn.

 

 

 

Summary of Financial Results2

(in millions of U.S. dollars, rounded, except per share amounts and margins)

 

   For the
Six Months Ended
June 30,
   For the
Three Months Ended
June 30,
 
   2024   2023   2024   2023 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
                 
Total Revenue   17.3    12.7    8.9    7.0 
of which, NetNut Revenue was   16.7    8.4    8.7    5.0 
Gross profit   13.4    8.3    6.8    4.5 
Gross margin (in percentage)   77.7%   65.3%   76.9%   64.7%
Non-IFRS gross margin (in percentage)   79.9%   69.9%   78.5%   71.0%
Total operating expenses   8.1    17.0    4.2    12.8 
Finance income (expense), net   (3.3)   0.1    (2.5)   0.3 
Tax benefit (expense)   (0.8)   0.2    (0.5)   0.2 
Net profit (loss) for the period   1.1    (8.4)   (0.4)   (7.7)
Adjusted EBITDA   6.6    1.2    3.4    1.1 
Basic earnings (loss) per ADS (in U.S. Dollars)  $0.16   $(2.51)  $(0.05)  $(2.26)
Non-IFRS basic earnings per ADS (in U.S. Dollars)  $0.86   $0.42   $0.41   $0.45 
                     
Cash, cash equivalents3   21.6    3.8    21.6    3.8 
Shareholders’ equity4   20.4    6.1    20.4    6.1 

 

Second Quarter and First Half 2024 Financial Analysis

 

Revenues grew 27% year-over-year to a Company record $8.9 million in Q2 2024 (Q2 2023: $7.0 million). The increase is attributed to the growth of the enterprise internet access business, NetNut, which increased to $8.7 million in Q2 2024, up from $5.0 million in Q2 2023. H1 2024 revenues increased to a record $17.3 million (H1 2023: $12.7 million). NetNut’s revenues reached a record $16.7 million in H1 2024, achieving 99% year-over-year growth (H1 2023: $8.4 million).

 

Operating expenses totaled $4.2 million (Q2 2023: $12.8 million), and H1 2024 operating expenses totaled $8.1 million (H1 2023: $17.0 million). The quarterly and six-month year-over-year decrease resulted mainly from impairment of goodwill and intangible assets following the Company’s shift to enterprise internet access (NetNut) from consumer internet access (CyberKick). In addition, CyberKick’s operation expenses were reduced, while NetNut’s operation expenses increased in line with its growth.

 

Finance expenses in Q2 2024 were $2.5 million (Q2 2023: finance income of $0.3 million), and approximately $3.4 million in H1 2024 (H1 2023: financial income of $0.1 million). The year-over-year differences were mainly from expenses resulting from the fair value increase of derivative financial instruments (warrants issued in 2019 to 2020) due to the increase in the Company’s share price. The increase was partially offset by interest income on short-term bank deposits.

 

 
2The table below contains certain non-IFRS financial measures. See “Use of non-IFRS Financial Results” for additional information regarding these measures and reconciliations to the most comparable IFRS measures.
3As of the last day of the period.
4As of the last day of the quarter.

 

2

 

 

Income tax expenses totaled $0.8 million in H1 2024 (H1 2023: tax benefit of $0.2 million), following the first-time NetNut was profitable for tax purposes.

 

H1 2024 cash flow from operating activities reached $6.3 million (H1 2023: $(0.1) million)

 

As of June 30, 2024, shareholders’ equity totaled $20.4 million, compared to $6.1 million as of June 30, 2023, and $13.2 million as of December 31, 2023. The increase was driven by the H1 2024 net profit as well as warrants and options exercises.

 

Outstanding ordinary share count as of June 30, 2024, was approximately 68.4 million, or 6.8 million in ADSs.

 

Financial Outlook

 

“Alarum ended Q2 2024 with growing revenues, enhanced profitability, strong cash generation and a solid balance sheet, which provides the flexibility and resources to invest in the areas that will drive future growth,” said Mr. Shai Avnit, Chief Financial Officer of Alarum. “Today, for the first time, we are providing quarterly guidance, as we aim to enhance transparency. We anticipate Q3 2024 revenue to demonstrate year-over-year growth, and in fact, NetNut revenues are expected to cross the full-year 2023 revenue-bar of $21.2 million within the first nine months of 2024. Q3 2024 revenues are estimated at $7 million ±3% and Adjusted EBITDA for Q3 2024 is expected to range from $0.8 to $1.0 million.”

 

Second Quarter 2024 Financial Results Conference Call

 

Mr. Shachar Daniel, Chief Executive Officer of Alarum, and Mr. Shai Avnit, Chief Financial Officer of Alarum, will host a conference call today, August 26, 2024, at 8:30 a.m. ET, 5:30 a.m. Pacific time to discuss the second quarter 2024 results and the third quarter 2024 outlook, followed by a Q&A session. To attend, please dial one of the following numbers, at least five minutes before the call starts: 1-877-407-0789 or 1-201-689-8562. If you are unable to connect using the toll-free number, please try the international dial-in number. An Israeli toll-free number is: 1 809 406 247.

 

Participants will be required to state their name and company upon dialing in. If you have any difficulty connecting, please contact Michal Efraty on behalf of Alarum at +972-(0)-52-3044404. Replay: The conference call will be broadcast live and available for replay here, after 11:30 a.m. ET on August 26, 2024, through September 24, 2024. Toll-free replay numbers: 1-844-512-2921 or 1-412-317-6671, ID: 13748415.

 

Forward-Looking Statements

 

This press release contains forward-looking statements within the meaning of the “safe harbor” 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, Alarum is using forward-looking statements in this press release when it discusses its guidance regarding revenue and Adjusted EBITDA, potential due to its cash position and resources, growth, profitability, AI and analysis capabilities, customer retention, prospect, flexibility, market expansion and 2024 NetNut revenues, as well as the expected benefits and impacts of its existing and future products and services. Because such statements deal with future events and are based on Alarum’s current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of Alarum 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 Alarum’s annual report on Form 20-F filed with the Securities and Exchange Commission (“SEC”) on March 14, 2024, and in any subsequent filings with the SEC. Except as otherwise required by law, Alarum 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. Alarum is not responsible for the contents of third-party websites.

 

3

 

 

Condensed Consolidated Statements of Financial Position

(in thousands of U.S. dollars)

 

   June 30,   December 31, 
   2024   2023   2023 
   (Unaudited)   (Audited) 
Assets            
Current assets:            
Cash and cash equivalents   21,626    3,813    10,872 
Short-term restricted deposits   -    500    - 
Trade receivables, net   2,471    2,279    1,994 
Other receivables   961    481    399 
    25,058    7,073    13,265 
                
Non-current assets:               
Long-term restricted deposits   -    111    - 
Long-term deposit   102    119    104 
Other non-current assets   94    111    145 
Property and equipment, net   119    92    88 
Right-of-use assets   638    605    779 
Deferred tax assets   298    -    181 
Goodwill   4,118    4,118    4,118 
Intangible assets, net   1,082    1,901    1,386 
Total non-current assets   6,451    7,057    6,801 
Total assets   31,509    14,130    20,066 
                
Liabilities and equity               
Current liabilities:               
Trade payables   570    963    369 
Other payables   3,058    2,312    2,439 
Current maturities of long-term loan   564    497    290 
Short-term bank loans   -    1,601    - 
Contract liabilities   2,285    1,289    1,983 
Derivative financial instruments   3,409    2    109 
Short-term lease liabilities   362    227    370 
Total current liabilities   10,248    6,891    5,560 
                
Non-current liabilities:               
Long-term loans   398    647    802 
Long-term lease liabilities   439    405    523 
Deferred tax liabilities   -    63    - 
Total non-current liabilities   837    1,115    1,325 
Total liabilities   11,085    8,006    6,885 
                
Equity:               
Ordinary shares   -    -    - 
Share premium   108,963    95,754    100,576 
Other equity reserves   12,705    15,567    14,938 
Accumulated deficit   (101,244)   (105,197)   (102,333)
Total equity   20,424    6,124    13,181 
Total liabilities and equity   31,509    14,130    20,066 

 

4

 

 

Condensed Consolidated Statements of Profit or Loss

(in thousands of U.S. dollars, except per share amounts)

 

 

 

 

For the
Six Months Ended
June 30,
   For the
Three Months Ended
June 30,
   For the
Year Ended
December 31,
 
   2024   2023   2024   2023   2023 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)   (Audited) 
Continuing operations                    
Revenue   17,260    12,664    8,884    6,985    26,521 
Cost of revenue   3,854    4,390    2,051    2,463    7,711 
Gross profit   13,406    8,274    6,833    4,522    18,810 
                          
Operating expenses:                         
Research and development   2,143    1,948    1,121    886    3,557 
Sales and marketing   3,372    6,472    1,647    4,289    10,035 
General and administrative   2,626    2,286    1,386    1,291    4,406 
Impairment of goodwill   -    6,311    -    6,311    6,311 
Total operating expenses   8,141    17,017    4,154    12,777    24,309 
                          
Operating profit (loss)   5,265    (8,743)   2,679    (8,255)   (5,499)
                          
Finance income (expense), net   (3,345)   116    (2,497)   313    (590)
Profit (loss) from continuing operations before income tax   1,920    (8,627)   182    (7,942)   (6,089)
Tax benefit (expense)   (831)   238    (533)   242    482 
Profit (loss) from continuing operations, net of income tax   1,089    (8,389)   (351)   (7,700)   (5,607)
Profit from discontinued operations, net of income tax   -    -    -    -    82 
Net profit (loss) for the period   1,089    (8,389)   (351)   (7,700)   (5,525)
                          

Basic and diluted profit (loss) per share:

                         
Continuing operations  $0.02   $(0.25)  $(0.01)  $(0.23)  $(0.14)
                          
Discontinued operations   -    -    -    -    * 
   $0.02   $(0.25)  $(0.01)  $(0.23)  $(0.14)
                          
Basic profit (loss) per ADS:                    
                    
Continuing operations  $0.16   $(2.51)  $(0.05)  $(2.26)  $(1.35)
                          
Discontinued operations   -    -    -    -    * 
   $0.16   $(2.51)  $(0.05)  $(2.26)  $(1.35)

 

*Less than $0.01

 

5

 

 

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 EBITDA (EBITDA loss), Adjusted EBITDA (Adjusted EBITDA loss), non-IFRS net profit (loss), non-IFRS gross profit, non-IFRS gross margin and non-IFRS basic earnings (loss) per share or ADS for the periods presented. The Company defines EBITDA (EBITDA loss) as net profit (loss) from continuing operations before depreciation, amortization and impairment of intangible assets, finance income (expense) and income tax; defines Adjusted EBITDA (Adjusted EBITDA loss) as EBITDA (EBITDA loss) as further adjusted to remove the impact of (i) impairment of goodwill (if any); and (ii) share-based compensation; defines non-IFRS net profit (loss) as net profit (loss) from continuing operations before depreciation, amortization and impairment of intangible assets, impairment of goodwill, finance income (expense) effects primarily related to derivative financial instruments as well as long-term loan, deferred tax effects and share-based compensation; defines non-IFRS gross profit as gross profit from continuing operations adjusted to remove the impact of depreciation, amortization and impairment of intangible assets and share-based compensation recorded under cost of revenues; defines non-IFRS gross margin as the percentage of the non-IFRS gross profit out of revenues; and defines non-IFRS basic earnings (loss) per share or ADS as non-IFRS net profit (loss) divided by the weighted average number of ordinary shares or ADSs. The Company’s management believes the non-IFRS financial information provided in this press 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.

 

Other Metrics

 

Net retention rate (NRR) represents the average growth rates for the preceding four quarters compared to the equivalent period a year earlier, of current customers only, without the revenues generated from new customers, but including up-sales and cross-sales on one hand and churn on the other hand. NRR greater than 1.00 indicates that the Company experiences revenue growth from its existing customer base in the specific period even after accounting for lost revenue due to customers’ churn. Conversely, an NRR lower than 1.00 suggests that the Company loses revenue from existing customers in the specific period due to churn which is higher than revenue gain through up-sells or cross-sells.

 

6

 

 

Non-IFRS Financial Measures

(in millions of U.S. dollars, rounded)

 

The following tables present the reconciled effect of the above on the Company’s Adjusted EBITDA (EBITDA loss); non-IFRS net profit (loss); and non-IFRS gross profit for the six and three months ended June 30, 2024 and 2023, and for the year ended December 31, 2023:

 

  

For the
Six Months Ended
June 30,

  

For the
Three Months Ended
June 30,

  

For the
Year Ended
December 31,

 
   2024   2023   2024   2023   2023 
                     
Net profit (loss) from continuing operations   1.1    (8.4)   (0.3)   (7.7)   (5.6)
Adjustments:                         
Depreciation, amortization and impairment of intangible assets   0.3    3.0    0.1    2.7    3.5 
Finance expense (income), net   3.4    (0.1)   2.5    (0.3)   0.6 
Tax expense (tax benefit)   0.8    (0.2)   0.5    (0.2)   (0.5)
EBITDA (EBITDA loss)   5.6    (5.7)   2.8    (5.5)   (2.0)
Adjustments:                         
Impairment of goodwill   -    6.3    -    6.3    6.3 
Share-based compensation   1.0    0.6    0.6    0.3    0.9 
Adjusted EBITDA for the period   6.6    1.2    3.4    1.1    5.2 

 

  

For the
Six Months Ended
June 30,

  

For the
Three Months Ended
June 30,

  

For the
Year Ended
December 31,

 
   2024   2023   2024   2023   2023 
Net profit (loss) from continuing operations   1.1    (8.4)   (0.3)   (7.7)   (5.6)
Adjustments:                         
Depreciation, amortization and impairment of intangible assets   0.3    3.0    *    2.7    3.5 
Finance expense, net effects   3.3    0.1    2.5    0.1    0.1 
Deferred tax effects   (0.1)   (0.2)   *    (0.2)   (0.5)
Impairment of goodwill   -    6.3    -    6.3    6.3 
Share-based compensation   1.0    0.6    0.6    0.3    0.9 
Non-IFRS net profit for the period   5.6    1.4    2.8    1.5    4.7 

 

*Less than $0.1 million

 

  

For the
Six Months Ended
June 30,

  

For the
Three Months Ended
June 30,

  

For the
Year Ended
December 31,

 
   2024   2023   2024   2023   2023 
Gross profit from continuing operations   13.4    8.3    6.8    4.5    18.8 
Adjustments:                         
Depreciation, amortization and impairment of intangible assets   0.3    0.6    0.1    0.4    0.9 
Share-based compensation   *    *    *    *    * 
Non-IFRS gross profit for the period   13.7    8.9    6.9    4.9    19.7 

 

*Less than $0.1 million

 

7

 

 

About Alarum Technologies Ltd.

 

Alarum Technologies Ltd. (Nasdaq, TASE: ALAR) is a global provider of internet access and web data collection solutions. The solutions by NetNut, our enterprise internet access and web data collection arm, are based on our world’s fastest and most advanced and secured hybrid proxy network, enabling our customers to collect data anonymously at any scale from any public sources over the web. Our network comprises both exit points based on our proprietary reflection technology and hundreds of servers located at our ISP partners around the world. The infrastructure is optimally designed to guarantee privacy, quality, stability, and the speed of the service.

 

For more information about Alarum and its internet access and web data collection solutions, please visit www.alarum.io.

 

Follow us on Twitter

 

Subscribe to our YouTube channel

 

Investor Relations Contacts:

 

Michal Efraty

+972-(0)52-3044404
investors@alarum.io

 

8

 

Exhibit 99.2

 

 

 

 

 

 

ALARUM TECHNOLOGIES LTD.

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

JUNE 30, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ALARUM TECHNOLOGIES LTD.

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

(UNAUDITED)

 

JUNE 30, 2024

 

TABLE OF CONTENTS

 

 

Page

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:  
Condensed Consolidated Statements of Financial Position 3
Condensed Consolidated Statements of Profit or Loss 4
Condensed Consolidated Statements of Changes in Equity 5
Condensed Consolidated Statements of Cash Flows 6-7
Notes to Condensed Consolidated Financial Statements 8-11

 

2

 

 

ALARUM TECHNOLOGIES LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(UNAUDITED)

 

   June 30,
2024
   December 31,
2023
 
   U.S. dollars in thousands 
Assets        
Current assets:        
Cash and cash equivalents   21,626    10,872 
Accounts receivable:          
Trade, net   2,471    1,994 
Other   961    399 
    25,058    13,265 
Non-current assets:          
Long-term deposits   102    104 
Property and equipment, net   119    88 
Right-of-use assets   638    779 
Deferred tax assets   298    181 
Intangible assets, net   1,082    1,386 
Goodwill   4,118    4,118 
Other non-current assets   94    145 
    6,451    6,801 
Total assets   31,509    20,066 
           
Liabilities and equity          
Current liabilities:          
Accounts payable and accruals:          
Trade   570    369 
Other   3,058    2,439 
Current maturities of long-term loans   564    290 
Contract liabilities   2,285    1,983 
Derivative financial instruments   3,409    109 
Short-term lease liabilities   362    370 
    10,248    5,560 
Non-current liabilities:          
Long-term lease liabilities   398    523 
Long-term loans, net of current maturities   439    802 
    837    1,325 
Total liabilities   11,085    6,885 
           
Equity:          
Ordinary shares   
-
    
-
 
Share premium   108,963    100,576 
Other equity reserves   12,705    14,938 
Accumulated deficit   (101,244)   (102,333)
Total equity   20,424    13,181 
Total liabilities and equity   31,509    20,066 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

 

 

ALARUM TECHNOLOGIES LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

(UNAUDITED)

 

   Six months ended June 30 
   2024   2023 
   U.S. dollars in thousands
(except per share amounts)
 
         
Revenue   17,260    12,664 
Cost of revenue   3,854    4,390 
Gross profit   13,406    8,274 
           
Operating expenses:          
Research and development   2,143    1,948 
Selling and marketing   3,372    6,472 
General and administrative   2,626    2,286 
Impairment of goodwill   
-
    6,311 
Total operating expenses   8,141    17,017 
           
Operating profit (loss)   5,265    (8,743)
           
Finance expense   3,612    177 
Finance income   (267)   (293)
Finance expense (income), net   3,345    (116)
           
Profit (loss) before income tax   1,920    (8,627)
Tax benefit (expense)   (831)   238 
Net profit (loss) for the period   1,089    (8,389)
           
Basic and diluted profit (loss) per share:          
Basic profit (loss) per share   0.02    (0.25)
Diluted profit (loss) per share   0.02    (0.25)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4

 

 

ALARUM TECHNOLOGIES LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

 

   Ordinary shares       Other         
   Number of
shares
   Amount   Share
premium
   equity
reserves
   Accumulated
deficit
   Total 
   U.S. dollars in thousands (except share data) 
                         
Balance at January 1, 2024   59,681,632    
-
    100,576    14,938    (102,333)   13,181 
Changes during the six months ended June 30, 2024:                              
Issuance of ordinary shares upon exercise of options and vesting of RSUs   2,638,521    
-
    4,740    (1,795)   
-
    2,945 
Issuance of ordinary shares upon exercise of warrants   6,035,860    
-
    3,636    (1,383)   
-
    2,253 
Expiration of options   -    
-
    11    (11)   
-
    
-
 
Share-based payments   -    
-
    
-
    956    
-
    956 
Net profit for the period   -    -    -    -    1,089    1,089 
Balance at June 30, 2024   68,356,013    
-
    108,963    12,705    (101,244)   20,424 
                               
Balance at January 1, 2023   32,628,044    
-
    95,077    15,042    (96,808)   13,311 
Changes during the six months ended June 30, 2023:                              
Issuance of ordinary shares upon exercise of options   165,046    
-
    111    (91)   
-
    20 
Expiration of options   -    
-
    21    (21)   
-
    
-
 
Share-based payments   -    
-
    
-
    637    
-
    637 
At-the-market offering, net of issuance costs   2,076,140    
-
    545    
-
    
-
    545 
Net loss for the period   -    -    -    -    (8,389)   (8,389)
Balance at June 30, 2023   34,869,230    
-
    95,754    15,567    (105,197)   6,124 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5

 

 

ALARUM TECHNOLOGIES LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   Six months ended June 30 
   2024   2023 
   U.S. dollars in thousands 
Cash flows from operating activities        
Net profit (loss) for the period   1,089    (8,389)
Adjustments for:          
Effect of exchange rate differences on cash and cash equivalents and restricted deposits balances   68    26 
Change in fair value of derivative financial instruments   3,300    (24)
Impairment of goodwill and intangible assets   
-
    8,806 
Depreciation and amortization   474    617 
Interest income related to short-term bank deposits   (267)   
-
 
Interest portion of lease payments   68    7 
Interest and other finance expense )income( related to long-term loan   161    (250)
Interest expense related to short-term bank loans   
-
    83 
Share-based payments   956    599 
    4,760    9,864 
Changes in asset and liability items:          
Trade receivables   (477)   (489)
Other receivables   (127)   268 
Trade payables   201    (1,226)
Other payables   653    (50)
Deferred taxes   (117)   (238)
Contract liabilities   302    119 
    435    (1,616)
Net cash provided by (used in) operating activities   6,284    (141)
           
Cash flows from investing activities          
Withdrawn of short-term restricted deposits   
-
    60 
Withdrawn of long-term deposits   2    
-
 
Interest related to short-term bank deposits   267    
-
 
Investment in long-term deposits   
-
    (48)
Investment in long-term restricted deposits   
-
    (21)
Repayment of long-term restricted deposits   
-
    33 
Purchase of property and equipment   (60)   (24)
Net cash provided by investing activities   209    
-
 
           
Cash flows from financing activities          
Long-term loans received   
-
    888 
Long-term loans interest payments   (110)   (230)
Long-term loans principal payments   (89)   (329)
Short-term bank loans received   
-
    4,800 
Repayment of short-term bank loans   
-
    (4,800)
Short-term bank loans interest payments   
-
    (88)
Principal portion of lease payments   (133)   (107)
Interest portion of lease payments   (68)   (7)
Proceeds from exercise of options and warrants   4,763    20 
Proceeds from at-the-market offering   
-
    688 
Issuance costs in connection with offerings   (34)   (151)
Net cash provided by financing activities   4,329    684 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6

 

 

ALARUM TECHNOLOGIES LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   Six months ended June 30 
   2024   2023 
   U.S. dollars in thousands 
         
Changes in cash and cash equivalents   10,822    543 
Cash and cash equivalents at beginning of the period   10,872    3,290 
Effect of exchange rate changes on cash and cash equivalents   (68)   (20)
Cash and cash equivalents at end of the period   21,626    3,813 
           
Supplemental disclosure of non-cash investing and financing activities:          
Receivables due to exercise of options   435    
-
 
Addition of right-of-use assets   
-
    541 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7

 

 

ALARUM TECHNOLOGIES LTD.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 - GENERAL:

 

Background

 

Alarum Technologies Ltd. (“Alarum”, and collectively referred to with its wholly-owned subsidiaries as the “Company”) is a global provider of internet access and web data collection solutions.

 

The Company’s ordinary shares are listed on the Tel Aviv Stock Exchange (“TASE”) and the Company’s American Depositary Shares (“ADSs”) are listed on the Nasdaq Capital Market.

 

The Company currently operates in two segments - enterprise internet access and consumer internet access. The enterprise internet access solutions are provided through the Company’s wholly owned subsidiary NetNut Ltd. (“NetNut”) and enable customers to collect data anonymously at any scale from any public sources over the web using a unique hybrid network. The consumer internet access solutions are provided through the Company’s wholly-owned subsidiary CyberKick Ltd. (“CyberKick”), and provide a powerful, secured and encrypted connection, masking the customers online activity and keeping them safe from hackers.

 

The Company currently funds its operations primarily through cash generated from operating activities. Accordingly, cash and cash equivalents as of June 30, 2024, were $21,626 thousand and cash provided by operating activities was $6,284 thousand for the six months ended June 30, 2024. Based on the Company’s cash position, the Company believes that it has sufficient resources to fund its operations for at least the next twelve months from the date on which the condensed consolidated financial statements are authorized for issue.

 

War in Israel

 

In October 2023, Israel was attacked by the Hamas terrorist organization and entered a state of war. To date, there is no material adverse impact on the Company’s operations and financial results as a result of this war. However, at this time, it is not possible to predict the intensity or duration of the war, nor can the Company predict how this war will ultimately affect Israel’s economy in general. The Company continues to monitor the situation closely and examine the potential disruptions that could adversely affect its operations.

 

NOTE 2 - ACCOUNTING POLICIES:

 

Basis of presentation

 

The Company’s condensed consolidated financial statements for the six months ended June 30, 2024, have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. These condensed consolidated financial statements, which are unaudited, do not include all of the information and disclosures that would otherwise be required in a complete set of annual financial statements and should be read in conjunction with the annual financial statements for the year ended December 31, 2023 and their accompanying notes, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as published by the International Accounting Standards Board.

 

The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2024, or for any other interim period.

 

Estimates

 

The preparation of interim financial statements requires the Company’s management to exercise its judgment and to use significant accounting estimates and assumptions that affect the application of the Company’s accounting policies and the amounts of reported assets, liabilities, income and expenses. Actual results may materially differ from those estimates.

 

8

 

 

ALARUM TECHNOLOGIES LTD.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

 

In preparation of these condensed consolidated financial statements, the significant judgments that were exercised by the management in applying the Company’s accounting policies and the key sources of estimation uncertainty were similar to those applied in the Company’s annual financial statements for the year ended December 31, 2023.

 

Accounting policies

 

The accounting policies applied in the preparation of these condensed consolidated financial statements are consistent with those applied in the preparation of the annual financial statements for the year ended December 31, 2023, except as described below.

 

Income tax

 

Income tax expense for interim periods is recognized at an amount determined by multiplying the profit before income tax for the interim period of each individual jurisdiction by management’s best estimate of the expected effective annual income tax rate of each jurisdiction, adjusted for the tax effects of certain items recognized in full in the interim period.

 

New standards and amendments adopted

 

Several new standards, amendments to standards and interpretations that are effective for annual periods beginning on January 1, 2024, have been applied in preparing these condensed consolidated financial statements. None of these had a material effect on the Company’s condensed consolidated financial statements.

 

New standards and amendments not yet adopted

 

IFRS 18, “Presentation and Disclosure in Financial Statements” (“IFRS 18”)

 

IFRS 18 replaces IAS 1, “Presentation of Financial Statements” (“IAS 1”). As part of the new disclosure requirements, companies will be required to present new defined subtotals in the statement of profit or loss, as follows: (i) operating profit and (ii) profit before financing and tax. In addition, items in the statement of profit or loss will be classified into three defined categories: operating, investment and financing. The standard also includes a requirement to provide a separate disclosure in the financial statements regarding the use of management-defined performance measures (“non-GAAP measures”), and specific instructions were added for the grouping and splitting of items in the financial statements and their accompanying notes. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, with an option for early adoption. The Company is currently in a preliminary stage of assessing the expected effect of this new standard.

 

NOTE 3 - SIGNIFICANT CHANGES IN THE CURRENT REPORTING PERIOD:

 

Shares issuance

 

During the six months ended June 30, 2024, 527,686 warrants issued as a part of the Company’s September 14, 2023 private placement and 75,900 warrants issued as part of April 3, 2020 public offering, were exercised into 603,586 ADSs, or 6,035,860 ordinary shares, for a total consideration of $2,253 thousand.

 

During the six months ended June 30, 2024, 2,492,688 options were exercised into 2,492,688 ordinary shares for a total consideration of $2,945 thousand, and 145,833 vested restricted share units (“RSUs”) were issued into 145,833 ordinary shares.

 

9

 

 

ALARUM TECHNOLOGIES LTD.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

 

Derivative financial instruments

 

Derivative financial instruments consist of certain warrants previously issued to investors which are accounted for as financial liabilities at fair value through profit or loss. Accordingly, these warrants are measured at fair value (level 3) and changes are recorded to profit or loss on a periodic basis.

 

During the six months ended June 30, 2024, there was a significant increase in the fair value of derivative financial instruments, mainly due to an increase in the Company’s share price, which resulted in an increase of $3,300 thousand recognized in finance expense in profit or loss.

 

The fair value of the warrants as of June 30, 2024, was estimated using the Black-Scholes model, with the following principal assumptions: risk-free interest rate of 4.99%-5.43%, expected term (in years) of 0.36-1.25 and volatility of 96.54%-109.20%.

 

As of June 30, 2024, derivative financial instruments totaled to $3,409 thousand.

 

O.R.B agreement

 

Further to the described in Note 10 to the Company’s annual financial statements for the year ended December 31, 2023, during the six months ended June 30, 2024, the Company repaid to O.R.B. Spring Ltd. an amount of $199 thousand, based on the actual customers’ payments according to the revenue share model.

 

For the six months ended June 30, 2024, interest expenses related to long-term loan totaled to $110 thousand.

 

As of June 30, 2024, long-term loan, including current maturities, totaled to $1,003 thousand.

 

Options and RSUs grants

 

During the six months ended June 30, 2024, the Company’s board of directors (“BOD”) approved grants of 240,044 RSUs and 145,012 options to purchase 145,012 ordinary shares. The options have exercise prices range of NIS 0-3.97 and they will vest over 1-3 years from the grant dates. The total fair value of these grants was $493 thousand.

 

NOTE 4 - SEGMENT AND REVENUE INFORMATION:

 

Disaggregation of revenue

 

The Company’s revenue is disaggregated by segments and source.

 

The following table presents the Company’s revenue disaggregated by source for the six months ended June 30, 2024 and 2023:

 

   Six months ended June 30 
   2024   2023 
   U.S. dollars in thousands 
         
Software as a Service   17,257    9,983 
Advertising services   3    2,681 
    17,260    12,664 

 

10

 

 

ALARUM TECHNOLOGIES LTD.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(UNAUDITED)

 

Segments

 

Management has determined the Company’s operating segments based on the information reviewed by the Company’s chief operating decision maker for the purpose of allocating resources to the segments and assessing their performance.

 

The chief operating decision maker, who is the Company’s Chief Executive Officer (“CEO”), examines the performance of each operating segment based on revenue and segment adjusted EBITDA. The Company defines segment adjusted EBITDA as net profit (loss) before depreciation, amortization and impairment of intangible assets, finance income (expense) and income tax, as further adjusted for the effect of impairment of goodwill, share-based payments and other adjustments, as applicable.

 

The following table presents details of the Company’s operating segments and a reconciliation of the total segment adjusted EBITDA to profit (loss) before income tax for the six months ended June 30, 2024 and 2023:

 

   Six months ended June 30 
   2024   2023 
   U.S. dollars in thousands 
Revenue        
Enterprise internet access   16,751    8,428 
Consumer internet access   509    4,236 
    17,260    12,664 
Segment adjusted EBITDA          
Enterprise internet access   7,610    2,219 
Consumer internet access   260    73 
    7,870    2,292 
Non-attributable corporate costs   (1,315)   (1,123)
Depreciation, amortization and impairment of intangible assets   (334)   (3,002)
Impairment of goodwill   
-
    (6,311)
Share-based payments   (956)   (599)
Finance income (expense), net   (3,345)   116 
Profit (loss) before income tax   1,920    (8,627)

 

NOTE 5 - SUBSEQUENT EVENTS:

 

On July 16, 2024, the Company’s BOD approved a grant of 199,992 RSUs to the Company’s CEO. The grant is subject to the shareholders’ approval.

 

In addition, the Company’s BOD approved grants of 55,020 RSUs to employees and 100,000 options to purchase 100,000 ordinary shares to a consultant. The options have a zero-exercise price and they will vest over a period of 2 years from the grant date.

 

11

 

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Exhibit 99.3

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

As of June 30, 2024, and for the Six Months then Ended

 

Cautionary Statement Regarding Forward-Looking Statements

 

Certain information included in this analysis may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “plans,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.

 

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

 

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

 

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

 

  our planned level of revenues and capital expenditures;
     
  our ability to market and sell our products;
     
  the ability of our clients to continue utilize our products at their current levels;
     
  our ability to expand the number and the diversification of customers in order to avoid a material effect on our operating margins, our profitability, our sales and our results of operations as a result of a loss of a significant customer, or a material reduction in sales to a significant customer;
     
  our plans to continue to invest in research and development to develop technology for both existing and new products;
     
  our ability to maintain our relationships with partners and customers;
     
  our ability to maintain or protect the validity of our European, U.S. and other patents and other intellectual property;
     
  our ability to engage in future strategic opportunities, including, but not limited to, strategic acquisitions, and achieve any expected benefits there from;
     
  our ability to launch and penetrate markets in new locations, including taking steps to expand our worldwide activities and to enter into engagements with new business partners in those markets;
     
  our intention to increase marketing and sales activities;
     
  our intention to establish partnerships with industry leaders;

 

 

 

 

  our ability to locate additional funding available to us on acceptable terms;
     
  our ability to retain professional employees and executive members;
     
  our ability to internally develop new inventions and intellectual property;
     
  our expectations regarding future changes in our cost of revenues and our operating expenses;
     
  our expectations regarding our tax classifications;
     
  interpretations of current laws and the passages of future laws and/or regulations;
     
  our ability to continue to effectively comply with the requirements of Nasdaq;
     
  the impact of potential litigation; 
     
  acceptance of our business model and performance by investors; and
     
  general market, political, and economic conditions in the countries in which we operate including those related to recent unrest and actual or potential armed conflict in Israel and other parts of the Middle East, such as the Israel-Hamas war.

 

The foregoing list is intended to identify only certain of the principal factors that could cause actual results to differ. For a more detailed description of the risks and uncertainties affecting our company, reference is made to our Annual Report on Form 20-F for the year ended December 31, 2023, or our Annual Report, which is on file with the Securities and Exchange Commission, or the SEC, and the other risk factors discussed from time to time by our company in reports filed or furnished to the SEC.

 

Except as otherwise required by law, we undertake 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.

 

General

 

Introduction

 

Unless indicated otherwise by the context, all references in this report to “Alarum”, the “Company”, “we”, “us” or “our” are to Alarum Technologies Ltd. and its subsidiaries. All references in this report to “dollars” or “$” means United States dollars.

 

You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements for the six months ended June 30, 2024 and notes thereto, and together with our audited consolidated financial statements for the year ended December 31, 2023 and notes thereto filed with the SEC as part of our Annual Report.

 

Overview

 

Alarum is a global provider of internet access and web data collection solutions.

 

We currently operate in two segments: enterprise internet access and consumer internet access.

 

Our enterprise internet access and web data collection solutions are provided through our wholly owned subsidiary NetNut Ltd., or NetNut, and offer secured, fast, and anonymous IP Proxy Network Solutions, or IPPN solutions, to our business customers which, in turn, enables them to anonymously and securely browse the internet as well as to collect data from any publicly available source on the web, for their own business purposes. Our IPPN solutions allow organizations to collect vast amounts of accurate, transparent web data from public online sources by simultaneously connecting to the Internet from different IP addresses. Our customers can choose from various types of IPs from our IP pool which contains millions of IPs, including ISP IPs, data center IPs, and residential service provider IPs.

 

2

 

 

With our solutions, customers gain data-driven information that provides valuable insights with respect to predictive capabilities or behaviors, thereby assisting ongoing business management operation and decision making. An added benefit to our customers is the fact that utilizing our network completely conceals enterprises from the internet by modifying IP addresses, thus ensuring high levels of privacy for their online presence. Our solutions enable access to the internet through millions of end points globally, thus ensuring multiple business use cases, including large-scale data collection and analysis, cyber security, price comparison, ad verification, search engine optimization validations, web data extraction, collection of data for financial analysis, and more.

 

Our consumer internet access solutions are provided through our wholly-owned subsidiary CyberKick Ltd., or CyberKick, and offer a powerful, secured and encrypted connection, masking consumers’ online activity and keeping them safe from hackers. The solutions are designed for advanced and basic users, ensuring complete protection for all personal and digital information. As part of our focus on generating profitable revenues, we decided in July 2023 to downscale our investment in the consumer internet access segment of our business. We continue to maintain our products and the service only to current paying users, which allows us to generate revenue from past investments in acquiring such users, with minimal costs.

 

Our Business Model

 

We generate Software as a Service, or SaaS, revenues when customers subscribe to our enterprise and consumer access platforms and pay for the packages they choose. The packages are usually for the earlier of one to twelve months, or maximum bandwidth usage in the enterprise access segment, and for a month or a year in the consumer access segment. Our revenue is recognized on a straight-line basis over the package period.

 

Results of Operations

 

The following discussion of our results of operations for the six months ended June 30, 2024 and 2023, included in the following table, which presents selected financial information data, is based upon our consolidated statements of profit or loss contained in our unaudited condensed consolidated financial statements for those periods, and the related notes.

 

   For the Six Months
Ended June 30,
 
U.S. dollars in millions  2024   2023 
Revenue   17.3    12.7 
Cost of revenue   3.9    4.4 
Gross profit   13.4    8.3 
Operating expenses:          
Research and development   2.1    1.9 
Selling and marketing   3.4    6.5 
General and administrative   2.6    2.3 
Impairment of goodwill   -    6.3 
Total operating expenses   8.1    17.0 
Operating profit (loss)   5.3    (8.7)
Finance income (expense), net   (3.4)   0.1 
Profit (loss) before income tax   1.9    (8.6)
Tax benefit (expense)   (0.8)   0.2 
Net profit (loss) for the period   1.1    (8.4)

 

3

 

 

Key Business Metrics

 

In addition to our results, determined in accordance with International Financial Reporting Standards, or IFRS, we believe the following non-IFRS financial measures are useful in evaluating our operating performance.

 

EBITDA (EBITDA loss). We define EBITDA (EBITDA loss) as net profit (loss) before depreciation, amortization and impairment of intangible assets, finance income (expense) and income tax.

 

Adjusted EBITDA. We define Adjusted EBITDA as EBITDA (EBITDA loss) as further adjusted to remove the impact of (i) impairment of goodwill (if any); and (ii) share-based compensation.

 

Non-IFRS net profit (loss). We define non-IFRS net profit (loss) as net profit (loss) before depreciation, amortization and impairment of intangible assets, impairment of goodwill, finance income (expense) effects primarily related to derivative financial instruments as well as long-term loan, deferred tax effects and share-based compensation.

 

In accordance with IFRS, we are required to record non-cash expenses and non-core expenses, which have a material effect on our profitability. We believe that these non-IFRS financial measures are useful in evaluating our business because of varying available valuation methodologies, subjective assumptions and the variety of financial instruments that can impact a company’s non-cash expenses, and because they exclude non-cash expenditures such as the expenses mentioned above, that do not reflect the performance of our core business. By excluding non-cash items that have been expensed in accordance with IFRS, we believe that the Company’s non-IFRS results provide information to both management and investors that is useful in assessing the Company’s core operating performance and in evaluating and comparing the Company’s results of ongoing operations on a consistent basis from period to period. Our management also uses both IFRS and non-IFRS information in evaluating and operating our business internally. 

 

The following tables present the reconciled effect of the above on the Company’s Adjusted EBITDA and non-IFRS net profit for the six months ended June 30, 2024, and 2023:

 

   For the Six Months
Ended June 30,
 
U.S. dollars in millions  2024   2023 
Net profit (loss) for the period   1.1    (8.4)
Adjustments:          
Depreciation, amortization and impairment of intangible assets   0.3    3.0 
Finance expense (income), net   3.4    (0.1)
Tax expense (benefit)   0.8    (0.2)
EBITDA (EBITDA loss)   5.6    (5.7)
Adjustments:          
Impairment of goodwill   -    6.3 
Share-based compensation   1.0    0.6 
Adjusted EBITDA   6.6    1.2 

 

   For the Six Months
Ended June 30,
 
U.S. dollars in millions  2024   2023 
Net profit (loss) for the period   1.1    (8.4)
Adjustments:          
Depreciation, amortization and impairment of intangible assets   0.3    3.0 
Finance expense, net effects   3.3    0.1 
Impairment of goodwill   -    6.3 
Deferred tax effects   (0.1)   (0.2)
Share-based compensation   1.0    0.6 
Non-IFRS net profit   5.6    1.4 

 

4

 

 

Factors Affecting our Performance

 

We rely on businesses requiring gathering data over the Internet using residential and Data Center IP addresses from various geographies. Also, our revenues from consumer access tools rely on consumers’ willingness to spend money to increase their safety and privacy while using the internet.

 

Our prospective customers in the enterprise access segment often do not have a specific portion of their information technology budgets allocated for products that address the next generation of privacy solutions. We invest in sales and marketing efforts to increase market awareness, educate prospective customers, and drive the adoption of our offerings. We believe that we will need to invest additional resources in targeted global markets to drive awareness and market adoption. The degree to which prospective customers recognize the mission critical need for collecting valuable information from internet sites will drive our ability to acquire new customers, increase renewals and follow-on sales opportunities, which, in turn, will affect our future financial performance.

 

Reliance on Large Customers

 

We work continuously to increase our customer base, in order to reduce reliance on large customers. During the first half of 2024, 44% of our enterprise internet access revenue came from 38 customers who purchased services in amounts ranging between $50,000 and $500,000, and 13% of our revenue was generated from 128 customers who purchased services at amounts ranging between $5,000 and $50,000. As of June 30, 2024, we had 5 customers that purchased services in amounts greater than $500,000, who generated together approximately 42% of the total enterprise internet access business revenues. To the extent any of the Company’s significant customers reduce their purchases of services, our revenues would be adversely impacted; however, an alteration in customer composition could strengthen the Company’s market position and support more sustainable growth.

 

Expansion from Existing Customers

 

Our large customer base represents a significant opportunity for further sales expansion. When customers have purchased subscriptions from us, we have achieved significant expansion with them over time as they add additional features, geographic coverage, users, and digital intelligence solutions. We believe the increased spending from our customers is an indication of the value we provide them over time.

 

An indication of our success to increase spending from existing customers in the enterprise internet access business is our Net dollar-based Retention Rate, or NRR, which compares our Annual Recurring Revenue, or ARR, from the same set of customers as of a certain point in time, relative to the same point in time in the previous year ago period. We calculate our NRR as of a period-end by starting with the ARR from the cohort of all customers as of 12 months prior to such period-end, or the Prior Period ARR. We then calculate the ARR from these same customers as of the current period-end, or the Current Period ARR. Current Period ARR includes any expansion and is net of contraction or attrition over the last 12 months but excludes ARR from new customers in the current period. We then divide the Current Period ARR by the Prior Period ARR to arrive at the point-in-time NRR. We then calculate the average of the trailing four quarter point-in-time NRR to arrive at the NRR. As of June 30, 2024, our NRR was 1.59.

 

Our NRR may fluctuate due to a number of major factors, such as: material changes in our customers’ businesses; our customers’ satisfaction with our solutions; pricing; support; and the competition which may impact the revenues from significant customers due to changes in our customers’ spending levels.

 

5

 

 

Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023

 

Revenue

 

The following table summarizes our revenues by source for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

 

   For the Six Months
Ended June 30,
 
U.S. dollars in millions  2024   2023 
Revenue by source:        
Software as a Service   17.3    10.0 
Advertising services   *    2.7 
Total revenue   17.3    12.7 

 

*Less than $0.1 million

 

Our revenue for the six months ended June 30, 2024, totaled $17.3 million, compared to $12.7 million generated in the six months ended June 30, 2023. The increase in revenue is mainly due to an increase in SaaS revenue in the enterprise internet access segment generated by NetNut, which doubled its revenues from $8.4 million to $16.8 million, primarily due to higher transactions volumes from our customers during the six months ended June 30, 2024. Our decision to scale down our consumer internet access business, drove a partial offset in revenue growth, of which $2.7 million is attributed to advertising revenue and $1.1 million to a drop in the SaaS revenues in this segment from $1.6 million in the first half of 2023 to $0.5 million in the equivalent period in 2024.

 

Cost of Revenue and Gross Profit

 

The following table summarizes our cost of revenue for the periods presented, as well as presenting the gross profit as a percentage of total revenue. The period-to-period comparison of results is not necessarily indicative of results for future periods. 

 

   For the Six Months
Ended June 30,
 
U.S. dollars in millions  2024   2023 
Internet protocol addresses costs   2.7    1.7 
Traffic acquisition costs   -    1.1 
Networks and servers   0.4    0.3 
Depreciation, amortization and impairment of intangible assets   0.3    0.6 
Clearing fees   0.1    0.5 
Payroll, related expenses and share-based payment   0.3    0.2 
Other   0.1    * 
Total cost of revenue   3.9    4.4 
Gross profit   13.4    8.3 
Gross profit %   78%   65%

 

*Less than $0.1 million

 

Our cost of revenue for the six months ended June 30, 2024, totaled $3.9 million, compared to $4.4 million in the six months ended June 30, 2023. The decrease is primarily attributed to the operational scale down in the consumer internet access segment of $1.5 million, mainly in traffic acquisition costs, partially offset by an increase of $1.1 million in the enterprise internet access segment costs of addresses and networks and servers, to support the increase in revenue.

 

As a result of a higher increase in revenue compared to cost of revenue, gross profit for the six months ended June 30, 2024, totaled $13.4 million, compared to $8.3 million in the six months ended June 30, 2023, representing an increase of 61%.

 

6

 

 

Research and Development Expenses

 

The following table summarizes our research and development expenses for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

 

   For the Six Months
Ended June 30,
 
U.S. dollars in millions  2024   2023 
Payroll, related expenses and share-based payment   1.7    1.7 
Subcontractors   0.1    * 
Other   0.3    0.2 
Total research and development expenses   2.1    1.9 

   

*Less than $0.1 million

 

Research and development expenses for the six months ended June 30, 2024, totaled $2.1 million, compared to $1.9 million for the six months ended June 30, 2023. The increase is attributed to higher payroll and subcontractors’ costs in the enterprise internet access segment, partially offset by the stoppage of development operations in the consumer internet access segment, mainly payroll and related expenses.

 

Selling and Marketing Expenses

 

The following table summarizes our sales and marketing expenses for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

 

   For the Six Months
Ended June 30,
 
U.S. dollars in millions  2024   2023 
Payroll, related expenses and share-based payment   2.2    2.0 
Media costs   -    1.4 
Marketing   0.5    0.3 
Professional fees   0.1    0.1 
Depreciation, amortization and impairment of intangible assets   0.1    2.5 
Other   0.5    0.2 
Total selling and marketing expenses   3.4    6.5 

  

Sales and marketing expenses for the six months ended June 30, 2024, totaled $3.4 million, compared to $6.5 million in the six months ended June 30, 2023. The decrease resulted from CyberKick’s (the consumer internet access solutions) intangible assets impairment loss of $2.2 million during the six months ended June 30, 2023, as well as the scale down in its selling and marketing operations, mainly media costs at the amount of $1.4 million, partially offset by a $0.9 million increase in the enterprise internet access segment costs, especially payroll and related expenses.

 

General and Administrative Expenses

 

The following table summarizes our general and administrative expenses for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

 

   For the Six Months
Ended June 30,
 
U.S. dollars in millions  2024   2023 
Payroll and related expenses and share-based payment   1.5    1.0 
Professional fees   0.9    1.1 
Other   0.2    0.2 
Total general and administration expenses   2.6    2.3 

 

General and administrative expenses for the six months ended June 30, 2024, totaled $2.6 million, compared to $2.3 million in the six months ended June 30, 2023. The change is primarily due to higher payroll and share-based compensation expenses, partially offset by lower professional fees costs.

 

7

 

 

Impairment of Goodwill

 

For the six months ended June 30, 2024, no goodwill impairment loss was recorded, compared to $6.3 million in the six months ended June 30, 2023, related to the CyberKick cash-generating-unit.

 

Operating Profit (Loss)

 

As a result of the foregoing, our operating profit for the six months ended June 30, 2024, totaled $5.3 million, compared to an operating loss of $8.7 million in the six months ended June 30, 2023.

 

Finance income (expenses), net

 

Finance expense, net, for the six months ended June 30, 2024, totaled $3.4 million, compared to financial income, net of $0.1 million in the six months ended June 30, 2023. This change is primarily due to an increase in the fair value of derivative financial instruments, as a result of the sharp rise in the Company’s share price as of June 30, 2024, compared to December 31, 2023.

 

Tax Benefit (Expense)

 

Tax expense for the six months ended June 30, 2024, totaled $0.8 million, compared to tax benefit of $0.2 million in the six months ended June 30, 2023. The switch to tax expense is due to the profit before income tax generated by NetNut in the first half of 2024, after utilizing all of its carryforward tax losses.

 

Net Profit (Loss) for the Period

 

As a result of the foregoing, our net profit for the six months ended June 30, 2024, totaled $1.1 million, compared to an $8.4 million net loss in the six months ended June 30, 2023.

 

8

 

 

Liquidity and Capital Resources

 

Overview

 

As of June 30, 2024, our cash and cash equivalents of approximately $21.6 million were intended for working capital, capital expenditures, investment in technology and business acquisition purposes.

 

We believe that our cash and cash equivalents will be sufficient to meet our anticipated cash needs for the foreseeable future and at least for the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings, the continuing market acceptance of our products and our pursuit of strategic opportunities, including, but not limited to, strategic acquisitions. If we are unable to raise additional capital when desired or if we cannot generate profit from operating activities, our business, operating results, and financial condition would be adversely affected. 

 

   For the Six Months
Ended June 30,
 
U.S. dollars in millions  2024   2023 
Net cash provided by (used in) operating activities   6.3    (0.2)
           
Net cash provided by investing activities   0.2    - 
           
Net cash provided by financing activities   4.3    0.7 
           
Net increase in cash and cash equivalents   10.8    0.5 

 

Operating Activities

 

During the six months ended June 30, 2024, net cash provided by operating activities was $6.3 million, primarily attributable to an increase in the Company’s operating profit from the enterprise internet access segment. This increase in cash provided by operating activities represents a $6.5 improvement compared to the $0.2 million used in operating activities during the six months period ended June 30, 2023.

 

Investing Activities

 

During the six months ended June 30, 2024, net cash provided by investing activities totaled $0.2 million, compared to no change during the six months ended June 30, 2023, primarily due to interest received on short-term bank deposits.

 

Financing Activities

 

During the six months ended June 30, 2024, net cash provided by financing activities totaled $4.3 million, mainly due to warrants and options exercises, compared to $0.7 million which stemmed from funds received mainly from our at-the-market offering of $0.5 million, net of issuance costs, during the six months ended June 30, 2023.

 

Net increase in Cash and Cash Equivalents

 

As a result of the foregoing, our cash and cash equivalents increased by $10.8 million during the six months ended June 30, 2024, compared to an increase of $0.5 million during the six months ended June 30, 2023.

 

9

 

 

Strategic Funding

 

On August 8, 2022, we signed a strategic funding agreement with O.R.B. Spring Ltd., or O.R.B., as further amended, of up to $4.0 million to support the growth of our consumer access solutions and its customer acquisition program. The repayment of the funding was based on a revenue share model in connection with sales generated from new customers acquired with each funding installment.

 

As of June 30, 2024, we received aggregate funding of approximately $2.6 million and repaid to O.R.B. an amount of approximately $1.4 million from the revenues that were generated as a result of the funding, and approximately $1.2 million is outstanding.

 

Private Placement 

 

On September 14, 2023, we completed a private placement offering of an aggregate of 187,225 units, or the Units, at a purchase price of $22.70 per Unit. Each Unit consists of 10 American Depositary Shares, or ADSs, and one non-tradeable warrant, or the Private Placement Warrants (the “PP Warrants”), each exercisable into three ADSs. Net proceeds totaled $3.82 million, after deducting offering costs of approximately $0.4 million.

 

The PP Warrants are exercisable at any time for a period of 30 months from the offering date upon payment of an exercise price of $2.72 per ADS. In addition, we issued an aggregate amount of 91,851 warrants to purchase 91,851 ADSs to placement agents, or the Agent Warrants, which can be exercised at an exercise price of $2.27 per ADS within 30 months from the offering date.

 

During the six months ended June 30, 2024, 466,452 PP Warrants were exercised to 466,452 ADSs in exchange for $1.27 million and 61,234 Agents Warrants were exercised to 61,234 ADSs in exchange for $0.14 million. As of June 30, 2024, all PP Warrants and Agent Warrants were exercised.

 

Current Outlook

 

As of June 30, 2024, our cash and cash equivalents were approximately $21.6 million. We expect that our current resources will be sufficient to meet our anticipated cash needs for the foreseeable future and at least for the next 12 months. Our operating plans may change as a result of many factors that may currently be unknown to us, which may impact our funding plans. Our future capital requirements will depend on many factors, including:

 

  the progress and costs of our research and development activities;
     
  the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally;
     
  the scope of our general and administrative expenses; and

 

  potential future acquisitions.

 

Research and development, patents and licenses, etc.

 

A comprehensive discussion of our research and development, patents and licenses, etc., is included in “Item 5. Operating and Financial Review and Prospects - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report. 

 

Critical Accounting Estimates

 

The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. A comprehensive discussion of our critical accounting estimates is included in “Item 5. Operating and Financial Review and Prospects – Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our Annual Report, as well as our unaudited condensed consolidated financial statements and the related notes thereto for the six months ended June 30, 2024, included elsewhere in this Report Form 6-K. 

 

 

10

 

v3.24.2.u1
Document And Entity Information
6 Months Ended
Jun. 30, 2024
Document Information Line Items  
Entity Registrant Name ALARUM TECHNOLOGIES LTD.
Document Type 6-K
Current Fiscal Year End Date --12-31
Amendment Flag false
Entity Central Index Key 0001725332
Document Period End Date Jun. 30, 2024
Document Fiscal Year Focus 2024
Document Fiscal Period Focus Q2
Entity File Number 001-38610
v3.24.2.u1
Condensed Consolidated Statements of Financial Position (Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Current assets:    
Cash and cash equivalents $ 21,626 $ 10,872
Trade, net 2,471 1,994
Other 961 399
Current assets 25,058 13,265
Non-current assets:    
Long-term deposits 102 104
Property and equipment, net 119 88
Right-of-use assets 638 779
Deferred tax assets 298 181
Intangible assets, net 1,082 1,386
Goodwill 4,118 4,118
Other non-current assets 94 145
Non-current assets 6,451 6,801
Total assets 31,509 20,066
Current liabilities:    
Trade 570 369
Other 3,058 2,439
Current maturities of long-term loans 564 290
Contract liabilities 2,285 1,983
Derivative financial instruments 3,409 109
Short-term lease liabilities 362 370
Current liabilities 10,248 5,560
Non-current liabilities:    
Long-term lease liabilities 398 523
Long-term loans, net of current maturities 439 802
Non-current liabilities 837 1,325
Total liabilities 11,085 6,885
Equity:    
Ordinary shares
Share premium 108,963 100,576
Other equity reserves 12,705 14,938
Accumulated deficit (101,244) (102,333)
Total equity 20,424 13,181
Total liabilities and equity $ 31,509 $ 20,066
v3.24.2.u1
Condensed Consolidated Statements of Profit or Loss (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Profit or loss [Abstract]    
Revenue $ 17,260 $ 12,664
Cost of revenue 3,854 4,390
Gross profit 13,406 8,274
Operating expenses:    
Research and development 2,143 1,948
Selling and marketing 3,372 6,472
General and administrative 2,626 2,286
Impairment of goodwill 6,311
Total operating expenses 8,141 17,017
Operating profit (loss) 5,265 (8,743)
Finance expense 3,612 177
Finance income (267) (293)
Finance expense (income), net 3,345 (116)
Profit (loss) before income tax 1,920 (8,627)
Tax benefit (expense) (831) 238
Net profit (loss) for the period $ 1,089 $ (8,389)
Basic and diluted profit (loss) per share:    
Basic profit (loss) per share (in Dollars per share) $ 0.02 $ (0.25)
Diluted profit (loss) per share (in Dollars per share) $ 0.02 $ (0.25)
v3.24.2.u1
Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($)
$ in Thousands
Ordinary shares
Share premium
Other equity reserves
Accumulated deficit
Total
Balance at Dec. 31, 2022 $ 95,077 $ 15,042 $ (96,808) $ 13,311
Balance (in Shares) at Dec. 31, 2022 32,628,044        
Issuance of ordinary shares upon exercise of options 111 (91) 20
Issuance of ordinary shares upon exercise of options (in Shares) 165,046        
Expiration of options 21 (21)
Share-based payments 637 637
At-the-market offering, net of issuance costs 545 545
At-the-market offering, net of issuance costs (in Shares) 2,076,140        
Net profit (loss) for the period       (8,389) (8,389)
Balance at Jun. 30, 2023 95,754 15,567 (105,197) 6,124
Balance (in Shares) at Jun. 30, 2023 34,869,230        
Balance at Dec. 31, 2023 100,576 14,938 (102,333) 13,181
Balance (in Shares) at Dec. 31, 2023 59,681,632        
Issuance of ordinary shares upon exercise of options and vesting of RSUs 4,740 (1,795) 2,945
Issuance of ordinary shares upon exercise of options and vesting of RSUs (in Shares) 2,638,521        
Issuance of ordinary shares upon exercise of warrants 3,636 (1,383) 2,253
Issuance of ordinary shares upon exercise of warrants (in Shares) 6,035,860        
Expiration of options 11 (11)
Share-based payments 956 956
Net profit (loss) for the period       1,089 1,089
Balance at Jun. 30, 2024 $ 108,963 $ 12,705 $ (101,244) $ 20,424
Balance (in Shares) at Jun. 30, 2024 68,356,013        
v3.24.2.u1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Cash flows from operating activities    
Net profit (loss) for the period $ 1,089 $ (8,389)
Adjustments for:    
Effect of exchange rate differences on cash and cash equivalents and restricted deposits balances 68 26
Change in fair value of derivative financial instruments 3,300 (24)
Impairment of goodwill and intangible assets 8,806
Depreciation and amortization 474 617
Interest income related to short-term bank deposits (267)
Interest portion of lease payments 68 7
Interest and other finance expense )income( related to long-term loan 161 (250)
Interest expense related to short-term bank loans 83
Share-based payments 956 599
Total adjustments 4,760 9,864
Changes in asset and liability items:    
Trade receivables (477) (489)
Other receivables (127) 268
Trade payables 201 (1,226)
Other payables 653 (50)
Deferred taxes (117) (238)
Contract liabilities 302 119
Changes in operating asset and liability, total 435 (1,616)
Net cash provided by (used in) operating activities 6,284 (141)
Cash flows from investing activities    
Withdrawn of short-term restricted deposits 60
Withdrawn of long-term deposits 2
Interest related to short-term bank deposits 267
Investment in long-term deposits (48)
Investment in long-term restricted deposits (21)
Repayment of long-term restricted deposits 33
Purchase of property and equipment (60) (24)
Net cash provided by investing activities 209
Cash flows from financing activities    
Long-term loans received 888
Long-term loans interest payments (110) (230)
Long-term loans principal payments (89) (329)
Short-term bank loans received 4,800
Repayment of short-term bank loans (4,800)
Short-term bank loans interest payments (88)
Principal portion of lease payments (133) (107)
Interest portion of lease payments (68) (7)
Proceeds from exercise of options and warrants 4,763 20
Proceeds from at-the-market offering 688
Issuance costs in connection with offerings (34) (151)
Net cash provided by financing activities 4,329 684
Changes in cash and cash equivalents 10,822 543
Cash and cash equivalents at beginning of the period 10,872 3,290
Effect of exchange rate changes on cash and cash equivalents (68) (20)
Cash and cash equivalents at end of the period 21,626 3,813
Supplemental disclosure of non-cash investing and financing activities:    
Receivables due to exercise of options 435
Addition of right-of-use assets $ 541
v3.24.2.u1
General
6 Months Ended
Jun. 30, 2024
General [Abstract]  
GENERAL

NOTE 1 - GENERAL:

 

Background

 

Alarum Technologies Ltd. (“Alarum”, and collectively referred to with its wholly-owned subsidiaries as the “Company”) is a global provider of internet access and web data collection solutions.

 

The Company’s ordinary shares are listed on the Tel Aviv Stock Exchange (“TASE”) and the Company’s American Depositary Shares (“ADSs”) are listed on the Nasdaq Capital Market.

 

The Company currently operates in two segments - enterprise internet access and consumer internet access. The enterprise internet access solutions are provided through the Company’s wholly owned subsidiary NetNut Ltd. (“NetNut”) and enable customers to collect data anonymously at any scale from any public sources over the web using a unique hybrid network. The consumer internet access solutions are provided through the Company’s wholly-owned subsidiary CyberKick Ltd. (“CyberKick”), and provide a powerful, secured and encrypted connection, masking the customers online activity and keeping them safe from hackers.

 

The Company currently funds its operations primarily through cash generated from operating activities. Accordingly, cash and cash equivalents as of June 30, 2024, were $21,626 thousand and cash provided by operating activities was $6,284 thousand for the six months ended June 30, 2024. Based on the Company’s cash position, the Company believes that it has sufficient resources to fund its operations for at least the next twelve months from the date on which the condensed consolidated financial statements are authorized for issue.

 

War in Israel

 

In October 2023, Israel was attacked by the Hamas terrorist organization and entered a state of war. To date, there is no material adverse impact on the Company’s operations and financial results as a result of this war. However, at this time, it is not possible to predict the intensity or duration of the war, nor can the Company predict how this war will ultimately affect Israel’s economy in general. The Company continues to monitor the situation closely and examine the potential disruptions that could adversely affect its operations.

v3.24.2.u1
Accounting Policies
6 Months Ended
Jun. 30, 2024
General [Abstract]  
ACCOUNTING POLICIES

NOTE 2 - ACCOUNTING POLICIES:

 

Basis of presentation

 

The Company’s condensed consolidated financial statements for the six months ended June 30, 2024, have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. These condensed consolidated financial statements, which are unaudited, do not include all of the information and disclosures that would otherwise be required in a complete set of annual financial statements and should be read in conjunction with the annual financial statements for the year ended December 31, 2023 and their accompanying notes, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as published by the International Accounting Standards Board.

 

The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2024, or for any other interim period.

 

Estimates

 

The preparation of interim financial statements requires the Company’s management to exercise its judgment and to use significant accounting estimates and assumptions that affect the application of the Company’s accounting policies and the amounts of reported assets, liabilities, income and expenses. Actual results may materially differ from those estimates.

 

In preparation of these condensed consolidated financial statements, the significant judgments that were exercised by the management in applying the Company’s accounting policies and the key sources of estimation uncertainty were similar to those applied in the Company’s annual financial statements for the year ended December 31, 2023.

 

Accounting policies

 

The accounting policies applied in the preparation of these condensed consolidated financial statements are consistent with those applied in the preparation of the annual financial statements for the year ended December 31, 2023, except as described below.

 

Income tax

 

Income tax expense for interim periods is recognized at an amount determined by multiplying the profit before income tax for the interim period of each individual jurisdiction by management’s best estimate of the expected effective annual income tax rate of each jurisdiction, adjusted for the tax effects of certain items recognized in full in the interim period.

 

New standards and amendments adopted

 

Several new standards, amendments to standards and interpretations that are effective for annual periods beginning on January 1, 2024, have been applied in preparing these condensed consolidated financial statements. None of these had a material effect on the Company’s condensed consolidated financial statements.

 

New standards and amendments not yet adopted

 

IFRS 18, “Presentation and Disclosure in Financial Statements” (“IFRS 18”)

 

IFRS 18 replaces IAS 1, “Presentation of Financial Statements” (“IAS 1”). As part of the new disclosure requirements, companies will be required to present new defined subtotals in the statement of profit or loss, as follows: (i) operating profit and (ii) profit before financing and tax. In addition, items in the statement of profit or loss will be classified into three defined categories: operating, investment and financing. The standard also includes a requirement to provide a separate disclosure in the financial statements regarding the use of management-defined performance measures (“non-GAAP measures”), and specific instructions were added for the grouping and splitting of items in the financial statements and their accompanying notes. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, with an option for early adoption. The Company is currently in a preliminary stage of assessing the expected effect of this new standard.

v3.24.2.u1
Significant Changes in the Current Reporting Period
6 Months Ended
Jun. 30, 2024
Significant Changes in the Current Reporting Period [Abstract]  
SIGNIFICANT CHANGES IN THE CURRENT REPORTING PERIOD

NOTE 3 - SIGNIFICANT CHANGES IN THE CURRENT REPORTING PERIOD:

 

Shares issuance

 

During the six months ended June 30, 2024, 527,686 warrants issued as a part of the Company’s September 14, 2023 private placement and 75,900 warrants issued as part of April 3, 2020 public offering, were exercised into 603,586 ADSs, or 6,035,860 ordinary shares, for a total consideration of $2,253 thousand.

 

During the six months ended June 30, 2024, 2,492,688 options were exercised into 2,492,688 ordinary shares for a total consideration of $2,945 thousand, and 145,833 vested restricted share units (“RSUs”) were issued into 145,833 ordinary shares.

 

Derivative financial instruments

 

Derivative financial instruments consist of certain warrants previously issued to investors which are accounted for as financial liabilities at fair value through profit or loss. Accordingly, these warrants are measured at fair value (level 3) and changes are recorded to profit or loss on a periodic basis.

 

During the six months ended June 30, 2024, there was a significant increase in the fair value of derivative financial instruments, mainly due to an increase in the Company’s share price, which resulted in an increase of $3,300 thousand recognized in finance expense in profit or loss.

 

The fair value of the warrants as of June 30, 2024, was estimated using the Black-Scholes model, with the following principal assumptions: risk-free interest rate of 4.99%-5.43%, expected term (in years) of 0.36-1.25 and volatility of 96.54%-109.20%.

 

As of June 30, 2024, derivative financial instruments totaled to $3,409 thousand.

 

O.R.B agreement

 

Further to the described in Note 10 to the Company’s annual financial statements for the year ended December 31, 2023, during the six months ended June 30, 2024, the Company repaid to O.R.B. Spring Ltd. an amount of $199 thousand, based on the actual customers’ payments according to the revenue share model.

 

For the six months ended June 30, 2024, interest expenses related to long-term loan totaled to $110 thousand.

 

As of June 30, 2024, long-term loan, including current maturities, totaled to $1,003 thousand.

 

Options and RSUs grants

 

During the six months ended June 30, 2024, the Company’s board of directors (“BOD”) approved grants of 240,044 RSUs and 145,012 options to purchase 145,012 ordinary shares. The options have exercise prices range of NIS 0-3.97 and they will vest over 1-3 years from the grant dates. The total fair value of these grants was $493 thousand.

v3.24.2.u1
Segment and Revenue Information
6 Months Ended
Jun. 30, 2024
Segment and Revenue Information [Abstract]  
SEGMENT AND REVENUE INFORMATION

NOTE 4 - SEGMENT AND REVENUE INFORMATION:

 

Disaggregation of revenue

 

The Company’s revenue is disaggregated by segments and source.

 

The following table presents the Company’s revenue disaggregated by source for the six months ended June 30, 2024 and 2023:

 

   Six months ended June 30 
   2024   2023 
   U.S. dollars in thousands 
         
Software as a Service   17,257    9,983 
Advertising services   3    2,681 
    17,260    12,664 

 

Segments

 

Management has determined the Company’s operating segments based on the information reviewed by the Company’s chief operating decision maker for the purpose of allocating resources to the segments and assessing their performance.

 

The chief operating decision maker, who is the Company’s Chief Executive Officer (“CEO”), examines the performance of each operating segment based on revenue and segment adjusted EBITDA. The Company defines segment adjusted EBITDA as net profit (loss) before depreciation, amortization and impairment of intangible assets, finance income (expense) and income tax, as further adjusted for the effect of impairment of goodwill, share-based payments and other adjustments, as applicable.

 

The following table presents details of the Company’s operating segments and a reconciliation of the total segment adjusted EBITDA to profit (loss) before income tax for the six months ended June 30, 2024 and 2023:

 

   Six months ended June 30 
   2024   2023 
   U.S. dollars in thousands 
Revenue        
Enterprise internet access   16,751    8,428 
Consumer internet access   509    4,236 
    17,260    12,664 
Segment adjusted EBITDA          
Enterprise internet access   7,610    2,219 
Consumer internet access   260    73 
    7,870    2,292 
Non-attributable corporate costs   (1,315)   (1,123)
Depreciation, amortization and impairment of intangible assets   (334)   (3,002)
Impairment of goodwill   
-
    (6,311)
Share-based payments   (956)   (599)
Finance income (expense), net   (3,345)   116 
Profit (loss) before income tax   1,920    (8,627)
v3.24.2.u1
Subsequent Events
6 Months Ended
Jun. 30, 2024
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 5 - SUBSEQUENT EVENTS:

 

On July 16, 2024, the Company’s BOD approved a grant of 199,992 RSUs to the Company’s CEO. The grant is subject to the shareholders’ approval.

 

In addition, the Company’s BOD approved grants of 55,020 RSUs to employees and 100,000 options to purchase 100,000 ordinary shares to a consultant. The options have a zero-exercise price and they will vest over a period of 2 years from the grant date.

v3.24.2.u1
Accounting Policies, by Policy (Policies)
6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Basis of presentation

Basis of presentation

The Company’s condensed consolidated financial statements for the six months ended June 30, 2024, have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. These condensed consolidated financial statements, which are unaudited, do not include all of the information and disclosures that would otherwise be required in a complete set of annual financial statements and should be read in conjunction with the annual financial statements for the year ended December 31, 2023 and their accompanying notes, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as published by the International Accounting Standards Board.

The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2024, or for any other interim period.

Estimates

Estimates

The preparation of interim financial statements requires the Company’s management to exercise its judgment and to use significant accounting estimates and assumptions that affect the application of the Company’s accounting policies and the amounts of reported assets, liabilities, income and expenses. Actual results may materially differ from those estimates.

 

In preparation of these condensed consolidated financial statements, the significant judgments that were exercised by the management in applying the Company’s accounting policies and the key sources of estimation uncertainty were similar to those applied in the Company’s annual financial statements for the year ended December 31, 2023.

Accounting policies

Accounting policies

The accounting policies applied in the preparation of these condensed consolidated financial statements are consistent with those applied in the preparation of the annual financial statements for the year ended December 31, 2023, except as described below.

Income tax

Income tax

Income tax expense for interim periods is recognized at an amount determined by multiplying the profit before income tax for the interim period of each individual jurisdiction by management’s best estimate of the expected effective annual income tax rate of each jurisdiction, adjusted for the tax effects of certain items recognized in full in the interim period.

New standards and amendments adopted

New standards and amendments adopted

Several new standards, amendments to standards and interpretations that are effective for annual periods beginning on January 1, 2024, have been applied in preparing these condensed consolidated financial statements. None of these had a material effect on the Company’s condensed consolidated financial statements.

New standards and amendments not yet adopted

New standards and amendments not yet adopted

IFRS 18, “Presentation and Disclosure in Financial Statements” (“IFRS 18”)

IFRS 18 replaces IAS 1, “Presentation of Financial Statements” (“IAS 1”). As part of the new disclosure requirements, companies will be required to present new defined subtotals in the statement of profit or loss, as follows: (i) operating profit and (ii) profit before financing and tax. In addition, items in the statement of profit or loss will be classified into three defined categories: operating, investment and financing. The standard also includes a requirement to provide a separate disclosure in the financial statements regarding the use of management-defined performance measures (“non-GAAP measures”), and specific instructions were added for the grouping and splitting of items in the financial statements and their accompanying notes. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, with an option for early adoption. The Company is currently in a preliminary stage of assessing the expected effect of this new standard.

v3.24.2.u1
Segment and Revenue Information (Tables)
6 Months Ended
Jun. 30, 2024
Segment and Revenue Information [Abstract]  
Schedule of Company’s Revenue Disaggregated The following table presents the Company’s revenue disaggregated by source for the six months ended June 30, 2024 and 2023:
   Six months ended June 30 
   2024   2023 
   U.S. dollars in thousands 
         
Software as a Service   17,257    9,983 
Advertising services   3    2,681 
    17,260    12,664 

 

Schedule of Operating Segments and a Reconciliation of the Total Segment The following table presents details of the Company’s operating segments and a reconciliation of the total segment adjusted EBITDA to profit (loss) before income tax for the six months ended June 30, 2024 and 2023:
   Six months ended June 30 
   2024   2023 
   U.S. dollars in thousands 
Revenue        
Enterprise internet access   16,751    8,428 
Consumer internet access   509    4,236 
    17,260    12,664 
Segment adjusted EBITDA          
Enterprise internet access   7,610    2,219 
Consumer internet access   260    73 
    7,870    2,292 
Non-attributable corporate costs   (1,315)   (1,123)
Depreciation, amortization and impairment of intangible assets   (334)   (3,002)
Impairment of goodwill   
-
    (6,311)
Share-based payments   (956)   (599)
Finance income (expense), net   (3,345)   116 
Profit (loss) before income tax   1,920    (8,627)
v3.24.2.u1
General (Details)
$ in Thousands
6 Months Ended
Jun. 30, 2024
USD ($)
Jun. 30, 2023
USD ($)
Dec. 31, 2023
USD ($)
Dec. 31, 2022
USD ($)
General [Line Items]        
Operating segments 2      
Cash and cash equivalents $ 21,626 $ 3,813 $ 10,872 $ 3,290
Cash provided by operating activities $ 6,284 $ (141)    
v3.24.2.u1
Significant Changes in the Current Reporting Period (Details)
$ / shares in Units, $ in Thousands
6 Months Ended
Jun. 30, 2024
USD ($)
Years
$ / shares
shares
Jun. 30, 2024
USD ($)
₪ / shares
shares
Dec. 31, 2023
USD ($)
Sep. 14, 2023
shares
Significant Changes in the Current Reporting Period [Line Items]        
Warrants issued | shares 527,686 527,686   75,900
Exercised (in Dollars per share) | $ / shares $ 603,586      
Exercise of warrants | shares 6,035,860      
Total consideration (in Dollars) | $ $ 2,253 $ 2,253    
Options exercised | shares 2,492,688      
Shares issued | shares 2,492,688 2,492,688    
Vested restricted share units | shares 145,833      
Fair value of derivative financial instruments (in Dollars) | $ $ 3,300 $ 3,300    
Derivative financial instruments (in Dollars) | $ 3,409 3,409 $ 109  
Actual customers payments (in Dollars) | $ 199      
Interest expenses (in Dollars) | $ 110      
Current maturities (in Dollars) | $ $ 1,003 $ 1,003    
Purchase options | shares 145,012      
Ordinary shares | shares 145,012      
Bottom of range [member]        
Significant Changes in the Current Reporting Period [Line Items]        
Risk-free interest rate 4.99%      
Expected term (in Years) | Years 0.36      
Volatility 96.54%      
Exercise prices range (in New Shekels per share) | ₪ / shares   $ 0    
Vest over 1 year      
Top of range [member]        
Significant Changes in the Current Reporting Period [Line Items]        
Risk-free interest rate 5.43%      
Volatility 109.20%      
Exercise prices range (in New Shekels per share) | ₪ / shares   $ 3.97    
Vest over 3 years      
RSUs [Member]        
Significant Changes in the Current Reporting Period [Line Items]        
Total consideration (in Dollars) | $ $ 2,945 $ 2,945    
Shares issued | shares 145,833 145,833    
Options and RSUs grants [Member]        
Significant Changes in the Current Reporting Period [Line Items]        
Total consideration (in Dollars) | $ $ 493 $ 493    
Number of options granted 240,044      
v3.24.2.u1
Segment and Revenue Information (Details) - Schedule of Company’s Revenue Disaggregated - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Schedule of Company’s Revenue Disaggregated [Line Items]    
Revenue $ 17,260 $ 12,664
Software as a Service [Member]    
Schedule of Company’s Revenue Disaggregated [Line Items]    
Revenue 17,257 9,983
Advertising Services [Member]    
Schedule of Company’s Revenue Disaggregated [Line Items]    
Revenue $ 3 $ 2,681
v3.24.2.u1
Segment and Revenue Information (Details) - Schedule of Operating Segments and a Reconciliation of the Total Segment - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Revenue    
Revenue $ 17,260 $ 12,664
Segment adjusted EBITDA    
Segment adjusted EBITDA 7,870 2,292
Non-attributable corporate costs (1,315) (1,123)
Depreciation, amortization and impairment of intangible assets (334) (3,002)
Impairment of goodwill (6,311)
Share-based payments (956) (599)
Finance income (expense), net (3,345) 116
Profit (loss) before income tax 1,920 (8,627)
Enterprise internet access [Member] | Operating segments [member]    
Revenue    
Revenue 16,751 8,428
Enterprise internet access [Member] | Reconciliation total segment adjusted EBITDA [Member]    
Segment adjusted EBITDA    
Segment adjusted EBITDA 7,610 2,219
Consumer internet access [Member] | Operating segments [member]    
Revenue    
Revenue 509 4,236
Consumer internet access [Member] | Reconciliation total segment adjusted EBITDA [Member]    
Segment adjusted EBITDA    
Segment adjusted EBITDA $ 260 $ 73
v3.24.2.u1
Subsequent Events (Details) - Non-adjusting events after reporting period [Member]
Jul. 16, 2024
shares
Subsequent Events [Line Items]  
Vest over a period 2 years
Restricted share units [member]  
Subsequent Events [Line Items]  
Number of option grant 100,000
Chief Executive Officer [Member] | Restricted share units [member]  
Subsequent Events [Line Items]  
Number of option grant 199,992
Consultant [Member]  
Subsequent Events [Line Items]  
Ordinary shares (in Shares) 100,000
Employees [Member] | Restricted share units [member]  
Subsequent Events [Line Items]  
Number of option grant 55,020

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