UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the Month of July 2017
Commission File Number 333-206989
Ability Inc.
(Translation of registrant’s name into English)
Yad Harutzim 14
Tel Aviv 6770007, Israel
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
ABILITY INC.
On July 17, 2017, Ability Inc. (the “Company”) announced its financial results for the three months ended March 31, 2017.
2017 First Quarter Financial Summary
Due to the significant decline in revenues and an increase in legal and professional services fees, the Company has suffered losses from operations, and has a net capital deficiency that, along with other matters, raises a substantial doubt about its ability to continue as a going concern.
Revenues for the three months ended March 31, 2017 were $797,000 compared to $6.5 million for the three months ended March 31, 2016. The decrease was primarily due to customer adoption of ULIN, which has been much slower than the Company had anticipated, as well as decrease in sales of Company’s legacy products as a result of the ongoing transition to a revenue stream more focused on ULIN.
Cost of revenues for the three months ended March 31, 2017 were $620,000 compared to $3.2 million for the three months ended March 31, 2016, such decrease is consistent with the decrease in revenues.
Operating loss for the three months ended March 31, 2017 was $(3.1) million compared to operating income of $1.0 million in the three months ended March 31, 2016. The decrease was due to lower revenues, and higher general and administrative expenses, primarily increased legal and professional fees.
Net loss for the three months ended March 31, 2017 was $(3.0) million, or $(0.12) per basic and diluted share, compared to $(242,000), or $(0.01) per basic and diluted share, for the three months ended March 31, 2016. Negative EBITDA for the three months ended March 31, 2017 was $(2.9) million compared to positive EBITDA of $1.1 million in the three months ended March 31, 2016. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.
Balance Sheet Highlights
Cash and cash equivalents as of March 31, 2017 totaled $8.5 million compared to $11.8 million as of December 31, 2016. Cash used in operating activities was $3.4 million for the first three months of 2017 compared with $1.2 million for the three months ended March 31, 2016. Shareholders' equity totaled $6.7 million as of March 31, 2017 compared to $9.7 million as of December 31, 2016.
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Ability Inc.
Consolidated Balance Sheets
| Unaudited | Audited | |||||||
| March 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| ASSETS | U.S. Dollar in thousands | |||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 8,470 | $ | 11,840 | ||||
| Restricted deposits | $ | 1,861 | $ | 1,758 | ||||
| Restricted deposit for put option | $ | 12,077 | $ | 12,028 | ||||
| Accounts receivable | $ | 2,010 | $ | 3,173 | ||||
| Inventory | $ | 302 | $ | 481 | ||||
| Accumulated costs with respect to projects in excess of progress payments | $ | - | $ | 151 | ||||
| Due from Controlling Shareholders | $ | 207 | $ | 196 | ||||
| Income tax receivable | $ | 150 | $ | 267 | ||||
| Other current assets | $ | 845 | $ | 353 | ||||
| Total Current Assets | $ | 25,922 | $ | 30,247 | ||||
| NON-CURRENT ASSETS: | ||||||||
| Other long term assets | $ | 15 | $ | - | ||||
| Property and equipment, net | $ | 1,646 | $ | 1,588 | ||||
| Total Non-Current Assets | $ | 1,661 | $ | 1,588 | ||||
| Total Assets | $ | 27,583 | $ | 31,835 | ||||
| LIABILITIES & SHAREHOLDER'S EQUITY: | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accrued payroll and other compensation related accruals | $ | 156 | $ | 270 | ||||
| Trade accounts payable, accrued expenses and other accounts payable | $ | 5,537 | $ | 4,952 | ||||
| Put option liability | $ | 11,900 | $ | 11,900 | ||||
| Income tax payable | $ | 44 | $ | 32 | ||||
| Accrued expenses and accounts payable with respect to Projects | $ | 2,552 | $ | 4,734 | ||||
| Progress payments in excess of accumulated costs with respect to Projects | $ | 426 | $ | - | ||||
| Total Current Liabilities | $ | 20,615 | $ | 21,888 | ||||
| NON CURRENT LIABILITIES: | ||||||||
| Other accounts payable | $ | 15 | $ | - | ||||
| Accrued severance pay | $ | 251 | $ | 245 | ||||
| Total Non Current Liabilities | $ | 266 | $ | 245 | ||||
| Total Liabilities | $ | 20,881 | $ | 22,133 | ||||
| SHAREHOLDERS' EQUITY | ||||||||
| Preferred shares $0.0001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding at March 31, 2017 and December 31, 2016 | $ | - | $ | - | ||||
| Ordinary shares $0.0001 par value, 200,000,000 shares authorized, 25,756,142 shares issued and outstanding at March 31, 2017 and December 31, 2016 | $ | 3 | $ | 3 | ||||
| Additional paid in capital | $ | 18,560 | $ | 18,560 | ||||
| Accumulated deficit | $ | (11,861 | ) | $ | (8,861 | ) | ||
| Total Shareholders' Equity | $ | 6,702 | $ | 9,702 | ||||
| Total Liabilities and Shareholders' Equity | $ | 27,583 | $ | 31,835 | ||||
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Ability Inc.
Consolidated Statements of Comprehensive Loss
| Unaudited | ||||||||
| Three months ended | ||||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| U.S. Dollar in thousands, except per share data | ||||||||
| Revenues | $ | 797 | $ | 6,463 | ||||
| Cost of revenues | $ | 620 | $ | 3,217 | ||||
| Gross profit | $ | 177 | $ | 3,246 | ||||
| Sales and marketing expenses | $ | 746 | $ | 1,207 | ||||
| General and administrative expenses | $ | 2,486 | $ | 1,016 | ||||
| Operating income (loss) | $ | (3,055 | ) | $ | 1,023 | |||
| Finance (income) expenses, net | $ | (67 | ) | $ | 21 | |||
| Income (loss) before income tax | $ | (2,988 | ) | $ | 1,002 | |||
| Income tax expenses | $ | 12 | $ | 1,244 | ||||
| Net and comprehensive loss | $ | (3,000 | ) | $ | (242 | ) | ||
| Weighted-average ordinary shares outstanding - Basic and diluted | 24,582,874 | 24,582,874 | ||||||
| Loss per ordinary basic and diluted | $ | (0.12 | ) | $ | (0.01 | ) | ||
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Ability Inc.
Consolidated Cash flows
| Unaudited | ||||||||
| Three months ended | ||||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| U.S. Dollar in thousands | ||||||||
| CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (3,000 | ) | $ | (242 | ) | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation | $ | 43 | $ | 34 | ||||
| Amortization | $ | 78 | $ | - | ||||
| Change in operating assets and liabilities: | ||||||||
| Restricted deposits | $ | (103 | ) | $ | (120 | ) | ||
| Accounts receivable | $ | 1,163 | $ | (425 | ) | |||
| Inventory* | $ | - | $ | (250 | ) | |||
| Other current assets | $ | (492 | ) | $ | 1,661 | |||
| Restricted deposit for put option | $ | (49 | ) | $ | - | |||
| Accrued payroll and other compensation related accruals | $ | (114 | ) | $ | 218 | |||
| Trade accounts payable, accrued expenses and other accounts payables* | $ | 585 | $ | (289 | ) | |||
| Income tax payable | $ | 129 | $ | (1,121 | ) | |||
| Accrued expenses and accounts payable with respect to Projects* | $ | (2,182 | ) | $ | (1,271 | ) | ||
| Progress payments in excess of accumulated costs with respect to Projects* | $ | 577 | $ | 641 | ||||
| Accrued severance pay | $ | 6 | $ | - | ||||
| Total adjustments | $ | (359 | ) | $ | (922 | ) | ||
| Net cash used in operating activities | $ | (3,359 | ) | $ | (1,164 | ) | ||
| CASH FLOW FROM INVESTING ACTIVITIES | ||||||||
| Purchase of Property and equipment | $ | - | $ | (128 | ) | |||
| Net cash used in investing activities | $ | - | $ | (128 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Due from Controlling Shareholders * | $ | (11 | ) | $ | (367 | ) | ||
| Net cash used in financing activities | $ | (11 | ) | $ | (367 | ) | ||
| Net Change In Cash | $ | (3,370 | ) | $ | (1,659 | ) | ||
| CASH AT BEGINNING OF THE YEAR | $ | 11,840 | $ | 25,829 | ||||
| CASH AND CASH EQUIVALENTS AT END OF THE FISCAL PERIOD | $ | 8,470 | $ | 24,170 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid: | ||||||||
| Interest and banks' charges | $ | 6 | $ | 12 | ||||
| Income tax | $ | 2 | $ | - | ||||
*Reclassified
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Ability Inc.
Consolidated EBITDA
| Unaudited | ||||||||
| Three months ended | ||||||||
| March 31, | ||||||||
| 2017 | 2016 | |||||||
| U.S. Dollar in thousands | ||||||||
| Operating income (loss) | $ | (3,055 | ) | $ | 1,023 | |||
| Depreciation | $ | 43 | $ | 34 | ||||
| Amortization | $ | 78 | $ | - | ||||
| EBITDA income (loss) | $ | (2,934 | ) | $ | 1,057 | |||
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ABILITY INC. | ||
| By: | /s/ Anatoly Hurgin | |
| Anatoly Hurgin | ||
| Chief Executive Officer | ||
Date: July 17, 2017
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