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 2020 (Report No. 2)

Commission file number: 001-38610

SAFE-T GROUP LTD.

(Translation of registrant’s name into English)

8 Abba Eban Ave.

Herzliya, 4672526 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  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulations S-T Rule 101(b)(1):_____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulations S-T Rule 101(b)(7):_____

CONTENTS

This Report of Foreign Private Issuer on Form 6-K consists of (i) the Registrant’s press release issued on August 31, 2020, titled “Safe-T Reports Second Quarter 2020 Financial Results,” which is attached hereto as Exhibit 99.1; (ii) the Registrant’s Interim Condensed Consolidated Financial Statements as of June 30, 2020, which is 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, 2020, which is attached hereto as Exhibit 99.3.

The first three paragraphs, the sections titled “Recent Developments”, “Second Quarter 2020 Corporate Highlights,” “COVID-19 Impacts”, “Financial results for the six months ended June 30, 2020”, “Financial results for the three months ended June 30, 2020”, “Balance Sheet Highlights” and “Forward-Looking Statements,” and the IFRS financial statements in the press release attached as Exhibit 99.1, and Exhibits 99.2 and 99.3 are incorporated by reference into the registration statements on Form S-8 (File No. 333-233510 and 333-239249) and Form F-3 (File Nos. 333-233724, 333-235367, 333-235368 and 333-236030) 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and Exchange Commission, to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.

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.

2

Exhibit 99.1

Safe-T Reports Second Quarter 2020 Financial Results

Revenue Growth of 164% for the First Half of 2020 Compared to the First Half of 2019

HERZLIYA, Israel, August 31, 2020 - Safe-T® Group Ltd. (Nasdaq, TASE: SFET), a provider of secure access solutions for on-premise and hybrid cloud environments, today announced its financial results for the six and three-month periods ended June 30, 2020.

Revenues for the first half of 2020 totaled $2,165,000, an increase of 164% compared to $821,000 in the first half of 2019. Revenues for the three-month period ended June 30, 2020 totaled $1,077,000, an increase of 173% compared to $394,000 in the three-month period ended June 30, 2019.

The Company’s cash balance at the end of the quarter was $9,771,000. During July and August 2020, the Company raised gross funds of $6,794,000 through the issuance of ADSs and pre-funded warrants, and the exercise of warrants, bringing the cash balance of the Company including short-term deposits as of August 27, 2020 to approximately $15.0 million.

Shachar Daniel, Chief Executive Officer, commented on the results: “Over the past few months we continued to make successful progress towards some of the goals we set at the beginning of the year: accelerating revenue growth; moving fully to an indirect go-to-market approach (working with partners) with our innovative product for secure remote work while reducing implementation and support costs resulting in improved gross margin; and developing innovative capabilities of our IP proxy product to expand potential customers and maximize sales potential of our solution. We continued to receive market validation for our products’ technological superiority by receiving a prestigious order from one of the leading intelligence agencies in the world and in a number of prestigious engagements with the most professional and industry-leading distribution agencies.”

Mr. Daniel added, “In addition, we were able to strengthen the Company’s balance sheet and raise significant funds that will provide us the ability to continue growing organically as well as in the form of successful acquisitions such as the acquisition of NetNut during 2019. We are proud of the fact that despite this challenging period, we continued to work hard at full capacity, while maintaining efficient operations with minimal expenses.”

Recent Material Developments:

Second Quarter 2020 Corporate Highlights:

COVID-19 Impacts

The COVID-19 outbreak has forced us to modify our business practices and we have adopted early and strict prevention measures to protect the health of our employees (including employees’ travel, employees’ work locations and cancellation of physical participation in meetings, events and conferences). Thanks to the resilience of our operational capabilities, we have been able to continuously serve our clients during this crisis. We leveraged our IT expertise to implement remote connections with employees, customers and vendors to deliver a functional and productive work-from-home strategy.

Due to an almost complete freeze in the travel sector, we experienced a reduction in revenue of some of the IP proxy business sectors. At the same time, this business recently gained new entry into the cyber-security market and launched its Dynamic Residential Proxy network in Europe and Asia, that we believe can compensate for the travel sector-related revenue reduction. Due to the COVID-19 lack of visibility implications, the decision making of customers in the cyber-security business had slowed down, and we anticipate longer sale cycles as organizations continue to evaluate their strategic and financial position. Nevertheless, as an agile and responsive business, we believe we are able to put in place the correct measures on health and safety, customer service, cost controls, cash management and employee engagement during this evolving situation. This pandemic in a global, highly connected world, has shown the increased need for secure remote access solutions that we offer, and with our unique ZoneZero® solution, we are able to complete an entire end-to-end sales cycle remotely, from pre-sale stage to final implementation.

Our business, despite the resilience it has shown in the first half of the year, might not be immune to the impact that global lockdowns resulting from the pandemic are having on a number of the markets that we operate in or serve. We may experience a slowdown in the pace of new business in the second half of the year, which we plan to compensate by closely monitoring all parts of the business to make sure we can respond quickly to fluctuations in demand, as well as by executing our M&A strategy in the coming months.

Financial results for the six months ended June 30, 2020:

Financial results for the three months ended June 30, 2020:

All descriptions of Safe-T’s share capital in this press release, including share amounts and per share amounts, are presented after giving effect to the reverse split that the Company affected on October 21, 2019.

The following table presents the reconciled effect of the non-cash expenses/income and one-time expenses further described below on the Company’s net loss for the six and three-month periods ended June 30, 2020 and 2019, and for the year ended December 31, 2019:

Balance Sheet Highlights

Use of Non-IFRS Financial Results

In addition to disclosing financial results calculated in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, this press release contains non-IFRS financial measures of net loss for the periods presented that exclude the effect of share-based compensation expenses, amortization of intangible assets, non-cash issuance and acquisition expenses and the revaluation of finance liabilities at fair value. The Company’s management believes the non-IFRS financial information provided in this release is useful to investors’ understanding and assessment of the Company’s ongoing operations. Management also uses both IFRS and non-IFRS information in evaluating and operating its business internally, and as such deemed it important to provide this information to investors. The non-IFRS financial measures disclosed by the Company should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with IFRS, and the financial results calculated in accordance with IFRS and reconciliations to those financial statements should be carefully evaluated. Investors are encouraged to review the reconciliations of these non-IFRS measures to their most directly comparable IFRS financial measures provided in the financial statement tables herein.

About Safe-T® Group Ltd. 

Safe-T Group Ltd. (Nasdaq, TASE: SFET) is a provider of Zero Trust Access solutions which mitigate attacks on enterprises’ business-critical services and sensitive data, while ensuring uninterrupted business continuity. Safe-T’s cloud and on-premises solutions ensure that an organization’s access use cases, whether into the organization or from the organization out to the internet, are secured according to the “validate first, access later” philosophy of Zero Trust. This means that no one is trusted by default from inside or outside the network, and verification is required from everyone trying to gain access to resources on the network or in the cloud.

Safe-T’s wide range of access solutions reduce organizations’ attack surface and improve their ability to defend against modern cyberthreats. As an additional layer of security, our integrated business-grade global proxy solution cloud service enables smooth and efficient traffic flow, interruption-free service, unlimited concurrent connections, instant scaling and simple integration with our services.

With Safe-T’s patented reverse-access technology and proprietary routing technology, organizations of all size and type can secure their data, services and networks against internal and external threats.

Safe-T’s SDP solution on AWS Marketplace is available here.

For more information about Safe-T, visit www.safe-t.com

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements. For example, Safe-T is using forward-looking statements in this press release when it discusses its outlook for the future, the expanding of potential customers and maximization of sales potential of its solution, the increasing interest in its innovative solutions, the positive results and growth over time, the impact of COVID-19, closely monitoring the Company’s business in order to respond quickly to fluctuations in demand and the ability to continue growing organically as well as executing its M&A strategy. Because such statements deal with future events and are based on Safe-T’s current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of Safe-T could differ materially from those described in or implied by the statements in this press release. The forward-looking statements contained or implied in this press release are subject to other risks and uncertainties, including those discussed under the heading “Risk Factors” in Safe-T’s annual report on Form 20-F filed with the Securities and Exchange Commission (“SEC”) on March 31, 2020, and in any subsequent filings with the SEC. Except as otherwise required by law, Safe-T undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. References and links to websites have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release. Safe-T is not responsible for the contents of third-party websites. 

CONTACT INVESTOR RELATIONS: 
Michal Efraty

+972-(0)52-3044404
michal@efraty.com 

Consolidated Statements of Financial Position

(In thousands of USD)

Consolidated Statements of Profit or Loss

(In thousands of USD, except per share amounts)

6

Exhibit 99.2

SAFE-T GROUP LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

JUNE 30, 2020

SAFE-T GROUP LTD.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

JUNE 30, 2020

TABLE OF CONTENTS

SAFE-T GROUP LTD.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)

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

SAFE-T GROUP LTD.

CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS

(Unaudited)

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

SAFE-T GROUP LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

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

SAFE-T GROUP LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

SAFE-T GROUP LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL:

Due to an almost complete freeze in the travel sector, the Company experienced a reduction of approximately 10% in revenue from the IP proxy business. At the same time, this business just recently gained new entry into the cyber-security market, which the Company believes may compensate for the revenue reduction mentioned above.

Also, due to the COVID-19 lack of visibility implications, the decision making of customers in the cyber security business had slowed down, such that it may affect the pace of the Company’s growth plans for the remainder of 2020.

Overall, the Company is closely monitoring all parts of the business to ensure that it can respond quickly to fluctuations in demand. Refer also note 9.

Management’s plans include the continued commercialization of the Company’s products and raising capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships. There are no assurances however, that the Company will be successful in obtaining the level of financing needed for its operations. If the Company is unsuccessful in commercializing its products and raising capital, it may need to reduce activities, curtail or cease operations.

NOTE 2 - BASIS OF PREPARATION:

The Company’s condensed consolidated financial statements for the six and three month periods ended June 30, 2020 have been prepared in accordance with International Accounting Standard (hereinafter - “IAS”) 34, “Interim Financial Reporting”. These condensed consolidated financial statements, which are unaudited, do not include all 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 as of December 31, 2019 and their accompanying notes, which have been prepared in accordance with International Financial Reporting Standards (hereinafter - “IFRS”) as published by the International Accounting Standards Board (hereinafter – “IASB”). The results of operations for the six and three month periods ended June 30, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year ending December 31, 2020, or for any other interim period.

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - BASIS OF PREPARATION (continued):

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, 2019.

NOTE 3 - SIGNIFICANT 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 as of December 31, 2019, unless otherwise indicated.

NOTE 4 - DISAGGREGATED REVENUE DATA:

Set forth below is a breakdown of the Company’s revenue by revenue stream:

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5 - FINANCIAL INSTRUMENTS AND FINANCIAL RISKS:

Level 1 and level 2 financial instruments:

As of June 30, 2020 and December 31, 2019, the Company has no financial asset or liability measured at level 1 or level 2.

Level 3 financial instruments:

The Company has several financial liabilities measured at fair value through profit or loss, which meet the level 3 criteria as of June 30, 2020 and December 31, 2019.

The Company evaluated the fair value of convertible debentures, contingent consideration and derivative financial instruments that were issued in connection with capital raising rounds.

The following table presents the changes in level 3 instruments for the six-month period ended June 30, 2020 (unaudited):

The following table presents the changes in level 3 instruments for the three-month period ended June 30, 2020 (unaudited):

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 5 - FINANCIAL INSTRUMENTS AND FINANCIAL RISKS (continued):

Assets and liabilities which are not measured on a recurrent basis at fair value are presented at their carrying amount, which approximates their fair value.

NOTE 6 - CONVERTIBLE DEBENTURES:

On April 9, 2019, the Company entered into a Securities Purchase Agreement (the “April 2019 SPA”) with certain lenders (the “Lenders”), according to which, the Company obtained a convertible loan in an aggregate amount of $6 million, for the issuance of convertible debentures (the “Convertible Debentures,” or the “Debentures”) and 146,341 warrants (the “Warrants”) to purchase up to 146,341 ADSs. The first tranche of the loan, in the amount of $1 million was received during April 2019, and the second tranche, in the amount of $5 million, was received during June 2019.

The Convertible Debentures had an 18-month term from issuance and bore interest at 8% per annum payable quarterly in cash or ADSs. The Debentures’ initial conversion price was set to $41 per ADS, and then was several times reset following triggering of an adjustment mechanism that was agreed upon in the April 2019 Agreement, setting forth that the conversion price will be reset, if there is a subsequent issuance of the Company’s securities below the conversion price, to the price of the subsequent issuance. The Debentures contained other customary anti-dilution features, with the Black-Scholes value of the Debentures payable upon the occurrence of a fundamental transaction. The Debentures were redeemable by the Company after the effective date, which was set as June 4, 2019, upon a 20 trading days prior notice to the Lenders at 120% of the principal amount of the Debentures, plus accrued interest.

Upon issuance, the Warrants had an exercise price of $47.15 per ADS, with 100% warrant coverage to the value of the Debentures. The Warrants had a five-year term and were exercisable for cash or on a cashless basis if no resale registration statement is available for resale of the ADSs issuable upon exercise. The exercise price of the Warrants was reset several times, in accordance with the adjustment mechanism setting forth that, if within 18-month from the issuance of the Warrants there is a subsequent issuance of the Company’s securities below the exercise price, the exercise price will be reset to the price of the subsequent issuance. The Warrants contained other customary anti-dilution features, with the Black-Scholes value of the Warrants payable upon the occurrence of a fundamental transaction.

Each Lender was granted with a 12-month participation right in a subsequent financing, up to the amount equal to 50% of the subsequent financing, which expired on June 5, 2020. The Lenders had a right to purchase additional debentures on the same terms until six months from June 4, 2019 (“Greenshoe Option”). The Lenders also had a most favored nation right (the “Most Favored Nation Right”) for the term of the debenture with respect to a subsequent financing on better terms, such that the Lenders may convert into the subsequent financing terms on a dollar-for-dollar basis. Each of the Company’s wholly owned subsidiaries guaranteed the obligations under the April 2019 SPA. The Debentures and Warrants contained customary beneficial ownership blockers for the Lenders, which prevented a Lender from acquiring a controlling block in the Company.

On July 22, 2019, the Company signed a repricing agreement with the Lenders (the “Repricing Agreement”) pursuant to which in exchange for the exercise of 36,232 Warrants into ADSs, the Company reduced the exercise price of these Warrants to $27.60 per ADS. The Repricing Agreement was considered as a dilutive issuance, and as a result triggered also the adjustment of the Debenture conversion price and the exercise price of other outstanding Warrants to $27.60.

Following the execution of the Repricing Agreement, the Lenders exercised the Warrants into 36,232 ADSs (representing 1,449,280 ordinary shares of the Company) on July 24, 2019, for consideration of $1 million.

On August 30, 2019, the Company signed an additional repricing agreement (the “Second Repricing Agreement”) with one of the Lenders pursuant to which in exchange for the exercise of 5,020 Warrants into ADSs, the Company reduced the exercise price of these Warrants to $19.92 per ADS.

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 6 - CONVERTIBLE DEBENTURES (continued):

The Second Repricing Agreement was considered, again, as a dilutive issuance, and as a result triggered another adjustment of the Debenture conversion price and the exercise price of other outstanding Warrants to $19.92.

Following the execution of the Second Repricing Agreement, the Lender exercised the said Warrants into 5,020 ADSs (representing 200,800 ordinary shares of the Company) on August 30, 2019 for consideration of $100 thousand.

On August 30, 2019, pursuant to a partial exercise of such Lenders’ Greenshoe Option, the Company signed a second securities purchase agreement, according to which the Company obtained another convertible loan from one of the Lenders in the amount of $400 thousand (the “August Greenshoe Debentures”). The August Greenshoe Debentures have an 18-month term from issuance and bear interest at 8% per annum payable quarterly in cash or ADSs. Upon issuance, the August Greenshoe Debentures were convertible at $19.92. The conversion price of the August Greenshoe Debentures would reset, but not below $8 per ADS, if there was a subsequent issuance of the Company’s securities below the conversion price per share, to the price of the subsequent issuance.

On October 31, 2019, the Company signed an additional securities purchase agreement, according to which the Company obtained another convertible loan from one of the Lenders, who partially exercised its Greenshoe Option in the amount of $500 thousand (the “October Greenshoe Debentures”). The October Greenshoe Debentures had an 18-month term from issuance and bear interest at 8% per annum payable quarterly in cash or ADSs. The October Greenshoe Debentures’ initial conversion price was $8.00 per ADS, subject to adjustments. The Company also signed an amendment to the April 2019 SPA with this Lender, that in exchange for waiving his Most Favored Nation Right with respect to the November 5, 2019 public offering, this Lender was able to exercise this right at any time following this offering, under the offering terms.

On November 5, 2019, the Company repaid Debentures in the amount of $470 thousand to the other Lender. Also, the Company paid to the other Lender an amount of $330 thousand for waiving his Most Favored Nation Right with respect only to the November 5, 2019 public offering. Following a public offering of the Company’s ADSs on November 5, 2019, the outstanding Warrants price of the said Lender was reset to $8.00.

The Company also agreed with one of the Lenders that he may exercise his respective Most Favored Nation Rights at any time for their total outstanding Debenture balance, while the respective Debenture was outstanding, in connection with the Company’s November 2019 Public Offering. If the Lender decided to exercise his Most Favored Nation Rights in connection with the November 2019 Public Offering, then the Lender would exchange his debentures for (i) ADSs at an exchange rate equal to $7.00, the per ADS offering price in the November 2019 Public Offering, and (ii) an even number of ADS purchase warrants at $7.70 per ADS (the “$7.70 MFN Warrants”), which $7.70 MFN Warrants were to be in form and substance identical to the warrants issued in the concurrent private placement to the November 2019 Public Offering, except for also having cashless exercise mechanism.

During November 2019, the lender converted debentures at an aggregate amount of approximately $1.6million, and was issued with 344,144 $7.70 MFN Warrants at expiration terms of 5 years from issuance.

On December 4, 2019, the Company agreed to extend the Lenders’ Greenshoe Option, until January 4, 2020.

On December 26, 2019, the Company closed a registered direct offering (the “December 2019 Registered Direct Offering”), providing for the issuance of ADSs and pre-funded warrants, each to purchase one ADS. Additionally, in a concurrent private placement, the Company issued to the investors unregistered warrants to purchase ADSs.

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 6 - CONVERTIBLE DEBENTURES (continued):

On December 26, 2019, the Company signed an additional securities purchase agreement, according to which the Company obtained another convertible loan from the Lenders, who partially exercised their Greenshoe Option in the approximate amount of $666 thousand for each Lender, for a total of $1,332 thousand (the “December Greenshoe Debentures”). The December Greenshoe Debentures had an 18-month term from issuance and bear interest at 8% per annum payable quarterly in cash or ADSs. According to the agreement, the December Greenshoe Debentures as well as all previous outstanding Debentures, are convertible at $8.00, subject to adjustments. In addition, the Lenders had a Most Favored Nation Right for a subsequent financing on better terms, for the term of the Debentures, for the December Greenshoe Debentures as well as for all previous outstanding Debentures in the amount of $3,854 thousand, such that the Lenders were able to convert into the subsequent financing on a dollar-for-dollar basis or at the terms of the December 2019 Registered Direct Offering.

The Company has also agreed with the Lenders that the Lenders may exercise their respective Most Favored Nation Rights at any time for their total outstanding Debenture balance, while the respective Debenture is outstanding, in connection with the Company’s December 2019 Registered Direct Offering. If the Lenders decided to exercise their Most Favored Nation Rights in connection with the December 2019 Registered Direct Offering, then the Lenders would exchange their debentures for (i) ADSs at an exchange rate equal to $3.15, the per ADS offering price in the December 2019 Registered Direct Offering, and (ii) an even number of ADS purchase warrants at $3.30 per ADS (the “$3.30 MFN Warrants”), which $3.30 MFN Warrants would be in form and substance identical to the warrants issued in the concurrent private placement to the December 2019 Registered Direct Offering.

During 2019, the Lenders were issued 410,045 ADSs (16,401,808 ordinary shares) upon conversion of Debentures including interest, as well as exercises of Warrants, and as a result, a net amount of $3,262 thousand was classified to equity. As of December 31, 2019, the actual outstanding amount of the Debentures principle summed to $3,854 thousand.

On January 4, 2020, the Greenshoe Option of the Lenders expired, with no additional exercises of the right.

During the period from January 1, 2020 through April 1, 2020, the Lenders were issued 1,092,575 ADSs upon conversion of Debentures including interest. Also, they were issued with 1,053,417 $3.30 MFN Warrants, which can be exercised into 1,053,417 ADSs.

On April 1, 2020 the Company converted in full its outstanding Debenture to one of the Lenders, excluding periodical interest payment, which accrued up to such date. On June 1, 2020, the Company issued to this Lender 17,133 ADSs on behalf the final and last accrued interest payment.

During the period from December 26, 2019 through April 1, 2020, the lenders converted Debentures at an aggregate amount of approximately $3.3 million, and were issued with 1,053,417 $3.30 MFN Warrants at expiration terms of 5.5 years from issuance.

On April 23, 2020, the Company retired in full its outstanding Debenture to the other lender, by payment of $836 thousand, which including redemption premium and accrued interest.

For accounting purposes, these financial instruments were classified as financial liabilities in the consolidated statement of financial position as of June 30, 2020 and December 31, 2019 (the Warrants (including MFN Warrants) and Greenshoe Option as “derivative financial instruments” and the Debentures as “convertible debenture”). The Convertible Debentures were designated at fair value through profit or loss, given the conversion option derivative embedded in such instrument. Changes in the Company’s own credit risk from the date of initial recognition are negligible. The Warrants (including MFN Warrants) and Greenshoe Option are derivative financial instruments measured at fair value through profit or loss. These financial liabilities were initially recognized at fair value, adjusted to reflect the day 1 loss and are measured at fair value in each period-end while unrecognized day 1 loss is amortized over the contractual life of each instrument.

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 7 - EQUITY:

On January 28, 2020, the Company’s shareholders approved an increase of the authorized share capital of the Company by an additional 1,250,000,000 ordinary shares, and to amend and restate the articles of association of the Company to reflect the same.

As of June 30, 2020, the authorized share capital of the Company is comprised of 1,500,000,000 ordinary shares.

Each Unit was sold at a price of $1.10 per unit, and each Pre-Funded Unit was sold at a price of $1.099 per unit, including an exercise price of $0.001 per full ADS. The Pre-Funded Warrants are exercisable at any time after the date of issuance upon payment of the exercise price. The Warrants have a per ADS exercise price of $1.20 per full ADS, are exercisable immediately, and will expire five years from the date of issuance.

The Company granted the underwriter a 45-day option to purchase up to an additional 1,145,415 ADSs and/or Warrants to cover over-allotments, if any. The underwriter did not exercise its option.

During the period from January 1, 2020 through June 30, 2020, all the Pre-Funded Warrants were exercised into 6,777,500 ADSs in exchange for an aggregate exercise amount of approximately $7 thousand. Also, 2,320,000 Warrants were exercised into 2,320,000 ADSs in exchange for an aggregate exercise amount of approximately $2.8 million.

NOTE 8 - BUSINESS COMBINATION:

On April 4, 2019, the Company entered into a share and asset purchase agreement (the “Share and Asset Purchase Agreement”) with NetNut and its shareholders, pursuant to which the Company acquired all (100%) of the outstanding share capital of NetNut (“Purchased Shares”), a private Israeli company, in the business proxy network solution industry, and certain assets of DiViNetworks Ltd. (“DiVi”), NetNut’s former controlling shareholder, which its assets are required for the ongoing operations of NetNut (the “Purchased Assets”). The Purchased Shares and assets acquired were accounted for together as a business combination.

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8 - BUSINESS COMBINATION (continued):

In consideration for the Purchased Shares, the Company agreed to pay NetNut’s shareholders:

An amount equal to $3,400 thousand (the “Initial Shares Purchase Price”), out of which (i) $1,615 thousand was paid on Closing (as defined below) in immediate funds (in addition to an amount of $250 thousand down payment paid by the Company upon signing of Share and Asset Purchase Agreement); (ii) $175 thousand was deposited in escrow; and (iii) $1,360 thousand was paid by issuance of 1,217,370 ordinary shares of the Company (based on NIS 4.062 which is a per share 30-day average price of the Company’s ordinary shares on the TASE prior to the date on which the Share and Asset Purchase Agreement was signed (the “Initial Consideration PPS”)). The parties agreed that the Initial Shares Purchase Price may be increased or decreased on a dollar-for-dollar basis in the event NetNut has a negative working capital on the date of the Closing. Pursuant to this mechanism, in October 2019 the Initial Shares Purchase Price was decreased by $233 thousand which amount was repaid to the Company.

An amount of up to $5,000 thousand payable in contingent consideration (the “EarnOut Amount”), will be paid and distributed to the shareholders of NetNut upon NetNut achieving certain revenue milestones in 2019, hence, the payment of the payable EarnOut Amount will be deferred to the time when the Company’s financial results for the year 2019 are published. The Company, at its sole discretion, may elect to pay up to fifty percent (50%) of the EarnOut Amount in ordinary shares (the “EarnOut Shares”), provided that in any event, the amount of the EarnOut Shares will not exceed 2,237,814 ordinary shares (representing a quotient of half of the maximum EarnOut amount, i.e. $2,500 thousand, divided by the Initial Consideration PPS).

In consideration for the sale, delivery, transfer and assignment of the Purchased Assets, the Company agreed to pay DiVi at Closing:

An aggregate amount equal to $6,300 thousand (the “Assets Purchase Price”). The Assets Purchase Price was paid as follows:

In connection with the transaction, the Company agreed to pay to certain finders of the transaction a fee equal to the sum of 3% of the total purchase price of the transaction. The Company elected to pay up to 50% of such fee in equity securities of the Company. Accordingly, the Company incurred transaction costs amounting to approximately $312 thousand that were charged to profit or loss within “general and administrative expenses.”

On June 12, 2019, the Company completed the acquisition according to the terms mentioned above (the “Closing”).

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8 - BUSINESS COMBINATION (continued):

The tables below summarize the total purchase price paid for NetNut, and the amounts of assets acquired, and liabilities assumed, as of the Closing date, at their fair values:

The market price per share is the share closing price in the TASE as of June 12, 2019, translated into U.S. dollars using the exchange rate as of such date.

The fair value of the contingent consideration was valued using a Monte Carlo model with the expected sales and volatility as well as the discount rate being the primary inputs. On June 25, 2020, the Company entered into a settlement and release of claims agreement, refer also note 10.

Transaction costs were charged to profit or loss under “general and administrative expenses.”

Technology and supplier relations and customer relations are amortized on a straight-line basis over 5 years and 7.5 years, respectively. Goodwill primarily represented the value of expected synergies arising from the acquisition, as well as assembled workforce, and was allocated entirely to the NetNut segment.

On October 3, 2019, the Company received an amount of $233 thousand as a repayment on behalf of the acquisition, due to the acquisition working capital adjustments. The repaid amount was allocated as a deduction to the goodwill amount, which was set to $7,356 thousand.

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 9 - INTANGIBLE ASSETS:

Testing of goodwill impairment

The Company performed a goodwill impairment testing as of March 31, 2020 for its proxy services business.

The indicators for the quantitative assessment for goodwill impairment for the proxy services business included a decrease in forecasted operating results, among others, because of COVID-19 implications. For the purpose of the goodwill impairment testing of the proxy services business, the recoverable amount was assessed by management based on value-in-use calculations. The value-in-use calculations use pre-tax cash flow projections covering an approximately six-year forecasted period alongside with a terminal value beyond such forecast period. Cash flows beyond the six-year period to be generated from continuing use are extrapolated using estimated growth rate. The growth rate represents the long-term average growth rate of the proxy services business. As a result of the impairment test, the Company recognized an impairment loss of $800 thousand related to the proxy services business. As of June 30, 2020, goodwill of the proxy services business amounts to $6,077 thousand.

The key assumptions used as part purpose of the goodwill impairment testing of the proxy services business are terminal growth rate of 2%, after-tax discount rate of 20.9% and pre-tax discount rate of 22.9%.

A hypothetical decrease in the growth rate of 1% or an increase of 1% to the discount rate would reduce the value-in-use of the proxy services business by approximately $311 thousand and $702 thousand, respectively, and could trigger a potential impairment of its goodwill.

During the second quarter of 2020, the Company performed an analysis of the impact of recent events on the fair value of the proxy services business. As part of this analysis, the Company considered the potential impacts of COVID-19 and the sensitivity of estimates and assumptions used in the last impairment test and concluded that the fair value exceeds its carrying amount by more than 9%.

NOTE 10 - CONTINGENT LIABILITIES:

On June 11, 2020, Luminati Networks Ltd. filed an action alleging infringement of patent against several companies, including against NetNut. The action was filed in the United States District Court, Eastern District of Texas, Marshal Division. The complaint was served to the Company on June 30, 2020.

Based on the Company’s legal counsel, management is of the opinion that no violation was made by NetNut with respect to the asserted patents. NetNut denies any wrongdoing or liability and intends to defend itself against this complaint. As such, no amounts have been accrued related to the outcome of such claim.

In connection with the Share and Asset Purchase Agreement, the Company was required to transfer $300,000 to NetNut prior to June 15, 2019, for the purposes of its business and activities as a wholly-owned subsidiary of the Company. By December 31, 2019, the Company had transferred only $175,000. The Company accounted for EarnOut Amount based on the provisions of the Share and Asset Purchase Agreement which requires a payment of approximately $1.7 million, as well as a provision for an additional potential compensation to NetNut’s former shareholders due to the above-mentioned breach.

On June 25, 2020, the Company entered into a settlement and release of claims agreement (the “Settlement Agreement”) with certain former shareholders of NetNut (the “Settling Shareholders”), consisting of 80% of the former shareholders of NetNut, pursuant to which the Company will make certain payments to the Settling Shareholders in lieu of paying the Earnout Amount. The Settlement Agreement stated, among other things, that it supersedes and terminates any Earnout Amount related provisions in the Share and Asset Purchase Agreement. Additionally, the Settlement Agreement also contained a mutual release among the parties to the Settlement Agreement. On June 29, 2020, the Company paid $1.6 million on behalf of the Settlement Agreement.

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 10 - CONTINGENT LIABILITIES (continued):

As of June 30, 2020, the Company accrued $1.0 million for the contingent consideration payment based on (1) the Settlement Agreement terms; and (2) a potential consideration to NetNut’s only remaining former shareholder, which elected not to join the Settling Shareholders, and on July 1, 2020, sent a letter claiming that the Company had breached certain provisions of the Share and Asset Purchase Agreement. The Company replied to this letter on July 5, 2020, denying all allegations in the light of the Settlement Agreement and inviting that certain NetNut’s former shareholder to join the Settlement Agreement. On August 25, 2020, the Company received another letter from the former shareholder, with additional claims and certain demands. The Company has not responded to this letter until the financial statements date.

NOTE 11 - LOSS PER SHARE:

Basic loss per share is calculated by dividing the loss attributable to Company’s owners by the weighted average number of issued ordinary shares.

The Company adjusts the loss attributable to holders of ordinary shares and the weighted average number of shares in issue, to reflect the effect of all potentially dilutive ordinary shares, as follows:

The Company adds to the weighted average number of shares in issue that was used to calculate the basic loss per share, the weighted average of the number of shares to be issued assuming that all shares that have a potentially dilutive effect would be converted into shares, and adjusts net loss attributable to holders of the Company’s ordinary shares to exclude any profits or losses recorded during the year with respect to potentially dilutive shares.

The potential shares, as mentioned above, are only taken into account in cases where their effect is dilutive (reducing the earnings per share or increasing the loss per share).

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 11 - LOSS PER SHARE (continued):

When calculating the diluted loss per share the Company accounted for the dilutive effect of the derivative financial instruments and the Convertible Debentures for the six- and three-month periods. Other financial instruments were not accounted for when calculating the diluted loss per share since their effect, on a fully diluted basis, is anti-dilutive.

NOTE 12 - ENTITY LEVEL DISCLOSURES AND SEGMENT INFORMATION:

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 examines the performance of the operating segments based on revenues and adjusted operating profit (loss), which is calculated based on operating profit (loss) before depreciation and amortization, impairment of goodwill and intangible assets, contingent consideration measurement and the effects of share-based payment transactions.

As of June 30, 2020, and following NetNut acquisition at June 12, 2019, the Company has two operating segments: Cyber Security and Proxy Services (the latter represents the operations of NetNut).

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 12 - ENTITY LEVEL DISCLOSURES AND SEGMENT INFORMATION (continued):

SAFE-T GROUP LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 13 - SUBSEQUENT EVENTS:

On July 22, 2020, the Company closed a registered direct equity offering. The offering included the issuance of 3,075,000 ADSs at a purchase price of $1.40 per ADS, and 1,145,000 Pre-Funded Warrants. The Pre-Funded Warrants were sold at a price of $1.40 each, including the Pre-Funded Warrant exercise price of $0.001 per full ADS. The Pre-Funded Warrants will be exercisable at any time after the date of issuance upon payment of the exercise price.

The offering resulted in gross proceeds to the Company of approximately $5.9 million.

During the period from the offering date until August 27, 2020, 435,000 Pre-Funded Warrants were exercised into 435,000 ADS’s in exchange for an aggregate exercise amount of $435.

During the period from July 1, 2020 until August 27, 2020, 739,000 Warrants were exercised into 739,000 ADSs in exchange for an aggregate exercise amount of approximately $887 thousand.

On August 2, 2020, the Company’s board of directors approved an aggregate grant of 51,290,000 options to purchase 51,290,000 ordinary shares, to officers, employees and consultants. The exercise prices of the options granted range from NIS 0 to NIS 0.151 per share, their vesting schedules range between immediate vesting to 4 years, and they will expire 1.5-10 years from the grant date.

Also, on August 30, 2020, the board of directors approved a grant of 300,000 options to purchase 300,000 ordinary shares to a consultant. The options were granted at an exercise price of NIS 0.13 per share, their vesting schedule is over 3 years, and they will expire 10 years from the grant date.

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Exhibit 99.3

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

As of June 30, 2020, and for the Six Months then Ended

Cautionary Statement Regarding Forward-Looking Statements

Certain information included herein 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,” “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, expansion of marketing and channel activities, converting prospects to customers, statements that contain projections of expected market size, 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:

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, 2019, 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 “Safe-T”, the “Company”, “we”, “us” or “our” are to Safe-T Group 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 consolidated financial statements for the six months ended June 30, 2020 and notes thereto, and together with our audited consolidated financial statements for the year ended December 31, 2019 and notes thereto filed with the SEC as part of our Annual Report.

Covid-19

The spread of COVID-19 has forced us to modify its business practices (including employee travel, employee work locations and cancellation of physical participation in meetings, events and conferences). Further actions may be taken as required. In responding to the crisis, we leveraged our IT capabilities to implement remote connections with employees, customers and vendors to deliver a functional and productive work-from-home strategy.

Due to an almost complete freeze in the travel sector, we experienced a reduction of approximately 10% in revenue from the IP proxy business. At the same time, this business just recently gained new entry into the cyber-security market, which the we believes may compensate for the revenue reduction mentioned above.

Also, due to the COVID-19 lack of visibility implications, the decision making of customers in the cyber security business had slowed down, such that it may affect the pace of our growth plans for the remainder of 2020. We offered our Secure Application Access solution free-of-charge to organizations that were affected by the pandemic for a period of three months, and it was successfully deployed by several companies in Israel and the United States. Overall, we are closely monitoring all parts of the business to ensure that we can respond quickly to fluctuations in demand. 

Our business, despite the resilience it has shown in the first half of the year, might not be immune to the impact that global lockdowns resulting from the pandemic are having on a number of the markets that we operate in or serve. We may experience a slowdown in the pace of new business in the second half of the year, which we plan to compensate by closely monitoring all parts of the business to make sure we can respond quickly to fluctuations in demand, as well as by executing our M&A strategy in the coming months.

Overview

We develop and market Zero-Trust Access solutions that mitigate attacks on enterprises’ business-critical services and sensitive data, while ensuring uninterrupted business continuity. Safe-T’s cloud and on-premises solutions ensure that the organization’s access practices, whether into the organization or from the organization out to the internet, are secured according to the philosophy of Zero-Trust, “validate first, access later.” This means that no one is trusted by default from inside or outside the network, and verification is required from everyone trying to gain access to resources on the network or in the cloud.

We generate revenue from sales of our Zero+ secure access family of products and solutions and our Secure Data Exchange (SDE) solutions for data exchange. Our sales model consists of perpetual or subscribed licenses of our products, and related services. Also, we generate Software-as-a-Service, or SaaS, revenues from our secure internet access solution and from product maintenance and customer support.

Our product license revenue consists primarily of revenue generated from the sale of our main products. License revenue can be generated through the sale of either perpetual licenses or subscribed licenses. In a perpetual license sale, the customer purchases our product, usually accompanied with one to three years of maintenance and support services. Thereafter, the customer is not obligated to continue the engagement with us, but in order to maintain maintenance and support services, including receiving updates and upgrades for our products, which are essential in order to monitor and successfully block any potential threats, they will usually purchase additional and continuous periods of maintenance and support services.

A subscribed license sale is generated when the customer elects to use our product as a service, usually for periods ranging from one to three years. This service also includes maintenance and support throughout the subscribed period, which after its expiration the customer is not entitled to use the products unless the subscription is renewed for additional periods. The price of a one-year subscription is lower than the same license sold as a perpetual license, but the cash flow renewals in later years is higher than the renewal of maintenance and support services in the perpetual licenses’ method.

Maintenance and support service renewals from the Zero+ and the SDE products are usually 15%-25% of the perpetual license price, depending mainly on the supporting hours and response times, and are important, as they represent, like subscription renewals, steady and visible cash flow growth.

SaaS revenues are generated when customers are subscribing to our NetNut IP proxy solution, from NetNut’s website, and paying for the bandwidth package they choose. The packages are usually for the earlier of one month or maximum bandwidth usage. Our revenue is recognized on a straight-line basis over the package period.

We also generate revenues from other services, such as implementation services or product development services requested by our customers to enhance the security of specific processes or applications. The services to the customer can be provided by either specific product developments or support/implementation services, which are provided at the customer’s premises.

Critical Accounting Policies

The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, obligations, income and expenses during the reporting periods. A comprehensive discussion of our critical accounting policies 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.

Results of Operations

The following discussion of our unaudited results of operations for the six month periods ended June 30, 2020 and 2019, included in the following table, which presents selected financial information data, is based upon our unaudited statements of profit or loss contained in our financial statements for those periods, and the related notes.

Comparison of the six months ended June 30, 2020 to the six months ended June 30, 2019

Revenues

The following table summarizes our revenues through types and regions for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

Revenues through types:

Revenues through regions:

Total revenues for the six months ended June 30, 2020 amounted to $2,165,000, compared to of $821,000 generated in the six months ended June 30, 2019. The increase in revenues compared to the first half of 2019 is due to the consolidation of revenues generated by Safe-T’s wholly owned subsidiary, NetNut Ltd., or NetNut, a provider of IP Proxy Network services throughout the entire period compared to the consolidation in 2019, which occurred only from NetNut’s acquisition on June 12, 2019 until the period end on June 30, 3019. The increase, in the amount of $1,635,000, was partially offset mainly by a reduction of $196,000 in the sales of the SDE product, as part of the Company’s strategic plan to focus on the Zero Trust solutions. 

Cost of Revenues

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

Cost of revenues for the six months ended June 30, 2020 totaled to $1,121,000 compared to cost of revenues of $416,000 for the equivalent period in 2019. The increase is mainly due to the consolidation of NetNut’s cost of revenues, primarily $419,000 in cost of networks, servers and internet service providers, as well as an increase in amortization of NetNut’s intangible assets in an amount of $463,000, partially offset by a decrease of $88,000 in costs resulting from the streamlining of support and post sales teams. 

Research and Development Expenses, Net

The following table summarizes our research and development, or R&D, costs for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

R&D expenses for the six months ended June 30, 2020 were $793,000, compared to $1,373,000 for the six months ended June 30, 2019. The decrease is due to a reduction in the SDE solution development costs in a total amount of $810,000, partially offset by the consolidation of NetNut’s development costs in the amount of $230,000.

Sales and Marketing Expenses

The following table summarizes our sales and marketing, or S&M, costs for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

S&M expenses for the six months ended June 30, 2020 totaled to $1,781,000 compared to an amount of $1,637,000 for the six months ended June 30, 2019. The increase is primarily attributed to consolidation of NetNut’s sales and marketing costs in an amount of $706,000, partially offset by efficiency measures and cost reductions in overall sales, professional and marketing costs of the cyber business, in an amount of $562,000.

General and Administrative Expenses

The following table summarizes our general and administrative, or G&A, costs for the periods presented. The period-to-period comparison of results is not necessarily indicative of results for future periods.

G&A expenses for the six-months ended June 30, 2020 totaled to $1,495,000, compared to $1,628,000 in the equivalent period in 2019. The decrease is due to a $508,000 reduction in share-based payments, partially offset mainly by an increase of $86,000 in professional fees costs as well as an increase of $217,000 due to the consolidation of NetNut’s general and administrative costs.

Impairment of Goodwill

We recorded in the six-month ended June 30 ,2020 an impairment loss of $800,000 related to our proxy services segment due to a decrease in forecasted operating results, among others, because of COVID-19 implications.

Contingent Consideration

We recorded in the six-month ended June 30 ,2020 expenses of $430,000 resulting from the additional compensation of the contingent consideration to NetNut’s former shareholders, compared to the amount that was evaluated on December 31, 2019.

Operating Loss

As a result of the foregoing, our operating loss for the six months ended June 30, 2020 was $4,255,000, compared to an operating loss of $4,233,000 in the equivalent period in 2019.

Financial Income, Net

We had net financial income of $2,589,000 for the for the six months ended June 30, 2020, compared to net financial income of $1,720,000 for the six months ended June 30, 2019. The increase is primarily due to a reduction in the fair value of convertible debenture and derivative financial instruments liabilities, net of day 1 loss amortization recorded in the six months ended June 30, 2020 compared to the equivalent period of 2019.

Net Loss for the Period

As a result of the foregoing, our net loss for the six months ended June 30, 2020 was $1,544,000, compared to a loss of $2,510,000 during the equivalent period in 2019.

Overview

As of August 27, 2020, our cash and cash equivalents of approximately $15.0 million were held for working capital, capital expenditures, investment in technology and business acquisition purposes. We believe that our current cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least one year. 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 the pursuing for strategic opportunities, including, but not limited to, strategic acquisitions. These factors and the risk inherent in the Company’s operations raise a substantial doubt as to the Company’s ability to continue as a going concern.

Net Cash Used in Operating Activities

During the six months ended June 30, 2020, net cash used in operating activities was $3,161,000, primarily attributed to operational costs which exceeded cash flows from customers’ payments. The increase, compared to $3,010,000 used in operating activities during the six months ended June 30, 2019, is primarily attributed to a reduction in the Company’s cyber business staff as well as professional services, offset by the consolidation of NetNut’s operating activities.

Net Cash Used in Investing Activities

During the year six months ended June 30, 2020, net cash provided by investing activities was $14,000 due to investment in a cash deposit, compared to net cash used in investing activities of $5,758,000 during the six months ended June 30, 2019. The decrease is attributed almost solely to the acquisition of NetNut, which took place in the second quarter of 2019.

Net Cash Provided by Financing Activities

During the six months ended June 30, 2020, net cash provided by financing activities was $8,337,000, primarily attributed to funds from a public offering closed on April 23, 2020 with gross proceeds of approximately $8,392,000 and a registered direct offering closed on April 2, 2020 with gross proceeds of $720,000, as well as from warrants exercises.

During the six months ended June 30, 2019, net cash provided by financing activities was $5,954,000, primarily attributed to a convertible loan we received in order to finance NetNut’s acquisition.

Net Increase in Cash and Cash Equivalents

As a result of the foregoing, our cash and cash equivalents increased in the amount of $5,190,000 during the six months ended June 30, 2020, compared to a decrease in the amount of $2,814,000 during the six months ended June 30, 2019.

Current Outlook

We have financed our operations to date primarily through proceeds from sales of our equity securities. We have incurred losses and generated negative cash flows from operations since our subsidiary, Safe T Data A.R. Ltd.’s inception in February 2013.

As of August 27, 2020, our cash and cash equivalents, including short-term bank deposits, were approximately $15.0 million. We expect that our current resources will be sufficient to meet our anticipated cash needs for at least one year. However, our operating plans may change as a result of many factors that may currently be unknown to us, which may impact our funding planes. Our future capital requirements will depend on many factors, including:

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through equity financings. There are no assurances however, that we will be successful in obtaining the level of financing needed for our operations. If we are unsuccessful in commercializing our products and raising capital, we may need to reduce activities, curtail or cease operations.

7