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
of the Securities Exchange Act of 1934
For the Month of August 2017
Commission File Number 333-206989
Ability Inc.
(Translation of registrant’s name into English)
Yad
Harutzim 14
Tel Aviv 6770007, Israel
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
ABILITY INC.
On August 30, 2017, Ability Inc. (the “Company”) announced its financial results for the three and six months ended June 30, 2017.
2017 Second Quarter Financial Summary
Revenues for the three months ended June 30, 2017 were $35,000, compared to $1.0 million for the three months ended June 30, 2016. The decrease was primarily due to slower than anticipated customer adoption of the Company’s new generation system as well as a decrease in sales of the Company’s legacy products because of the ongoing transition to a revenue stream primarily focused on the Company’s new generation system. In addition, the Company suspended recognizing revenues from one of its customers due to collectability issues which resulted in lower revenues than anticipated for the three months ended June 30, 2017.
Cost of revenues for the three months ended June 30, 2017 were $543,000, compared to $1.0 million for the three months ended June 30, 2016. This decrease is consistent with the decrease in revenues.
Operating loss for both the three months ended June 30, 2017 and 2016 was $(3.2) million. The operating loss for the three months ended June 30, 2017, compared to the same period in 2016 was the result of lower revenues and higher general and administrative expenses, primarily due to increased legal fees, offset by lower cost of revenues and sales and marketing expenses, primarily due to lower commissions.
Net loss for both the three months ended June 30, 2017 and 2016 was $(3.1), or $(0.13) per basic and diluted share. Negative EBITDA for the three months ended June 30, 2017 was $(3.0) million, compared to $(3.1) million for the three months ended June 30, 2016. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.
2017 Year-to-Date Financial Summary
Revenues for the six months ended June 30, 2017 were $832,000, compared to $7.5 million for the six months ended June 30, 2016. The decrease was primarily due to slower than anticipated customer adoption of the Company’s new generation system, as well as decrease in sales of the Company’s legacy products because of the ongoing transition to a revenue stream primarily focused on the Company’s new generation system. In addition, the Company suspended recognizing revenues from one of its customers due to collectability issues which resulted in lower revenues than anticipated for the six months ended June 30, 2017.
Cost of revenues for the six months ended June 30, 2017 were $1.2 million, compared to $4.3 million for the six months ended June 30, 2016. This decrease is consistent with the decrease in revenues.
Operating loss for the six months ended June 30, 2017 was $(6.2) million, compared to $(2.2) million for the six months ended June 30, 2016. The increase was due to lower revenues and higher general and administrative expenses, primarily due to increased legal and professional fees, partially offset by lower cost of revenues and sales and marketing expenses, primarily due to lower commissions.
Net loss for the six months ended June 30, 2017 was $(6.1) million, or $(0.25) per basic and diluted share, compared to $(3.3) million, or $(0.14) per basic and diluted share, for the six months ended June 30, 2016. Negative EBITDA for the six months ended June 30, 2017 was $(6.0) million, compared to $(2.0) million for the six months ended June 30, 2016. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.
Balance Sheet Highlights
Cash and cash equivalents as of June 30, 2017 totaled $6.0 million, compared to $11.8 million as of December 31, 2016. Cash used in operating activities was $6.0 million for the six months ended June 30, 2017 compared with $548,000 for the six months ended June 30, 2016. Shareholders' equity totaled $3.6 million as of June 30, 2017 compared to $9.7 million as of December 31, 2016.
Due to the significant decline in revenues and the increase in legal and professional services fees, the Company has suffered operating losses, and has an accumulated deficit as part of its shareholders’ equity and negative cash flows from operating activities that, along with other matters, raises a substantial doubt about its ability to continue as a going concern.
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Ability Inc.
Condensed Consolidated Balance Sheets
| June 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| U.S. Dollar in thousands | ||||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 5,991 | $ | 11,840 | ||||
| Restricted deposits | 22 | 1,758 | ||||||
| Restricted deposit for put option | 12,126 | 12,028 | ||||||
| Accounts receivable | 1,975 | 3,173 | ||||||
| Inventory | 352 | 481 | ||||||
| Accumulated costs with respect to projects in excess of progress payments | 93 | 151 | ||||||
| Due from Controlling Shareholders | - | 196 | ||||||
| Income tax receivable | 159 | 267 | ||||||
| Other current assets | 616 | 353 | ||||||
| Total Current Assets | 21,334 | 30,247 | ||||||
| NON-CURRENT ASSETS: | ||||||||
| Property and equipment, net | 1,567 | 1,588 | ||||||
| Total Non-Current Assets | 1,567 | 1,588 | ||||||
| Total Assets | $ | 22,901 | $ | 31,835 | ||||
| LIABILITIES & SHAREHOLDER'S EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accrued payroll and other compensation related accruals | $ | 229 | $ | 270 | ||||
| Trade accounts payable, accrued expenses and other accounts payable | 3,488 | 4,952 | ||||||
| Put option liability | 11,900 | 11,900 | ||||||
| Income tax payable | 55 | 32 | ||||||
| Accrued expenses and accounts payable with respect to projects | 2,486 | 4,734 | ||||||
| Progress payments in excess of accumulated costs with respect to projects | 905 | - | ||||||
| Total Current Liabilities | 19,063 | 21,888 | ||||||
| NON CURRENT LIABILITIES: | ||||||||
| Accrued severance pay | 249 | 245 | ||||||
| Total Non-Current Liabilities | 249 | 245 | ||||||
| Total Liabilities | 19,312 | 22,133 | ||||||
| SHAREHOLDERS' EQUITY: | ||||||||
| Ordinary shares $0.0001 par value, 200,000,000 shares authorized, 25,756,142 shares issued and outstanding at June 30, 2017 and December 31, 2016 | 3 | 3 | ||||||
| Preferred shares $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2017 and December 31, 2016 | - | - | ||||||
| Additional paid-in-capital | 18,560 | 18,560 | ||||||
| Accumulated deficit | (14,974 | ) | (8,861 | ) | ||||
| Total Shareholders' Equity | 3,589 | 9,702 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 22,901 | $ | 31,835 | ||||
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Ability Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| U.S. Dollar in thousands, except per share data | ||||||||||||||||
| Unaudited | ||||||||||||||||
| Revenues | $ | 35 | $ | 1,015 | $ | 832 | $ | 7,478 | ||||||||
| Cost of revenues | 543 | 1,039 | 1,163 | 4,256 | ||||||||||||
| Gross profit (loss) | (508 | ) | (24 | ) | (331 | ) | 3,222 | |||||||||
| Sales and marketing expenses | 819 | 1,716 | 1,565 | 2,923 | ||||||||||||
| General and administrative expenses | 1,833 | 1,500 | 4,319 | 2,516 | ||||||||||||
| Operating loss | (3,160 | ) | (3,240 | ) | (6,215 | ) | (2,217 | ) | ||||||||
| Finance income, net | (58 | ) | (83 | ) | (125 | ) | (62 | ) | ||||||||
| Loss before income taxes | (3,102 | ) | (3,157 | ) | (6,090 | ) | (2,155 | ) | ||||||||
| Income taxes (benefit) expenses | 11 | (67 | ) | 23 | 1,177 | |||||||||||
| Net loss | $ | (3,113 | ) | $ | (3,090 | ) | $ | (6,113 | ) | $ | (3,332 | ) | ||||
| Weighted-average ordinary shares outstanding - Basic and diluted | 24,582,874 | 24,582,874 | 24,582,874 | 24,582,874 | ||||||||||||
| Loss per ordinary basic and diluted | $ | (0.13 | ) | $ | (0.13 | ) | $ | (0.25 | ) | $ | (0.14 | ) | ||||
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Ability Inc.
Condensed Consolidated Statements of Cash Flows
| Six months ended | ||||||||
| June 30, | ||||||||
| 2017 | 2016 | |||||||
| U.S. Dollar in thousands | ||||||||
| Unaudited | ||||||||
| CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (6,113 | ) | $ | (3,332 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 87 | 73 | ||||||
| Amortization | 158 | - | ||||||
| Impairment of fixed assets | - | 114 | ||||||
| Capital loss | 15 | - | ||||||
| Change in operating assets and liabilities: | ||||||||
| Restricted deposits | 1,736 | 325 | ||||||
| Accounts receivable | 1,198 | 1,734 | ||||||
| Inventory | (50 | ) | (233 | ) | ||||
| Deferred taxes | - | (463 | ) | |||||
| Other current assets | (263 | ) | 1,579 | |||||
| Restricted deposit for put option | (98 | ) | (29 | ) | ||||
| Accrued payroll and other compensation related accruals | (41 | ) | 255 | |||||
| Trade accounts payable, accrued expenses and other accounts payable | (1,464 | ) | 122 | |||||
| Income tax payable | 131 | (1,173 | ) | |||||
| Accrued expenses and accounts payable with respect to projects | (2,248 | ) | (1,280 | ) | ||||
| Progress payments in excess of accumulated costs with respect to projects | 963 | 1,186 | ||||||
| Accrued severance pay | 4 | - | ||||||
| Total adjustments | 128 | 2,210 | ||||||
| Net cash used in operating activities | (5,985 | ) | (1,122 | ) | ||||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of Property and equipment | (125 | ) | (121 | ) | ||||
| Proceeds from sale of Property and equipment | 65 | - | ||||||
| Net cash used in investing activities | (60 | ) | (121 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Due from Controlling Shareholders* | 196 | 574 | ||||||
| Withholding taxes paid by the Company on behalf of the Controlling shareholders' with respect to dividends distributed | - | (3,403 | ) | |||||
| Net cash provided by (used in) financing activities | 196 | (2,829 | ) | |||||
| Net Change In Cash | (5,849 | ) | (4,072 | ) | ||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR | 11,840 | 25,829 | ||||||
| CASH AT END OF THE FISCAL PERIOD | $ | 5,991 | $ | 21,757 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid: | ||||||||
| Interest and banks' charges | $ | 8 | $ | 20 | ||||
| Income tax | $ | 5 | $ | 3,715 | ||||
* Reclassified
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Ability Inc.
Condensed Consolidated Statements of EBITDA
| Three months ended | Six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| U.S. Dollar in thousands | ||||||||||||||||
| Unaudited | ||||||||||||||||
| Operating loss | $ | (3,160 | ) | $ | (3,240 | ) | $ | (6,215 | ) | $ | (2,217 | ) | ||||
| Depreciation | 43 | 39 | 87 | 73 | ||||||||||||
| Amortization | 80 | - | 158 | - | ||||||||||||
| Impairment of fixed assets | - | 114 | - | 114 | ||||||||||||
| EBITDA loss | $ | (3,037 | ) | $ | (3,087 | ) | $ | (5,970 | ) | $ | (2,030 | ) | ||||
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SIGNATURE
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 hereunto duly authorized.
| ABILITY INC. | ||
| By: | /s/ Anatoly Hurgin | |
| Anatoly Hurgin | ||
| Chief Executive Officer | ||
Date: August 30, 2017
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