ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis
of our financial condition and results of operations should be read in conjunction with the information contained in our consolidated
financial statements and the notes thereto. The following discussion and analysis includes forward-looking statements that involve
certain risks and uncertainties, including, but not limited to, those described in Item 1A. Risk Factors in our most recent
Annual Report on Form 10-K (the “2019 Annual Report”). Our actual results may differ materially from those discussed
below. See “Special Note Regarding Forward-Looking Statements” below.
Overview
Purpose built for the
cloud, Cyren is an early pioneer and leading innovator of Software-as-a-Service (SaaS) security solutions that protect businesses,
their employees and customers against threats from email and the web.
Cyren’s cloud-based
approach to security sets us apart from other vendors in the market. Our security solutions are architected around the fundamental
belief that cyber security is a race against time – and the cloud best enables the speed, sophistication and advanced automation
needed to detect and block threats as they emerge on the internet. As more and more businesses move their data and applications
to the cloud, they need a security provider that is able to keep pace.
Cyren’s security
cloud delivers faster detection and protection, with SaaS security solutions that inspect web and email traffic before it reaches
a user’s browser or inbox – often identifying and blocking threats in just seconds. Our SaaS solutions are easy to
deploy and manage, delivering critical security and faster innovation, for a low total cost of ownership.
Cyren’s cloud
security products and services fall into three categories:
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Cyren Threat Detection Services – these services detect a variety of threats in email and from the web, and are embedded into products from the world’s leading technology and security vendors. Cyren Threat Detection Services include our Email Security Detection Engine, Malware Detection Engine, Web Security Engine, and Threat Analysis Service.
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Cyren Threat Intelligence Feeds – Cyren’s threat intelligence feeds provide valuable threat intelligence data that can be used by enterprise or OEM customers to support threat detection, threat hunting and incident response. Cyren’s threat intelligence feed offerings include IP Reputation Intelligence, Phishing Intelligence, Malware Intelligence and Zombie Intelligence.
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Cyren Enterprise Email Security Products – these include cloud-based solutions designed for enterprise customers, and are sold either directly or through channel partners. Cyren enterprise email security products include Cyren Email Security, a cloud-based secure email gateway and Cyren Inbox Security, an anti-phishing product for Office 365.
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Key Opportunities and Challenges
Threat Landscape
The last several years
have possibly experienced the greatest amount of dramatic global incidents directly related to malware and cyber threats since
the advent of the internet. From election hacks to global ransomware attacks, malware threats are at an all-time high. Phishing
attacks have become increasingly common, and no company, large or small seems immune to these threats. Hackers have become more
successful at monetizing these attacks, and as long as these activities prove lucrative, we expect these incidents to continue.
Cloud and Mobility
Businesses are going
through a massive change in their IT strategies as they look to drive more business value, agility, and better customer experiences,
while cloud and mobility are becoming increasingly important, as evidenced by the following trends:
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Business internet traffic continues to increase every year;
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Data and applications are increasingly moving to the cloud;
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More and more users are working remotely;
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Buyers continue to move away from traditional on-premise solutions;
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Mature and legacy on premise deployments are reaching end of life and are increasingly being replaced by cloud and SaaS alternatives;
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IT security staffing shortages;
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Increasingly fast, sophisticated, expensive and high-profile attacks target organizations of all sizes;
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Compliance and regulatory mandates;
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Heightened cybercrime activity among commercial enterprises and nation states;
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Automation is increasingly considered critical to accelerating detection and protection; and
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The need to simplify operations through vendor consolidation.
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These are some of the
reasons why we believe Cyren’s vision for 100% cloud security is compelling to IT security teams looking to protect their
businesses in today’s cloud-centric mobile-first world.
Investments in Operations, Research
and Development and Sales and Marketing
Our cost of revenues, research
and development expenses, and sales and marketing expenses are all significant contributing factors to our operating losses. Over
time, we expect that our utilization of our cloud infrastructure will increase and provide the opportunity for improved gross margins.
Our investments in research and development are required in order to enhance and improve our solutions. In the future, we expect
to lower the rate of R&D investment as a percentage of revenue, and we expect to be able to drive more revenue from existing
solutions rather than by adding new solutions. The return on our sales and marketing investment is tied to attracting new customers
and enhancing our business with existing customers, thereby lowering the overall sales and marketing costs as a percent of revenues.
In the first quarter of 2020, headcount declined as we continue to reduce expenses, and we believe managing future headcount and
expense growth will be key in improving our gross and operating margins over time.
Growing Our Enterprise Business
Although all of our
services are subscription services, our Enterprise offerings on the CCS and CIS platforms are typically invoiced up front for an
annual contract amount, or the full multi-year contract amount, at the start of the term. As a result, this business is expected
to provide a larger immediate contribution to cash flow and better return on investment. As this enterprise business grows as a
portion of our overall revenues, we expect to increase deferred revenue and our operating results and cash flow to improve, which
will make us less reliant on other sources of capital in the future.
Components of our Operating Results
Revenue
We derive revenues
from the sale of real-time cloud-based services for each of Cyren’s email security, web security, antimalware and advanced
threat protection offerings.
We sell all of our
solutions as subscription services, either through OEMs and service providers, which are considered Cyren customers, or as complete
security services directly, or indirectly via our partners, to enterprises.
Cost of Revenue
Personnel costs, which consist of salaries,
benefits, bonuses and stock-based compensation for employees that operate our network and provide support services
to our customers, as well as data center costs, are the most significant components of our cost of revenues. Other costs include
third party contractors, royalties for use of third-party technologies, amortization of intangibles and depreciation of data center
equipment. We expect these costs may increase in absolute dollars as we continue to optimize our cloud infrastructure and our support
services, but should reduce as a percentage of overall revenue.
Operating Expenses
Our operating expenses
consist of research and development, sales and marketing, and general and administrative expenses. Personnel costs, which consist
of salaries, benefits, bonuses, and stock-based compensation, are the most significant component of our operating expenses. Operating
expenses also include allocated overhead costs for facilities, IT and depreciation. We expect operating expenses to increase in
absolute dollars as we continue to grow.
Research and Development.
Research and development expenses consist primarily of personnel costs, outsourced engineering and threat analysis services. We
believe these investments are crucial for our ability to continue to enhance the functionality of our services, as well as to develop
and introduce new services to the market. We expect research and development expenses may decrease as we release new products during
2020. Development costs related to internal use technology that supports our security services are capitalized on the balance sheet,
while other development costs are expensed as they are incurred.
Sales and Marketing.
Sales and marketing expenses primarily include personnel costs, sales commissions, marketing activities, and travel associated
with sales and marketing. We market and sell our services worldwide through our sales organization and distribution channels. We
capitalize sales commissions paid to internal sales personnel and amortize these expenses over an estimated period of benefit that
reflects the expected future revenue streams. We reduced sales and marketing expense in 2019 and in the first quarter 2020 but
anticipate that we may need to increase investment in these areas as we launch our new products and enhance our sales and marketing
teams to support our further growth. Our sales personnel are typically not immediately productive, and therefore the increase in
expenses we incur when adding personnel is not immediately accompanied by increased revenue and in some cases may not result in
increased revenue if these new sales personnel are unsuccessful in becoming productive.
General and Administrative. General and administrative expenses
consist primarily of personnel costs, audit fees, legal expenses, recruiting expenses and other general operating costs. We expect
our general and administrative expenses to grow in absolute dollars as we continue our operational growth.
Other Income (Expense), net
Other income (expense),
net consists generally of capital gain or loss from the sale of assets. However, in the first quarter of 2019, we reached a financial
settlement with the former shareholders of eleven related to the legal dispute regarding the amount and timing of the earn-out
payments related to the acquisition of eleven (the “eleven settlement”). Since the financial settlement was less than
the accrued interest and the unpaid earn-out consideration on the Company’s balance sheet, the difference was reflected as
other income during the period.
Financial Expenses, net
Financial expenses,
net consist mainly of foreign exchange gains and losses, interest expense on our outstanding debt and interest income earned on
our cash and cash equivalents. In 2019 and 2020, these expenses also included income related to the accounting for a multi-year
arrangement where a customer paid upfront the full contract value. This has been deemed a significant financing component under
ASC 606.
Tax Benefit
Our tax benefit is
derived primarily from income taxes in foreign jurisdictions in which we conduct business. We estimate income taxes in each of
the jurisdictions in which we operate. This process involves determining income tax expense together with calculating the deferred
income tax expense related to temporary differences resulting from the differing treatment of items for tax and accounting purposes.
Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. These temporary differences result in deferred tax assets and liabilities, which are included
net as applicable within our balance sheets. For most of our recent years, we have incurred operating losses in Israel and the
U.S., where we have recorded a full valuation allowance against our deferred tax assets in those jurisdictions.
RESULTS OF OPERATIONS
The following table sets forth financial
data for the three months ended March 31, 2020 and 2019. Percentages may not add due to rounding.
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Three
months ended
March 31,
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2020
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2019
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Amount
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% of Revenue
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Amount
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% of Revenue
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Revenues
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$
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9,649
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100
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%
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$
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9,655
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100
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%
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Cost of revenues
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3,598
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37
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4,000
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41
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Gross profit
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6,051
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63
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5,655
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59
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Operating expenses:
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Research and development, net
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3,344
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35
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4,177
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43
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Sales and marketing
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3,036
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31
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3,856
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40
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General and administrative
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2,214
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23
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2,432
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25
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Total operating expenses
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8,594
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89
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10,465
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108
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Operating loss
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(2,543
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)
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(26
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)
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(4,810
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)
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(50
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)
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Other income (loss), net
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6
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0
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248
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3
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Financial expenses, net
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(231
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)
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|
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(2
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)
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(53
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)
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(1
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)
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Loss before taxes on income
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(2,768
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)
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(29
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)
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(4,615
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)
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(48
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)
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Tax benefit
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17
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0
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39
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-
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Net loss
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$
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(2,751
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)
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(29
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)%
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$
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(4,576
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)
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(47
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)%
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Three Months Ended March 31, 2020 Compared
to Three Months Ended March 31, 2019
Revenues. In the
three months ended March 31, 2020, revenues of $9.7 million were approximately in line with the same quarter in the prior year
of $9.7 million. Threat intelligence revenues from existing customers increased slightly which offset some smaller contracts that
were terminated in during the three months ended March 31, 2020.
Cost of Revenues.
Cost of revenues decreased by $0.4 million from $4.0 million for the three months ended March 31, 2019 to $3.6 million for the
three months ended March 31, 2020, which represents a 10% year-over-year decrease. For the three months ended March 31, 2020, cost
of revenues represented 37% of revenue, compared to 41% during the prior year, and accordingly gross margins for the period were
63% for the three months ended March 31, 2020 compared to 59% for the same period in the prior year. The decrease in cost of revenue
is the result of a decrease in payroll and related costs of approximately $0.1 million due to lower headcount. The use of outside
services decreased by approximately 0.1 million in an effort to reduce costs and datacenter costs decreased by approximately $0.2
million related to bandwidth and hosting costs.
Operating Expenses.
Overall operating expenses decreased by $1.9 million from $10.5 million for the three months ended March 31, 2019 to $8.6
million for the three months ended March 31, 2020, which represents a decrease of 18% year-over-year. Operating expenses for the
quarter totaled 89% of quarterly revenue, compared to 108% of quarterly revenue a year ago. The decrease in operating expenses
was primarily due to a decrease in employee headcount, captured in cost of revenues and operating expenses, which totaled 242
employees at the end of March 31, 2020, compared to 272 employees at the end of March 31, 2019.
Research and Development,
Net. R&D expense decreased by $0.9 million from $4.2million for the three months ended March 31, 2019 to $3.3 million for
the three months ended March 31, 2020, which represents a decrease of 20%. R&D expense for the quarter represented 35% of revenue,
compared to 43% a year ago. The decrease in R&D expense was primarily driven by decreased employee headcount leading to lower
payroll and employee related costs of approximately $0.3 million. Approximately $0.5 million of the R&D expense decrease was
the result of capitalization of new technology development which reduced overall R&D expenses. Capitalization of technology
development increased from $0.7 million for the three months ended March 31, 2019 to $1.2 million for the three months ended March
31, 2020. Outside services decreased by approximately $0.1 million primarily related to a reduction in use of external consultants
to reduce costs. R&D headcount decreased to 128 as of March 31, 2020 compared to 139 as of March 31, 2019.
Sales and Marketing.
Sales and marketing expenses decreased by $0.8 million (rounded) from $3.9 million for the three months ended March 31, 2019, to
$3.0 million for the three months ended March 31, 2020, which represents a decrease of 21%. Sales and marketing expense represented
31% of revenue during the three-month period ended March 31, 2020 compared to 40% of revenue for the three months ended March 31,
2019. The decrease in sales and marketing expense was primarily due to a reduction of overall sales and marketing headcount to
44 employees as of March 31, 2020 compared to 59 as of March 31, 2019 which resulted in approximately $0.5 million reduction in
expenses, as well as a reduction in overall marketing spend related to travel, use of outside services and advertising and industry
trade shows which accounted for a decrease of approximately $0.3 million for the three months ended March 31, 2020.
General and Administrative.
General and administrative (“G&A”) expense decreased by $0.2 million from $2.4 million for the three months ended
March 31, 2019 to $2.2 million for the three months ended March 31, 2020, which represents a decrease of 9%. G&A expense represented
23% of revenue for the first quarter of 2020, compared to 25% of revenue during the first quarter of 2019. The decrease is primarily
due to a reduction of $0.5 million in costs associated with outside services for the three months ended March 31, 2020 compared
to the three months ended March 31, 2019. Offsetting the decrease, payroll and payroll related costs increased by approximately
$0.2 million, driven by higher stock based compensation expense of $0.3 million due to new employee awards granted after March
31, 2019, offset by a decrease in bonus expense of $0.1 million due to lower expense in the three month period ended March 31,
2020 due to lower than anticipated bonus payments associated with 2019. Rent and office related costs increased by approximately
$0.1 million for the three-month period ended March 31, 2020 compared to the three month period ended March 31, 2019.
Other Income (Expense),
Net. Other income, net for the three months ended March 31, 2020 was $0.0 million, compared to an expense of $0.2 million for
the three months ended March 31, 2019. During the first quarter of 2019, we reached a financial settlement with the former shareholders
of eleven related to the legal dispute regarding the amount and timing of the earn-out payments related to the acquisition of eleven
(the “eleven settlement”). Since the financial settlement was less than the accrued interest and the unpaid earn-out
consideration on the Company’s balance sheet, the difference was reflected as other income during the period. For additional
information, please refer to “Earn-Out Consideration” below and Note 4 of the consolidated financial statements included
elsewhere in this quarterly report on Form 10-Q (the “Quarterly Report”).
Financial Expense,
Net. Financial expenses, net, increased by $0.18 million for the three months ended March 31, 2020, to $0.23 million from
$0.05 million as of March 31, 2019. The increase is mainly due to a $0.1 million increase in the expenses resulting from the
effect of foreign currency exchange rate fluctuation, $0.02 million of additional interest expense associated with the
issuance of the convertible debentures in March 2020, $0.03 million of interest associated with a significant financing
component with one of our contracts under ASC 606 and a $0.02 million decrease in interest income earned on our cash and cash
equivalents.
Effective Corporate Tax Rates
Corporate tax rates
and real capital gains tax in Israel were 23% for the three months ended March 31, 2020 and 2019.
Our German subsidiary
is subject to German tax at a consolidated rate of approximately 30%.
Other non-Israeli subsidiaries
are taxed according to the tax laws in their respective countries of residence.
We do not provide deferred
tax liabilities when we intend to reinvest earnings of foreign subsidiaries indefinitely. As of March 31, 2020, there are no undistributed
earnings of foreign subsidiaries.
We may currently qualify
as an “industrial company” within the definition of the Law for the Encouragement of Industry (Taxation) and, as such,
we may be eligible for certain tax benefits, including, inter alia, special depreciation rates for machinery, equipment and buildings,
amortization of patents, certain other intangible property rights and deduction of share issuance expenses.
Net Operating Loss Carry-Forwards
As of December 31,
2019, the Israeli entity had net operating loss carryforwards for tax purposes of $91.7 million and capital loss carryforwards
of $17.8 million which may be carried forward and offset against taxable income in the future, for an indefinite period.
As of December 31,
2019, the U.S. subsidiary had net operating loss carryforwards of $39.7 million for federal tax purposes and $11.1 million for
state tax purposes. These losses may offset any future U.S. taxable income of the U.S. subsidiary and will expire in the years
2020 through 2039.
Management currently
believes that based upon its estimations for future taxable income, it is more likely than not that the deferred tax assets regarding
the loss carryforwards will not be utilized in the foreseeable future. Thus, a valuation allowance was provided to reduce deferred
tax assets to their realizable value.
LIQUIDITY AND CAPITAL RESOURCES
We finance our operations
primarily from our cash and cash equivalents and cash from operations. As of March 31, 2020, and December 31, 2019, we had approximately
$15.1 million and $11.6 million of cash and cash equivalents, respectively.
Our future capital requirements
will depend on many factors, including, but not limited to our growth, market acceptance of our offerings, the timing and extent
of spending to support our efforts to develop our platform and the expansion of sales and marketing activities. We may be required
to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not
be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business,
financial condition and results of operations could be adversely affected.
Outlook
During 2020, we expect
to continue to incur capital expenditures associated with R&D and data center infrastructure. Over the past several years,
the Company has devoted most of its effort to research and development, product development and increasing revenues through additional
investments in sales & marketing. The Company generated a loss of $2.8 million and negative cash flow of $4.4 million from
operating activities in the three-month period ended March 31, 2020 and has an accumulated deficit of $234.1 million as of March
31, 2020. The Company is planning to finance its operations from its existing and future working capital resources and to continue
to evaluate additional sources of capital and financing. However, there is no assurance that additional capital and/or financing
will be available to the Company, and even if available, whether it will be on terms acceptable to the Company or in amounts required.
Accordingly, the Company’s Board modified its contingency plan, to be effected if needed, in whole or in part, at its discretion,
to allow the Company to continue its operations and meet its cash obligations. The contingency plan consists of cost reduction,
which include mainly the following steps: reduction in consultants’ expenses, headcount, compensation paid to key management
personnel and capital expenditures. The Company and the Board believe that its existing capital resources and other future measures
that may be implemented, if so required, will be adequate to satisfy its expected liquidity requirements for at least twelve months
from the filing date.
Cash Flows from Operating Activities
Cash used in operating
activities was $4.4 million for the three months ended March 31, 2020 as compared to $1.3 million for the three months ended March
31, 2019. The increase in cash usage of $3.1 million was primarily due to a three-year prepayment for services related to a customer
contract renewal during the first quarter of 2019, thus leading to an increase in cash usage in the first quarter of 2020 since
payment had occurred during the prior year.
Cash Flows from Investing Activities
Cash used in investing
activities was $1.6 million for the three months ended March 31, 2020 as compared to $1.2 million for the three months ended March
31, 2019. The increase of $0.4 million was primarily due to higher capitalization of technology associated with new product development
compared to the same period a year ago.
Cash Flows from Financing Activities
Cash provided by financing
activities was $9.4 million for the three months ended March 31, 2020 as compared to cash used of $2.5 million for the three months
ended March 31, 2019. The change of $11.9 million was primarily attributable to the convertible debentures issued on March 19,
2020 with gross proceeds of $10.2 million, offset by payment of debt issuance costs of $0.8 million. For the three months ended
March 31, 2019, Cyren, as previously disclosed, had a payment of $2.7 million in conjunction with the eleven settlement and $0.2
million of proceeds from stock option exercises, thus contributing to the change year over year.
Working Capital
As of March 31, 2020, and
2019 we had positive working capital of $6.4 million and $5.1 million, respectively. The increase in working capital during the
three months ended March 31, 2020 as compared to the prior year was primarily due to the issuance of the convertible debentures
in March 2020 (the “Convertible Debentures”) offset by a significant upfront customer payment in the first quarter
of 2019 for a multi-year agreement of which did not occur in the first quarter of 2020.
Financings
On December 5, 2018, the
Company issued $10.0 million aggregate principal amount of convertible notes in a private placement to affiliates of an existing
minority institutional shareholder (the “Convertible Notes”). The Convertible Notes are unsecured, unsubordinated obligations
of Cyren and carry a 5.75% interest rate, payable semi-annually in (i) 50% cash and (ii) 50% cash or ordinary shares at Cyren’s
election. The Convertible Notes have a 3-year term and mature in December 2021, unless converted in accordance with their terms
prior to maturity. The Convertible Notes were issued with a conversion price of $3.90 per share which was subject to adjustment
using a weighted average ratchet mechanism based on the size and price of future equity offerings and the total shares outstanding.
On November 7, 2019, Cyren
announced the closing of a rights offering that raised gross proceeds of $8.0 million. As a result of this offering, the conversion
price of the Convertible Notes was adjusted to $3.73. In addition, the Convertible Notes would be subject to immediate conversion
upon any change in control in the Company (or subject to repayment if the price in the change in control transaction is less than
the conversion price).
On March 19, 2020, we issued
$10.25 million aggregate principal amount of Convertible Debentures in a private placement to certain accredited investors (the
“Purchasers”). The Convertible Debentures are guaranteed by two of our subsidiaries and carry a 5.75% interest rate,
payable semi-annually in cash or, subject to the satisfaction of certain equity conditions, in ordinary shares. The Convertible
Debentures mature in March 2024, unless converted in accordance with their terms prior to maturity. The Convertible Debentures
have an initial conversion price of $0.75 per share, subject to adjustments. If the closing bid price of our ordinary shares is
at least $2.25 (subject to adjustment) for at least 20 trading days during any 30 consecutive trading day period, and certain conditions
are satisfied, we may force a conversion of all or any part of the outstanding principal amount of the Convertible Debentures,
accrued and unpaid interest and any other amounts then owing, subject to certain conditions.
Earn-Out Consideration
In conjunction with the
2012 acquisition of eleven, the Company entered into an earn-out agreement with the former shareholders that would pay additional
consideration based on the revenue performance for the years ending 2012-2015. Subsequently in 2014 the Company had a legal dispute
regarding the amount and timing of the earn-out payments and had entered into arbitral proceedings with the former shareholders
of eleven. On March 9, 2017, the Company received the arbitral judgement. Pursuant to the judgement, the earn-out consideration
balance was increased to reflect additional legal expenses and interest expenses covering the period up to December 31, 2016. During
2017 and 2018, the Company continued to accrue interest on the unpaid earn-out consideration balance. In May 2018, the Company
made a partial payment of the earn-out consideration to five of the six former shareholders, in an amount of $604 thousand. The
earn-out consideration balance presented on the Company’s balance sheet as of December 31, 2018 reflected the complete remaining
liability relating to the earn-out, including accrued interest. In February 2019, the parties agreed to resolve all pending claims,
and on February 28, 2019 the Company paid approximately $2.7 million to settle the earn-out consideration in full. For additional
information, please refer to Note 4 of the consolidated financial statements included elsewhere in this Quarterly Report.
Registration Statements
In connection with our
private placement to Warburg Pincus in November 2017, in which we issued approximately 10.6 million ordinary shares for $1.85 per
share, we and Warburg Pincus entered into a registration rights agreement, which, among other things, provides Warburg Pincus with
three demand registration rights, piggyback and shelf registration rights. The demand registration rights became exercisable as
of August 6, 2018, subject to certain customary blackout periods.
In connection with the
issuance of the Convertible Debentures, we entered into a Registration Rights Agreement with the Purchasers. Pursuant to that agreement,
we agreed to file one or more registration statements with the SEC within sixty days of the date of the agreement to cover the
resale of the shares of our ordinary shares that are issuable to the Purchasers upon any conversion of the Convertible Debentures
or as interest payments.
On September 21, 2018,
we filed a shelf registration statement on Form F-3 with the SEC, which we converted to a Form S-3 on August 16, 2019. This registration
statement enables us to issue debt securities, ordinary shares, warrants or subscription rights up to an aggregate amount of $50
million. Under the rules governing shelf registration statements, we will file a prospectus supplement with the SEC which describes
the amount and type of securities being offered each time we issue securities under this registration statement. No securities
were issued under the registration statement on Form F-3. In November 2019, we issued shares as part of our rights offerings using
our Form S-3 as described above.
Off-Balance Sheet Arrangements
As of March 31, 2020,
we did not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our significant accounting
policies are discussed in Note 2. Significant Accounting Policies to our consolidated financial statements included in the Company’s
2019 Annual Report. There have been no significant changes to these policies for the three months ended March 31, 2020, except
as described in Note 2. Significant Accounting Policies to our condensed consolidated financial statements are included elsewhere
in this Quarterly Report. The critical accounting policies requiring estimates, assumptions, and judgements that we believe have
the most significant impact on our consolidated financial statements are described in Part II, Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations included in our 2019 Annual Report.
Recent Accounting Pronouncements
Please refer to Note
2. Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this Quarterly Report
for a full description of recent accounting pronouncements.